10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-15875

King Pharmaceuticals, Inc.

Exact name of registrant as specified in its charter

Tennessee State or other jurisdiction of incorporation or organization	54-1684963 I.R.S. Employer Identification No.
501 Fifth Street Bristol, Tennessee Address of Principal Executive Offices	37620 Zip Code

Registrant’s telephone number, including area code: (423) 989-8000

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock	New York Stock Exchange

Securities registered under Section 12(g) of the Exchange Act:
None

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o     No þ

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 þ     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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of June 30, 2008 was $2,565,169,935. The number of shares of Common Stock, no par value, outstanding at February 24, 2009 was 246,490,681.

Documents Incorporated by Reference:
Certain information required in Part III of this Annual Report on Form 10-K is incorporated
by reference from the registrant’s Proxy Statement for its 2009 annual meeting of shareholders.

Table of Contents

PART I			2
	Item 1.	Business	2
	Item 1A.	Risk Factors	23
	Item 2.	Properties	39
	Item 3.	Legal Proceedings	39
PART II			40
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
	Item 6.	Selected Financial Data	42
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	79
	Item 8.	Financial Statements and Supplementary Data	79
	Item 9A.	Controls and Procedures	79
PART III			80
PART IV			81
	Item 15.	Exhibits, Financial Statement Schedules	81
EX-10.88
EX-10.89
EX-10.90
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1.   Business

King Pharmaceuticals, Inc. was incorporated in the State of Tennessee in 1993. Our direct wholly-owned subsidiaries are Alpharma Inc.; Meridian Medical Technologies, Inc.; Monarch Pharmaceuticals, Inc.; King Pharmaceuticals Research and Development, Inc.; Parkedale Pharmaceuticals, Inc.; and Monarch Pharmaceuticals Ireland Limited.

Our principal executive offices are located at 501 Fifth Street, Bristol, Tennessee 37620. Our telephone number is (423) 989-8000 and our facsimile number is (423) 274-8677. Our website is www.kingpharm.com, where you may view our Corporate Code of Conduct and Ethics (“Code”). To the extent permitted by U.S. Securities and Exchange Commission (“SEC”) and New York Stock Exchange (“NYSE”) regulations, we intend to disclose information as to any amendments to the Code and any waivers from provisions of the Code for our principal executive officer, principal financial officer, and certain other officers by posting the information on our website, to the extent such matters arise. We make available through our website, free of charge, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments, as well as other documents, as soon as reasonably practicable after their filing with the SEC. These filings are also available to the public through the Internet at the website of the SEC, at www.sec.gov. You may also read and copy any document that we file at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.

Our Chief Executive Officer, Brian A. Markison, submitted to the NYSE an Annual Chief Executive Officer Certification on June 9, 2008, pursuant to Section 303A.12 of the NYSE’s listing standards, certifying that he was not aware of any violation by King of the NYSE’s corporate governance listing standards as of that date.

King is a vertically integrated company that performs basic research and develops, manufactures, markets and sells branded prescription pharmaceutical products and animal health products. By “vertically integrated,” we mean that we have the following capabilities:

•   research and development	•   distribution
•   manufacturing	•   sales and marketing
•   packaging	•   business development
•   quality control and assurance	•   regulatory management

Our branded prescription pharmaceuticals include neuroscience products (primarily pain medicines), hospital products, and legacy brands. The animal health business is focused on medicated feed additives (“MFAs”) and water-soluble therapeutics primarily for poultry, cattle, and swine.

Our corporate strategy is focused on specialty markets, particularly specialty-driven branded prescription pharmaceutical markets. We believe our target markets have significant potential and our organization is aligned accordingly. Our growth in specialty markets is achieved through organic growth and acquisitions.

Under our corporate strategy we work to achieve organic growth by maximizing the potential of our currently marketed products through sales and marketing and prudent product life-cycle management. By “product life-cycle management,” we mean the extension of the economic life of a product, including seeking and gaining necessary related governmental approvals, by such means as:

•  securing from the U.S. Food and Drug Administration, which we refer to as the “FDA”, additional approved uses (“indications”) for our products;

•  developing and producing different strengths;

•  producing different package sizes;

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•  developing new dosage forms; and

•  developing new product formulations.

Our strategy also focuses on growth through the acquisition of novel branded prescription pharmaceutical products in various stages of development and the acquisition of prescription pharmaceutical technologies, particularly those products and technologies that we believe have significant market potential and complement the commercial footprint we have established in the neuroscience and hospital markets. Using our internal resources and a disciplined business development process, we strive to be a leader in developing and commercializing innovative, clinically-differentiated therapies and technologies in these target, specialty-driven markets. We may also seek company acquisitions that add products or products in development, technologies or sales and marketing capabilities to our existing platforms or that otherwise complement our operations. We also work to achieve organic growth by continuing to develop investigational drugs, as we have a commitment to research and development and advancing the products and technologies in our development pipeline.

We market our branded prescription pharmaceutical products primarily through a dedicated sales force to general/family practitioners, internal medicine physicians, neurologists, pain specialists, surgeons and hospitals across the United States and in Puerto Rico. Branded prescription pharmaceutical products are innovative products sold under a brand name that have, or previously had, some degree of market exclusivity.

Our animal health products are marketed through a staff of trained sales and technical service and marketing employees, many of whom are veterinarians and nutritionists. We have sales offices in the U.S., Europe, Canada, Mexico, South America and Asia. Elsewhere, our animal health products are sold primarily through the use of distributors and other third-party sales companies.

Business Segments

Our business consists of four main segments: a specialty-driven branded prescription pharmaceuticals business, our global animal health business, our Meridian auto-injector business, and royalties.

Segment Net Revenues Summary

The following table summarizes net revenues by operating segment (in thousands), almost all of which were derived from activities within the United States. Note that the table does not include net revenues for the animal health segment or the Flector^® Patch product within the branded prescription pharmaceuticals segment since these are part of Alpharma Inc. (“Alpharma”), a company we acquired at the end of December 2008.

	For the Years Ended December 31,
	2008		2007		2006
Branded Prescription Pharmaceuticals	$	1,263,488	$	1,857,813	$	1,724,701
Meridian Auto-Injector		218,448		183,860		164,760
Royalties		79,442		82,589		80,357
Contract Manufacturing		1,327		9,201		16,501
Other		2,356		3,419		2,181
Total	$	1,565,061	$	2,136,882	$	1,988,500

For information regarding profit and loss and total assets associated with each segment, see Note 20, “Segment Information” in Part IV, Item 15(a)(1) “Financial Statements.”

Branded Prescription Pharmaceuticals Segment

We market a variety of branded prescription pharmaceutical products that are divided into the following categories:

•  neuroscience (including Skelaxin^®, Avinza^® and Flector^® Patch),

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•  hospital (including Thrombin-JMI^®), and

•  legacy products (including Altace^®, Levoxyl^®, Cytomel^® and Bicillin^®).

Our branded prescription pharmaceutical products are generally in high-volume markets and we believe they are well known for their treatment indications. Branded prescription pharmaceutical products represented approximately 81% of our total net revenues for the year ended December 31, 2008 and approximately 87% for each of the years ended December 31, 2007 and 2006.

Some of our branded prescription pharmaceutical products are described below:

Product	Product Description and Indication
Neuroscience	Products in this category are primarily marketed to primary care physicians, neurologists, orthopedic surgeons and pain specialists.
Skelaxin®	A muscle relaxant tablet indicated for the relief of discomfort associated with acute, painful musculoskeletal conditions.
Flector® Patch	A topical non-steroidal anti-inflammatory patch for the treatment of acute pain due to minor strains, sprains and contusions.
Avinza®	A long-acting formulation of morphine indicated as a once-daily treatment for moderate to severe pain in patients who require continuous, around the clock opioid therapy for an extended period of time.
Hospital	Products in this category are primarily marketed to hospitals.
Thrombin-JMI®	A chromatographically purified topical (bovine) thrombin solution indicated as an aid to hemostasis whenever oozing blood and minor bleeding from capillaries and small venules is accessible.
Legacy Products	Products in this category are not actively promoted through our sales force and many have generic competition.
Altace®	An oral administration indicated for the treatment of hypertension and reduction of the risk of stroke, myocardial infarction (heart attack) and death from cardiovascular causes in patients 55 and over with either a history of coronary artery disease, stroke or peripheral vascular disease or with diabetes and one other cardiovascular risk factor (such as elevated cholesterol levels or cigarette smoking). Altace® is also indicated in stable patients who have demonstrated clinical signs of congestive heart failure after sustaining an acute myocardial infarction.
Levoxyl®	Color-coded, potency-marked tablets indicated for thyroid hormone replacement or supplemental therapy for hypothyroidism.
Cytomel®	A tablet indicated in the medical treatment of hypothyroidism.
Bicillin®	A penicillin-based antibiotic suspension for deep muscular injection indicated for the treatment of infections due to penicillin-G-susceptible microorganisms.

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Net sales of certain of our branded prescription pharmaceutical products for the year ended December 31, 2008 are set forth below.

	Net Sales
Neuroscience
Skelaxin®	$	446.2
Avinza®		135.5
Hospital
Thrombin-JMI®	$	254.6
Legacy Branded
Altace®	$	166.4
Levoxyl®		73.1
Cytomel®		51.1
Bicillin®		50.5

Flector^® Patch was added to our portfolio of branded prescription pharmaceutical products as a result of our acquisition of Alpharma at the end of December 2008, and accordingly sales from the Flector^® Patch in 2008 are not included in the table above or our financial results provided elsewhere in this report.

Animal Health Segment

Our animal health business is a global leader in the development, registration, manufacture and marketing of MFAs and water soluble therapeutics, primarily for poultry, cattle and swine. Our MFAs and water soluble products are anti-infective animal health products that are added to the feed and water of livestock and poultry. This market is comprised of three primary categories: antibiotics, anticoccidials and antibacterials. This business was part of Alpharma. Because we acquired Alpharma at the end of December 2008, the animal health segment is not included in the financial results provided in this report.

Some of our animal health products are described below:

Product	Product Description and Indication
Antibiotic Products	Products in this category are used primarily in poultry, swine and cattle to prevent and/or treat diseases and maintain health.
Albac®	A bacitracin-based MFA used to prevent and/or treat diseases, maintain health and/or improve feed efficiency.
Aureomycin®, Aureomycin®- combination products, Aurofac® and Chlormax®	Feed-grade antibiotics containing chlortetracycline used in combination with an antibacterial to prevent and/or treat diseases, maintain health and/or improve feed efficiency.
BMD®	A bacitracin-based MFA used to prevent and/or treat diseases and maintain health.
Anticoccidial Products	Products in this category are used primarily in poultry and cattle to prevent coccidiosis, a condition caused by an intestinal parasite that affects the health of the animal.
Bio-Cox® and Cygro®	MFAs used to prevent and control coccidiosis in poultry.
Bovatec® and Avatec®	MFAs used to prevent and control coccidiosis in cattle and poultry and to maintain health and improve feed efficiency in cattle.
Deccox®	An MFA used to prevent and control coccidiosis in poultry, cattle and calves.
Robenz® and Cycostat®	Used to prevent coccidiosis in poultry and rabbits.

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Product	Product Description and Indication
Rofenaid®	Used to control disease in poultry.
Antibacterial Products	Products in this category are used to prevent disease in poultry and swine.
3-Nitro®	An MFA used to treat disease and improve feed efficiency in poultry and swine.
Histostat®	An MFA used to prevent disease in chickens and turkeys.

In addition to our antibiotic, anticoccidial and antibacterial products, we also sell water soluble vitamins, minerals and electrolytes that are used as nutritional supplements primarily for poultry, cattle and swine.

Meridian Auto-Injector Segment

Our Meridian Auto-Injector segment manufactures and markets pharmaceutical products that are delivered using an auto-injector. An auto-injector is a pre-filled, pen-like device that allows a patient or caregiver to automatically inject a precise drug dosage quickly, easily, safely and reliably. Auto-injectors are a convenient, disposable, one-time use drug delivery system designed to improve the medical and economic value of injectable drug therapies. We pioneered the development and are a manufacturer of auto-injectors for the self-administration of injectable drugs. Our auto-injector products currently consist of a variety of acute care medicines.

The commercial pharmaceutical business of our Meridian segment consists of EpiPen^®, an auto-injector filled with epinephrine for the emergency treatment of anaphylaxis resulting from severe or allergic reactions to insect stings or bites, foods, drugs and other allergens, as well as idiopathic or exercise-induced anaphylaxis.

Our Meridian Auto-Injector segment also includes pharmaceutical products that are sold primarily to the U.S. Department of Defense (“DoD”) under an Industrial Base Maintenance Contract which is terminable by the DoD at its convenience. These products include the nerve agent antidotes AtroPen^® and ComboPen^®, and the Antidote Treatment Nerve Agent Auto-injector, which we refer to as the “ATNAA.” AtroPen^® is an atropine-filled auto-injector and ComboPen^® consists of an atropine-filled auto-injector and a pralidoxime-filled auto-injector. The ATNAA utilizes a dual chambered auto-injector and injection process to administer atropine and pralidoxime, providing an improved, more efficient means of delivering these nerve agent antidotes. Other products sold to the DoD include a diazepam-filled auto-injector for the treatment of seizures and a morphine-filled auto-injector for pain management.

Royalties Segment

We developed a currently marketed adenosine-based product, Adenoscan^®, for which we receive royalty revenues. Adenoscan^® is a sterile, intravenous solution of adenosine administered intravenously as an adjunct to imaging agents used in cardiac stress testing of patients who are unable to exercise adequately. Specifically, we are party to an agreement under which Astellas Pharma US, Inc. (“Astellas”) manufactures and markets Adenoscan^® in the United States and Canada in exchange for royalties through the duration of the patents. We have licensed exclusive rights to other third-party pharmaceutical companies to manufacture and market Adenoscan^® in certain countries other than the United States and Canada in exchange for royalties.

Royalties received by us from sales of Adenoscan^® outside of the United States and Canada are shared equally with Astellas. Astellas, on its own behalf and ours, obtained a license to additional intellectual property rights for intravenous adenosine in cardiac imaging and the right to use intravenous adenosine as a cardioprotectant in combination with thrombolytic therapy, balloon angioplasty and coronary bypass surgery. For additional information on our royalty agreements and anticipated competition, please see the section below entitled “Intellectual Property.”

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Recent Developments

Acquisition of Alpharma Inc.

On December 29, 2008, we completed our acquisition of all the outstanding common shares of Alpharma at a price of $37.00 per share in cash, for an aggregate purchase price of approximately $1.6 billion.

As a result of the transaction, Alpharma is now a wholly-owned subsidiary of King. The acquisition was funded with available cash on hand, borrowings of $425.0 million under our Senior Secured Revolving Credit Facility, as amended on December 5, 2008 (the “Revolving Credit Facility”), and borrowings of $200.0 million under a term loan.

Alpharma has a growing branded prescription pharmaceutical franchise in the U.S. pain market with its Flector^® Patch (diclofenac epolamine topical patch) 1.3% and a pipeline of new pain medicines led by Embeda^tm, a formulation of long-acting morphine that is designed to provide controlled pain relief and deter certain common methods of misuse an4d abuse. Alpharma is also a leading provider of MFAs for food-production animals, principally poultry, cattle and swine.

We believe our acquisition of Alpharma is particularly significant because it strengthens our portfolio and development pipeline of pain management products and increases our capabilities and expertise in this important market. The development pipeline provides us with both near-term and long-term revenue opportunities and the animal health business further diversifies our revenue base. As a result, we believe this acquisition creates a stronger foundation for sustainable, long-term growth for our Company.

Contemporaneous with our acquisition of Alpharma and in accordance with a consent order with the U.S. Federal Trade Commission, we divested the rights to Alpharma’s Kadian^® (morphine sulfate long-acting) to Actavis Elizabeth, L.L.C. Pursuant to the divestiture, we will receive from Actavis Elizabeth future quarterly payments of up to an aggregate of $127.5 million in cash based on the achievement of certain Kadian^® quarterly gross-profit related milestones for the period beginning January 1, 2009 and ending June 30, 2010.

Potential Generic Substitution for Skelaxin^®

On January 20, 2009, the U.S. District Court for the Eastern District of New York issued an Order ruling invalid United States Patent Nos. 6,407,128 and 6,683,102, two patents relating to Skelaxin^®, our branded muscle relaxant. The Order was issued without benefit of a hearing in response to Eon Labs’ motion for summary judgment. Upon the entry of an appropriate judgment, we plan to appeal and vigorously defend our interests. Invalidation of these two patents would likely lead to generic versions of Skelaxin^® entering the market sooner than previously expected and would likely cause our net sales of Skelaxin^® to decline significantly.

Following the decision of the District Court, our senior management team conducted an extensive examination of our company and developed a restructuring initiative designed to partially offset the potential decline in Skelaxin sales in the event that a generic competitor enters the market. Based on an analysis of our strategic needs, this initiative includes: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams. Our animal health activities are not affected by the restructuring.

On January 29, 2009, our management approved the restructuring initiative, effective immediately. Pursuant to this initiative, we will reduce our workforce by approximately 520 positions, including approximately 380 field sales positions. This reduction, which we expect to be substantially complete by late March 2009, represents approximately 17% of our current workforce after taking into account a previous reduction in workforce following our acquisition of Alpharma.

We estimate that, in connection with the restructuring initiative, we will incur total restructuring costs of between $50 million and $55 million, all of which are expected to be paid during the first half of 2009. These costs all relate to severance pay and other employee termination expenses.

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Also, in January 2008, we entered into an agreement with CorePharma, LLC (“CorePharma”) granting CorePharma a license to launch an authorized generic version of Skelaxin^® in December 2012 or earlier under certain conditions.

Branded Prescription Pharmaceuticals — Development Advances

Embeda^tm

The Embeda^tm New Drug Application (“NDA”) was submitted to the FDA in June 2008. Utilizing proprietary technology, Embeda^tm, which contains long-acting morphine pellets, each with a sequestered core of naltrexone, an opioid antagonist, has a proposed indication for the management of moderate to severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. The formulation is designed to work such that if taken as directed, the morphine would relieve pain while the sequestered naltrexone would pass through the body with no intended clinical effect. If Embeda^tm capsules are crushed or chewed, however, the naltrexone would be released, mitigating the euphoric effect that might otherwise be caused by the morphine under these circumstances. We acquired Embeda^tm on December 29, 2008 as part of our acquisition of Alpharma. In December 2008, the FDA informed us that it is continuing its review of the Embeda^tm NDA.

Remoxy^®

The Remoxy^® NDA was submitted to the FDA in June 2008. In December 2008, our partner Pain Therapeutics, Inc. (“PTI”) received a Complete Response Letter from the FDA with respect to the NDA for Remoxy^®, requiring additional non-clinical information to support approval. We are working with PTI to complete an assessment of the Complete Response Letter and prepare a written response. We together with PTI plan to meet with the FDA during the second quarter of 2009 to discuss our response, following which we expect to have a better understanding of the additional steps and the time required to obtain approval.

Remoxy^® is a unique long-acting formulation of oral oxycodone with a proposed indication for the management of moderate to severe pain when a continuous, around-the-clock, opioid analgesic is needed for an extended period of time. This formulation uses the Oradur^tm platform technology which provides a unique physical barrier that is designed to provide controlled pain relief and resist certain common methods used to extract the opioid more rapidly than intended as can occur with products currently on the market. Common methods used to cause a rapid extraction of an opioid include crushing, chewing and dissolution in alcohol. These methods are typically used to cause failure of the controlled release dosage form, resulting in “dose dumping” of oxycodone, or the immediate release of the active drug.

Acurox^® Tablets

An NDA for Acurox^® (oxycodone HCl/niacin) Tablets was submitted to the FDA in December 2008. Acurox^® Tablets, a patented, orally administered, immediate release tablet containing oxycodone HCl as its sole active analgesic ingredient, has a proposed indication for the relief of moderate to severe pain. Acurox^® uses the patented Aversion^® Technology of Acura Pharmaceuticals, Inc. (“Acura”), which is designed to deter misuse and abuse by intentional swallowing of excess quantities of tablets, intravenous injection of dissolved tablets and nasal snorting of crushed tablets. Attempts to extract oxycodone from an Acurox^® Tablet by dissolving it in liquid results in the formation of a viscous gel which is intended to sequester the opioid and deter I.V. injection. Crushing an Acurox^® Tablet for the purposes of nasal snorting releases an ingredient that is intended to cause nasal irritation and thereby discourage this method of misuse and abuse. Swallowing excessive numbers of Acurox^® Tablets releases niacin in quantities that are intended to cause unpleasant and undesirable side effects that may potentially deter this method of misuse and abuse.

CorVue^tm (binodenoson) for injection

In December 2008, we submitted an NDA for CorVue^tm to the FDA. CorVue^tm is a cardiac pharmacologic stress SPECT (single-photon-emission computed tomographic) imaging agent with a proposed indication for use in patients with or at risk for coronary artery disease who are unable to perform a cardiac exercise stress test. In the NDA, we are requesting FDA approval of CorVue^tm as an adjunct to non-invasive myocardial

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perfusion imaging tests to detect perfusion abnormalities in patients with known or suspected coronary artery disease.

T-62

In December 2008, we initiated a Phase II clinical trial program evaluating the efficacy and safety of T-62, our investigational oral drug formulation for the treatment of neuropathic pain. T-62, a new chemical entity, is an adenosine A1 allosteric enhancer that is intended to increase the effectiveness of the body’s endogenous adenosine to treat neuropathic pain. The Phase II clinical trial is a multicenter, randomized, double-blind, placebo-controlled study assessing the analgesic efficacy and safety of T-62 in subjects with postherpetic neuralgia and its associated pain. The study is expected to enroll approximately 130 patients in up to 20 study centers and will evaluate two doses of T-62 and placebo utilizing a parallel design. Each patient will complete a 7-day screening period, a 28-day treatment period, and a 14-day post-treatment period.

Branded Prescription Pharmaceuticals — Promoted Portfolio Developments

Avinza^®

New mandates of the Food and Drug Administration Amendments Act of 2007 (FDAAA) authorize the FDA to require a risk evaluation and mitigation strategy (REMS) as part of the new drug approval process if the agency believes that it is needed to ensure that a proposed new drug’s benefits outweigh its risks. The law also authorizes the agency to require a REMS for certain drugs approved before FDAAA was signed into law. A REMS can include a Medication Guide, Patient Package Insert, a communication plan, elements to ensure safe use and an implementation schedule, and must include a timetable for assessment of the REMS. Elements to ensure safe use include requiring that: healthcare providers have particular training or be certified, pharmacies, practitioners or healthcare settings that dispense the drug be specially certified, the drug be dispensed to patients only in certain healthcare settings, the drug be dispensed to patients with evidence of safe use conditions, each patient be subject to certain monitoring, and/or each patient using the drug be enrolled in a registry.

On February 6, 2009, the FDA sent a letter to the 16 manufacturers of previously approved, currently marketed long-acting opioid drug products, including us as manufacturer of Avinza^®, indicating that this class of drugs will be required to have a REMS. FDA has determined that a REMS is required to ensure that the benefits outweigh the risks of: 1) use of certain opioid products in non-opioid tolerant individuals; 2) abuse; and 3) overdose, both accidental and intentional. The agency has announced its intention to consult all relevant stakeholders, including manufacturers, pharmacies, healthcare practitioners, patient groups and others in developing this class-wide REMS of long-acting opioids. In the first of a series of such meetings, the FDA has invited those companies that market the affected opioid drugs to meet with the agency on March 3, 2009 to discuss development of such a class-wide REMS.

King currently has a Risk Management Program (RMP) in place for Avinza^® consisting of an Appropriate Use and Communication Program, Monitoring and Surveillance, Research and Evaluation. King’s Risk Management Team (RMT) meets every 6 weeks to review data collected on any reported misuse, abuse and diversion of Avinza^®. It is not possible at this time to determine whether or in what way the consideration of a class-wide REMS for all long-acting opioids will change the elements of King’s current risk management program for Avinza^® or how any such changes might affect the marketing or sales of Avinza^®.

As discussed elsewhere in this report, King has NDAs for two long-acting opioid products, Embeda^tm and Remoxy^®, under review by the FDA. Both of these applications include comprehensive proposals for REMS for those products. It is not possible at this time to determine what, if any, effect the FDA’s ongoing process for developing class-wide REMS for previously approved, currently marketed long-acting opioids will have on the FDA’s review timeline of the pending NDAs for Embeda^tm and/or Remoxy^®, or their future market potential.

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Thrombin-JMI^®

Beginning in the fourth quarter of 2007, Thrombin-JMI^®, our bovine thrombin product, faced new competition. A human thrombin product entered the market in the fourth quarter of 2007 and a recombinant human thrombin entered the market during the first quarter of 2008.

Sonata^®

In June 2008, a third party entered the market with a generic substitute for Sonata^® following the expiration of our patent covering Sonata^®.

Industries

The global human pharmaceutical and animal health industries are highly competitive and each includes a variety of participants, including large and small branded pharmaceutical companies, specialty and niche-market human pharmaceutical and/or animal health companies, biotechnology firms, large and small research and drug development organizations, and generic drug manufacturers. These participants compete on a number of bases, including technological innovation, clinical efficacy, safety, convenience or ease of administration and cost-effectiveness. In order to promote their products, industry participants devote considerable resources to advertising, marketing and sales force personnel, distribution mechanisms and relationships with medical and research centers, physicians, patient advocacy and support groups, veterinarians, commercial animal food manufacturers, wholesalers and integrated cattle, swine and poultry producers.

The human pharmaceutical industry is affected by the following factors, among others:

•  the aging of the patient population, including diseases specific to the aging process and demographic factors, including obesity, diabetes, cardiovascular disease, and patient and physician demand for products that meet chronic or unmet medical needs;

•  technological innovation, both in drug discovery and corporate processes;

•  merger and acquisition activity whereby pharmaceutical companies acquire one another, biotechnology companies, or particular products;

•  cost containment and downward price pressure from managed care organizations and governmental entities, both in the United States and in other countries;

•  increasing drug development, manufacturing and compliance costs for pharmaceutical producers;

•  the actions of generic pharmaceutical companies and challenges to patent protection and sales exclusivity;

•  more frequent product liability litigation;

•  increased governmental scrutiny of the healthcare sector, including issues of patient safety, cost, efficacy and reimbursement/insurance matters; and

•  the cost of advertising and marketing, including direct-to-consumer advertising on television and in print.

The animal health industry is affected by the following factors, among others:

•  technological innovation, both in drug discovery and corporate processes;

•  merger and acquisition activity whereby animal health companies acquire one another, biotechnology companies, or particular products;

•  cost containment and downward price pressure;

•  increased drug development, manufacturing and compliance costs for producers of animal health products;

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•  more frequent product liability litigation; and

•  increased governmental scrutiny of the sector, including governmental restrictions on the use of antibiotics in certain food-producing animals.

Sales and Marketing

Branded Prescription Pharmaceuticals

The commercial operations organization for our branded prescription pharmaceuticals business, which includes sales and marketing, is based in Bridgewater, New Jersey. We have a sales force consisting of approximately 720 employees in the United States and Puerto Rico. We distribute our branded prescription pharmaceutical products primarily through wholesale pharmaceutical distributors. These products are ordinarily dispensed to the public through pharmacies as a result of prescriptions written by physicians and other licensed practitioners. Our marketing and sales promotions for branded prescription pharmaceutical products principally target general/family practitioners, internal medicine physicians, neurologists, pain specialists, surgeons and hospitals through detailing and sampling to encourage physicians to prescribe our products. The sales force is supported by telemarketing and direct mail, as well as by advertising in trade publications and representation at regional and national medical conventions. We identify and target physicians using data available from suppliers of prescriber prescription data. The marketing and distribution of these products in foreign countries generally requires the prior registration of the products in those countries. In those situations when we seek to sell one of our branded prescription pharmaceutical products in a market outside of the United States, we generally enter into distribution agreements with companies with established marketing and distribution capabilities in those territories since we do not have a distribution network in place for distribution outside the United States, Canada and Puerto Rico.

Similar to other pharmaceutical companies, our principal customers for our branded prescription pharmaceutical products are wholesale pharmaceutical distributors. The wholesale distributor network for branded prescription pharmaceutical products has in recent years been subject to increasing consolidation, which has increased our, and other industry participants’, customer concentration. In addition, the number of independent drug stores and small chains has decreased as retail consolidation has occurred. For the year ended December 31, 2008, approximately 72% of our gross sales were attributable to three key wholesalers: McKesson Corporation (30%), Cardinal/Bindley (28%), and Amerisource Bergen Corporation (14%).

Meridian Auto-Injector

We have a supply agreement with Dey, L.P., in which we granted Dey the exclusive right to market, distribute, and sell EpiPen^® worldwide. The supply agreement expires December 31, 2015. In March 2006, we acquired substantially all of the assets of Allerex Laboratory LTD. The primary asset purchased from Allerex was the exclusive right to market and sell EpiPen^® throughout Canada. We also obtained from Dey, L.P. an extension of those exclusive rights to market and sell EpiPen^® in Canada through 2015. Accordingly, through a limited team of sales professionals, we market EpiPen^® to allergists, pediatricians, internal medicine physicians, general practitioners and pharmacists across Canada.

Through a team of inside sales professionals, we market a portfolio of acute care auto-injector products to the pre-hospital emergency services market, which includes U.S. federal, state and local governments, public health agencies, emergency medical personnel and first responders.

Animal Health

Our animal health products are marketed through a staff of approximately 100 technically trained sales and technical service and marketing employees, many of whom are veterinarians and nutritionists. We have sales offices in the U.S., Europe, Canada, Mexico, South America and Asia. Elsewhere, our animal health products are sold primarily through the use of distributors and other third-party sales companies. Sales are made principally to commercial animal feed manufacturers, wholesalers and integrated cattle, swine and poultry producers.

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Although the customer base for our animal health products is not significantly concentrated, consolidation is taking place. Accordingly, as consolidation continues, our animal health business may become more dependent on certain individual customers.

Manufacturing

Branded Prescription Pharmaceuticals and Meridian Auto-Injector Segments

We manufacture certain of our own branded prescription pharmaceutical products at facilities located in Bristol, Tennessee; Rochester, Michigan; Middleton, Wisconsin; and St. Petersburg, Florida. Our Meridian Auto-Injector manufacturing facility is located in St. Louis, Missouri. These facilities have manufacturing, packaging, laboratory, office and warehouse space. We are licensed by the Drug Enforcement Agency, which we refer to as the “DEA,” a division of the Department of Justice, to procure and produce controlled substances. We maintain an operational excellence program utilizing Six Sigma and lean manufacturing techniques to identify and execute cost-saving and process-improvement initiatives.

We are capable of producing a broad range of dosage forms, including injectables, tablets and capsules, creams and ointments. We believe this manufacturing versatility allows us to pursue drug development and product line extensions more efficiently. However, currently many of our product lines, including Skelaxin^®, Thrombin-JMI^®, Avinza^®, Flector^® Patch and Synercid^® are manufactured for us by third parties. Our branded prescription pharmaceutical and Meridian Auto-Injector facilities generally operate at moderate capacity utilization rates except for the Bristol facility that currently has a low level of capacity utilization. Although the capacity utilization at our Bristol facility was lower in 2008 than in previous years, we expect that the capacity utilization at that location will increase in future years. We are transferring the production of Levoxyl^® from our St. Petersburg facility to our Bristol facility. Following the transfer, which we expect to complete in 2009, we will close our St. Petersburg facility. In addition, we plan to increase some of the utilization at our Bristol facility by manufacturing some of the new products we expect to emerge from our pipeline in the near future.

In addition to manufacturing, we have fully integrated manufacturing support systems including quality assurance, quality control, regulatory management and logistics. We believe that these support systems enable us to maintain high standards of quality for our products and simultaneously deliver reliable goods to our customers on a timely basis.

We require a supply of quality raw materials and components to manufacture and package drug products. Generally, we have not had difficulty obtaining raw materials and components from suppliers. Currently, we rely on more than 500 suppliers to deliver the necessary raw materials and components for our products.

Animal Health Segment

We produce our animal health products in several manufacturing facilities, including those located in Chicago Heights, Illinois, which contains a modern fermentation and recovery plant; Shenzhou, China; Yantai, China; Longmont, Colorado, which produces the majority of our soluble antibiotics and vitamins; Willow Island, West Virginia, which produces unblended chlortetracycline (“CTC”) and lasalocid; Van Buren, Arkansas, which blends Bio-Cox^®; Salisbury, Maryland, which blends Avatec^® and Bovatec^®; and Eagle Grove, Iowa, which formulates Aureomycin^® products. Process improvement and manufacturing development is performed primarily at the Chicago Heights and Willow Island facilities. In addition, we make significant use of third-party facilities. Our animal health facilities generally operate at moderate capacity utilization rates except the Chicago Heights and Willow Island facilities, which currently have a high level of capacity utilization, and the Yantai facility, which currently has a low level of capacity utilization.

Research and Development

Branded Prescription Pharmaceuticals and Meridian Auto-Injector Segments

We are engaged in the development of chemical compounds, including new chemical entities, which provide us with strategic pipeline opportunities for the commercialization of new branded prescription

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pharmaceutical products. In addition to developing new chemical compounds, we pursue strategies to enhance the value of existing products by developing new uses, formulations, and drug delivery technology that may provide additional benefits to patients and improvements in the quality and efficiency of our manufacturing processes.

We invest in research and development because we believe it is important to our long-term growth. We presently employ approximately 100 people in research and development, including pre-clinical and toxicology experts, pharmaceutical formulation scientists, clinical development experts, medical affairs personnel, regulatory affairs experts, data scientists/statisticians and project managers.

We outsource a substantial portion of our non-critical research and development activities. This approach provides us with substantial flexibility and allows high efficiency while minimizing internal fixed costs. Utilizing this approach, we supplement our internal efforts by collaborating with independent research organizations, including educational institutions and research-based pharmaceutical and biotechnology companies, and contracting with other parties to perform research in their facilities. We use the services of physicians, hospitals, medical schools, universities, and other research organizations worldwide to conduct clinical trials to establish the safety and efficacy of new products. We seek investments in external research and technologies that hold the promise to complement and strengthen our own research efforts. These investments can take many forms, including in-licensing arrangements, development agreements, joint ventures and the acquisition of products in development.

Drug development is time-consuming and expensive. Only a small percentage of chemical compounds discovered by researchers prove to be both medically effective and safe enough to become an approved medicine. The process from discovery to regulatory approval typically takes 10 to 15 years or longer. Drug candidates can fail at any stage of the process, and even late-stage product candidates frequently fail to receive regulatory approval.

Clinical trials are conducted in a series of sequential phases, with each phase designed to address a specific research question. In Phase I clinical trials, researchers test a new drug or treatment in a small group of people to evaluate the drug’s safety, determine a safe dosage range and identify side effects. In Phase II clinical trials, researchers give the drug or treatment to a larger population to assess effectiveness and to further evaluate safety. In Phase III clinical trials, researchers give the drug or treatment to an even larger population to confirm its effectiveness, monitor side effects, compare it to commonly used treatments and collect information that will allow the drug or treatment to be used safely. The results of Phase III clinical trials are pivotal for purposes of obtaining FDA approval of a new product. Phase IV clinical trials are typically conducted after FDA approval in order to broaden the understanding of the safety and efficacy of a drug as utilized in actual clinical practice or to explore alternative or additional uses.

Our development projects, including those for which we have collaboration agreements with third parties, include the following:

•  Embeda^tm, a novel formulation of long-acting morphine with a proposed indication for the management of moderate to severe chronic pain, is specifically designed to resist certain common methods of misuse and abuse associated with long-acting morphine products that are currently available. The NDA for Embeda^tm was submitted to the FDA in June 2008. In December 2008, the FDA informed us that it is continuing its review of the Embeda^tm NDA.

•  Remoxy^®, a novel formulation of long-acting oxycodone with a proposed indication for the treatment of moderate to severe chronic pain, is specifically designed to resist certain common methods of misuse and abuse associated with long-acting oxycodone products that are currently available. In December 2008, the FDA issued a Complete Response Letter with respect to the NDA for Remoxy^®, requiring additional non-clinical information to support approval of the product. We are working with our partner, Pain Therapeutics, Inc., to complete our assessment of the Complete Response Letter and prepare a written response. We together with PTI plan to meet with the FDA during the second quarter of 2009 to discuss our response, following which we expect to have a better understanding of the additional steps and the time required to obtain approval.

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•  Acurox^® Tablets, a novel formulation of immediate release oxycodone with a proposed indication for the treatment of moderate to severe pain, is specifically designed to deter certain common methods of misuse and abuse associated with immediate release oxycodone products that are currently available. Our partner, Acura, submitted the NDA for Acurox^® in December 2008 and requested priority review.

•  CorVue^tm (binodenoson) is our next generation cardiac pharmacologic stress-imaging agent. We submitted an NDA to the FDA in December 2008.

•  Ketoprofen in Transfersome^® gel, our topical non-steroidal anti-inflammatory drug, entered Phase III clinical trials in the second quarter of 2008.

•  Vanquix^tm, a diazepam-filled auto-injector with a proposed indication for the treatment of acute, repetitive epileptic seizures, is currently in Phase III clinical trials.

•  T-62, an investigational drug for the treatment of neuropathic pain, is currently in Phase II clinical trials.

•  Eladur^®, an investigational transdermal bupivacaine patch for the treatment of pain associated with postherpetic neuralgia, is currently in Phase II clinical trials.

•  Oxycodone NT, a novel formulation of long-acting oxycodone for the treatment of moderate to severe chronic pain, is currently in early stages of clinical development. Oxycodone NT is specifically designed to resist certain common methods of misuse and abuse associated with long-acting oxycodone products that are currently available.

•  Hydrocodone NT, a novel formulation of long-acting hydrocodone for treatment of moderate-to-severe chronic pain, is currently in early stages of clinical development. Hydrocodone NT is specifically designed to resist certain common methods of misuse and abuse associated with long-acting hydrocodone products that are currently available.

Our research and development expenses totaled $145.2 million in 2008 compared to $149.4 million in 2007 and $143.6 million in 2006, excluding research and development in-process at the time of acquisition of a product. These amounts also exclude research and development expenses incurred by Alpharma since it was not acquired until the end of December 2008. In-process research and development expenses were $598.5 million for the year ended December 31, 2008, $35.3 million for the year ended December 31, 2007 and $110.0 million for the year ended December 31, 2006. In-process research and development represents the actual cost of acquiring rights to branded prescription pharmaceutical projects in development from third parties, which costs we expense at the time of acquisition. The in-process research and development expenses in 2008 primarily relate to our acquisition of Alpharma on December 29, 2008.

Animal Health Segment

Our product portfolio enhancement initiatives with respect to our animal health business focus on activities complementary to in-licensing and co-developing technology through third parties and expanding the geographic reach of our current product line with new registrations in new jurisdictions. In addition, we conduct technical product development activities at our Willow Island, West Virginia, Chicago Heights, Illinois and Bridgewater, New Jersey facilities, as well as through contract research organizations and independent research facilities. We presently employ approximately 20 research and development professionals in our animal health business.

Government Regulation

Branded Prescription Pharmaceuticals and Meridian Auto-Injector Segments

Our business and our products are subject to extensive and rigorous regulation. Our existing and investigational products are subject to pre-market approval requirements. New drugs are approved under, and are subject to, the Food, Drug and Cosmetics Act (“FDC Act”) and related regulations. Biological drugs are

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subject to both the FDC Act and the Public Health Service Act, which we refer to as the “PHS Act,” and related regulations. Biological drugs are licensed under the PHS Act.

At the federal level, we are principally regulated by the FDA as well as by the DEA, the Consumer Product Safety Commission, the Federal Trade Commission (“FTC”), the Occupational Safety and Health Administration, and the U.S. Environmental Protection Agency (“EPA”). The FDC Act, the regulations promulgated thereunder, and other federal and state statutes and regulations govern, among other things, the development, testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of branded prescription pharmaceutical products.

The processes by which regulatory approvals are obtained from the FDA to market and sell a new product are complex, require a number of years and involve the expenditure of substantial resources. Compounds or potential new products that appear promising in development can prove unsuccessful and fail to receive FDA approval, fail to receive approval of specific anticipated indications, be substantially delayed, or receive unfavorable product labeling (including limitations on indications or stringent safety warnings), each of which can materially affect the commercial value of the product. Additional factors that may materially affect the success and/or timing of regulatory approval of a new product, and its commercial potential, include the regulatory filing strategies employed, the timing of and delays in FDA review, and the intervention by third parties in the approval process through administrative or judicial means.

When we acquire the right to market an existing approved branded prescription pharmaceutical product, both we and the former application holder are required to submit certain information to the FDA. This information, if adequate, results in the transfer of marketing rights to us. We are also required to report to the FDA, and sometimes acquire prior approval from the FDA for, certain changes in an approved NDA or Biologics Licensing Application, as set forth in the FDA’s regulations. When advantageous, we transfer the manufacture of acquired branded prescription pharmaceutical products to other manufacturing facilities, which may include manufacturing assets we own, after regulatory requirements are satisfied. In order to transfer manufacturing of acquired products, the prospective new manufacturing facility must demonstrate, through the filing of information with the FDA, that it can manufacture the product in accordance with current Good Manufacturing Practices, referred to as “cGMPs,” and the specifications and conditions of the approved marketing application. There can be no assurance that the FDA will grant necessary approvals in a timely manner, if at all.

The FDA also mandates that drugs be manufactured, packaged and labeled in conformity with cGMPs at all times. In complying with cGMPs, manufacturers must continue to expend time, money and effort in production, record keeping and quality control to ensure that the products meet applicable specifications and other requirements to ensure product safety and efficacy.

The FDA and other government agencies periodically inspect drug manufacturing facilities to ensure compliance with applicable cGMP and other regulatory requirements. Failure to comply with these statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing, recall of product or seizure of product. We must report adverse experiences associated with the use of our products by patients to the FDA. The FDA could impose market restrictions on us such as labeling changes or product removal as a result of significant reports of unexpected, severe adverse experiences. Product approvals may be withdrawn if we fail to comply with regulatory requirements or if there are problems with the safety or efficacy of the product.

The federal government has extensive enforcement powers over the activities of pharmaceutical manufacturers, including the authority to withdraw product approvals at any time, commence actions to seize and prohibit the sale of unapproved or non-complying products, halt manufacturing operations that are not in compliance with cGMPs, and impose or seek injunctions, voluntary or involuntary recalls, and civil monetary and criminal penalties. A restriction or prohibition on sales or withdrawal of approval of products marketed by us could materially adversely affect our business, financial condition or results of operations.

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Certain of the branded prescription pharmaceutical products we manufacture and sell are “controlled substances” as defined in the Controlled Substances Act and related federal and state laws. These laws establish certain security, licensing, record keeping, reporting and personnel requirements administered by the DEA and state authorities. The DEA has dual missions of law enforcement and regulation. The former deals with the illicit aspects of the control of abusable substances and the equipment and raw materials used in making them. The DEA shares enforcement authority with the Federal Bureau of Investigation, another division of the Department of Justice. The DEA’s regulatory responsibilities are concerned with the control of licensed manufacturers, distributors and dispensers of controlled substances, the substances themselves and the equipment and raw materials used in their manufacture and packaging in order to prevent these articles from being diverted into illicit channels of commerce. We maintain appropriate licenses and certificates with the DEA and applicable state authorities in order to engage in the development, manufacturing and distribution of pharmaceutical products containing controlled substances.

The distribution and promotion of pharmaceutical products is subject to the Prescription Drug Marketing Act (“PDMA”), a part of the FDC Act, which regulates distribution activities at both the federal and state levels. Under the PDMA and its implementing regulations, states are permitted to require registration of manufacturers and distributors who provide pharmaceuticals even if these manufacturers or distributors have no place of business within the state. States are also permitted to adopt regulations limiting the distribution of product samples to licensed practitioners, and in most states, distributing samples of controlled substances to licensed practitioners is prohibited. The PDMA also imposes extensive licensing, personnel record keeping, packaging, labeling, product handling, storage and security requirements intended to prevent the sale of pharmaceutical product samples or other diversions of samples.

A number of states have passed laws specifically designed to track and regulate specified activities of pharmaceutical companies. Other states and the federal government presently have pending legislation that will have similar effects. Some of these state laws require the tracking and reporting of advertising or marketing activities and spending within the state. Others limit spending on items provided to healthcare providers or state officials.

Animal Health Segment

Our animal health business and products are subject to extensive and rigorous regulation by federal, state, local and foreign agencies. Additionally, our operations are subject to complex federal, state, local and foreign laws and regulations concerning the environment and occupational and health safety.

Animal drugs must be reviewed and receive registration from the FDA for marketing in the United States and approval or registration by similar regulatory agencies in other countries, most notably those in Canada, the European Union, Asia and Latin America. Regulatory approvals for products to be used in food producing animals are complex due to, among other things, the possible impact on humans. Government regulation of our animal health products includes detailed inspections of, and controls over, testing, manufacturing, safety, efficacy, labeling, storage, record keeping, reporting, approval, advertising, promotion, sale and distribution.

Approval also must be granted in the United States for the use of an animal drug in combination with other animal drugs in feeds. Such combination approval generally requires the cooperation of other manufacturers to consent to authorize the FDA to refer to such manufacturer’s New Animal Drug Application (or NADA) in support of our regulatory submissions. This consent is necessary to obtain approval from the FDA for the use of an animal drug in combination with other animal drugs in feeds. To date, we have been successful in obtaining the cooperation of third parties to seek combination approval for many products, which extends the reach and potential market share of such products.

Environmental Matters

Our operations are subject to numerous and increasingly stringent federal, state, local and foreign environmental laws and regulations concerning, among other things, the generation, handling, storage,

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transportation, treatment and disposal of toxic and hazardous substances and the discharge of pollutants into the air and water. Environmental permits and controls are required for some of our operations and these permits are subject to modification, renewal and revocation by the issuing authorities. We believe that our facilities are in substantial compliance with our permits and environmental laws and regulations and do not believe that future compliance with current environmental laws will have a material adverse effect on our business, financial condition or results of operations. Our environmental capital expenditures and costs for environmental compliance were immaterial in 2008 and 2007, but may increase in the future as a result of changes in environmental laws and regulations or as a result of increased manufacturing activities at any of our facilities.

Competition

Branded Prescription Pharmaceuticals and Meridian Auto-Injector Segments

We compete with numerous other pharmaceutical companies, including large, global pharmaceutical companies, for the acquisition of products and technologies in later stages of development. We also compete with other pharmaceutical companies for currently marketed products and product line acquisitions. Additionally, our products are subject to competition from products with similar qualities. Our branded prescription pharmaceutical products may be subject to competition from alternate therapies during the period of patent protection and thereafter from generic equivalents. The manufacturers of generic products typically do not bear the related research and development costs and consequently are able to offer such products at considerably lower prices than the branded equivalents. There are, however, a number of factors which enable some products to remain profitable once patent protection has ceased. These include the establishment of a strong brand image with the prescriber or the consumer, supported by the development of a broader range of alternative formulations than the manufacturers of generic products typically supply.

Some of our branded prescription pharmaceutical products currently face competition from generic substitutes and others may face competition from generic substitutes in the future. For a manufacturer to launch a generic substitute, it must prove to the FDA that the branded prescription pharmaceutical product and the generic substitute are therapeutically equivalent.

The FDA requires that generic applicants claiming invalidity or non-infringement of patents listed by a NDA holder give the NDA holder notice each time an abbreviated new drug application (“ANDA”) which claims invalidity or non-infringement of listed patents is either submitted or amended. If the NDA holder files a patent infringement suit against the generic applicant within 45 days of receiving such notice, the FDA is barred (or stayed) from approving the ANDA for 30 months unless specific events occur sooner. To avoid multiple 30-month stays for the same branded drug, the relevant provisions of the Hatch-Waxman Act (21 U.S.C. §§ 355(j)(2) and (5)) indicate that a 30-month stay will only attach to patents that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, which we refer to as the “FDA’s Orange Book,” at the time an ANDA is originally filed. Although the ANDA filer is still required to certify against a newly listed patent, and the NDA holder can still bring suit based upon infringement of that patent, such a suit will not trigger an additional 30-month stay of FDA approval of the ANDA.

Patents that claim a composition of matter relating to a drug or certain methods of using a drug are required to be listed in the FDA’s Orange Book. The FDA’s regulations prohibit listing of certain types of patents. Thus, some patents that may issue are not eligible for listing in the FDA’s Orange Book and thus not eligible for protection by a 30-month stay of FDA approval of the ANDA.

Animal Health Segment

Our animal health products compete in a highly competitive global market on the basis of brand name, customer service and price. Some of our competitors in the animal health industry offer a wide range of products with various therapeutic and production enhancing qualities. Some of the principal competitors include Eli Lilly and Company (Elanco), Pennfield, Phibro Animal Health, Novartis and Huvepharma. Given

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our strong market position in MFAs and experience in obtaining requisite FDA approvals for combination claims, we believe we have a competitive advantage in marketing MFAs under the FDA approved combination clearances. No assurances can be given, however, that third parties will continue to cooperate in seeking combination approval for our products and we expect additional entrants in the generic MFA market in the future. More than half of our animal health products are sold in the U.S. and we have a growing presence in Europe, Mexico, Canada, South America and Asia.

Intellectual Property

Patents, Licenses and Proprietary Rights

The protection of discoveries in connection with our development activities is critical to our business. The patent positions of pharmaceutical companies, including ours, are uncertain and involve legal and factual questions which can be difficult to resolve. We seek patent protection in the United States and selected foreign countries where and when appropriate.

Skelaxin^® has three method-of-use patents listed in the FDA’s Orange Book, two of which expire in December 2021 and the last of which expires in February 2026. On January 20, 2009, the U.S. District Court for the Eastern District of New York issued an Order ruling invalid United States Patent Nos. 6,407,128 and 6,683,102, two patents relating to Skelaxin^®, our branded muscle relaxant. The Order was issued without benefit of a hearing in response to Eon Labs’ motion for summary judgment. We plan to appeal, upon the entry of an appropriate judgment, and we intend to vigorously defend our interests. In addition, in January 2008, we entered into an agreement with CorePharma providing it with a license to launch an authorized generic version of Skelaxin^® in December 2012 or earlier under certain conditions.

Avinza^® has a formulation patent listed in the FDA’s Orange Book that expires in November 2017.

Flector^® Patch has a formulation patent listed in the FDA’s Orange Book that expires in April 2014.

We own the intellectual property rights associated with Meridian’s dual-chambered auto-injector and injection process, which include a patent in the United States that expires in April 2010.

We receive royalties on sales of Adenoscan^®, a product that we developed. We own one patent on Adenoscan^® with an expiration date of May 2009. We also have certain rights tied to another patent covering this product which does not expire until 2015. In October 2007, we entered into an agreement with Astellas and a subsidiary of Teva Pharmaceutical Industries Ltd. providing Teva with the right to launch a generic version of Adenoscan^® pursuant to a license in September 2012 or earlier under certain conditions.

In addition to the intellectual property for the currently marketed products described above, we also have created, acquired or licensed intellectual property related to various products currently under development. For example, in connection with our collaborative agreement with Pain Therapeutics, Inc., we have acquired an exclusive license (subject to preexisting license rights granted by Pain Therapeutics) to certain intellectual property rights related to opioid formulations, including Remoxy^®, which is currently in development for the treatment of moderate to severe chronic pain. In connection with our collaborative agreement with Acura Pharmaceuticals, Inc., we have acquired a license to intellectual property rights related to the Aversion^® Technology platform. We acquired exclusive rights to patents related to CorVue^tm. We acquired certain intellectual property rights from Mutual Pharmaceutical Company, Inc. related to metaxalone, the active pharmaceutical ingredient in Skelaxin^®. As part of our acquisition of Alpharma, we have acquired rights to intellectual property related to several products in development. For example, we obtained rights to intellectual property related to Embeda^tm. In connection with a collaboration agreement with IDEA AG, we obtained rights to intellectual property related to Transfersome^® gel technology. Finally, in connection with a collaboration agreement with Durect, we obtained rights to a bupivacaine patch (Eladur^®).

We also rely upon trade secrets, unpatented proprietary know-how and continuing technological innovation to develop and sustain our competitive position. There can be no assurance that others will not

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independently develop substantially equivalent proprietary technology and techniques or otherwise gain access to our trade secrets or disclose the technology or that we can adequately protect our trade secrets.

Trademarks

We sell our branded products under a variety of trademarks. We believe that we have valid proprietary interests in all currently used trademarks, including those for our principal branded prescription pharmaceutical and animal health products registered in the United States and selected foreign countries where and when appropriate.

Backlog

There was no material backlog as of February 26, 2009.

Directors and Executive Officers

Name	Age		Position with the Company
Brian A. Markison		49		President, Chief Executive Officer and Chairman of the Board of Directors
Earnest W. Deavenport, Jr.		70		Director
Elizabeth M. Greetham		59		Director
Philip A. Incarnati		54		Director
Gregory D. Jordan, Ph.D.		57		Director
R. Charles Moyer, Ph.D.		63		Director
D. Greg Rooker		61		Director
Ted G. Wood		71		Lead Independent Director
Joseph Squicciarino		52		Chief Financial Officer
Stephen J. Andrzejewski		43		Chief Commercial Officer
Frederick Brouillette, Jr.		57		Corporate Compliance Officer
Eric J. Bruce		52		President, Alpharma Animal Health
Dr. Eric G. Carter		57		Chief Science Officer
James W. Elrod		48		Chief Legal Officer, Secretary
James E. Green		49		Executive Vice President, Corporate Affairs

Directors

Brian A. Markison was elected as Chairman of the Board in May 2007. He has been President and Chief Executive Officer and a director since July 2004. He joined King as Chief Operating Officer in March 2004. Mr. Markison served in various positions with Bristol-Myers Squibb beginning in 1982, most recently as President of Bristol-Myers Squibb’s Oncology, Virology and Oncology Therapeutics Network businesses. Between 1998 and 2001, he served variously as Senior Vice President, Neuroscience/Infectious Disease; President, Neuroscience/Infectious Disease/Dermatology; and Vice President, Operational Excellence and Productivity. He also held various sales and marketing positions. Mr. Markison is a member of the Board of Directors of Immunomedics, Inc., a publicly held corporation. He graduated from Iona College in 1982 with a Bachelor of Science degree.

Earnest W. Deavenport, Jr. has served as a director since May 2000. In 2002, he retired as Chairman of the Board and Chief Executive Officer of Eastman Chemical Company, Kingsport, Tennessee, where he was employed in various capacities since 1960. He was Chairman of the National Association of Manufacturers in 1998 and is currently a member of the National Academy of Engineering. Mr. Deavenport is also a member of the boards of directors of Zep, Inc. and Regions Financial Corporation, each a publicly-held company. Mr. Deavenport graduated from the Massachusetts Institute of Technology with a Master of Science degree in Management in 1985 and from Mississippi State University with a Bachelor of Science degree in Chemical Engineering in 1960.

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Elizabeth M. Greetham has served as a director since November 2003. She retired as the Chief Executive Officer and President of ACCL Financial Consultants Ltd. in December 2007. From 1998 until 2004 she was a director of DrugAbuse Sciences, Inc. and served as its Chief Executive Officer from August 2000 until 2004 and as Chief Financial Officer and Senior Vice President, Business Development from April 1999 to August 2000. Prior to joining DrugAbuse Sciences, Inc., Ms. Greetham was a portfolio manager with Weiss, Peck & Greer, an institutional investment management firm, where she managed the WPG Life Sciences Funds, L.P., which invests in select biotechnology stocks. She was previously a consultant to F. Eberstadt & Co. In total, Ms. Greetham has over 25 years of experience as a portfolio manager and health care analyst in the United States and Europe. Ms. Greetham earned a Master of Arts (Honours) degree in Economics from the University of Edinburgh, Scotland in 1971.

Philip A. Incarnati has served as a director of King since November 2006. He has served as President and Chief Executive Officer of McLaren Health Care Corporation, an integrated health care system, since 1989. Before joining McLaren, Mr. Incarnati held top-level executive positions with the Wayne State University School of Medicine, Detroit Receiving Hospital and University Health Center, and Horizon Health System. Mr. Incarnati also serves on the board of Medical Staffing Network, Inc., a publicly-traded company, and on the boards of two privately-held companies, PHNS, Inc. and Reliant Renal Care Inc. Mr. Incarnati earned both a Bachelor’s Degree and a Master’s Degree in management and finance from Eastern Michigan University (EMU). He has been a member of the EMU Board of Regents since 1992, when he was appointed by former Michigan Governor John Engler, serving as its Chairman from 1995 until 2005.

Gregory D. Jordan, Ph.D. has served as a director since June 2001. He has served as President of King College in Bristol, Tennessee since 1997, having joined the King College faculty in 1980. He received his Bachelor of Arts degree from Belhaven College in 1973; his Master of Arts and Divinity degrees from Trinity Evangelical Divinity School in 1976 and 1977, respectively; his Doctorate in Hebraic and Cognate Studies from Hebrew Union College Jewish Institute of Religion in 1987; and his Master of Business Administration degree from the Babcock Graduate School of Management at Wake Forest University in 2004.

R. Charles Moyer, Ph.D. has served as a director since December 2000. Dr. Moyer presently serves as Dean of the College of Business at the University of Louisville. He is Dean Emeritus of the Babcock Graduate School of Management at Wake Forest University, having served as Dean from 1996 until his retirement from this position in August 2003, and as a professor from 1988 until 2005. Dr. Moyer held the GMAC Insurance Chair of Finance at Wake Forest University. Prior to joining the faculty at Wake Forest in 1988, Dr. Moyer was Finance Department Chairman at Texas Tech University. Dr. Moyer earned his Doctorate in Finance and Managerial Economics from the University of Pittsburgh in 1971, his Master of Business Administration degree from the University of Pittsburgh in 1968 and his Bachelor of Arts degree in Economics from Howard University in 1967.

D. Greg Rooker has served as a director since October 1997. Mr. Rooker is the former owner and President of Family Community Newspapers of Southwest Virginia, Inc., Wytheville, Virginia, which consisted of six community newspapers and a national monthly motor sports magazine. He retired from this position in 2000. He is a co-founder of The Jason Foundation and Brain Injury Services of SWVA, Inc., each a non-profit organization providing services to brain injury survivors. Mr. Rooker serves as Secretary/Treasurer of The Jason Foundation and as a member of the Board of Directors of Brain Injury Services of SWVA, Inc. Mr. Rooker graduated from Northwestern University with a degree in Journalism in 1969.

Ted G. Wood has served as a director since August 2003 and as Lead Independent Director since May 2007. Mr. Wood was the Non-Executive Chairman from May 2004 until May 2007. He is retired from The United Company in Bristol, Virginia, where he served as Vice Chairman from January 2003 until August 2003. He previously served as President of the United Operating Companies from 1998 to 2002. Mr. Wood was previously a director of King from April 1997 to May 2000. From 1992 to 1993, he was President of Boehringer Mannheim Pharmaceutical Corporation in Rockville, Maryland. From 1993 to 1994, he was President of KV Pharmaceutical Company in St. Louis, Missouri. From 1975 to 1991, he was employed by SmithKline Beecham Corporation where he served as President of Beecham Laboratories from 1988 to 1989 and Executive Vice President of SmithKline from 1990 to 1991. Mr. Wood is also a member of the board of

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directors of Alpha Natural Resources, Inc., a publicly-held corporation. He graduated from the University of Kentucky with a Bachelor of Science degree in Commerce in 1960. In 1986 he completed the Advanced Management Program at Harvard University.

Executive Officers

Joseph Squicciarino has served as King’s Chief Financial Officer since June 2005. Prior to joining King, he was Chief Financial Officer — North America for Revlon, Inc. since March 2005. From February 2003 until March 2005 he served as Chief Financial Officer — International for Revlon International, Inc. He held the position of Group Controller Pharmaceuticals — Europe, Middle East, Africa with Johnson & Johnson from October 2001 until October 2002. He held a variety of positions with the Bristol-Myers Squibb Company and its predecessor, the Squibb Corporation, from 1979 until 2001, including Vice President Finance, International Medicines; Vice President Finance, Europe Pharmaceuticals & Worldwide Consumer Medicines; Vice President Finance, Technical Operations; and Vice President Finance, U.S. Pharmaceutical Group. Mr. Squicciarino also serves on the Board of Directors of Zep, Inc., a publicly held company. He is a Certified Public Accountant, a member of the New Jersey Society of Certified Public Accountants and a member of the American Institute of Certified Public Accountants. Mr. Squicciarino graduated from Adelphi University in 1978 with a Bachelor of Science degree in Accounting.

Stephen J. Andrzejewski has served as Chief Commercial Officer since October 2005. He was previously Corporate Head, Commercial Operations commencing in May 2004. Prior to joining King, Mr. Andrzejewski was Senior Vice President, Commercial Business at Endo Pharmaceuticals Inc. since June 2003. He previously served in various positions with Schering-Plough Corporation beginning in 1987, including Vice President of New Products and Vice President of Marketing, and had responsibility for launching the Claritin^® product. Mr. Andrzejewski graduated cum laude from Hamilton College with a Bachelor of Arts degree in 1987 and in 1992 graduated from New York University’s Stern School of Business with a Master of Business Administration degree.

Frederick Brouillette, Jr. has served as Corporate Compliance Officer since August 2003. He served as Executive Vice President, Finance from January 2003 until August 2003 and prior to that as Vice President, Risk Management beginning in February 2001. Before joining King, Mr. Brouillette, a Certified Public Accountant, was with PricewaterhouseCoopers for 4 years, serving most recently in that firm’s Richmond, Virginia office providing internal audit outsourcing and internal control consulting services. He was formerly a chief internal audit executive for two major public corporations and served for 12 years in the public accounting audit practice of Peat, Marwick Mitchell & Co., the predecessor firm to KPMG. Mr. Brouillette is a member of the Virginia Society of Certified Public Accountants, the American Institute of Certified Public Accountants, and the Institute of Internal Auditors. He graduated with honors from the University of Virginia’s McIntire School of Commerce in 1973 with a Bachelor of Science degree in accounting.

Eric J. Bruce has served as President, Alpharma Animal Health since February 2009. Previously he has served as Chief Technical Operations Officer since June 2005. Prior to joining King, Mr. Bruce was Vice President of Operations for Mallinckrodt Pharmaceuticals, a position he had occupied since 2000. Previously, he was Vice President of Manufacturing for Kendall Health Care from 1997 until 2000, and from 1996 until 1997 he held various positions with INBRAND, including that of Senior Vice President of Manufacturing. Mr. Bruce graduated from the Georgia Institute of Technology in 1978 with a Bachelor of Science degree in Industrial Management.

Eric G. Carter, M.D., Ph.D., has served as King’s Chief Science Officer since January 2007. Prior to joining King, he held several positions with GlaxoSmithKline commencing in 1999, most recently as Vice President and Global Head, Clinical Development and Medical Affairs, Gastroenterology, R&D. Dr. Carter has served as a Clinical Associate Professor at the University of North Carolina for the Division of Digestive Diseases and Nutrition, School of Medicine. He previously held academic positions with the University of California, where he was responsible for establishing and directing many research programs. After earning a bachelor’s degree in Biochemistry from the University of London, Dr. Carter received his medical degree from the University of Miami and a doctor of philosophy degree from the University of Cambridge. He obtained

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board certification from the American Board of Internal Medicine, Gastroenterology and Clinical Nutrition and has authored or co-authored more than 50 scientific publications.

James W. Elrod has served as Chief Legal Officer/General Counsel since February 2006 and Secretary since May 2005. He was Acting General Counsel from February 2005 to February 2006. He has worked in various positions with King since September 2003, including Vice President, Legal Affairs. Prior to joining King he served in various capacities at Service Merchandise Company, Inc. including Vice President, Legal Department. He previously practiced law in Nashville, Tennessee. Mr. Elrod earned a Juris Doctor degree from the University of Tennessee and a Bachelor of Arts degree from Berea College.

James E. Green has served as Executive Vice President, Corporate Affairs since April 2003. He was Vice President, Corporate Affairs commencing in June 2002 and was Senior Director, Corporate Affairs beginning in September 2000. Prior to joining King, he was engaged in the private practice of law for 15 years as a commercial transactions and commercial litigation attorney, having most recently served as the senior member of Green & Hale, a Professional Corporation, in Bristol, Tennessee. Mr. Green graduated from Southern Methodist University School of Law with a Juris Doctor degree in 1985 and Milligan College with a Bachelor of Science degree, cum laude, in 1982. He is licensed to practice law in Tennessee, Texas and Virginia.

Employees

As of February 23, 2009, we employed approximately 3,381 full-time and 11 part-time persons. Approximately 17 employees of the Rochester facility are covered by a collective bargaining agreement with United Steelworkers, Local 6-176. Approximately 295 employees of the St. Louis facility are covered by a collective bargaining agreement with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America Union, Local No. 688. Approximately 45 employees of the Willow Island facility are covered by a collective bargaining agreement with the United Steelworkers Union, Local No. 499, and 5 employees are covered by a collective bargaining agreement with the International Union of Operating Engineers, Local No. 18-S, AFL-CIO. We also have a limited number of employees in Europe, China and Brazil that are subject to collective bargaining or similar laws or provisions. We believe our employee relations are good. For additional information, please see Note 25, “Restructuring Activities,” and Note 27, “Subsequent Events,” in Part IV, Item 15(a)(1), “Financial Statements”.

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Item 1A.   Risk Factors

You should carefully consider the risks described below and the other information contained in this report, including our audited consolidated financial statements and related notes. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the adverse events described in this “Risk Factors” section or other sections of this report actually occurs, our business, results of operations and financial condition could be materially adversely affected, the trading price, if any, of our securities could decline and you might lose all or part of your investment.

Risks Related to Our Business

If we cannot successfully defend our rights under the patents relating to our key products, such as Skelaxin^®, or if we are unable to secure or defend our rights under other patents and trademarks and protect our trade secrets and other intellectual property, additional competitors could enter the market, and sales of affected products may decline materially.

Under the Hatch-Waxman Act, any generic pharmaceutical manufacturer may file an ANDA with a certification, known as a “Paragraph IV certification,” challenging the validity of or claiming non-infringement of a patent listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, which is known as the “FDA’s Orange Book,” four years after the pioneer company obtains approval of its NDA. As more fully described in Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements,” other companies have filed Paragraph IV certifications challenging the patents associated with some of our key products. If any of these Paragraph IV challenges succeeds, our affected product would face generic competition and its sales would likely decline materially. Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected product.

We may not be successful in securing or maintaining proprietary patent protection for products we currently market or for products and technologies we develop or license. In addition, our competitors may develop products similar to ours, including generic products, using methods and technologies that are beyond the scope of our intellectual property protection. The appearance in the market of products developed in this way could materially reduce our sales.

There is no proprietary protection for many of our branded prescription pharmaceutical products, and generic substitutes for many of these products are sold by other pharmaceutical companies. Further, we also rely upon trade secrets, unpatented proprietary know-how and continuing technological innovation in order to maintain our competitive position with respect to some products. Our sales could be materially reduced if our competitors independently develop equivalent proprietary technology and techniques or gain access to our trade secrets, know-how and technology.

If we are unable to defend our patents and trademarks or protect our trade secrets and other intellectual property, our results of operations and cash flows could be materially and adversely affected.

Additionally, certain of our supply agreements and purchase orders for raw materials contain minimum purchase commitments. If loss of market exclusivity or other factors cause sales of our products to fall below amounts necessary to use the inventory we have committed to purchase, we may incur losses in connection with those supply agreements or purchase orders.

In January 2009, two key patents associated with Skelaxin^® were ruled invalid by a federal court, and net sales of Skelaxin^® may decrease significantly as a result. Our related restructuring initiative might not succeed, and, in any event, the benefits of the initiative will not be sufficient to offset the loss of revenues from decreased Skelaxin^® sales.

In January 2009, a U.S. District Court ruled invalid two key patents related to Skelaxin^®. We plan to appeal, upon entry of an appropriate judgment, but the appeal may be unsuccessful.

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Following the decision of the District Court, we conducted an extensive examination of the company and developed a restructuring initiative designed to partially offset the potential material decline in Skelaxin^® sales in the event that a generic competitor entered the market. This initiative includes, based on an analysis of our strategic needs: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams.

If we are unable to complete the objectives of this initiative, our business and results of operations may be materially adversely affected. Moreover, if a generic competitor enters the market, the anticipated benefits of the restructuring initiative will not be sufficient to offset the loss of revenues from decreased Skelaxin^® sales.

We undertook borrowings totaling $625 million in connection with our acquisition of Alpharma. Our obligations to repay these borrowings will materially limit our ability to invest in other aspects of our business, to borrow other funds, to engage in other transactions and to take a variety of other actions. In addition, our future cash flows may not be sufficient to repay these borrowings.

In connection with the acquisition of Alpharma on December 29, 2008, we borrowed $425.0 million in principal amount under our $475.0 million revolving credit facility, as amended on December 5, 2008 (the “Revolving Credit Facility”). We also entered into a new $200.0 million term loan credit agreement, comprised of a four-year senior secured loan facility (the “Term Facility”).

A substantial portion of our operating cash flow will be dedicated to the payment of principal and interest on these debts, and our obligations to repay these debts will therefore limit our ability to invest in other aspects of our business (such as product development), to borrow other funds, to engage in other transactions and to take a variety of other actions.

The Revolving Credit Facility requires certain automatic and permanent reductions in the commitment over the life of the facility. The Term Facility requires repayment in certain quarterly installments, as outlined in the agreement, over the life of the facility. In addition, the Revolving Credit Facility and the Term Facility require mandatory prepayment equal to 50% of our annual excess cash flows, which can be reduced to 25% based on certain events. There are also mandatory prepayments upon certain events, such as an asset sale, the issuance of debt or equity, or the liquidation of auction rate securities.

The Revolving Credit Facility and the Term Facility contain certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, sale and leaseback transactions, loans and investments, acquisitions and purchases, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments, redemptions and repurchases of other indebtedness and other matters customarily restricted in such agreements.

The Revolving Credit Facility and the Term Facility also contain customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, certain impairments to the guarantees, and change in control. The breach of any covenants or obligations under the Revolving Credit Facility or the Term Facility could result in a default which could trigger acceleration of (or the right to accelerate) the related debt. Because of cross-default provisions in the agreements and instruments governing our indebtedness, a default under one agreement or instrument could result in a default under, and the acceleration of, our other indebtedness. In addition, our lenders would be entitled to proceed against the collateral securing the indebtedness. If any of our indebtedness were to be accelerated, it could adversely affect our ability to operate our business or we may be unable to repay such debt, and, therefore, such acceleration could adversely affect our results of operations, financial condition and, consequently, the price of our common stock.

For more information about the terms of the Revolving Credit Facility and the Term Facility, please see Note 13, “Long Term Debt,” in Part IV, Item 15(a)(1), “Financial Statements”.

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If we cannot integrate the business of companies or products we acquire, or appropriately and successfully manage and coordinate third-party collaborative development activities, our business may suffer. In particular, there are risks associated with the integration of our business with Alpharma Inc., which we acquired in December 2008.

The integration into our business of in-licensed or acquired assets or businesses, as well as the coordination and collaboration of research and development, sales and marketing efforts with third parties, requires significant management attention, maintenance of adequate operational, financial and management information systems, integration of systems that we acquire into our existing systems, and verification that the acquired processes and systems meet applicable standards for internal control over financial reporting. Our future results will also depend in part on our ability to hire, retain and motivate qualified employees to manage expanded operations efficiently in accordance with applicable regulatory standards. If we cannot manage our third-party collaborations and integrate in-licensed and acquired assets successfully, or, if we do not establish and maintain appropriate processes in support of these activities, this could have a material adverse effect on our business, financial condition, results of operations and cash flows and on our ability to make the necessary certifications with respect to our internal controls.

On December 29, 2008, we completed the acquisition of Alpharma Inc., a specialty pharmaceutical company that develops, manufactures and markets pharmaceutical products for humans and animals.

There are a number of risks associated with our integration of Alpharma’s operations into ours, including, but not limited to, the following:

•  The combination may not enhance our business to the extent we expect or may not result in operating or product synergies, and could have a negative impact on our earnings;

•  The process of integrating Alpharma’s business with ours, and/or the measures required to effectively use acquired intellectual property, products or other assets, could be time consuming and may result in unforeseen operating difficulties and/or expenses;

•  We may not be able to retain Alpharma’s key employees or maintain its critical business and customer relationships;

•  There may be unforeseen liabilities or other material facts that could adversely affect our business. For example, litigation or other claims made in connection with, or inheritance of claims or litigation risks as a result of, the acquisition of Alpharma could be time consuming and may create difficulties and expenses which are not currently anticipated. Please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.”

•  The intangible assets and goodwill recorded in connection with the acquisition could be subject to impairment charges. There is also the risk of significant accounting charges resulting from the completion and integration of this sizeable acquisition and increased capital expenditures.

The uncertainty and expense of the drug development process, actions by our competitors and other factors may adversely affect our ability to implement our strategy to grow our business through increased sales, acquisitions, development and in-licensing, and, as a result, our business or competitive position in the pharmaceutical industry may suffer.

Drug development is time-consuming and expensive. Only a small percentage of chemical compounds discovered by researchers prove to be both medically effective and safe enough to become an approved medicine. The process from discovery to regulatory approval typically takes 10 to 15 years or longer. Drug candidates can fail at any stage of the process, and even late-stage product candidates sometimes fail to receive regulatory approval.

Clinical trials are conducted in a series of sequential phases, with each phase designed to address a specific research question. In Phase I clinical trials, researchers test a new drug or treatment in a small group of people to evaluate the drug’s safety, determine a safe dosage range, and identify side effects. In Phase II

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clinical trials, researchers give the drug or treatment to a larger population to assess effectiveness and to further evaluate safety. In Phase III clinical trials, researchers give the drug or treatment to an even larger population to confirm its effectiveness, monitor side effects, compare it to commonly used treatments, and collect information that will allow the drug or treatment to be used safely. The results of Phase III clinical trials are pivotal for purposes of obtaining FDA approval of a new product.

The processes by which regulatory approvals are obtained from the FDA to market and sell a new product are complex, require a number of years and involve the expenditure of substantial resources. Compounds or potential new products that appear promising in development can prove unsuccessful and fail to receive FDA approval, fail to receive approval of specific anticipated indications, be substantially delayed, or receive unfavorable product labeling (including indications or safety warnings), each of which can materially affect the commercial value of the product. Additional factors that may materially affect the success and/or timing of regulatory approval of a new product, and its commercial potential, include the regulatory filing strategies employed, the timing of and delays in FDA review, and the intervention by third parties in the approval process through administrative or judicial means. As a result, there can be no assurance that we will receive regulatory approval of our products in development, or of new dosage forms for existing products, that our products or dosage forms will receive approval for specific indications or that the labeling of these products will be as we would prefer.

Our current strategy is to increase sales of certain of our existing products and to enhance our competitive standing through the acquisition or in-licensing of products, either in development or previously approved by the FDA, that complement our business and allow us to promote and sell new products through existing marketing and distribution channels. Moreover, since we engage in limited proprietary research activity with respect to the development of new chemical entities, we rely heavily on purchasing or licensing products in development and FDA-approved products from other companies.

Branded prescription pharmaceutical development projects, including those for which we have collaboration agreements with third parties, include the following:

•  Embeda^tm, a drug for the treatment of moderate to severe chronic pain;

•  Remoxy^tm, a drug for the treatment of moderate to severe chronic pain that we are developing with Pain Therapeutics, Inc.;

•  Acurox^® Tablets, a drug for the treatment of moderate to severe pain that we are developing with Acura Pharmaceuticals, Inc.;

•  CorVue^tm (binodenoson), a myocardial pharmacologic stress imaging agent;

•  Ketoprofen in Transfersome^® gel, a topical drug for local pain relief;

•  Eladur^®, a patch for the treatment of pain associated with postherpetic neuralgia;

•  Vanquix^tm, a diazepam-filled auto-injector for the treatment of acute, repetitive epileptic seizures;

•  T-62, a drug for the treatment of neuropathic pain;

•  Oxycodone NT, a drug for treatment of moderate to severe chronic pain; and

•  Hydrocodone NT, a drug for treatment of moderate to severe chronic pain.

We compete with other pharmaceutical companies, including large pharmaceutical companies with financial, human and other resources substantially greater than ours, in the development and licensing of new products. We cannot assure you that we will be able to:

•  engage in product life-cycle management to develop new indications and line extensions for existing and acquired products,

•  successfully develop, license or commercialize new products on a timely basis or at all,

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•  continue to develop products already in development in a cost effective manner, or

•  obtain any FDA approvals necessary to successfully implement the strategies described above.

If we are not successful in the development or licensing of new products already in development, including obtaining any necessary FDA approvals, our business, financial condition, and results of operations could be materially adversely affected.

Additionally, since our currently marketed products are generally established and commonly sold, they are subject to competition from products with similar qualities. For example:

•  Altace^® has multiple generic substitutes that entered the market in December 2007 and in 2008.

•  Skelaxin^® competes in a highly genericized market with other muscle relaxants and could be subject to additional competition from generic products following a court’s order ruling invalid two patents related to Skelaxin^® in January 2009.

•  Sonata^® competes with other insomnia treatments in a highly competitive market. A generic substitute entered the market in the second quarter of 2008.

•  Levoxyl^® competes in a competitive and highly genericized market with other levothyroxine sodium products.

•  Beginning in the fourth quarter of 2007, Thrombin-JMI^®, our bovine thrombin product, faced new competition from human thrombin and recombinant human thrombin.

Other of our branded prescription pharmaceutical products also face competition from generic substitutes.

The manufacturers of generic products typically do not bear the related research and development costs and, consequently, are able to offer such products at considerably lower prices than the branded equivalents. We cannot assure you that any of our products will not face generic competition, or maintain their market share, gross margins and cash flows, the failure of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Other companies may license or develop products or may acquire technologies for the development of products that are the same as or similar to the products we have in development or that we license. Because there is rapid technological change in the industry and because many other companies may have more financial resources than we do, other companies may:

•  develop or license their products more rapidly than we can,

•  complete any applicable regulatory approval process sooner than we can,

•  market or license their products before we can market or license our products, or

•  offer their newly developed or licensed products at prices lower than our prices.

Any of these events would thereby have a negative effect on the sales of our existing, newly developed or licensed products. The inability to effect acquisitions or licenses of additional branded products in development and FDA-approved products could limit the overall growth of our business. Furthermore, even if we obtain rights to a pharmaceutical product or acquire a company, we may not be able to generate sales sufficient to create a profit or otherwise avoid a loss. Technological developments or the FDA’s approval of new products or of new therapeutic indications for existing products may make our existing products or those products we are licensing or developing obsolete or may make them more difficult to market successfully, which could have a material adverse effect on results of operations and cash flows.

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We are required annually, or on an interim basis as needed, to review the carrying value of our intangible assets and goodwill for impairment. If sales of our products decline because of, for example, generic competition or an inability to manufacture or obtain sufficient supply of product, the intangible asset value of any declining product could become impaired.

As of December 31, 2008, we had approximately $1.4 billion of net intangible assets and goodwill. Intangible assets primarily include the net book value of various product rights, trademarks, patents and other intangible rights. If a change in circumstances causes us to lower our future sales forecast for a product, we may be required to write off a portion of the net book value of the intangible assets associated with that product. In evaluating goodwill for impairment, we estimate the fair value of our individual business reporting units on a discounted cash flow basis. In the event the value of an individual business reporting unit declines significantly, it could result in a non-cash impairment charge. Any impairment of the net book value of any intangible asset or goodwill, depending on the size, could result in a material adverse effect on our business, financial condition and results of operations.

We have entered into agreements with manufacturers and/or distributors of generic pharmaceutical products with whom we are presently engaged, or have previously been engaged, in litigation, and these agreements could subject us to claims that we have violated federal and/or state anti-trust laws.

We have negotiated and entered into a number of agreements with manufacturers and/or distributors of generic pharmaceutical products, some of whom are presently engaged or have previously been engaged in litigation with us. Governmental and/or private parties may allege that these arrangements and activities in furtherance of the success of these arrangements violate applicable federal or state anti-trust laws. Alternatively, courts could interpret these laws in a manner contrary to current understandings of and past rulings relating to such laws. If a court or other governmental body were to conclude that a violation of these laws had occurred, any liability based on such a finding could be materially adverse and could be preceded or followed by private litigation such as class action litigation.

For example, we have received civil investigative demands (“CIDs”) for information from the U.S. Federal Trade Commission (“FTC”). The CIDs require us to provide information related to our collaboration with Arrow, the dismissal without prejudice of our patent infringement litigation against Cobalt under the Hatch-Waxman Act of 1984 and other information. We are cooperating with the FTC in this investigation.

An expansion of the ban of the use of antibiotics used in food-producing animals could result in a decrease in our sales.

The issue of the potential transfer of increased bacterial resistance to human pathogens due to the use of certain antibiotics in certain food-producing animals is the subject of discussions on a worldwide basis and, in certain instances, has led to government restrictions on the use of antibiotics in these food-producing animals. While most of the government activity in this area has involved products other than those that we offer for sale, the European Union (“EU”) and a number of non-EU countries, including Norway and Turkey, banned the use of zinc bacitracin, a feed antibiotic growth promoter manufactured by us and others that has been used in livestock feeds for over 40 years, as a feed additive growth promoter. We have not sold this product as a feed additive growth promoter in these countries since the bans took effect (initially in the EU in July 1999; in Turkey, Bulgaria and Romania (the latter two now part of the EU) in 2000; and in Norway in January 2006). The EU ban is based upon the “Precautionary Principle,” which states that a product may be withdrawn from the market based upon a finding of a potential threat of serious or irreversible damage even if such finding is not supported by scientific certainty.

Taiwan, South Korea and Brazil have implemented, or are expected to implement shortly, restrictions on the use of antibiotics in animal feed. We have marketed antibiotics for use in food-producing animals in these countries but will be required to curtail or discontinue those practices. The actions by these countries may negatively impact our business as a result of reduced sales. It is not yet known whether this reduction will be material to our financial position or its results of operations.

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We cannot predict whether the present zinc bacitracin ban or other antibiotic restrictions will be expanded. If any one of the following events occurs, the resultant loss of sales could be material to our financial condition, cash flows and results of operations:

•  the EU, countries within or outside the EU, or meat importers act to prevent the importation of meat products from countries that allow the use of bacitracin-based or other antibiotic-containing products,

•  there is an expansion of the zinc bacitracin ban to additional countries, such as the U.S., where we have material sales of bacitracin-based products,

•  a similar ban is instituted relating to other antibiotic feed additives sold by us in the U.S. or in one or more other countries where we have material sales, or

•  there is an increase in public pressure to discontinue the use of antibiotic feed additives.

We cannot predict whether this antibiotic resistance concern will result in expanded regulations or public pressure adversely affecting other antibiotic-based animal health products previously sold by us in the jurisdictions where the ban has been imposed or in other countries in which those products are presently sold.

Discussions of the antibiotic resistance issue continue actively in the U.S. Various sources have published reports concerning possible adverse human effects from the use of antibiotics in food animals. Some of these reports have asserted that major animal producers, some of whom are our customers or the end-users of our products, are reducing the use of antibiotics. In July 2005, the FDA withdrew the approval of an antibiotic poultry water medication due to concerns regarding antibiotic resistance in humans. While we do not market this drug, this ruling would be significant if its conclusions were expanded to the medicated feed additives sold by us. It is uncertain what additional actions, if any, the FDA may take for approved animal drug products. However, the FDA has established a rating system to be used to compare the risks associated with the use of specific antibiotic products in food producing animals, including those sold by us. While we do not believe that the presently proposed risk assessment system would be materially adverse to our business, it is subject to change prior to adoption or to later amendment. The sales of our animal health segment are principally antibiotic-based products for use with food-producing animals; therefore, the future loss of major markets, including the U.S., or negative publicity regarding this use of antibiotic-based products, could have a negative impact on our business, financial condition, results of operations and cash flows.

Unfavorable results in pending and future claims and litigation matters could have an adverse impact on us.

We are named as a party in various lawsuits. For information about our pending material litigation matters, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.” While we intend to vigorously defend ourselves in these actions, we are generally unable to predict the outcome or reasonably estimate the range of potential loss, if any, in the pending litigation. If we were not to prevail in the pending litigation, we could be required to pay material sums in connection with judgments or settlements related to these matters, or the pending litigation could otherwise have a material adverse effect on our business, results of operations, financial condition and cash flows.

Potential adverse effects on human health linked to the raising or consumption of food-producing animals using our products could result in a decrease in our sales.

Should the government find, or the public perceive, a risk to human health from consumption of food-producing animals which utilize our products (such as Avian flu) or as a by-product to the raising of such animals, such as the “Chicken Litter” litigation, there may be a decline in either the sale of these food products, which would result in a decrease in the use of our products, or a decrease in the use of our products in the growing of these food-producing animals. For additional information regarding the “Chicken Litter” litigation, please see Note 19, “Commitments and Contingencies”, in Part IV, Item 15(a)(1), “Financial Statements”.

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Any significant delays or difficulties in the manufacture of, or supply of materials for, our products may reduce our profit margins and revenues, limit the sales of our products, or harm our products’ reputations.

Many of our products, including Skelaxin^®, the Flector^® Patch, Thrombin-JMI^®, Avinza^® and certain animal health products and ingredients, are currently manufactured in part or entirely by third parties. Our dependence upon third parties for the manufacture of certain products may adversely affect our profit margins or may result in unforeseen delays or other problems beyond our control. For example, if any of these third parties is not in compliance with applicable regulations, the manufacture of our products could be delayed, halted or otherwise adversely affected. If for any reason we are unable to obtain or retain third-party manufacturers on commercially acceptable terms, we may not be able to distribute our products as planned.

Further, if we encounter other delays or difficulties in producing or packaging products either handled by third parties or by us, the distribution, marketing and subsequent sales of these products could be adversely affected, and we may have to seek alternative sources of supply or abandon product lines or sell them on unsatisfactory terms. We might not be able to enter into alternative supply arrangements in a timely manner or at commercially acceptable rates, if at all. We also cannot assure you that third-party manufacturers we use will be able to provide us with sufficient quantities of our products or that the products supplied to us will meet our specifications.

Sales of Thrombin-JMI^® may be affected by the perception of risks associated with some of the raw materials used in its manufacture. If we are unable to maintain purification procedures at our facilities that are in accordance with the FDA’s expectations for biological products generally, the FDA could limit our ability to manufacture biological products at those facilities.

For the twelve months ended December 31, 2008, our product Thrombin-JMI^® accounted for 16.3% of our total revenues from continuing operations. The source material for Thrombin-JMI^® comes from bovine plasma and lung tissue which has been certified by the United States Department of Agriculture for use in the manufacture of pharmaceutical products. Bovine-sourced materials, particularly those from outside the United States, may be of some concern because of potential transmission of bovine spongiform encephalopathy, or “BSE.” However, we have taken precautions to minimize the risks of contamination from BSE in our source materials and process. Our principal precaution is the use of bovine materials only from FDA-approved sources in the United States. Accordingly, all source animals used in our production of Thrombin-JMI^® are of United States origin. Additionally, source animals used in production of Thrombin-JMI^® are generally less than 18 months of age (BSE has not been identified in animals less than 30 months of age).

There is currently no alternative to the bovine-sourced materials for the manufacture of Thrombin-JMI^®. We have two approved vendors as sources of supply of the bovine raw materials. Any interruption or delay in the supply of these materials could adversely affect the sales of Thrombin-JMI^®. We will continue surveillance of the source and believe that the risk of BSE contamination in the source materials for Thrombin-JMI^® is very low. While we believe that our procedures and those of our vendor for the supply, testing and handling of the bovine material comply with all federal, state, and local regulations, we cannot eliminate the risk of contamination or injury from these materials. There are high levels of global public concern about BSE. Physicians could determine not to administer Thrombin-JMI^® because of the perceived risk, which could adversely affect our sales of the product. Any injuries resulting from BSE contamination could expose us to extensive liability. If public concern about the risk of BSE infection in the United States should increase, the manufacture and sale of Thrombin-JMI^® and our business, financial condition, results of operations and cash flows could be materially and adversely affected.

The FDA expects manufacturers of biological products to have validated processes capable of removing extraneous viral contaminants to a high level of assurance. We have developed and implemented appropriate processing steps to achieve maximum assurance that potential extraneous viral contaminants are removed from Thrombin-JMI^®, which does not include BSE because it is not a viral contaminant, and we gained FDA approval for these processes. If we are unable to successfully maintain these processing steps or obtain the necessary supplies to do so in accordance with the FDA’s expectations, the manufacture and sale of Thrombin-

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JMI^® and our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Wholesaler and distributor buying patterns and other factors may cause our quarterly results to fluctuate, and these fluctuations may adversely affect our short-term results. Further, our access to wholesaler and distributor inventory levels and sales data affects our ability to estimate certain reserves included in our financial statements.

Our results of operations, including, in particular, product sales revenue, may vary from quarter to quarter due to many factors. Sales to wholesalers and distributors represent a substantial majority of our total sales. Buying patterns of our wholesalers and distributors may vary from time to time. In the event wholesalers and distributors with whom we do business determine to limit their purchases of our products, sales of our products could be adversely affected. For example, in advance of an anticipated price increase, customers may order branded prescription pharmaceutical products in larger than normal quantities. The ordering of excess quantities in any quarter could cause sales of some of our branded prescription pharmaceutical products to be lower in subsequent quarters than they would have been otherwise. We have inventory management and data services agreements with each of the three key branded prescription pharmaceutical products wholesale customers and other wholesale customers who purchase our branded prescription pharmaceutical products. These agreements provide wholesalers incentives to manage inventory levels and provide timely and accurate data with respect to inventory levels held, and valuable data regarding sales and marketplace activity. We rely on the timeliness and accuracy of the data that each customer provides to us on a regular basis pursuant to these agreements. If our wholesalers fail to provide us with timely and accurate data in accordance with the agreements, our estimates for certain reserves included in our financial statements could be materially and adversely affected.

Other factors that may affect quarterly results include, but are not limited to, expenditures related to the acquisition, sale and promotion of pharmaceutical products, a changing customer base, the availability and cost of raw materials, interruptions in supply by third-party manufacturers, new products introduced by us or our competitors, the mix of products we sell, interruptions in our internal manufacturing processes, product recalls, competitive pricing pressures and general economic and industry conditions that may affect customer demand. We cannot assure you that we will be successful in maintaining or improving our profitability or avoiding losses in any future period.

Our relationships with the U.S. Department of Defense and other government entities subject us to risks associated with doing business with the government.

All U.S. government contracts provide that they may be terminated for the convenience of the government as well as for default. Our Meridian Auto-Injector segment has pharmaceutical products that are presently sold primarily to the U.S. Department of Defense (“DoD”) under an Industrial Base Maintenance Contract (“IBMC”). The current IBMC expires on March 31, 2009, and we are in negotiations regarding renewal. Although we have reason to believe the DoD will renew the IBMC based on our relationship of many years, we cannot assure you that it will do so or whether this renewal will be timely. In the event the DoD does not renew the IBMC, our business, financial condition, results of operations and cash flows could be materially adversely affected. Additionally, the unexpected termination of one or more of our significant government contracts could result in a material adverse effect on our business, financial condition, results of operations and cash flows. A surge capability provision allows for the coverage of defense mobilization requirements in the event of rapid military deployment. If this surge capability provision becomes operative, we may be required to devote more of our Meridian Auto-Injector segment manufacturing capacity to the production of products for the government, which could result in less manufacturing capacity being devoted to products in this segment with higher profit margins.

Our supply contracts with the DoD are subject to pre- and post-award audits and potential price determination. These audits may include a review of our performance on the contract, our pricing practices, our cost structure and our compliance with applicable laws, regulations and standards. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while costs already reimbursed must be

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refunded. Therefore, a post-award audit or price redetermination could result in an adjustment to our revenues. From time to time the DoD makes claims for pricing adjustments with respect to completed contracts. If a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing business with the government.

Other risks involved in government sales include the unpredictability in funding for various government programs and the risks associated with changes in procurement policies and priorities. Reductions in defense budgets may result in reductions in our revenues. We also provide our nerve agent antidote auto-injectors to a number of state agencies and local communities for homeland defense against chemical agent terrorist attacks. Changes in governmental and agency procurement policies and priorities may also result in a reduction in government funding for programs involving our auto-injectors. A loss in government funding of these programs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to the risks of doing business outside of the United States.

Future growth rates and success of our animal health and auto-injector businesses depend in part on continued growth in our operations outside of the United States. In the case of animal health, we have both sales and manufacturing operations outside the United States and numerous risks and uncertainties affect those operations. These risks and uncertainties include political and economic instability, changes in local governmental laws, regulations and policies, including those related to tariffs, investments, taxation, employment regulations, repatriation of earnings, enforcement of contract and intellectual property rights and currency exchange fluctuations and restrictions.

International transactions may also involve increased financial and legal risks due to differing legal systems and customs, including risks of non-compliance with U.S. and local laws such as the U.S. Foreign Corrupt Practices Act and the U.S. Arms Export Control Act and the International Traffic in Arms Regulations affecting our activities abroad.

While the impact of these factors is difficult to predict, any of them could adversely affect our business, financial condition, operating results or cash flows. If we were to violate local or U.S. laws, we may be subject to fines, penalties, other costs, loss of ability to do business with the U.S. government or other business-related effects which could adversely affect our business, financial condition, results of operations and cash flows.

Compliance with the terms and conditions of our corporate integrity agreement with the Office of Inspector General of the United States Department of Health and Human Services requires significant resources and management time and, if we fail to comply, we could be subject to penalties or, under certain circumstances, excluded from government health care programs, which could materially reduce our sales.

In October 2005, as part of our settlement of a government pricing investigation of our company, we entered into a five-year corporate integrity agreement (“CIA”) with the Office of Inspector General of the United States Department of Health and Human Services (“HHS/OIG”). For additional information, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.” The purpose of the CIA, which applies to all of our U.S. subsidiaries and employees, is to promote compliance with the federal health care and procurement programs in which we participate, including the Medicaid Drug Rebate Program, the Medicare Program, the 340B Drug Pricing Program, and the Veterans Administration Pricing Program.

In addition to the challenges associated with complying with the regulations applicable to each of these programs (as discussed below), we are required, among other things, to keep in place our current compliance program, provide specified training to employees, retain an independent review organization to conduct periodic audits of our Medicaid Rebate calculations and our automated systems, processes, policies and practices related to government pricing calculations, and to provide periodic reports to HHS/OIG.

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Maintaining the broad array of processes, policies and procedures necessary to comply with the CIA is expected to continue to require a significant portion of management’s attention as well as the application of significant resources. Failing to meet the CIA obligations could have serious consequences for us including stipulated monetary penalties for each instance of noncompliance. In addition, flagrant or repeated violations of the CIA could result in our being excluded from participating in government health care programs, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our charter and bylaws and applicable state laws discourage unsolicited takeover proposals and could prevent shareholders from realizing a premium on their common stock.

Our charter and bylaws contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include:

•  a classified Board of Directors, although the classification of the Board is being phased out and will be eliminated in 2010;

•  the ability of our Board of Directors to designate the terms of and issue new series of preferred stock;

•  advance notice requirements for nominations for election to our Board of Directors; and

•  special voting requirements for the amendment of our charter and bylaws.

We are also subject to anti-takeover provisions under Tennessee law, each of which could delay or prevent a change of control. Together, these provisions may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.

At times, our stock price has been volatile, and such volatility in the future could result in substantial losses for our investors.

The trading price of our common stock has at times been volatile. The stock market in general and the market for the securities of emerging pharmaceutical companies such as King, in particular, have experienced extreme volatility. Many factors contribute to this volatility, including:

•  variations in our results of operations;

•  perceived risks and uncertainties concerning our business;

•  announcements of earnings;

•  the commencement of, or adverse developments in, any material litigation or governmental investigation;

•  failure to meet timelines for product development or other projections or forward-looking statements we may make to the public;

•  failure to meet or exceed security analysts’ financial projections for our company;

•  comments or recommendations made by securities analysts;

•  general market conditions;

•  perceptions about market conditions in the pharmaceutical industry;

•  announcements of technological innovations or the results of clinical trials or studies;

•  changes in marketing, product pricing and sales strategies or development of new products by us or our competitors;

•  changes in domestic or foreign governmental regulations or regulatory approval processes; and

•  announcements concerning regulatory compliance and government agency reviews.

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The volatility of our common stock imposes a greater risk of capital losses on our shareholders than would a less volatile stock. In addition, such volatility makes it difficult to ascribe a stable valuation to a shareholder’s holdings of our common stock.

Risks Related to Our Industries

Failure to comply with laws and government regulations could adversely affect our ability to operate our business.

Virtually all of our activities are regulated by U.S. federal and state statutes and government agencies as well as laws and agencies in foreign countries. The manufacturing, processing, formulation, packaging, labeling, distribution and marketing of our products, and disposal of waste products arising from these activities, are subject to regulation by one or more federal agencies, including the FDA, the Drug Enforcement Agency, or “DEA,” the Federal Trade Commission, the Consumer Product Safety Commission, the Department of Agriculture, the Occupational Safety and Health Administration, and the Environmental Protection Agency (“EPA”), as well as by foreign governments in countries where we manufacture or distribute products.

Failure to comply with the policies or requirements established by these agencies could subject us to enforcement actions or other consequences. For example, noncompliance with applicable FDA policies or requirements could subject us to suspensions of manufacturing or distribution, seizure of products, product recalls, fines, criminal penalties, injunctions, failure to approve pending drug product applications or withdrawal of product marketing approvals. Similar civil or criminal penalties could be imposed by other government agencies, such as the DEA, the EPA or various agencies of the states and localities in which our products are manufactured, sold or distributed, and could have ramifications for our contracts with government agencies, such as the Department of Veterans Affairs or the Department of Defense.

The FDA has the authority and discretion to withdraw existing marketing approvals and to review the regulatory status of marketed products at any time. For example, the FDA may require withdrawal of an approved marketing application for any drug product marketed if new information reveals problems with a drug’s safety or efficacy. All drugs must be manufactured in conformity with current Good Manufacturing Practices and drug products subject to an approved application must be manufactured, processed, packaged, held and labeled in accordance with information contained in the approved application.

While we believe that all of our currently marketed pharmaceutical products comply with FDA enforcement policies, have approval pending or have received the requisite agency approvals, our marketing is subject to challenge by the FDA at any time. Through various enforcement mechanisms, the FDA can ensure that noncomplying drugs are no longer marketed and that advertising and marketing materials and campaigns are in compliance with FDA regulations.

In addition, modifications, enhancements, or changes in manufacturing sites of approved products are in many circumstances subject to additional FDA approvals which may or may not be received and which may be subject to a lengthy FDA review process. Our manufacturing facilities and those of our third-party manufacturers are continually subject to inspection by governmental agencies. Manufacturing operations could be interrupted or halted in any of those facilities if a government or regulatory authority is unsatisfied with the results of an inspection. Any interruptions of this type could result in materially reduced sales of our products or increased manufacturing costs. For additional information please see the section entitled “Government Regulation” in Item 1, “Business,” in Part I.

Under the Comprehensive Environmental Response, Compensation, and Liability Act, “CERCLA,” the EPA can impose liability for the entire cost of cleanup of contaminated properties upon each or any of the current and former site owners, site operators or parties who sent waste to the site, regardless of fault or the legality of the original disposal activity. In addition, many states, including Tennessee, Michigan, Wisconsin, Florida and Missouri, have statutes and regulatory authorities similar to CERCLA and to the EPA. We have entered into hazardous waste hauling agreements with licensed third parties to properly dispose of hazardous wastes. We cannot assure you that we will not be found liable under CERCLA or other applicable state statutes or regulations for the costs of undertaking a cleanup at a site to which our wastes were transported.

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We cannot determine what effect changes in regulations, enforcement positions, statutes or legal interpretations, when and if promulgated, adopted or enacted, may have on our business in the future. These changes could, among other things, require modifications to our manufacturing methods or facilities, expanded or different labeling, new approvals, the recall, replacement or discontinuance of certain products, additional record keeping and expanded documentation of the properties of certain products and scientific substantiation. These changes, new legislation, or failure to comply with existing laws and regulations could have a material adverse effect on our business, financial condition, results of operations and cash flows.

New legislation or regulatory proposals may adversely affect our revenues.

A number of legislative and regulatory proposals have been proposed and could be proposed in the future that are aimed at changing the health care system, easing safeguards that limit importation and reimportation of prescription products from countries outside the United States, providing preferential treatment to manufacturers of generic pharmaceutical products, imposing additional and possibly conflicting reporting requirements on prescription pharmaceutical companies, reducing the level at which pharmaceutical companies are reimbursed for sales of their products, and requiring significant monitoring initiatives by manufacturers in an attempt to reduce the misuse and abuse of controlled substances. For more information relating to recent regulatory proposals, please see the section titled “Recent Developments, Branded Prescription Pharmaceuticals — Promoted Portfolio Developments, Avinza^®” in Item 7 below.

While we cannot predict when or whether any of these proposals will be adopted or the effect these proposals may have on our business, these and other similar proposals may exacerbate industry-wide pricing pressures and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

An increase in product liability claims or product recalls could harm our business.

We face an inherent business risk of exposure to product liability claims in the event that the use of our technologies or products is alleged to have resulted in adverse effects. These risks exist for products in clinical development and with respect to products that have received regulatory approval for commercial sale. While we have taken, and will continue to take, what we believe are appropriate precautions, we may not be able to avoid significant product liability exposure. We currently have product liability insurance covering all of our significant products, but we cannot assure you that the level or breadth of any insurance coverage will be sufficient to cover fully all potential claims. Also, adequate insurance coverage might not be available in the future at acceptable costs, if at all. With respect to any product liability claims that are not covered by insurance, we could be responsible for any monetary damages awarded by any court or any voluntary monetary settlements. Significant judgments against us for product liability for which we have no insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Product recalls or product field alerts may be issued at our discretion or at the discretion of the FDA, other government agencies or other companies having regulatory authority for pharmaceutical product sales. From time to time, we may recall products for various reasons, including failure of our products to maintain their stability through their expiration dates. Any recall or product field alert has the potential of damaging the reputation of the product or our reputation. To date, these recalls have not been significant and have not had a material adverse effect on our business, financial condition, results of operations or cash flows. However, we cannot assure you that the number and significance of recalls will not increase in the future. Any significant recalls could materially affect our sales and the prescription trends for the products and damage the reputation of the products or our reputation. In these cases, our business, financial condition, results of operations and cash flows could be materially adversely affected.

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If we fail to comply with our reporting and payment obligations under the Medicaid rebate program or other governmental pricing programs, we could be required to reimburse government programs for underpayments and could be required to pay penalties, sanctions and fines which could have a material adverse effect on our business.

Medicaid reporting and payment obligations are highly complex and in certain respects ambiguous. If we fail to comply with these obligations, we could be subject to additional reimbursements, penalties, sanctions and fines which could have a material adverse effect on our business. Our processes for estimating amounts due under Medicaid and other governmental pricing programs involve subjective decisions, and, as a result, these calculations will remain subject to the risk of errors.

The insolvency of any of our principal customers, who are wholesale pharmaceutical distributors, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As with most other pharmaceutical companies, the primary customers for our branded prescription pharmaceutical products are wholesale pharmaceutical distributors. The wholesale distributor network for pharmaceutical products has in recent years been subject to increasing consolidation, which has increased our, and other industry participants’, customer concentration. Accordingly, three key customers accounted for approximately 72% of our gross sales from branded prescription pharmaceutical products and a significant portion of our accounts receivable for the fiscal year ended December 31, 2008. The insolvency of any of our principal customers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Any reduction in reimbursement levels by managed care organizations or other third-party payors may have an adverse effect on our revenues.

Commercial success in producing, marketing and selling branded prescription pharmaceutical products depends, in part, on the availability of adequate reimbursement from third-party health care payors, such as the government, private health insurers and managed care organizations. Third-party payors are increasingly challenging whether to reimburse certain pharmaceutical products and medical services. For example, many managed health care organizations limit reimbursement of pharmaceutical products. These limits may take the form of formularies with differential co-pay tiers. The resulting competition among pharmaceutical companies to maximize their product reimbursement has generally reduced growth in average selling prices across the industry. We cannot assure you that our products will be appropriately reimbursed or included on the formulary lists of managed care organizations or any or all Medicare Part D plans, or that downward pricing pressures in the industry generally will not negatively impact our operations.

We establish accruals for the estimated amounts of rebates we will pay to managed care and government organizations each quarter. Any increased usage of our products through Medicaid, Medicare, or managed care programs will increase the amount of rebates that we owe. We cannot assure you that our products will be included on the formulary lists of managed care or Medicare organizations or that adverse reimbursement issues will not result in materially lower revenues.

If we fail to comply with the safe harbors provided under various federal and state laws, our business could be adversely affected.

We are subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to include, the referral of business, including the purchase or prescription of a particular drug. The federal government has published regulations that identify “safe harbors” or exemptions for certain payment arrangements that do not violate the anti-kickback statutes. We seek to comply with these safe harbors. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing some of our practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly (in the civil context), or knowingly and willfully (in the criminal

36

context), presenting, or causing to be presented for payment to third-party payors (including Medicaid and Medicare) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.

Violations of fraud and abuse laws may be punishable by civil and/or criminal sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs, including Medicaid and Medicare. Any such violations could have a material adverse effect on our financial results.

In the future, the publication of negative results of studies or clinical trials may adversely affect the sales of our products or the values of the intangible assets associated with them.

From time to time, studies or clinical trials on various aspects of pharmaceutical products are conducted by academics or others, including government agencies, the results of which, when published, may have dramatic effects on the markets for the pharmaceutical products that are the subject of the study, or those of related or similar products. The publication of negative results of studies or clinical trials related to our products or the therapeutic areas in which our products compete could adversely affect our sales, the prescription trends for our products and the reputation of our products. In the event of the publication of negative results of studies or clinical trials related to our branded prescription pharmaceutical products or the therapeutic areas in which our products compete, sales of these products may be materially adversely affected. Additionally, potential write-offs of the intangible assets associated with the affected products could materially adversely affect our results of operations.

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A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts that are not yet determinable. These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are identified by their use of terms and phrases, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and other similar terms and phrases, including references to assumptions. These statements are contained in the “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, as well as other sections of this report.

Forward-looking statements in this report include, but are not limited to, those regarding:

•  the potential of, including anticipated net sales and prescription trends for, our branded prescription pharmaceutical products, particularly Altace^®, Skelaxin^®, Avinza^®, Thrombin-JMI^®, the Flector^® Patch and Levoxyl^®;

•  expectations regarding the enforceability and effectiveness of product-related patents, including, in particular, patents related to Skelaxin^®, Avinza^®, and Adenoscan^®;

•  expected trends and projections with respect to particular products, reportable segment and income and expense line items;

•  the adequacy of our liquidity and capital resources;

•  anticipated capital expenditures;

•  the development, approval and successful commercialization of Remoxy^®, Embeda^tm, Acurox^® Tablets, CorVue^tm and other products;

•  the cost of and the successful execution of our growth and restructuring strategies;

•  anticipated developments and expansions of our business;

•  our plans for the manufacture of some of our products, including products manufactured by third parties;

•  the potential costs, outcomes and timing of research, clinical trials and other development activities involving pharmaceutical products, including, but not limited to, the magnitude and timing of potential payments to third parties in connection with development activities;

•  the development of product line extensions;

•  the expected timing of the initial marketing of certain products;

•  products developed, acquired or in-licensed that may be commercialized;

•  our intent, beliefs or current expectations, primarily with respect to our future operating performance;

•  expectations regarding sales growth, gross margins, manufacturing productivity, capital expenditures and effective tax rates;

•  expectations regarding the outcome of various pending legal proceedings including the Skelaxin^® and Avinza^® patent challenges, litigation, and other legal proceedings described in this report;

•  expectations regarding our financial condition and liquidity as well as future cash flows and earnings; and

•  expectations regarding our ability to liquidate our holdings of auction rate securities and the temporary nature of unrealized losses recorded in connection with some of those securities.

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These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those contemplated by our forward-looking statements. These known and unknown risks, uncertainties and other factors are described in detail in the “Risk Factors” section and in other sections of this report.

Item 2.   Properties

The location and business segments served by our primary facilities are as follows:

Location	Principal Purposes	Business Segment(s)
Bristol, Tennessee	Manufacturing, Distribution, and Administration	Branded Prescription Pharmaceuticals
Rochester, Michigan	Manufacturing	Branded Prescription Pharmaceuticals
St. Louis, Missouri	Manufacturing	Meridian Auto-Injector
St. Petersburg, Florida	Manufacturing	Branded Prescription Pharmaceuticals
Middleton, Wisconsin	Manufacturing	Branded Prescription Pharmaceuticals
Piscataway, New Jersey	Research and Development	Branded Prescription Pharmaceuticals
Van Buren, Arkansas	Manufacturing	Animal Health
Longmont, Colorado	Manufacturing	Animal Health
Chicago Heights, Illinois	Manufacturing	Animal Health
Eagle Grove, Iowa	Manufacturing	Animal Health
Salisbury, Maryland	Manufacturing	Animal Health
Willow Island, West Virginia	Manufacturing	Animal Health
Shenzhou, China	Manufacturing	Animal Health
Yantai, China	Manufacturing	Animal Health

We own each of these primary facilities, with the exception of the facility in Van Buren, Arkansas, which is leased, the facility in Willow Island, West Virginia, which is subject to a ground lease, and a portion of the facilities in St. Louis, Missouri, which is leased. For information regarding production capacity and extent of utilization, please see “Manufacturing” in Part I, Item 1, “Business.”

Our corporate headquarters and centralized branded prescription pharmaceuticals distribution center are located in Bristol, Tennessee. We consider our properties to be generally in good condition, well maintained, and generally suitable and adequate to carry on our business.

We currently lease office space for our branded prescription pharmaceutical commercial operations organization and our animal health operations located in Bridgewater, New Jersey, our branded prescription pharmaceutical research and development organization located in Cary, North Carolina, and our Meridian Auto-Injector business located in Columbia, Maryland. We also lease office space and warehouse facilities for the use of our animal health operations in the U.S. and elsewhere.

Item 3.   Legal Proceedings

Please see Note 19, “Commitments and Contingencies” in Part IV, Item 15(a)(1), “Financial Statements” for information regarding material legal proceedings in which we are involved.

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PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

The following table sets forth the range of high and low sales prices per share of our common stock for the periods indicated. Our common stock is listed on the New York Stock Exchange, where it trades under the symbol “KG.” There were approximately 856 shareholders of record on February 25, 2009.

	2008
	High		Low
First quarter	$	12.40	$	8.26
Second quarter		10.61		8.47
Third quarter		12.60		8.83
Fourth quarter		10.66		6.98

	2007
	High		Low
First quarter	$	19.86	$	15.79
Second quarter		22.25		19.40
Third quarter		21.10		11.43
Fourth quarter		11.82		9.75

On February 25, 2009, the closing price of our common stock as reported on the New York Stock Exchange was $8.00. For information regarding our equity compensation plans, please see Note 21, “Stock Based Compensation,” in Part IV, Item 15(a)(1), “Financial Statements.”

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PERFORMANCE GRAPH

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

The following graph compares the cumulative five-year total return provided shareholders on King Pharmaceuticals, Inc.’s common stock relative to the cumulative total returns of the S&P 500 Index and the NYSE US SIC Code 2830-2839, Drug index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2003 and its relative performance is tracked through December 31, 2008.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

Among King Pharmaceuticals, Inc., the S&P 500 Index

and NYSE US SIC Code 2830-2839, Drug

	12/03		12/04		12/05		12/06		12/07		12/08
King Pharmaceuticals, Inc.		100.00		81.26		110.88		104.33		67.10		69.59
S&P 500		100.00		110.88		116.33		134.70		142.10		89.53
NYSE US SIC Code 2830-2839, Drug		100.00		92.80		89.58		103.91		108.86		88.53

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

We have never paid cash dividends on our common stock. The payment of cash dividends is subject to the discretion of the Board of Directors and is limited by the terms of our Revolving Credit Facility and our Term Facility. We currently anticipate that for the foreseeable future we will retain our earnings.

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Item 6.   Selected Financial Data

The table below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited consolidated financial statements and related notes included elsewhere in this report.

	For the Year Ended December 31,
	2008			2007			2006		2005		2004
	(In thousands, except per share data)
Statement of Income Data:
Total revenues	$	1,565,061		$	2,136,882		$	1,988,500	$	1,772,881	$	1,304,364
Operating (loss) income		(219,645	)		227,513			402,546		180,079		(41,264	)
(Loss) income from continuing operations before income taxes and discontinued operations		(201,704	)		250,818			424,312		178,115		(58,034	)
Income tax expense (benefit)		131,359			67,600			135,730		61,485		(7,412	)
(Loss) income from continuing operations		(333,063	)		183,218			288,582		116,630		(50,622	)
(Loss) income from discontinued operations(1)		—			(237	)		367		1,203		(109,666	)
Net (loss) income	$	(333,063	)	$	182,981		$	288,949	$	117,833	$	(160,288	)
Income per common share:
Basic:
(Loss) income from continuing operations	$	(1.37	)	$	0.75		$	1.19	$	0.48	$	(0.21	)
(Loss) income from discontinued operations		—			—			—		0.01		(0.45	)
Net income (loss)	$	(1.37	)	$	0.75		$	1.19	$	0.49	$	(0.66	)
Diluted:
(Loss) income from continuing operations	$	(1.37	)	$	0.75		$	1.19	$	0.48	$	(0.21	)
Income (loss) from discontinued operations		—			—			—		0.01		(0.45	)
Net (loss) income	$	(1.37	)	$	0.75		$	1.19	$	0.49	$	(0.66	)
Dividends declared per share of common stock	$	0.00		$	0.00		$	0.00	$	0.00	$	0.00

	December 31,
	2008		2007		2006		2005		2004
	(In thousands)
Balance Sheet Data:
Working capital	$	662,143	$	1,366,569	$	1,055,677	$	276,329	$	438,133
Total assets		4,257,696		3,426,822		3,329,531		2,965,242		2,924,156
Total debt		1,407,499		400,000		400,000		345,000		345,000
Shareholders’ equity		2,177,331		2,510,757		2,288,606		1,973,422		1,848,790

(1) Reflects the classification of Nordette^® and Prefest^® product lines as discontinued operations.

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

The following discussion should be read in conjunction with the other parts of this report, including the audited consolidated financial statements and related notes. Historical results and percentage relationships set forth in the statement of income, including trends that might appear, are not necessarily indicative of future operations. Please see the “Risk Factors” and “Forward-Looking Statements” sections for a discussion of the uncertainties, risks and assumptions associated with these statements.

OVERVIEW

Our Business

We are a vertically integrated pharmaceutical company that performs basic research and develops, manufactures, markets and sells branded prescription pharmaceutical products and animal health products. By “vertically integrated,” we mean that we have the following capabilities:

•   research and development	•   distribution
•   manufacturing	•   sales and marketing
•   packaging	•   business development
•   quality control and assurance	•   regulatory management

Our branded prescription pharmaceuticals include neuroscience products (primarily pain medicines), hospital products, and legacy brands. The animal health business is focused on medicated feed additives (“MFAs”) and water-soluble therapeutics primarily for poultry, cattle, and swine.

Our corporate strategy is focused on specialty markets, particularly specialty-driven prescription pharmaceutical markets. We believe our target markets have significant potential and our organization is aligned accordingly. Our growth in specialty markets is achieved through organic growth and acquisitions.

Under our corporate strategy we work to achieve organic growth by maximizing the potential of our currently marketed products through sales and marketing and prudent product life-cycle management. By “product life-cycle management,” we mean the extension of the economic life of a product, including seeking and gaining necessary related governmental approvals, by such means as:

•  securing from the U.S. Food and Drug Administration, which we refer to as the “FDA,” additional approved uses (“indications”) for our products;

•  developing and producing different strengths;

•  producing different package sizes;

•  developing new dosage forms; and

•  developing new product formulations.

Our strategy also focuses on growth through the acquisition of novel branded prescription pharmaceutical products in various stages of development and the acquisition of prescription pharmaceutical technologies, particularly those products and technologies that we believe have significant market potential and complement the commercial footprint we have established in the neuroscience and hospital markets. Using our internal resources and a disciplined business development process, we strive to be a leader in developing and commercializing innovative, clinically-differentiated therapies and technologies in these target, specialty-driven markets. We may also seek company acquisitions that add products or products in development, technologies or sales and marketing capabilities to our existing platforms or that otherwise complement our operations. We also work to achieve organic growth by continuing to develop investigational drugs, as we have a commitment to research and development and advancing the products and technologies in our development pipeline.

We market our branded prescription pharmaceutical products primarily through a dedicated sales force to general/family practitioners, internal medicine physicians, neurologists, pain specialists, surgeons and hospitals across the United States and in Puerto Rico. Branded prescription pharmaceutical products are innovative

43

products sold under a brand name that have, or previously had, some degree of market exclusivity. When we refer to “branded prescription pharmaceutical products,” we mean branded prescription pharmaceutical products that are intended for humans.

Our animal health products are marketed through a staff of trained sales and technical service and marketing employees, many of whom are veterinarians and nutritionists. We have sales offices in the U.S., Europe, Canada, Mexico, South America and Asia. Elsewhere, our animal health products are sold primarily through the use of distributors and other third-party sales companies.

Recent Developments

Acquisition of Alpharma Inc.

On December 29, 2008, we completed our acquisition of all of the outstanding shares of the Class A Common Stock of Alpharma Inc. (“Alpharma”) at a price of $37.00 per share in cash, for an aggregate purchase price of approximately $1.6 billion.

As a result of the transaction, Alpharma is now a wholly-owned subsidiary of King. The acquisition was funded with available cash on hand, borrowings of $425.0 million under our Revolving Credit Facility, as amended on December 5, 2008, and borrowings of $200.0 million under a term loan.

Alpharma has a growing branded prescription pharmaceutical franchise in the U.S. pain market with its Flector^® Patch (diclofenac epolamine topical patch) 1.3%, and a pipeline of new pain medicines led by Embeda^tm, a formulation of long-acting morphine that is designed to provide controlled pain relief and deter certain common methods of misuse and abuse. Alpharma is also a global leader in the development, registration, manufacture and marketing of MFAs and water soluble therapeutics for food-producing animals, including poultry, cattle and swine.

We believe our acquisition of Alpharma is particularly significant because it strengthens our portfolio and development pipeline of pain management products, and increases our capabilities and expertise in this important market. The development pipeline provides us with both near-term and long-term revenue
opportunities and the animal health business further diversifies our revenue base. As a result, we believe this acquisition creates a stronger foundation for sustainable, long-term growth for our Company.

Contemporaneous with our acquisition of Alpharma and in accordance with a consent order with the U.S. Federal Trade Commission, we divested the rights to Alpharma’s Kadian^® (morphine sulfate long-acting) to Actavis Elizabeth, L.L.C. (“Actavis”). Pursuant to the divestiture, we will receive from Actavis future quarterly payments of up to an aggregate of $127.5 million in cash based on the achievement of certain Kadian^® quarterly gross profit-related milestones for the period beginning January 1, 2009 and ending June 30, 2010. In connection with the divestiture, we recorded a receivable equal to the present value of the estimated future cash flows from the quarterly gross-profit related milestones. There was no gain or loss recorded as a result of the divestiture.

Potential Generic Substitution for Skelaxin^®

On January 20, 2009 the U.S. District Court for the Eastern District of New York, in the case of King Pharmaceuticals, Inc., et al. v. Eon Labs, Inc., Case No. 04-cv-5540 (DGT), issued an Order ruling invalid United States Patent Nos. 6,407,128 and 6,683,102, two patents related to Skelaxin^®. The Order was issued without the benefit of a hearing in response to Eon Labs’ motion for summary judgment. We plan to appeal, upon the entry of an appropriate judgment, and intend to vigorously defend our interests. The entry of the Order may lead to generic versions of Skelaxin^® entering the market sooner than previously anticipated, which would likely cause net sales of Skelaxin^® to decline significantly. Also, in January 2008, we entered into an agreement with CorePharma, LLC (“CorePharma”) granting CorePharma a license to launch an authorized generic version of Skelaxin^® in December 2012, or earlier under certain conditions.

Following the decision of the District Court, our senior management team conducted an extensive examination of the Company and developed a restructuring initiative designed to partially offset the potential decline in Skelaxin^® sales in the event that a generic competitor entered the market. This initiative includes,

44

based on an analysis of our strategic needs: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams.

We estimate that, in connection with the restructuring initiative, we will incur total restructuring costs of between $50,000 and $55,000, all of which are expected to be incurred and expensed during the first half of 2009 and almost all of which will be cash expenditures. These costs all relate to severance pay and other employee termination expenses.

The restructuring charges include employee termination costs associated with a workforce reduction of approximately 520 employees, including approximately 380 people in our sales force.

Branded Prescription Pharmaceuticals — Development Advances

Embeda^tm

The Embeda^tm New Drug Application (“NDA”) was submitted to the FDA in June 2008. Utilizing proprietary technology, Embeda^tm, which contains long-acting morphine pellets, each with a sequestered core of naltrexone, an opioid antagonist, has a proposed indication for the management of moderate to severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. The formulation is designed to work such that if taken as directed, the morphine would relieve pain while the sequestered naltrexone would pass through the body with no intended clinical effect. If Embeda^tm capsules were crushed or chewed, however, the naltrexone would be released, mitigating the euphoric effect that might otherwise be caused by the morphine under these circumstances. We acquired Embeda^tm on December 29, 2008 as part of our acquisition of Alpharma. In December 2008, the FDA informed us that it is continuing its review of the NDA.

Remoxy^®

The Remoxy^® NDA was submitted to the FDA in June 2008. On December 10, 2008, we received a Complete Response Letter from the FDA with respect to the NDA for Remoxy^®, requiring additional non-clinical information to support approval. We are working with our partner, Pain Therapeutics, Inc., to complete an assessment of the Complete Response Letter and prepare a written response. We, together with PTI plan to meet with the FDA during the second quarter of 2009 to discuss the response, following which we expect to have a better understanding of the additional steps and the time required to obtain approval.

Remoxy^® is a unique long-acting formulation of oral oxycodone with a proposed indication for the management of moderate to severe pain when a continuous, around-the-clock, opioid analgesic is needed for an extended period of time. This formulation uses the Oradur^tm platform technology which provides a unique physical barrier that is designed to provide controlled pain relief and resist certain common methods used to extract the opioid more rapidly than intended as can occur with currently available products. Common methods used to cause a rapid extraction of an opioid include crushing, chewing, and dissolution in alcohol. These methods are typically used to cause failure of the controlled release dosage form, resulting in “dose dumping” of oxycodone, or the immediate release of the active drug.

Acurox^® Tablets

An NDA for Acurox^® (oxycodone HCl/niacin) Tablets was submitted to the FDA in December 2008. Acurox^®, a patented, orally administered, immediate release tablet containing oxycodone HCl as its sole active analgesic ingredient, has a proposed indication for the relief of moderate to severe pain. Acurox^® Tablets use the patented Aversion^® Technology of Acura Pharmaceuticals, Inc., which is designed to deter misuse and abuse by intentional swallowing of excess quantities of tablets, intravenous injection of dissolved tablets and nasal snorting of crushed tablets. Attempts to extract oxycodone from an Acurox^® Tablet by dissolving it in liquid results in the formation of a viscous gel which is intended to sequester the opioid and deter I.V. injection. Crushing an Acurox^® Tablet for the purposes of nasal snorting releases an ingredient that is intended to cause nasal irritation and thereby discourage this method of misuse and abuse. Swallowing excessive

45

numbers of Acurox^® Tablets releases niacin in quantities that are intended to cause unpleasant and undesirable side effects that may potentially deter this method of misuse and abuse.

CorVue^tm (binodenoson) for injection

In December 2008, we submitted an NDA for CorVue^tm to the FDA. CorVue^tm is a cardiac pharmacologic stress SPECT (single-photon-emission computed tomographic) imaging agent intended for use in patients with or at risk for coronary artery disease who are unable to perform a cardiac exercise stress test. In the NDA, we are requesting FDA approval of CorVue^tm as an adjunct to non-invasive myocardial perfusion imaging tests to detect perfusion abnormalities in patients with known or suspected coronary artery disease.

T-62

In December 2008, we initiated the Phase II clinical trial program evaluating the efficacy and safety of T-62, our investigational oral drug formulation for the treatment of neuropathic pain. T-62, a new chemical entity, is an adenosine A1 allosteric enhancer that increases the effectiveness of the body’s endogenous adenosine to treat neuropathic pain. The Phase II clinical trial is a multicenter, randomized, double-blind, placebo-controlled study assessing the analgesic efficacy and safety of T-62 in subjects with postherpetic neuralgia and its associated pain. The study is expected to enroll approximately 130 patients in up to 20 study centers and will evaluate two doses of T-62 and placebo utilizing a parallel design. Each patient will complete a 7-day screening period, a 28-day treatment period, and a 14-day post-treatment period.

Branded Prescription Pharmaceuticals — Promoted Portfolio Developments

Avinza^®

New mandates of the Food and Drug Administration Amendments Act of 2007 (FDAAA) authorize the FDA to require a risk evaluation and mitigation strategy (REMS) as part of the new drug approval process if the agency believes that it is needed to ensure that a proposed new drug’s benefits outweigh its risks. The law also authorizes the agency to require a REMS for certain drugs approved before FDAAA was signed into law. A REMS can include a Medication Guide, Patient Package Insert, a communication plan, elements to ensure safe use and an implementation schedule, and must include a timetable for assessment of the REMS. Elements to ensure safe use include requiring that: healthcare providers have particular training or be certified, pharmacies, practitioners or healthcare settings that dispense the drug be specially certified, the drug be dispensed to patients only in certain healthcare settings, the drug be dispensed to patients with evidence of safe use conditions, each patient be subject to certain monitoring, and/or each patient using the drug be enrolled in a registry.

On February 6, 2009, the FDA sent a letter to the 16 manufacturers of previously approved, currently marketed long-acting opioid drug products, including us as manufacturer of Avinza^®, indicating that this class of drugs will be required to have a REMS. FDA has determined that a REMS is required to ensure that the benefits outweigh the risks of: 1) use of certain opioid products in non-opioid tolerant individuals; 2) abuse; and 3) overdose, both accidental and intentional. The agency has announced its intention to consult all relevant stakeholders, including manufacturers, pharmacies, healthcare practitioners, patient groups and others in developing this class-wide REMS of long-acting opioids. In the first of a series of such meetings, the FDA has invited those companies that market the affected opioid drugs to meet with the agency on March 3, 2009 to discuss development of such a class-wide REMS.

King currently has a Risk Management Program (RMP) in place for Avinza^® consisting of an Appropriate Use and Communication Program, Monitoring and Surveillance, Research and Evaluation. King’s Risk Management Team (RMT) meets every 6 weeks to review data collected on any reported misuse, abuse and diversion of Avinza^®. It is not possible at this time to determine whether or in what way the consideration of a class-wide REMS for all long-acting opioids will change the elements of King’s current risk management program for Avinza^® or how any such changes might affect the marketing or sales of Avinza^®.

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As discussed elsewhere in this report, King has NDAs for two long-acting opioid products, Embeda^tm and Remoxy^®, under review by the FDA. Both of these applications include comprehensive proposals for REMS for those products. It is not possible at this time to determine what, if any, affect the FDA’s ongoing process for developing class-wide REMS for previously approved, currently marketed long-acting opioids will have on the FDA’s review timeline of the pending NDAs for Embeda^tm and/or Remoxy^®, or their future market potential.

Thrombin-JMI^®

Beginning in the fourth quarter of 2007, Thrombin-JMI^®, our bovine thrombin product, faced new competition. A human thrombin product entered the market in the fourth quarter of 2007 and a recombinant human thrombin entered the market during the first quarter of 2008.

Sonata^®

In June 2008, a third party entered the market with a generic substitute for Sonata^® following the expiration of our patent covering Sonata^®.

OPERATING RESULTS

The following table summarizes total revenues and cost of revenues by operating segment.

	For the Years Ended December 31,
	2008		2007		2006
	(In thousands)
Total Revenues
Branded prescription pharmaceuticals	$	1,263,488	$	1,857,813	$	1,724,701
Meridian Auto-Injector		218,448		183,860		164,760
Royalties		79,442		82,589		80,357
Contract manufacturing		1,327		9,201		16,501
Other		2,356		3,419		2,181
Total revenues	$	1,565,061	$	2,136,882	$	1,988,500
Cost of Revenues, exclusive of depreciation, amortization and impairments
Branded prescription pharmaceuticals	$	298,861	$	467,507	$	317,677
Meridian Auto-Injector		85,550		76,050		74,576
Royalties		9,720		10,158		9,748
Contract manufacturing		680		9,434		17,636
Other		14		3,385		171
Total cost of revenues	$	394,825	$	566,534	$	419,808

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The following table summarizes our deductions from gross sales.

	For the Years Ended December 31,
	2008		2007			2006
	(In thousands)
Gross Sales	$	1,899,096	$	2,623,330		$	2,461,588
Commercial Rebates		87,646		188,966			188,652
Medicare Part D Rebates		28,110		59,103			54,221
Medicaid Rebates		39,658		39,608			27,219
Chargebacks		92,252		97,251			102,876
Returns		12,892		11,679			14,832
Trade Discounts/Other		73,477		90,211			84,720
	$	1,565,061	$	2,136,512		$	1,989,068
Discontinued Operations		—		(370	)		568
Net Sales	$	1,565,061	$	2,136,882		$	1,988,500

Gross sales were lower in 2008 compared to 2007 primarily due to a decrease in gross sales of Altace^®, partially offset by increases in gross sales of Avinza^®, which we acquired on February 26, 2007, and the Meridian Auto-Injector segment. During December 2007 a competitor entered the market with a generic substitute for Altace^® and additional generic competitors entered the market in June 2008. We anticipate gross sales will increase in 2009 due to the acquisition of Alpharma at the end of December 2008, partially offset by anticipated decreases in sales of several key products in the branded prescription pharmaceuticals segment discussed below.

Gross sales were higher in 2007 compared to 2006 primarily due to the acquisition of Avinza^® on February 26, 2007, price increases taken during 2007 and an increase in gross sales of our Meridian Auto-Injector segment. These increases in gross sales were partially offset by a decline in prescriptions of certain of our branded prescription pharmaceutical products during 2007.

We maintain inventory management and data services agreements (“IMAs”) with each of our three key branded prescription wholesale customers and other wholesale customers. These agreements provide wholesalers incentives to manage inventory levels and provide timely and accurate data with respect to inventory levels held, and valuable data regarding sales and marketplace activity. We rely on the timeliness and accuracy of the data that each customer provides to us on a regular basis pursuant to these agreements. If our wholesalers fail to provide us with timely and accurate data in accordance with the agreements, our estimates for certain reserves included in our financial statements could be materially and adversely affected.

Based on inventory data provided by our key customers under the IMAs, we believe that wholesale inventory levels of Skelaxin^®, Thrombin-JMI^®, and Avinza^®, as of December 31, 2008, are at or below levels we consider normal. As part of the acquisition of Alpharma at the end of December 2008, we acquired the Flector^® Patch product. We believe that the wholesale inventory levels of Flector^® Patch at the time of the acquisition were well above levels we consider normal. As a result, we expect that sales of Flector^® Patch in the first quarter of 2009 will be significantly less than prescription demand. We estimate that the wholesale and retail inventories of all our products as of December 31, 2008 represent gross sales of approximately $140.0 million to $150.0 million.

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The following tables provide the activity and ending balances for our significant deductions from gross sales.

Accrual for Rebates, including Administrative Fees

	2008			2007			2006
	(In thousands)
Balance at January 1, net of prepaid amounts	$	65,301		$	53,765		$	126,240
Current provision related to sales made in current period		151,014			285,253			282,603
Current provision related to sales made in prior periods		4,400			2,424			(12,511	)
Rebates paid		(199,912	)		(276,141	)		(342,567	)
Alpharma acquisition		37,326			—			—
Balance at December 31, net of prepaid amounts	$	58,129		$	65,301		$	53,765

Rebates include commercial rebates and Medicaid and Medicare rebates.

During the first quarter of 2006, we paid approximately $129.3 million related to (i) the settlement agreements with the Office of Inspector General of the United States Department of Health and Human Services (“HHS/OIG”) and the Department of Veterans Affairs, to resolve the governmental investigations related to our underpayment of rebates owed to Medicaid and other governmental pricing programs during the period from 1994 to 2002 and (ii) similar state settlement agreements. Of the $129.3 million paid in the first quarter of 2006, approximately $64.0 million reduced the rebate accrual and is reflected in “Rebates paid” in the table above.

In addition, during the first quarter of 2006, we delayed our regular periodic Medicaid rebate payments as a result of prior overpayments. During the second quarter of 2006, we began reducing our payments for Medicaid rebates to utilize overpayments made to the government related to Medicaid during the government pricing investigation in 2003, 2004 and 2005. During the period of the investigation, we made actual Medicaid payments in excess of estimated expense to avoid any underpayments to the government. During the third quarter of 2005, we began reporting to the Centers for Medicare and Medicaid Services using a refined calculation to compute our Average Manufacturer’s Price (“AMP”) and Best Price. As a result of refining the AMP and Best Price calculations in the third quarter of 2005, we discontinued the practice of making payments in excess of the amounts expensed. We expect to recover the remaining overpayments to the government and will continue to reduce cash payments in the future until this overpayment is fully recovered. In 2008, 2007 and 2006, the utilization of overpayments reduced our rebate payments by approximately $25.3 million, $6.5 million and $25.0 million, respectively. The utilization of the overpayment has therefore reduced “Rebates paid” in the table above.

During the third quarter of 2006, we reduced our Medicaid rebate expense and increased net sales from branded prescription pharmaceutical products by approximately $9.3 million due to the determination that a liability established in 2005 for a government pricing program for military dependents and retirees was no longer probable.

A competitor entered the market with a generic substitute for Altace^® during December 2007 and additional competitors entered the market in June 2008. As a result of this competition, sales of Altace^® and utilization of Altace^® by rebate-eligible customers decreased in each quarter of 2008 and we expect sales of Altace^® to continue to decline significantly in the future. The significant decrease in utilization of Altace^® by rebate-eligible customers has significantly decreased the “current provision related to sales made in the current period” in the table above. As Altace^® sales continue to decline, we expect rebate payments to continue to exceed the current provision as shown in the table above. Rebate payments are made to rebate eligible customers approximately one quarter after the utilization. When Altace^® sales stabilize, we anticipate our rebate payments will more closely approximate our current provision for rebates. For a discussion regarding Altace^® net sales, please see “Altace^®” within the “Sales of Key Products” section below.

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Accrual for Returns

	2008			2007			2006
	(In thousands)
Balance at January 1	$	32,860		$	42,001		$	50,902
Current provision		12,892			11,679			14,832
Actual returns		(21,658	)		(20,820	)		(23,733	)
Alpharma acquisition		9,377			—			—
Ending balance at December 31	$	33,471		$	32,860		$	42,001

Our calculation for product return reserves is based on historical sales and return rates over the period during which customers have a right of return. We also consider current wholesale and retail inventory levels of our products.

Because actual returns related to sales in prior periods were lower than our original estimates, we recorded a decrease in our reserve for returns in each of the first quarter of 2007 and the first quarter of 2006. During the first quarter of 2007, we decreased our reserve for returns by approximately $8.0 million and increased our net sales from branded prescription pharmaceuticals, excluding the adjustment to sales classified as discontinued operations, by the same amount. The effect of the change in estimate on first quarter 2007 operating income was an increase of approximately $5.0 million. During the first quarter of 2006, we decreased our reserve for returns by approximately $8.0 million and increased our net sales from branded prescription pharmaceuticals, excluding the adjustment to sales classified as discontinued operations, by the same amount. The effect of the change in estimate on first quarter 2006 operating income was an increase of approximately $6.0 million. The “Accrual for Returns” table above reflects these adjustments as a reduction in the current provision.

Accrual for Chargebacks

	2008			2007			2006
	(In thousands)
Balance at January 1	$	11,120		$	13,939		$	13,153
Current provision		92,252			97,251			102,876
Actual chargebacks		(93,563	)		(100,070	)		(102,090	)
Alpharma acquisition		156			—			—
Ending balance at December 31	$	9,965		$	11,120		$	13,939

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Branded Prescription Pharmaceuticals Segment

							Change
	For the Years Ended December 31,						2008 vs. 2007						2007 vs. 2006
	2008		2007		2006		$			%			$			%
	(In thousands)
Branded prescription pharmaceuticals revenue:
Skelaxin®	$	446,243	$	440,003	$	415,173	$	6,240			1.4	%	$	24,830			6.0	%
Thrombin-JMI®		254,581		267,354		246,520		(12,773	)		(4.8	)		20,834			8.5
Altace®		166,406		645,989		652,962		(479,583	)		(74.2	)		(6,973	)		(1.1	)
Avinza®		135,452		108,546		—		26,906			24.8			108,546			—
Levoxyl®		73,064		100,102		111,771		(27,038	)		(27.0	)		(11,669	)		(10.4	)
Sonata®		31,158		78,695		85,809		(47,537	)		(60.4	)		(7,114	)		(8.3	)
Other		156,584		217,124		212,466		(60,540	)		(27.9	)		4,658			2.2
Total revenue	$	1,263,488	$	1,857,813	$	1,724,701	$	(594,325	)		(32.0	)%	$	133,112			7.7	%
Cost of Revenues, exclusive of depreciation, amortization and impairments	$	298,861	$	467,507	$	317,677	$	(168,646	)		(36.1	)%	$	149,830			47.2	%

Net sales from branded prescription pharmaceutical products were lower in 2008 than in 2007 primarily due to a decrease in net sales of Altace^®, partially offset by increases in net sales of Avinza^®, which we acquired on February 26, 2007. During December 2007 a competitor entered the market with a generic substitute for Altace^® and additional generic competitors entered the market in June 2008. Excluding the potential for sales from any products for which NDAs have been submitted to the FDA, we expect net sales from branded prescription pharmaceutical products in 2009 will be lower than that experienced in 2008 primarily due to lower net sales of Altace^®, Skelaxin^® and other products discussed below, partially offset by sales of Flector^® Patch, a branded prescription pharmaceutical product purchased in the Alpharma acquisition at the end of December 2008.

Net sales from branded prescription pharmaceutical products were higher in 2007 than in 2006 primarily due to the acquisition of Avinza^® on February 26, 2007 and price increases taken on various products. These increases in net sales were partially offset by a decline in prescriptions of certain of our branded prescription pharmaceutical products during 2007.

For a discussion regarding the potential risk of generic competition for Skelaxin^® and Avinza^®, please see Note 19 “Commitments and Contingencies” in Part IV, Item 15(a)(1), “Financial Statements.”

Sales of Key Products

Skelaxin^®

On January 20, 2009 the U.S. District Court for the Eastern District of New York, in the case of King Pharmaceuticals, Inc., et al. v. Eon Labs, Inc., Case No. 04-cv-5540 (DGT), issued an Order ruling invalid United States Patent Nos. 6,407,128 and 6,683,102, two patents related to Skelaxin^®. The Order was issued without the benefit of a hearing in response to Eon Labs’ motion for summary judgment. We plan to appeal, upon the entry of an appropriate judgment, and intend to vigorously defend our interests. The entry of the Order may lead to generic versions of Skelaxin^® entering the market sooner than previously anticipated, which would likely cause net sales of Skelaxin^® to decline significantly. Also, in January 2008, we entered into an agreement with CorePharma, LLC (“CorePharma”) granting CorePharma a license to launch an authorized generic version of Skelaxin^® in December 2012, or earlier under certain conditions.

For a discussion regarding the risk of potential generic competition for Skelaxin^®, please see Note 19 “Commitments and Contingencies” in Part IV, Item 15(a)(1), “Financial Statements.”

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Net sales of Skelaxin^® increased in 2008 from 2007 primarily due to a price increase taken in the fourth quarter of 2007 and decreases in wholesale inventory levels during 2007, partially offset by a decrease in prescriptions. During 2007, net sales of Skelaxin^® benefited from a favorable change in estimate during the first quarter of 2007 in the product’s reserve for returns as discussed above. Due to increased competition, total prescriptions for Skelaxin^® decreased approximately 11.9% in 2008 compared to 2007 according to IMS Health Incorporated (“IMS”) monthly prescription data. We believe net sales of Skelaxin^® will decrease significantly in 2009 compared to 2008 as a result of decreases in promotional efforts.

Net sales of Skelaxin^® increased in 2007 from 2006 primarily due to a price increase taken in the fourth quarter of 2006. During 2006, net sales of Skelaxin^® benefited from a reduction in the rebate reserve for a government pricing program for military dependents and retirees. During 2007, net sales of Skelaxin^® benefited from a favorable change in estimate in the products reserve for returns as discussed above. Total prescriptions for Skelaxin^® decreased approximately 1.6% in 2007 compared to 2006, according to IMS monthly prescription data.

Thrombin-JMI^®

Net sales of Thrombin-JMI^® decreased in 2008 compared to 2007 primarily due to price concessions. A competing product entered the market in the fourth quarter of 2007 and another entered the market in the first quarter of 2008. We believe net sales of Thrombin-JMI^® will decrease at a significantly higher rate than that experienced in 2008 due to additional price concessions as a result of these competing products.

Net sales of Thrombin-JMI^® increased in 2007 compared to 2006 primarily due to a price increase taken in the fourth quarter of 2006.

Altace^®

Net sales of Altace^® decreased significantly in 2008 from 2007 primarily due to a competitor entering the market in December 2007, and additional competitors entering the market in June 2008, with generic substitutes for Altace^®. As a result of the entry of generic competition, we expect net sales of Altace^® to continue to decline significantly in the future. Total prescriptions for Altace^® decreased approximately 74.5% in 2008 compared to 2007 according to IMS monthly prescription data.

Net sales of Altace^® decreased in 2007 from 2006 primarily due to decreases in prescriptions, partially offset by price increases taken in the fourth quarter of 2006 and the third quarter and fourth quarters of 2007. Total prescriptions for Altace^® decreased approximately 7.1% in 2007 compared to the same period of the prior year according to IMS monthly prescription data.

For a discussion regarding the generic competition for Altace^®, please see Note 19, “Commitments and Contingencies” in Part IV, Item 15(a)(1), “Financial Statements.”

Avinza^®

We acquired all rights to Avinza^® in the United States, its territories and Canada on February 26, 2007. Net sales of Avinza^® increased in 2008 compared to 2007 primarily due to a price increase taken in the fourth quarter of 2007, an increase in prescriptions and the fact that net sales of Avinza^® in 2007 only reflect sales occurring from February 26, 2007 through December 31, 2007. Total prescriptions for Avinza^® increased approximately 3.4% in 2008 compared to 2007 according to IMS monthly prescription data. We do not anticipate net sales of Avinza^® in 2009 will increase at the rate experienced in 2008 as the majority of the increase experienced in 2008 was due to the timing of its acquisition.

On March 24, 2008, we received a letter from the United States Food and Drug Administration, Division of Drug Marketing, Advertising, and Communications (“DDMAC”) regarding promotional material for Avinza^® that was created and submitted to the DDMAC by Ligand Pharmaceuticals (the company from which we acquired Avinza^® in late February 2007). The letter expressed concern with the balance of the described risks and benefits associated with the use of the product and the justification for certain statements made in the promotional material. We discontinued the use of promotional materials created by Ligand prior to

52

receiving the letter and have communicated this to DDMAC. In addition, DDMAC requested support for certain statements included in Avinza^® promotional materials which were then in use. We promptly responded to this request and asked for a meeting with DDMAC to discuss this matter.

Our request resulted in a teleconference with DDMAC representatives on January 6, 2009. After this call, we immediately ceased the dissemination of promotional materials for Avinza^® that included any statements with which DDMAC took issue in its March 24, 2008 letter. Further, we directed our sales representatives to discontinue the use of such materials and ceased all advertising containing the statements discussed in that letter. We continue to cooperate fully with DDMAC in this matter.

For a discussion regarding the risk of potential generic competition for Avinza^®, please see Note 19, “Commitments and Contingencies” in Part IV, Item 15(a)(1), “Financial Statements.”

Levoxyl^®

Net sales of Levoxyl^® decreased in 2008 compared to 2007 primarily due to a decrease in prescriptions as a result of generic competition. In addition, net sales of Levoxyl^® decreased as a result of decreases in the wholesale inventory levels in the first quarter 2008. These decreases in 2008 were partially offset by a price increase taken in the fourth quarter of 2007. Total prescriptions for Levoxyl^® decreased approximately 5.6% in 2008 compared to 2007 according to IMS monthly prescription data. We believe decreases in sales of Levoxyl^® in 2009 will more closely reflect anticipated decreases in prescriptions.

The decrease in net sales of Levoxyl^® in 2007 compared to 2006, primarily due to a decrease in prescriptions in 2007 discussed above, was partially offset by the effect of an increase in wholesale inventory levels during 2007. During 2006, net sales of Levoxyl^® benefited from a favorable change in estimate of approximately $7.0 million in the product’s reserve for Medicaid rebates as a result of the government pricing investigation settlement, partially offset by a decrease in wholesale inventory levels. This benefit was substantially offset by increases in Medicaid rebate reserves for other products as a result of the settlement. Total prescriptions for Levoxyl^® were approximately 12.4% lower in 2007 compared to 2006 according to IMS monthly prescription data.

Other

The branded prescription pharmaceutical products included in other branded prescription pharmaceutical products are not promoted through our sales force and prescriptions for many of our products included in this category are declining. Net sales of other branded prescription pharmaceutical products were lower in 2008 compared to 2007 primarily due to the sale of several of our other branded prescription pharmaceutical products to JHP Pharmaceuticals LLC (“JHP”) on October 1, 2007, and lower net sales of Sonata^® and Bicillin^®.

Net sales of Sonata^® were lower in 2008 compared to 2007 primarily due to competition entering the market with generic substitutes for Sonata^®. The composition of matter patent covering Sonata^® expired in June 2008, at which time several competitors entered the market with generic substitutes.

We completed construction of facilities to produce Bicillin^® at our Rochester, Michigan location, began commercial production in the fourth quarter of 2006 and replenished wholesale inventories of the product during the first quarter of 2007. As a result of this replenishment, we believe that net sales of Bicillin^® in 2007 exceeded demand. Prior to the first quarter of 2007, Bicillin^® was in short supply.

Net sales of other branded prescription pharmaceutical products were higher in 2007 compared to 2006 primarily due to an increase in net sales of Bicillin^® described above and price increases which were partially offset by decreases in prescriptions. As a result of generic competition for Sonata^® and declining demand for many other products included in this category, we anticipate net sales of other branded prescription pharmaceutical products will continue to decline in 2009.

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Cost of Revenues

Cost of revenues from branded prescription pharmaceutical products decreased in 2008 from 2007 primarily due to lower unit sales of Altace^® and the sale of several of our other branded prescription pharmaceutical products to JHP on October 1, 2007, partially offset by an increase in unit sales of Avinza^® due to the acquisition of this product on February 26, 2007.

Cost of revenues from branded prescription pharmaceutical products increased in 2007 from 2006 primarily due to an increase in royalties associated with Skelaxin^® and Avinza^® and the effects of special items in 2007 associated with Altace^® as discussed below.

Special items are those particular material income or expense items that our management believes are not related to our ongoing, underlying business, are not recurring, or are not generally predictable. These items include, but are not limited to, restructuring expenses; non-capitalized expenses associated with acquisitions, such as in-process research and development charges and inventory valuation adjustment charges; charges resulting from the early extinguishments of debt; asset impairment charges; expenses of drug recalls; and gains and losses resulting from the divestiture of assets. We believe the identification of special items enhances an analysis of our ongoing, underlying business and an analysis of our financial results when comparing those results to that of a previous or subsequent like period. However, it should be noted that the determination of whether to classify an item as a special item involves judgments by us.

Special items affecting cost of revenues from branded prescription pharmaceuticals during 2008, 2007 and 2006 included the following:

•  A charge of $8.1 million in 2008 primarily associated with minimum purchase requirements under a supply agreement to purchase raw materials associated with Altace^®.

•  An inventory valuation allowance that resulted in a charge of $78.8 million for inventories associated with Altace^® in 2007. For additional information please see Note 7, “Inventory,” in Part IV, Item 15(a)(1), “Financial Statements.”

•  A charge of $25.4 million primarily associated with minimum purchase requirements under a supply agreement to purchase raw material inventory associated with Altace^® in 2007. For additional information please see Note 7, “Inventory,” in Part IV, Item 15(a)(1), “Financial Statements.”

•  A contract termination that resulted in a charge of $3.8 million in 2007.

We anticipate cost of revenues will decrease in 2009 compared to 2008 primarily due to a decrease in unit sales of several branded prescription pharmaceutical products, as discussed above, partially offset by an increase in cost of revenues due to the Flector^® Patch due to the acquisition of Alpharma at the end of 2008.

Meridian Auto-Injector

							Change
	For the Years Ended December 31,						2008-2007					2007-2006
	2008		2007		2006		$		%			$		%
	(In thousands)
Meridian Auto-Injector revenue	$	218,448	$	183,860	$	164,760	$	34,588		18.8	%	$	19,100		11.6	%
Cost of Revenues, exclusive of depreciation, amortization and impairments		85,550		76,050		74,576		9,500		12.5	%		1,474		2.0
	$	132,898	$	107,810	$	90,184	$	25,088		23.3	%	$	17,626		19.5	%

Revenues from our Meridian Auto-Injector segment increased in 2008 compared to 2007 primarily due to higher unit sales of other products to various government agencies and higher unit sales of Epipen^®. Most of our Epipen^® sales are based on our supply agreement with Dey, L.P. which markets, distributes and sells the product worldwide, except for Canada where it is marketed, distributed and sold by us. Revenues from the

54

Meridian Auto-Injector segment fluctuate based on the buying patterns of Dey, L.P. and government customers.

Revenues from government entities were unusually high in 2008 compared to 2007. With respect to auto-injector products sold to government entities, demand for these products is affected by the timing of procurements which can be affected by preparedness initiatives and responses to domestic and international events.

Demand for Epipen^® is seasonal as a result of its use in emergency treatment of allergic reactions for both insect stings or bites, more of which occur in the warmer months, and food allergies, for which demand increases in the months preceding the start of a new school year. Revenues from Epipen^® in the United States increased in 2008 from 2007 due to an increase in prescriptions. Total prescriptions for Epipen^® in the United States increased approximately 6.4% in 2008 compared to 2007 according to IMS monthly prescription data.

We do not believe revenues from Meridian Auto-Injector segment will continue to increase at the rate experienced in 2008.

Revenues from our Meridian Auto-Injector segment increased in 2007 compared to 2006 primarily due to increases in unit sales of Epipen^® to Dey, L.P., an increase in revenues derived from our acquisition of the rights to market and sell Epipen^® in Canada that we purchased from Allerex Laboratory Ltd. in March 2006 and a price increase taken in the first quarter of 2007.

Cost of revenues from the Meridian Auto-Injector segment increased in 2008 compared to 2007 and in 2007 compared to 2006 primarily due to higher unit sales.

Royalties Segment

							Change
	For the Years Ended December 31,						2008-2007						2007-2006
	2008		2007		2006		$			%			$		%
	(In thousands)
Royalty revenue	$	79,442	$	82,589	$	80,357	$	(3,147	)		(3.8	)%	$	2,232		2.8	%
Cost of Revenues, exclusive of depreciation, amortization and impairments		9,720		10,158		9,748		(438	)		(4.3	)%		410		4.2
	$	69,722	$	72,431	$	70,609	$	(2,709	)		(3.7	)%	$	1,822		2.6	%

Revenues from royalties are derived primarily from payments we receive based on sales of Adenoscan^®. We are not responsible for the marketing of this product. As a result, we are not able to predict whether revenue from royalties will increase or decrease in future periods.

On April 10, 2008, CV Therapeutics, Inc. and Astellas Pharma US, Inc. announced that the FDA approved regadenoson injection, an A2A adenosine receptor agonist product that will compete with Adenoscan^®. Regadenoson has been commercialized by Astellas. Astellas is also responsible for the marketing and sale of Adenoscan^® pursuant to agreements we have with Astellas. It is anticipated that with the commercial launch of regadenoson, sales of Adenoscan and our royalty revenue may continue to decline. However, our agreements with Astellas provide for minimum royalty payments to King of $40.0 million per year for three years (beginning June 1, 2008 and ending May 31, 2011). King will continue to receive royalties on the sale of Adenoscan^® through expiration of the patents covering the product, but the minimum guaranteed portion of the royalty payments terminates upon certain events, including a finding of invalidity or unenforceability of the patents related to Adenoscan^®.

In October 2007, we entered into an agreement with Astellas and a subsidiary of Teva Pharmaceutical Industries Ltd. providing Teva with the right to launch a generic version of Adenoscan^® pursuant to a license in September 2012, or earlier under certain conditions.

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Operating Costs and Expenses

							Change
	For the Years Ended December 31,						2008-2007						2007-2006
	2008		2007		2006		$			%			$			%
	(In thousands)
Cost of revenues, exclusive of depreciation, amortization and impairments	$	394,825	$	566,534	$	419,808	$	(171,709	)		(30.3	)%	$	146,726			35.0	%
Selling, general and administrative		446,020		691,034		713,965		(245,014	)		(35.5	)		(22,931	)		(3.2	)
Research and development		743,673		184,735		253,596		558,938			>100			(68,861	)		(27.2	)
Depreciation and amortization		150,713		173,863		147,549		(23,150	)		(13.3	)		26,314			17.8
Asset impairments		40,995		223,025		47,842		(182,030	)		(81.6	)		175,183			>100
Restructuring charges		7,098		70,178		3,194		(63,080	)		(89.9	)		66,984			>100
Acquisition related costs		1,382		—		—		1,382			100.0			—			—
Total operating costs and expenses	$	1,784,706	$	1,909,369	$	1,585,954	$	(124,663	)		(6.5	)%	$	323,415			20.4	%

Selling, General and Administrative Expenses

							Change
	For the Years Ended December 31,						2008-2007						2007-2006
	2008		2007		2006		$			%			$			%
	(In thousands)
Selling, general and administrative, exclusive of co-promotion fees	$	408,955	$	511,303	$	496,215	$	(102,348	)		(20.0	)%	$	15,088			3.0	%
Co-promotion fees		37,065		179,731		217,750		(142,666	)		(79.4	)		(38,019	)		(17.5	)
Total selling, general and administrative	$	446,020	$	691,034	$	713,965	$	(245,014	)		(35.5	)%	$	(22,931	)		(3.2	)%

As a percentage of total revenues, total selling, general, and administrative expenses were 28.5%, 32.3% and 35.9% during 2008, 2007 and 2006, respectively.

Total selling, general and administrative expenses decreased in 2008 compared to 2007, primarily due to a decrease in co-promotion expenses for fees that we pay to Wyeth under our Amended and Restated Co-Promotion Agreement (the “Amended Co-Promotion Agreement”) and a decrease in operating expenses. The decrease in co-promotion expenses is due to a decrease in Altace^® net sales and the lower percentage of net sales of Altace^® that we paid Wyeth in 2008 compared to 2007 under the Amended Co-Promotion Agreement. For additional discussion regarding the Amended Co-Promotion Agreement, please see “General” within the “Liquidity and Capital Resources” section below. For a discussion regarding net sales of Altace^®, please see “Altace^®” within the “Sales of Key Products” section above. Following the Circuit Court’s decision in September 2007 invalidating our ’722 patent that covered Altace^®, our senior management team conducted an extensive examination of our company and developed a restructuring initiative. This initiative included a reduction in personnel, staff leverage, expense reductions and additional controls over spending, reorganization of sales teams and a realignment of research and development priorities. As a result of these actions, we reduced selling, general and administrative expenses, exclusive of co-promotion fees.

Total selling, general and administrative expenses decreased in 2007 compared to 2006, primarily due to a decrease in co-promotion fees we pay to Wyeth under our Amended Co-Promotion Agreement, partially offset by an increase in operating expenses associated with sales and marketing. The increases in sales and marketing expenses were driven by an increase in the size of our sales force and marketing costs primarily

56

associated with Altace^® and Avinza^®. The co-promotion fee decreased in 2007 compared to 2006 due to a lower co-promotion fee average rate during 2007 as a result of the Amended Co-Promotion Agreement.

Selling, general and administrative expense includes the following special items:

•  Income of $4.4 million during 2008 and charges of $2.1 million and $0.1 million during 2007 and 2006, respectively, primarily due to professional fees related to the previously completed investigation of our company by the HHS/OIG, and the SEC, and the private plaintiff securities litigation. During 2008, 2007 and 2006, we received payment from our insurance carriers for the recovery of legal fees in the amount of $11.0 million, $3.4 million and $6.8 million, respectively, related to the securities litigation. These recoveries have been reflected as reductions of professional fees in 2008, 2007 and 2006. For additional information, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.”

•  A charge of $45.1 million during 2006 related to the results of a binding arbitration proceeding with Elan Corporation, plc regarding an agreement concerning the development of a modified release formulation of Sonata^®. During 2004, we incurred a charge of $5.0 million as estimated settlement costs related to the termination of this agreement.

Research and Development Expense

							Change
	For the Years Ended December 31,						2008-2007			2007-2006
	2008		2007		2006		$			$
	(In thousands)
Research and development	$	145,173	$	149,425	$	143,596	$	(4,252	)	$	5,829
Research and development — in-process upon acquisition		598,500		35,310		110,000		563,190			(74,690	)
Total research and development	$	743,673	$	184,735	$	253,596	$	558,938		$	(68,861	)

Research and development represents expenses associated with the ongoing development of investigational drugs and product life-cycle management projects in our research and development pipeline, which primarily consists of branded prescription pharmaceutical products. During 2008, we expensed and paid milestone payments of $5.1 million associated with the acceptance of an investigational new drug application under our agreements with Pain Therapeutics, $15.8 million associated with the acceptance of the NDA filing for Remoxy^® by the FDA and a $5 million milestone to Acura associated with positive top-line results from the Phase III clinical trial evaluating Acurox^® Tablets. For a discussion regarding recent research and development activities, please see “Recent Developments” above.

Research and development — in-process upon acquisition represents the actual cost of acquiring rights to novel branded prescription pharmaceutical projects in development from third parties, which costs we expense at the time of acquisition. We classify these costs as special items, and in 2008, 2007, and 2006 special items included the following:

•  A charge of $590.0 million for our acquisition of in-process research and development related to the completion of our acquisition of Alpharma on December 29, 2008. The charge represents purchase price allocation associated with Embeda^tm, Oxycodone NT and Hydrocodone NT projects of $410.0 million, $90.0 million and $90.0 million, respectively. The amounts associated with each of these projects were expensed as the in-process research and development projects had not received regulatory approval and had no alternative future use. The Embeda^tm NDA was submitted to the FDA in June 2008. We currently believe we will obtain approval of the Embeda^tm NDA during 2009. The success of the project is dependent upon NDA approval by the FDA. Oxycodone NT and Hydrocodone NT, each long-acting treatments for moderate to severe chronic pain, are currently in the early stages of development. Oxycodone NT and Hydrocodone NT are each designed to resist certain common methods of misuse and abuse associated with long-acting oxycodone and hydrocodone products that are currently available. If the clinical development programs are successful, we would not expect to commercialize

57

these products any sooner than 2011. The estimated cost to complete the development of these products is approximately $35 million each. We believe there is a reasonable probability of completing these projects successfully, but the success of the projects depends on the outcome of the clinical development programs and approval by the FDA.

•  Charges totaling $6.0 million in 2008 for our acquisition of in-process research and development related to the exercise of our options for a third and fourth immediate-release opioid product under a License, Development and Commercialization Agreement with Acura to develop and commercialize certain opioid analgesic products utilizing Acura’s Aversion^® Technology in the United States, Canada and Mexico. The amount of each option exercise was $3.0 million. We believe there is a reasonable probability of completing the projects successfully, but the success of the projects depends on the successful outcome of the clinical development programs and approval of the products by the FDA. The estimated cost to complete each project at the time of the execution of the option was approximately $16.0 million for each product.

•  A charge of $2.5 million in 2008 for our acquisition of in-process research and development associated with our Product Development Agreement with CorePharma LLC (“CorePharma”) to develop new formulations of Skelaxin^®. Any intellectual property created as a result of the agreement will belong to us and we will grant CorePharma a non-exclusive, royalty-free license to use this newly created intellectual property with any product not containing metaxalone. The success of the project depends on additional development activities and FDA approval. The estimated cost to complete the development activities at the time of the execution of the agreement was approximately $2.5 million.

•  A charge of $32.0 million during 2007 associated with our collaborative agreement with Acura to develop and commercialize certain immediate-release opioid analgesic products utilizing Acura’s proprietary Aversion^® Technology in the United States, Canada and Mexico. The agreement provides us with an exclusive license for Acurox^® (oxycodone HCl/niacin) tablets and another immediate-release opioid product utilizing Acura’s Aversion^® Technology. In addition, the agreement provides us with an option to license all future opioid analgesic products developed utilizing Acura’s Aversion^® Technology.

In connection with the agreement with Acura, we recognized the above payments of $32.0 million as in-process research and development expense during 2007. This amount was expensed as the in-process research and development project had not received regulatory approval and had no alternative future use. The in-process research and development project is part of the branded prescription pharmaceutical segment. An NDA for Acurox^® Tablets was submitted to the FDA in December 2008. The success of the project depends on approval by the FDA. The estimated cost to complete the project at the execution of the agreement was approximately $9.0 million. We may obtain FDA approval in 2009.

•  A charge of $3.1 million during 2007 for a payment to Mutual Pharmaceutical Company (“Mutual”) to jointly research and develop one or more improved formulations of metaxalone. Under the agreement with Mutual, we sought Mutual’s expertise in developing improved formulations of metaxalone, including improved formulations Mutual developed prior to execution of this agreement and access to Mutual’s and United Research Laboratories’ rights in intellectual property pertaining to these formulations. Development activities under this agreement ceased in December 2007.

•  A charge of $110.0 million during 2006 for our acquisition of in-process research and development associated with our collaboration with Arrow to commercialize one or more novel formulations of ramipril, the active ingredient in our Altace^® product. Under a series of agreements, Arrow granted us rights to certain current and future NDAs regarding novel formulations of ramipril and intellectual property, including patent rights and technology licenses relating to these novel formulations. This project included a NDA filed by Arrow for a tablet formulation of ramipril in January 2006 (the “Ramipril Application”). The FDA approved the NDA on February 27, 2007. Arrow granted us an exclusive option to acquire their entire right, title and interest to the Ramipril Application or any future filed Amended Ramipril Application for the amount of $5.0 million. In April 2007, we exercised our option and paid $5.0 million to Arrow. We do not currently anticipate any future revenues as a result of our rights to these ramipril formulations.

58

Depreciation and Amortization Expense

Depreciation and amortization expense decreased in 2008 compared to 2007 primarily due to a decrease in amortization associated with Altace^®, partially offset by increases in amortization associated with Skelaxin^® and Avinza^®, as discussed below. In addition, the decrease in depreciation and amortization expense during 2008 was partially attributable to the cessation of depreciation and amortization associated with the Rochester, Michigan sterile manufacturing facility that we sold in October 2007.

Following the Circuit Court’s decision in September 2007 invalidating our ‘722 patent that covered Altace^®, we undertook an analysis of the potential effect on future net sales of the product. Based upon this analysis, we reduced the estimated remaining useful life of Altace^®. Accordingly, amortization of the remaining intangibles associated with Altace^® was completed during the first quarter of 2008. The amortization expense associated with Altace^® during the first quarter of 2008 was $29.7 million.

In January 2008, we entered into an agreement with CorePharma providing CorePharma with the right to launch an authorized generic version of Skelaxin^® pursuant to a license in December 2012, or earlier under certain conditions. As a result, we decreased the estimated useful life of Skelaxin^®, which had the effect of increasing amortization in 2008 compared to 2007. Additionally, on February 26, 2007, we completed our acquisition of Avinza^® and began amortizing the associated intangible assets as of that date.

Depreciation and amortization expense increased in 2007 compared to 2006 primarily due to increased amortization expense related to Avinza^® and Altace^®, partially offset by a decrease in depreciation and amortization expense associated with the sale of the Rochester, Michigan sterile manufacturing facility. On February 26, 2007, we completed our acquisition of Avinza^® and began amortizing the associated intangible assets as of that date. During 2007, following the Circuit Court’s decision invalidating our Altace^® patent as discussed above, we decreased the estimated useful life of our Altace^® intangible assets. On June 30, 2007, the assets associated with the sale of the Rochester, Michigan sterile manufacturing facility were classified as held for sale, and accordingly the depreciation and amortization was discontinued as of that date.

For additional information about the sale of the Rochester, Michigan facility and the acquisition of Avinza^®, please see Note 9, “Acquisitions, Dispositions, Co-Promotions and Alliances,” in Part IV, Item 15(a)(1), “Financial Statements.” For additional information relating to the Altace^® intangible assets, please see Note 10, “Intangible Assets and Goodwill,” in Part IV, Item 15(a)(1), “Financial Statements.”

Depreciation and amortization expense in 2008, 2007 and 2006 includes a special item consisting of $2.6 million, $7.0 million and $3.0 million, respectively, associated with accelerated depreciation on certain assets, including those associated with our decision to transfer the production of Levoxyl^® from our St. Petersburg, Florida facility to our Bristol, Tennessee facility, which we expect to complete in the first half of 2009.

Following the U.S. District Court’s Order ruling invalid two Skelaxin^® patents on January 20, 2009, we estimated the potential effect on future net sales of the product. Based upon this analysis, we reduced the estimated remaining useful life of Skelaxin^®. Accordingly, Skelaxin^® amortization will increase in 2009 compared to 2008. For additional information relating to Skelaxin^®, please see Note 27, “Subsequent Events,” in Part IV, Item 15(a)(1), “Financial Statements.”

In addition, the acquisition of Alpharma will increase depreciation and amortization in 2009 compared to 2008.

For additional information relating to 2009 amortization expense, please see Note 10, “Intangible Assets and Goodwill,” in Part IV, Item 15(a)(1), “Financial Statements.”

59

Other Operating Expenses

In addition to the special items described above, we incurred other special items affecting operating costs and expenses resulting in a net charge totaling $49.5 million during 2008 compared to a net charge totaling $293.2 million during 2007 and $51.0 million during 2006. These other special items included the following:

•  Asset impairment charges of $40.9 million in 2008 primarily associated with a decline in end-user demand for Synercid^®.

•  An intangible asset impairment charge of $146.4 million in 2007 related to our Altace^® product as a result of the invalidation of the ‘722 patent which covered the Altace^® product. Following the Circuit Court’s decision, we reduced the estimated useful life of this product and forecasted net sales. This decrease in estimated remaining useful life and forecasted net sales reduced the probability-weighted estimated undiscounted future cash flows associated with Altace^® intangible assets to a level below their carrying value. We determined the fair value of these assets based on probability-weighted estimated discounted future cash flows.

•  A charge of $46.4 million in 2007 related to the write-down of our Rochester, Michigan sterile manufacturing facility and certain legacy branded prescription pharmaceutical products. On October 1, 2007, we closed the asset purchase agreement with JHP, pursuant to which JHP acquired our Rochester, Michigan sterile manufacturing facility, some of our legacy products that are manufactured there and the related contract manufacturing business. For additional information, please see Note 10, “Intangible Assets and Goodwill,” in Part IV, Item 15(a)(1), “Financial Statements.”

•  Intangible asset impairment charges of $30.2 million in 2007 primarily related to our decision to no longer pursue the development of a new formulation of Intal^® utilizing hydroflouroalkane as a propellant.

•  An intangible asset impairment charge in 2006 of $47.8 million, which is primarily related to lower than expected prescription growth for Intal^® and Tilade^®. These charges were recorded in order to adjust the carrying value of the intangible assets on our balance sheet associated with these products so as to reflect the estimated fair value of these assets at the time the charges were incurred.

•  Restructuring charges in the amount of $7.1 million in 2008 primarily related to our integration of Alpharma.

•  Restructuring charges in the amount of $68.6 million in 2007 primarily due to our restructuring initiative designed to accelerate a planned strategic shift emphasizing our focus on the neuroscience and hospital markets and separation payments associated with the sale of the Rochester, Michigan sterile manufacturing facility discussed above.

•  Restructuring charges of $1.6 million and $3.2 million during 2007 and 2006, respectively, for separation payments that primarily arose in connection with our decision to transfer the production of Levoxyl^® from our St. Petersburg, Florida facility to the Bristol, Tennessee facility.

As of December 31, 2008, the net intangible assets associated with Skelaxin^® and Synercid^® totaled approximately $117.0 million and $29.0 million, respectively. We believe that these intangible assets are not currently impaired based on estimated undiscounted cash flows associated with these assets. However, if our estimates regarding future cash flows prove to be incorrect or adversely change, we may have to reduce the estimated remaining useful life and/or write off a portion or all of these intangible assets.

Certain generic companies have challenged patents on Skelaxin^® and Avinza^®. In addition, on January 20, 2009, the U.S. District Court issued an order ruling invalid two of our Skelaxin^® patents. For additional information, please see Note 19, “Commitments and Contingencies” and Note 27, “Subsequent Events” in Part IV, Item 15(a)(1), “Financial Statements.” If a generic version of Skelaxin^® or Avinza^® enters the market, we may have to write off a portion or all of the intangible assets associated with these products.

The net book value of some of our manufacturing facilities currently exceeds fair market value. Management currently believes that the long-term assets associated with these facilities are not impaired based

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on estimated undiscounted future cash flows. However, if we were to approve a plan to sell or close any of the facilities for which the carrying value exceeds fair market value, we would have to write off a portion of the assets or reduce the estimated useful life of the assets, which would accelerate depreciation.

NON-OPERATING ITEMS

	For the Years Ended December 31,
	2008			2007			2006
	(In thousands)
Interest income	$	36,970		$	42,491		$	32,152
Interest expense		(7,943	)		(7,818	)		(9,857	)
Loss on investment		(7,451	)		(11,591	)		—
Gain on early extinguishment of debt		—			—			628
Other, net		(3,635	)		223			(1,157	)
Income tax expense		131,359			67,600			135,730
Discontinued operations		—			(237	)		367

Other Income (Expense)

Interest Income

Interest income decreased during 2008 compared to 2007 primarily due to a decrease in interest rates partially offset by a higher total balance of cash, cash equivalents and investments in debt securities in 2008. Interest income increased in 2007 compared to 2006 primarily due to an increase in interest rates and a higher average balance of cash, cash equivalents and investments in debt securities in 2007 compared to 2006. We believe interest income will decrease in 2009 compared to 2008 due to a reduction in cash, cash equivalents and investments in debt securities. For additional information related to our investments in debt securities, please see “Liquidity and Capital Resources” below.

Interest Expense

On December 29, 2008, we completed our acquisition of all of the outstanding common shares of the Class A Common Stock of Alpharma at a price of $37.00 per share in cash, for an aggregate purchase price of approximately $1.6 billion. As a result of the transaction, Alpharma is now a wholly-owned subsidiary of King. The acquisition was funded with available cash on hand, borrowings of $425.0 million under the Senior Secured Revolving Credit Facility, as amended on December 5, 2008, and borrowings of $200.0 million under a new Senior Secured Term Facility. As a result of these borrowings we expect interest expense to increase significantly in 2009. For more information regarding this financing and the associated interest rates, please see the sections entitled “Senior Secured Revolving Credit Facility” and “Senior Secured Term Facility” under, “Certain Indebtedness and Other Matters,” below.

Additionally, In May 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (“FSP APB 14-1”). FSP APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We will adopt FSP APB 14-1 as of January 1, 2009. Upon adoption of FSP APB 14-1, our accounting for our $400.0 million 11/4% Convertible Senior Notes due April 1, 2026 will be affected. We are currently evaluating the potential effect of FSP APB 14-1 on our financial statements, but estimate that implementation would result in a reduction in the carrying value of the outstanding $400.0 million 11/4% Convertible Senior Notes due April 1, 2026 by approximately $130.0 million, with a corresponding increase in equity. We also estimate that upon adoption, the retrospective application of FSP APB 14-1 will

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result in increased interest expense of approximately $18.0 million for the year ending December 31, 2009. Retrospective application to all periods presented is required.

Special items affecting other income (expense) included the following:

•  A loss of $7.5 million in 2008 related to our investment in debt securities.

•  A loss of $11.6 million in 2007 related to our investment in Palatin.

•  Income of $0.6 million during 2006 resulting from the early retirement of our 23/4% Convertible Debentures due November 15, 2021.

Income Tax Expense

During 2008, our effective income tax rate on the loss from continuing operations was (65.1)%. This rate differed from the statutory rate of 35% primarily due to non-deductible research and development in process at acquisition and state taxes offset by tax benefits relating to tax-exempt interest income and domestic production activities deductions. We currently believe our effective tax rate in 2009 will be slightly higher than the statutory rate.

During 2007, our effective income tax rate on income from continuing operations was 27.0%. This rate differed from the statutory rate of 35% primarily due to tax benefits relating to tax-exempt interest income and domestic production activities deductions, which benefits were partially offset by state taxes. Additionally, the 2007 rate benefited from the release of reserves under FIN 48 as a result of the expiration of certain federal and state statutes of limitations for the 2002 and 2003 tax years.

During 2006, our effective tax rate for continuing operations was 32.0%. This rate differed from the federal statutory rate of 35% primarily due to benefits related to charitable contributions of inventory, tax-exempt interest income and domestic manufacturing activities deductions, which benefits were partially offset by state taxes.

For additional information relating to income taxes, please see Note 17, “Income Taxes,” in Part IV, Item 15(a)(1), “Financial Statements.”

Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments

We do not have any off-balance sheet arrangements, except for operating leases in the normal course of business as described in Note 11, “Lease Obligations”, in Part IV, Item 15(a)(1), “Financial Statements” to our audited consolidated financial statements included in this report and as reflected in the table below.

The following table summarizes contractual obligations and commitments as of December 31, 2008 (in thousands):

	Payment Due by Period
			Less Than		One to		Four to		More Than
	Total		One Year		Three Years		Five Years		Five Years
	(In thousands)
Contractual Obligations:
Long-term debt	$	1,402,269	$	436,401	$	266,447	$	699,421	$	—
Operating leases		78,901		14,489		24,804		24,974		14,634
Unconditional purchase obligations		431,941		201,527		91,303		53,370		85,741
Interest on long-term debt		121,349		43,015		64,410		13,924		—
Total	$	2,034,460	$	695,432	$	446,964	$	791,689	$	100,375

Our unconditional purchase obligations are primarily related to minimum purchase requirements under contracts with suppliers to purchase raw materials and finished goods related to our branded prescription pharmaceutical products and commitments associated with research and development projects. The above table

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does not reflect any potential milestone payments in connection with research and development projects or acquisitions. Required funding obligations for 2009 relating to the Company’s pension and other postretirement benefit plans are not expected to be material.

We have a supply agreement with a third party to produce metaxalone, the active ingredient in Skelaxin^®. This supply agreement requires us to purchase certain minimum levels of metaxalone and expires in 2010. If sales of Skelaxin^® are not consistent with current forecasts, we could incur losses in connection with purchase commitments for metaxalone, which could have a material adverse effect upon our results of operations and cash flows.

As of December 31, 2008, we had a liability for unrecognized tax benefits of $49.9 million. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for unrecognized tax benefits beyond one year, a reasonable estimate of the period of cash settlement for years beyond 2009 cannot be made.

Liquidity and Capital Resources

General

We believe that existing balances of cash, cash equivalents, investments in debt securities and marketable securities, cash generated from operations and our existing revolving credit facility are sufficient to finance our current operations and working capital requirements on both a short-term and long-term basis. However, we cannot predict the amount or timing of our need for additional funds. We cannot provide assurance that funds will be available to us when needed on favorable terms, or at all.

Investments in Debt Securities

As of December 31, 2008, our investments in debt securities consisted solely of tax-exempt auction rate securities and did not include any mortgage-backed securities or any securities backed by corporate debt obligations. The tax-exempt auction rate securities that we hold are long-term variable rate bonds tied to short-term interest rates that are intended to reset through an auction process generally every seven, 28 or 35 days. Our investment policy requires us to maintain an investment portfolio with a high credit quality. Accordingly, our investments in debt securities are limited to issues which were rated AA or higher at the time of purchase.

In the event that we attempt to liquidate a portion of our holdings through an auction and are unable to do so, we term it an “auction failure.” On February 11, 2008, we began to experience auction failures. As of December 31, 2008, all our investments in auction rate securities, with a total par value of $417.1 million, have experienced multiple failed auctions. In the event of an auction failure, the interest rate on the security is reset according to the contractual terms in the underlying indenture. As of February 25, 2009, we have received all scheduled interest payments associated with these securities.

The current instability in the credit markets may continue to affect our ability to liquidate these securities. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or a buyer outside the auction process emerges. Based on the frequency of auction failures and the lack of market activity, current market prices are not available for determining the fair value of these investments. As a result, we have measured $417.1 million in par value of our investments in debt securities, or 34.6% of the assets that we have measured at fair value, using unobservable inputs which are classified as Level 3 measurements under Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). For additional information regarding SFAS No. 157, please see Note 15, “Fair Value Measurements,” in Part IV, Item 15(a)(1), “Financial Statements.”

Although we have realized no loss of principal with respect to these investments, as of December 31, 2008, we recorded unrealized losses on our investments in auction rate securities of $56.8 million. We have recorded $45.3 million of the unrealized holding losses in accumulated other comprehensive income on our Consolidated Balance Sheet, as we believe the decline is temporary and we have the intent and ability to hold our investments in securities until they recover in value or until maturity. During the fourth quarter of 2008 we accepted an offer from UBS Financial Services, Inc. (“UBS”) providing us the right to sell certain auction rate securities with a par value of $40.7 million to UBS during the period from June 30, 2010 to July 2, 2012 at par value. We have elected to account for this right at fair value in accordance with SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. The right to sell the auction rate securities

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to UBS at par was valued at $4.0 million and has been reflected as an unrealized gain in other income (expense) in the accompanying Consolidated Statement of Operations. In addition, we transferred the classification of the auction rate securities that are included in this right from available-for-sale securities to trading securities and therefore recognized the unrealized losses related to these securities of $4.6 million in other income (expense) on the accompanying Consolidated Operations.

In addition, we have recognized unrealized losses of $6.8 million in other income (expense) on the accompanying Consolidated Statement of Operations for a municipal bond for which the holding losses were determined to be other than temporary.

As of December 31, 2008, we had approximately $417.1 million, in par value, invested in tax-exempt auction rate securities which consisted of $296.5 million associated with student loans backed by the federal family education loan program (FFELP), $89.4 million associated with municipal bonds in which performance is supported by bond insurers and $31.2 million associated with student loans collateralized by loan pools which equal at least 200% of the bond issue.

As of December 31, 2008, we classified $6.4 million of auction rate securities as current assets and $353.8 million as long-term assets.

Skelaxin^®

As previously disclosed, we are involved in multiple legal proceedings over patents relating to our product Skelaxin^®. On January 20, 2009, the U.S. District Court for the Eastern District of New York, in the case of King Pharmaceuticals, Inc., et al. v. Eon Labs Inc., Case No. 04-cv-5540 (DGT), issued an Order ruling invalid two of these patents, United States Patent Nos. 6,407,128 and 6,683,102. The Order was issued without the benefit of a hearing in response to Eon Labs’ motion for summary judgment. We plan to appeal, upon the entry of an appropriate judgment, and intend to vigorously defend our interests. The entry of the Order may lead to generic versions of Skelaxin^® entering the market sooner than previously anticipated, which would likely cause net sales of Skelaxin^® to decline significantly.

Following the decision of the District Court, we conducted an extensive examination of the company and developed a restructuring initiative designed to partially offset the potential material decline in Skelaxin sales in the event that a generic competitor enters the market. This initiative includes, based on an analysis of our strategic needs: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams. Our animal health activities are not affected by the restructuring.

We estimate that, in connection with the restructuring initiative, we will incur total restructuring costs of between $50 million and $55 million, all of which are expected to be incurred and expensed during the first half of 2009 and almost all of which will be cash expenditures. These costs all relate to severance pay and other employee termination expenses. For additional information, please see Note 27, “Subsequent Events,” in Part IV, Item 15(a)(1), “Financial Statements.”

Alpharma

On December 29, 2008, we completed our acquisition of all the outstanding shares of Class A Common Stock, together with the associated preferred stock purchase rights of Alpharma at a price of $37.00 per share in cash, for an aggregate purchase price of approximately $1.6 billion. Alpharma is a branded specialty pharmaceutical company with a growing specialty pharmaceutical franchise in the U.S. pain market with its Flector^® Patch (diclofenac epolamine topical patch) and a pipeline of new pain medicines led by Embeda^tm, a formulation of long-acting morphine that is designed to provide controlled pain relief and deter certain common methods of misuse and abuse. Alpharma is also a global leader in the development, registration, manufacture and marketing of MFAs and water soluble therapeutics for food-producing animals, including poultry, cattle and swine.

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The acquisition was financed with available cash on hand, borrowings under the Senior Secured Revolving Credit Facility of $425.0 million and borrowings under the Term Loan of $200.0 million. For additional information on the borrowings, please see below.

In connection with the acquisition of Alpharma, we together with Alpharma executed a consent order (the “Consent Order”) with the U.S. Federal Trade Commission. The Consent Order required us to divest the rights to Alpharma’s branded oral long-acting opioid analgesic drug Kadian^® to Actavis Elizabeth, L.L.C., (“Actavis”). In accordance with the Consent Order, effective upon the acquisition of Alpharma, on December 29, 2008, we divested the Kadian^® product to Actavis. Actavis is entitled to sell Kadian^® as a branded or generic product. Prior to this divestiture, Actavis supplied Kadian^® to Alpharma.

Actavis will pay a purchase price of up to an aggregate of $127.5 million in cash based on the achievement of certain Kadian^® quarterly gross profit related milestones for the period beginning January 1, 2009 and ending June 30, 2010. The maximum purchase price payment associated with each calendar quarter is as follows:

	Maximum Purchase
	Price Payment
First Quarter 2009	$	30.0 million
Second Quarter 2009	$	25.0 million
Third Quarter 2009	$	25.0 million
Fourth Quarter 2009	$	20.0 million
First Quarter 2010	$	20.0 million
Second Quarter 2010	$	7.5 million

None of the quarterly payments above, when combined with all prior payments made by Actavis, shall exceed the aggregate amount of gross profits from the sale of Kadian^® in the United States by Actavis and its affiliates for the period beginning on January 1, 2009 and ending on the last day of such calendar quarter. Any quarterly purchase price payment that is not paid by Actavis due to the application of such provision will be carried forward to the next calendar quarter, increasing the maximum quarterly payment in the subsequent quarter. However, the cumulative purchase price payable by Actavis will not exceed the lesser of (a) $127.5 million and (b) the gross profits from the sale of Kadian^® as determined by the agreement in the United States by Actavis and its affiliates for the period from January 1, 2009 through June 30, 2010. In connection with the divestiture, we recorded a receivable equal to the value of the estimated future cash flows from the quarterly gross-profit related milestones. There was no gain or loss recorded as a result of the divestiture.

As part of the integration of Alpharma, management developed a restructuring initiative to eliminate redundancies in operations created by the acquisition. This initiative includes, based on an analysis of our strategic needs: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams.

We estimated total costs of $66.5 million associated with this restructuring plan, of which all are cash related costs. All employee termination costs are expected to be paid by the end of 2011. All contract termination costs are expected to be paid by the end of 2018. The cash payments are expected to be paid through 2018. For additional information, please see Note 25, “Restructuring Activities,” in Part IV, Item 15(a)(1), ‘‘Financial Statements.”

During the first quarter of 2009, we paid $385.2 million to redeem the Convertible Senior Notes of Alpharma outstanding at the time of the acquisition and at December 31, 2008. For additional information, please see “Alpharma Convertible Senior Notes” in “Certain Indebtedness and Other Matters.”

Senior Secured Revolving Credit Facility

On April 23, 2002, we established a $400.0 million five-year Senior Secured Revolving Credit Facility which was scheduled to mature in April 2007. On April 19, 2007, this facility was terminated and replaced with a new $475.0 million five-year Senior Secured Revolving Credit Facility, as amended on December 5,

65

2008 (the “Revolving Credit Facility”). The Revolving Credit Facility matures in April 2012 or on September 30, 2011 if the Convertible Senior Notes have not been refinanced. In connection with the acquisition of Alpharma on December 29, 2008 we borrowed $425 million in principal amount under the Revolving Credit Facility.

As of December 31, 2008, the remaining undrawn commitment amount under the Revolving Credit Facility totals approximately $37.9 million after giving effect to outstanding letters of credit totaling approximately $12.1 million.

Under the Revolving Credit Facility, we are required to make prepayments equal to 50% of our annual excess cash flows, which can be reduced to 25% upon the occurrence of certain events. In addition, we are required to make prepayments upon the occurrence of certain events, such as an asset sale, the issuance of debt or equity or the liquidation of auction rate securities. These mandatory prepayments will be allocated among the Revolving Credit Facility and the Term Facility described below in accordance with these agreements and will permanently reduce the commitments under the Revolving Credit Facility. However, commitments under the Revolving Credit Facility would not be reduced in any event below $150.0 million.

Under the terms of the Revolving Credit Facility the credit commitments will be automatically and permanently reduced on a quarterly basis, to the amounts set forth below:

December 31, 2009	$	403.8 million
December 31, 2010	$	308.8 million
December 31, 2011	$	213.8 million
March 31, 2012	$	190.0 million

We have the right to prepay, without penalty (other than customary breakage costs), any borrowing under the Revolving Credit Facility.

Senior Secured Term Facility

Also on December 29, 2008, King entered into a $200 million term loan credit agreement, comprised of a four-year senior secured loan facility (the “Term Facility”) with a maturity date of December 28, 2012.

Under the terms of the Term Facility, we are required to repay the borrowings in equal quarterly payments that total the following annual amounts:

2009	$	30.0 million
2010	$	40.0 million
2011	$	40.0 million
2012	$	90.0 million

We have the right to prepay, without penalty (other than customary breakage costs), any borrowing under the Term Facility.

Under the Term Facility, we are required to make prepayments equal to 50% of our annual excess cash flows, which can be reduced to 25% upon the occurrence of certain events. In addition, we are required to make prepayments upon the occurrence of certain events, such as an asset sale, the issuance of debt or equity or the liquidation of auction rate securities. These mandatory prepayments will be allocated among the Term Facility and the Revolving Credit Facility in accordance with these agreements and will reduce on a pro-rata basis any remaining scheduled payments.

CorePharma

In June 2008, we entered into a Product Development Agreement with CorePharma to collaborate in the development of new formulations of metaxalone that we currently market under the brand name Skelaxin^®. Under the Agreement, we and CorePharma granted each other non-exclusive cross-licenses to certain pre-existing intellectual property. Any intellectual property created as a result of the agreement will belong to us and we will grant CorePharma a non-exclusive, royalty-free license to use this newly created intellectual

66

property with any product not containing metaxalone. In the second quarter of 2008 we made a non-refundable cash payment of $2.5 million to CorePharma. Under the terms of the agreement, we will reimburse CorePharma for the cost to complete the development activities incurred under the agreement, subject to a cap. In addition, we could be required to make milestone payments based on the achievement and success of specified development activities and the achievement of specified net sales thresholds of such formulations, as well as royalty payments based on net sales.

Acura

In October 2007, we entered into a License, Development and Commercialization Agreement with Acura to develop and commercialize certain opioid analgesic products utilizing Acura’s Aversion^® Technology in the United States, Canada and Mexico. The agreement provides us with an exclusive license for Acurox^® Tablets and another opioid product utilizing Acura’s Aversion^® Technology. In addition, the agreement provides us with an option to license all future opioid analgesic products developed utilizing Acura’s Aversion^® Technology. In May 2008 and December 2008, we exercised our options for third and fourth immediate-release opioid products under the agreement. In connection with the exercise of the options, we paid non-refundable option exercise fees to Acura of $3.0 million for each option.

Under the terms of the agreement, we made a non-refundable cash payment of $30.0 million to Acura in December 2007. In addition, we will reimburse Acura for all research and development expenses incurred beginning from September 19, 2007 for Acurox^® Tablets and all research and development expenses related to future products after the exercise of our option to an exclusive license for each future product. During January 2008, we made an additional payment of $2.0 million to Acura, which was accrued as of December 31, 2007, for certain research and development expenses incurred by Acura prior to the closing date of the agreement. We may make additional non-refundable cash milestone payments to Acura based on the successful achievement of certain clinical and regulatory milestones for Acurox^® Tablets and for each other product developed under the agreement. In June 2008, we made a milestone payment of $5.0 million associated with positive top-line results from the Phase III clinical trial evaluating Acurox^® Tablets. We will also make an additional $50.0 million non-refundable cash milestone payment to Acura in the first year that the aggregate net sales of all products developed under the agreement exceeds $750.0 million. In addition, we will make royalty payments to Acura ranging from 5% to 25% based on the level of combined annual net sales of all products developed under the agreement.

Altace^®

In December 2007, a third party launched a generic substitute for Altace^®. In June 2008, additional competitors entered the market with generic substitutes for Altace^®. As a result of the entry of generic competition, Altace^® net sales decreased in 2008 and we expect net sales of Altace^® will continue to decline significantly during 2009. For a discussion regarding the generic competition for Altace^®, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.”

Following the Circuit Court’s decision in September 2007 invalidating our ‘722 Patent that covered Altace^®, our senior management team conducted an extensive examination of our company and developed a restructuring initiative. This initiative included a reduction in personnel, staff leverage, expense reductions and additional controls over spending, reorganization of sales teams and a realignment of research and development priorities. We incurred total costs of approximately $67.0 million in connection with this initiative. This total included the contract termination payment paid to Depomed, Inc. in October of 2007 of approximately $29.7 million. We made additional cash payments of $22.2 million during the first quarter of 2008 primarily related to employee termination costs. For additional information, please see Note 25, “Restructuring Activities,” in Part IV, Item 15(a)(1), “Financial Statements.”

Rochester Facility

In October 2007, we sold our Rochester, Michigan sterile manufacturing facility, some of our legacy products that are manufactured there and the related contract manufacturing business to JHP Pharmaceuticals,

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LLC for $91.7 million, less fees of $5.4 million. We retained our stand-alone Bicillin (sterile penicillin products) manufacturing facility which is also located in Rochester, Michigan. For additional information, please see Note 9, “Acquisitions, Dispositions, Co-Promotions and Alliances,” in Part IV, Item 15(a)(1), “Financial Statements.”

Avinza^®

In September 2006, we entered into a definitive asset purchase agreement and related agreements with Ligand Pharmaceuticals Incorporated (“Ligand”) to acquire rights to Avinza^® (morphine sulfate long-acting). Avinza^® is a long-acting formulation of morphine and is indicated as a once-daily treatment for moderate to severe pain in patients who require continuous opioid therapy for an extended period of time. We completed the acquisition of Avinza^® on February 26, 2007, acquiring all the rights to Avinza^® in the United States, its territories and Canada. Under the terms of the asset purchase agreement the purchase price was $289.7 million, consisting of $289.3 million in cash consideration and $0.4 million for the assumption of a short-term liability. Additionally, we incurred acquisition costs of $6.8 million. Of the cash payments made to Ligand, $15.0 million was set aside in an escrow account to fund potential liabilities that Ligand could later owe us, of which $7.5 million was released to Ligand in each of the third quarter of 2007 and the first quarter of 2008.

As part of the transaction, we have agreed to pay Ligand an ongoing royalty and assume payment of Ligand’s royalty obligations to third parties. We paid Ligand a royalty of 15% of net sales of Avinza^® until October 2008. Subsequent royalty payments to Ligand will be based upon calendar year net sales of Avinza^® as follows:

•  If calendar year net sales are less than $200.0 million, the royalty payment will be 5% of all net sales.

•  If calendar year net sales are greater than $200.0 million, then the royalty payment will be 10% of all net sales up to $250.0 million, plus 15% of net sales greater than $250.0 million.

In connection with the transaction, in October 2006, we entered into a loan agreement with Ligand for the amount of $37.8 million. The principal amount of the loan was to be used solely for the purpose of paying a specific liability related to Avinza^®. The loan was subject to certain market terms, including a 9.5% interest rate and security interest in the assets that comprise Avinza^® and certain of the proceeds of Ligand’s sale of certain assets. On January 8, 2007, Ligand repaid the principal amount of the loan of $37.8 million and accrued interest of $0.9 million. Pursuant to the terms of the loan agreement with Ligand, we forgave the interest on the loan and repaid Ligand the interest at the time of closing the transaction to acquire Avinza^®. Accordingly, we have not recognized interest income on the note receivable.

Other

In June 2000, we entered into a Co-Promotion Agreement with Wyeth to promote Altace^® in the United States and Puerto Rico through October 29, 2008, with possible extensions as outlined in the Co-Promotion Agreement. Under the agreement, Wyeth paid an upfront fee to us of $75.0 million. In connection with the Co-Promotion Agreement, we agreed to pay Wyeth a promotional fee based on annual net sales of Altace^®. In July 2006, we entered into an Amended and Restated Co-Promotion Agreement with Wyeth regarding Altace^®. Effective January 1, 2007, we assumed full responsibility for selling and marketing Altace^®. For all of 2006, the Wyeth sales force promoted the product with us and Wyeth shared marketing expenses. We have paid or will pay Wyeth a reduced annual fee as follows:

•  For 2006, 15% of Altace^® net sales up to $165.0 million, 42.5% of Altace^® net sales in excess of $165.0 million and less than or equal to $465.0 million, and 52.5% of Altace^® net sales that are in excess of $465.0 million and less than or equal to $585.0 million.

•  For 2007, 30% of Altace^® net sales, with the fee not to exceed $178.5 million.

•  For 2008, 22.5% of Altace^® net sales, with the fee not to exceed $134.0 million.

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•  For 2009, 14.2% of Altace^® net sales, with the fee not to exceed $84.5 million.

•  For 2010, 25% of Altace^® net sales, with the fee not to exceed $5.0 million.

The annual fee is accrued quarterly based on a percentage of Altace^® net sales at a rate equal to the expected relationship of the expected fee for the year to applicable expected Altace^® net sales for the year.

In March 2006, we acquired the exclusive right to market, distribute and sell EpiPen^® throughout Canada and other specific assets from Allerex Laboratory LTD (“Allerex”). Under the terms of the agreements, the initial purchase price was approximately $23.9 million, plus acquisition costs of approximately $0.7 million. As an additional component of the purchase price, we pay Allerex an earn-out equal to a percentage of future sales of EpiPen^® in Canada over a fixed period of time. As these additional payments accrue, we will increase intangible assets by the amount of the accrual. As of December 31, 2008, we have incurred a total of $8.7 million for these earn-out payments. The aggregate amount of these payments will not exceed $13.2 million.

In December 2005, we entered into a cross-license agreement with Mutual. Under the terms of the agreement, each of the parties has granted the other a worldwide license to certain intellectual property, including patent rights and know-how, relating to metaxalone. As of January 1, 2006, we began paying royalties on net sales of products containing metaxalone to Mutual. This royalty increased in the fourth quarter of 2006 due to the achievement of a certain milestone and may continue to increase depending on the achievement of certain regulatory and commercial milestones in the future. We anticipate an increase in the royalty rate in 2009 due to the achievement of certain regulatory milestones. The royalty we pay to Mutual is in addition to the royalty we pay to Elan Corporation, plc (“Elan”) on our current formulation of metaxalone, which we refer to as “Skelaxin^®.”

During the fourth quarter of 2005, we entered into a strategic alliance with Pain Therapeutics, Inc. to develop and commercialize Remoxy^® and other opioid painkillers. Remoxy^®, an investigational novel formulation of long-acting oxycodone with a proposed indication for the treatment of moderate to severe chronic pain, provides a unique physical barrier that is designed to provide controlled pain relief and resist certain common methods used to extract the opioid more rapidly than intended, as can occur with currently available products. Common methods used to cause a rapid extraction of the opioid include crushing, chewing, or dissolution in alcohol. These methods are typically used to cause failure of the controlled release dosage form, resulting in “dose dumping” of oxycodone, or the immediate release of the active drug. Under the strategic alliance, we made an upfront cash payment of $150.0 million in December 2005 and made a milestone payment of $5.0 million in July 2006 to Pain Therapeutics. In August 2008, we made milestone payments totaling $20.0 million. In addition, we may pay additional milestone payments of up to $125.0 million in cash based on the successful clinical and regulatory development of Remoxy^® and other opioid products. This amount includes $15.0 million upon FDA approval of Remoxy^®. We are responsible for research and development expenses related to this alliance subject to certain limitations set forth in the agreement. After regulatory approval and commercialization of Remoxy^® or other products developed through this alliance, we will pay a royalty of 15% of the cumulative net sales up to $1.0 billion and 20% of the cumulative net sales over $1.0 billion.

Elan was working to develop a modified release formulation of Sonata^®, which we refer to as Sonata^® MR, pursuant to an agreement we had with them which we refer to as the Sonata^® MR Development Agreement. In early 2005, we advised Elan that we considered the Sonata^® MR Development Agreement terminated for failure to satisfy the target product profile required by us. Elan disputed the termination and initiated an arbitration proceeding. During December of 2006, the arbitration panel reached a decision in favor of Elan and ordered us to pay Elan certain milestone payments and other research and development-related expenses of approximately $49.8 million, plus interest from the date of the decision. In January 2007, we paid Elan $50.1 million, which included interest of $0.4 million.

Governmental Pricing Investigation and Related Matters

For information on these matters, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.”

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Patent Challenges

Certain generic companies have challenged patents on Skelaxin^® and Avinza^®. For additional information, please see Note 19, “Commitments and Contingencies,” in Part IV, Item 15(a)(1), “Financial Statements.” If a generic version of Skelaxin^® or Avinza^® enters the market, our business, financial condition, results of operations and cash flows could be materially adversely affected.

Cash Flows

Operating Activities

	For the Years Ended December 31,
	2008		2007		2006
	(In thousands)
Net cash provided by operating activities	$	491,391	$	672,649	$	465,627

Our net cash from operations was lower in 2008 than in 2007 primarily due to a decrease in net sales of branded prescription pharmaceutical products. Branded prescription pharmaceutical product net sales decreased in 2008 from 2007 primarily as a result of a competitor entering the market in December 2007 and additional competitors entering the market in June 2008 with generic substitutes for Altace^®. The decrease in net sales was partially offset by a decrease in selling, general and administration expenses and co-promotion fees. Please see the section entitled “Operating Results” for a discussion of net sales, selling, general and administrative expenses and co-promotion fees. Our net cash flows from operations in 2007 include a payment of $50.1 million resulting from a binding arbitration proceeding with Elan in 2006.

Our net cash from operations was higher in 2007 than in 2006 primarily due to our payment in 2006 of $129.3 million as a result of the government pricing investigation, an increase in net sales and a lower co-promotion fee rate in 2007 compared to 2006. Our net cash flows from operations in 2007 benefited from an $80.1 million reduction in accounts receivable during 2007 which is discussed below, that was partially offset by the effect of a $50.1 million payment we made in 2007 as a result of a binding arbitration proceeding with Elan in 2006.

We expect net cash flows from operations will continue to decline in 2009. Although we anticipate an increase in sales in 2009 due to the acquisition of Alpharma at the end of December 2008, we anticipate a decrease in operating income due to the decrease in sales of several key branded prescription pharmaceutical products.

Please see the section entitled “Operating Results” for a discussion of net sales, selling, general and administrative expenses and co-promotion fees.

The following table summarizes the changes in operating assets and liabilities and deferred taxes for the periods ending December 31, 2008, 2007 and 2006 and the resulting cash provided by (used in) operating activities:

	2008			2007			2006
	(In thousands)
Accounts receivable, net of allowance	$	37,956		$	80,106		$	(41,746	)
Inventories		22,785			55,056			48,275
Prepaid expenses and other current assets		16,785			(43,555	)		(45,796	)
Accounts payable		9,673			(16,276	)		(8,568	)
Accrued expenses and other liabilities		(180,960	)		(33,408	)		(50,458	)
Income taxes payable		24,713			(9,009	)		8,479
Deferred revenue		(4,680	)		(4,680	)		(6,886	)
Other assets		27,078			(3,470	)		(20,173	)
Deferred taxes		37,313			(91,229	)		(39,010	)
Total changes from operating assets and liabilities and deferred taxes	$	(9,337	)	$	(66,465	)	$	(155,883	)

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The significant decrease in accounts receivable at December 31, 2007 from December 31, 2006 is primarily due to the timing of sales within the year. Gross sales in December 2007 and December 2006 were $124.7 million and $189.7 million, respectively. Sales to our three major pharmaceutical wholesale customers represented approximately 75% of total gross sales in 2007. The timing of orders from these customers can vary within a quarter and can have a material effect on our accounts receivable balance and cash flows from operations.

Investing Activities

	For the Years Ended December 31,
	2008			2007			2006
	(In thousands)
Net cash used in investing activities	$	(156,110	)	$	(776,251	)	$	(436,315	)

During 2008, we used cash of approximately $1.557 billion, offset by $532.6 million of cash acquired, for the acquisition of Alpharma, Inc. Net sales of our investments in debt securities provided cash of $927.9 million during 2008. We incurred capital expenditures of $57.5 million during 2008.

Investing activities in 2007 include the acquisition of Avinza^® for $296.4 million, purchases of product rights and intellectual property for $98.9 million and net investments in debt securities of $454.8 million. Capital expenditures during 2007 totaled $49.6 million, which included property, plant and equipment purchases, building improvements for facility upgrades and costs associated with improving our production capabilities. These payments were partially offset by the collection of the loan to Ligand in the amount of $37.8 million and the net proceeds received of $86.3 million from the sale of the Company’s Rochester, Michigan sterile manufacturing facility.

Investing activities in 2006 primarily relate to our net investments in debt securities of $395.5 million. We transferred $129.3 million from restricted cash for payments associated with the government pricing investigation noted above in cash flows from operating activities. Additionally, we made payments totaling $85.8 million for our collaboration agreement with Arrow and our acquisition from Allerex Laboratory LTD of the exclusive right to market Epipen^® in Canada. Capital expenditures during 2006 totaled $45.8 million which included property, plant and equipment purchases, building improvements for facility upgrades and costs associated with improving our production capabilities, as well as costs associated with moving production of some of our pharmaceutical products to our facilities in St. Louis, Bristol and Rochester. Additionally, in the fourth quarter of 2006, in connection with our pending acquisition from Ligand of all of Ligand’s assets related to Avinza^®, we entered into a Loan Agreement with Ligand pursuant to which we loaned Ligand $37.8 million. The principal amount of the Loan was to be used solely for the purpose of paying certain obligations of Ligand to Organon USA Inc., which obligations we assumed as part of the acquisition.

We anticipate capital expenditures, for the year ending December 31, 2009 of approximately $60.0 to $65.0 million, which we expect to fund with cash from operations. The principal capital expenditures are anticipated to include costs associated with the preparation of our facilities to manufacture new products as they emerge from our research and development pipeline.

Financing Activities

	2008		2007		2006
	(In thousands)
Net cash provided by financing activities	$	584,922	$	9,834	$	54,451

Our cash flows from financing activities for 2008 primarily related to $425.0 million in proceeds from the Revolving Credit Facility and $192.0 million in proceeds from the Term Facility partially offset by $30.0 million in debt issuance costs and $2.0 million related to activities associated with our stock compensation plans, including the exercise of employee stock options.

Our cash flows from financing activities for 2007 primarily related to activities associated with our stock compensation plans, including the exercise of employee stock options.

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During 2006, we issued $400.0 million of 11/4% Convertible Senior Notes due April 1, 2026 and repurchased all of our outstanding 23/4% Convertible Debentures due November 15, 2021 for $342.7 million.

Certain Indebtedness and Other Matters

During 2006, we issued $400.0 million of 11/4% Convertible Senior Notes due April 1, 2026 (the “Notes”). The Notes are unsecured obligations and are guaranteed by each of our U.S. subsidiaries other than Alpharma and its subsidiaries. We expect Alpharma and its subsidiaries to become guarantors during the first quarter of 2009. on a joint and several basis. The Notes accrue interest at an initial rate of 11/4%. Beginning with the six-month interest period that commences on April 1, 2013, we will pay additional interest during any six-month interest period if the average trading price of the Notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of such six-month period equals 120% or more of the principal amount of the Notes. Interest is payable on April 1 and October 1 of each year, beginning October 1, 2006.

On or after April 5, 2013, we may redeem for cash some or all of the Notes at any time at a price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest, and liquidated damages, if any, to but excluding the date fixed for redemption. Holders may require us to purchase for cash some or all of their Notes on April 1, 2013, April 1, 2016 and April 1, 2021, or upon the occurrence of a fundamental change, at 100% of the principal amount of the Notes to be purchased, plus any accrued and unpaid interest, and liquidated damages, if any, to but excluding the purchase date.

Senior Secured Revolving Credit Facility

On April 23, 2002, we established a $400.0 million five-year Senior Secured Revolving Credit Facility which was scheduled to mature in April 2007. On April 19, 2007, this facility was terminated and replaced with a new $475.0 five-year Senior Secured Revolving Credit Facility, as amended on December 5, 2008, (the “Revolving Credit Facility”). The Revolving Credit Facility matures in April 2012 or in October 2011 if the Convertible Senior Notes have not been refinanced. In connection with our acquisition of Alpharma on December 29, 2008, we borrowed $425.0 million in principal. The Revolving Credit Facility requires us to pledge as collateral 100% of the equity of our domestic subsidiaries and 65% of the equity of any material foreign subsidiaries. Our obligations under this facility are unconditionally guaranteed on a senior basis by all of our U.S. subsidiaries.

Under the terms of the Revolving Credit Facility, the credit commitments will be automatically and permanently reduced, on a quarterly basis. Additionally, we have the right, without penalty (other than customary breakage costs), to prepay any borrowing under the Revolving Credit Facility and, subject to certain conditions, we could be required to make mandatory prepayments. For additional information, please see the discussion in the section titled “Liquidity and Capital Resources” above.

Our borrowings under the Revolving Credit Facility bear interest at annual rates that, at our option, will be either:

•  a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Credit Suisse and (b) the federal funds effective rate plus 0.5% and (ii) an applicable percentage of 4.0%; or

•  an adjusted LIBO rate generally defined as the sum of (i) the product of (a) LIBOR (by reference to the British Banking Association Interest Settlement Rates) and (b) a fraction, the numerator of which is one and the denominator of which is the number one minus certain maximum statutory reserves for eurocurrency liabilities and (ii) an applicable percentage of 5.0%.

Interest on our borrowings is payable quarterly in arrears for base rate loans and at the end of each interest rate period (but not less often than quarterly) for LIBO rate loans. We are required to pay an unused commitment fee on the difference between committed amounts and amounts actually borrowed under the Revolving Credit Facility equal to 0.5% per annum. We are required to pay a letter of credit participation fee based upon the aggregate face amount of outstanding letters of credit equal to 5.0% per annum.

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The Revolving Credit Facility requires us to meet certain financial tests, including, without limitation:

•  maintenance of maximum funded debt to consolidated EBITDA ratios that range from 1.50 to 1 to 3.25 to 1 (depending on dates and the occurrence of certain events relating to certain patents); and

•  maintenance of minimum consolidated EBITDA to interest expense ratios that range from 3.75 to 1 to 4.00 to 1 (depending on dates and the occurrence of certain events relating to certain patents).

In addition, the Revolving Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, sale and leaseback transactions, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments, redemptions and repurchases of other indebtedness, capital expenditures and other matters customarily restricted in such agreements. The Revolving Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, certain impairments to the guarantees, and change in control.

The Revolving Credit Facility requires us to maintain hedging agreements that will fix the interest rates on 50% of our outstanding long term debt beginning 90 days after the amendment to the facility for a period of not less than two years.

The remaining undrawn committed amount under the Revolving Credit Facility after giving effect to the borrowing described above, and after giving effect to outstanding letters of credit totaling approximately $12.1 million, is approximately $37.9 million.

In connection with the borrowings, we incurred approximately $21.6 million of deferred financing costs that are being amortized ratably from the date of the borrowing through the maturity date based on the automatic commitment reductions described above.

Senior Secured Term Facility

On December 29, 2008, we entered into a $200.0 million term loan credit agreement, comprised of a four-year senior secured loan facility (the “Term Facility”) with a maturity date of December 28, 2012. We borrowed $200.0 million under the Term Facility and received proceeds of $192.0 million, net of the discount at issuance. The Term Facility requires us to pledge as collateral 100% of the equity of our U.S. subsidiaries and 65% of the equity of any material foreign subsidiaries. Our obligations under this facility are unconditionally guaranteed on a senior basis by all of our U.S. subsidiaries.

Under the terms of the Term Facility, we will repay the borrowings in quarterly payments. Additionally, we have the right, without penalty (other than customary breakage costs), to prepay any borrowing under the Term Facility and, subject to certain conditions, we could be required to make mandatory prepayments. For additional information please see the discussion in the section titled “Liquidity and Capital Resources” above.

Our borrowings under the Term Facility bear interest at annual rates that, at our option, will be either:

•  5.00% plus the Adjusted LIBO Rate or

•  4.00% plus the Alternate Base Rate.

The “Alternate Base Rate” is the highest of (x) the federal funds rate plus 0.50%, (y) the prime or base commercial lending rate, and (z) the Adjusted LIBO Rate for a one-month interest period plus 1.00%. The Adjusted LIBO Rate is the higher of (x) 3.00% and (y) the rate per annum, determined by the administrative agent under the Term Facility, in accordance with its customary procedures, at which dollar deposits for applicable periods are offered to major banks in the London interbank market, adjusted by the reserve percentage prescribed by governmental authorities as determined by such administrative agent.

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The Term Facility requires us to meet certain financial tests, including, without limitation:

•  maintenance of maximum funded debt to consolidated EBITDA ratios that range from 1.50 to 1 to 3.25 to 1 (depending on dates and the occurrence of certain events relating to certain patents); and

•  maintenance of minimum consolidated EBITDA to interest expense ratios that range from 3.75 to 1 to 4.00 to 1 (depending on dates and the occurrence of certain events relating to certain patents).

In addition, the Term Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, sale and leaseback transactions, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments, redemptions and repurchases of other indebtedness, capital expenditures and other matters customarily restricted in such agreements. The Term Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, certain impairments to the guarantees, and change in control.

The Term Facility requires us to maintain hedging agreements that will fix the interest rates on 50% of our outstanding long term debt beginning 90 days after the borrowing under the facility for a period of two years.

In connection with the borrowings, we incurred approximately $8.5 million of deferred financing costs that are being amortized ratably from the date of the borrowing through the maturity date based on the repayment schedule described above.

Alpharma Convertible Senior Notes

At the time of the acquisition of Alpharma by us, Alpharma had $300.0 million of Convertible Senior Notes outstanding (“Alpharma Notes”). The Alpharma Notes were convertible into shares of Alpharma’s Class A common stock at an initial conversion rate of 30.6725 Alpharma common shares per $1,000 principal amount. The conversion rate of the Alpharma Notes was subject to adjustment upon the direct or indirect sale of all or substantially all of Alpharma’s assets or more than 50% of the outstanding shares of the Alpharma common stock to a third party (a “Fundamental Change”). In the event of a Fundamental Change, the Alpharma Notes included a make-whole provision that adjusted the conversion rate by a predetermined number of additional shares of the Alpharma’s common stock based on (1) the effective date of the Fundamental Change; and (2) Alpharma’s common stock market price as of the effective date. The acquisition of Alpharma by us was a Fundamental Change. As a result, any Alpharma Notes converted in connection with the acquisition of Alpharma were entitled to be converted at an increased rate equal to the value of 34.7053 Alpharma common shares, at the acquisition price of $37 per share, per $1,000 principal amount of Alpharma Notes at a date no later than 35 trading days after the occurrence of the Fundamental Change.

As of December 31, 2008, we had $385.2 million of Alpharma Notes included in current portion of long-term debt in the accompanying financial statements. During the first quarter of 2009, we paid $385.2 million to redeem the Alpharma Notes.

Impact of Inflation

We have experienced only moderate raw material and labor price increases in recent years. In general, the price increases we have passed along to our customers have offset inflationary pressures.

Critical Accounting Policies and Estimates

We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial position, and apply those accounting policies in a consistent manner.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and

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liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates for which it is reasonably possible that a material change in estimate could occur in the near term include forecasted future cash flows used in testing for impairments of intangible and tangible assets and loss accruals for excess inventory and fixed purchase commitments under our supply contracts. Forecasted future cash flows in particular require considerable judgment and are subject to inherent imprecision. In the case of impairment testing, changes in estimates of future cash flows could result in a material impairment charge and, whether they result in an immediate impairment charge, could result prospectively in a reduction in the estimated remaining useful life of tangible or intangible assets, which could be material to the financial statements.

Other significant estimates include accruals for Medicaid and other rebates, returns and chargebacks, allowances for doubtful accounts and estimates used in applying the revenue recognition policy.

We are subject to risks and uncertainties that may cause actual results to differ from the related estimates, and our estimates may change from time to time in response to actual developments and new information.

The significant accounting estimates that we believe are important to aid in fully understanding our reported financial results include the following:

•  Intangible assets, goodwill, and other long-lived assets.  When we acquire product rights in conjunction with either business or asset acquisitions, we allocate an appropriate portion of the purchase price to intangible assets, goodwill and other long-lived assets. The purchase price is allocated to product rights and trademarks, patents, acquired research and development, if any, and other intangibles using the assistance of valuation consultants. We estimate the useful lives of the assets by factoring in the characteristics of the products such as: patent protection, competition by products prescribed for similar indications, estimated future introductions of competing products, and other issues. The factors that drive the estimate of the life of the asset are inherently uncertain. However, patents have specific legal lives over which they are amortized. Conversely, trademarks and product rights have no specific legal lives. We use a straight-line method of amortization for our intangible assets.

We review our property, plant and equipment and intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. We review our goodwill for possible impairment annually, or whenever events or circumstances indicate that the carrying amount may not be recoverable. In any event, we evaluate the remaining useful lives of our intangible assets each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. This evaluation is performed through our quarterly evaluation of intangibles for impairment. Further, on an annual basis, we review the life of each intangible asset and make adjustments as deemed appropriate. In evaluating goodwill for impairment, we estimate the fair value of our individual business reporting units on a discounted cash flow basis. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and, in some cases, the current fair value of the asset. In addition, our depreciation and amortization policies reflect judgments on the estimated useful lives of assets.

As of December 31, 2008, our goodwill totaled $450.5 million. Of this amount, $258.1 million is related to our branded prescription pharmaceuticals segment and includes $237.4 million associated with our acquisition of Alpharma on December 29, 2008. Our animal health segment has total goodwill of $84.0 million which is solely related to our acquisition of Alpharma. Additionally, our Meridian auto-injection segment has total goodwill of $108.4 million. Revenues associated with Meridian auto-injector increased 19% in 2008 compared to 2007. As of December 31, 2008, management believes that no impairment of goodwill exists. The allocation of the purchase price associated with the acquisition of Alpharma is not yet finalized as the acquisition was completed close to the end of the year and management is continuing to complete its initial estimate of the valuation of assets and liabilities.

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We may incur impairment charges in the future if prescriptions for, or sales of, our products are less than current expectations and result in a reduction of our estimated undiscounted future cash flows. This may be caused by many factors, including competition from generic substitutes, significant delays in the manufacture or supply of materials, the publication of negative results of studies or clinical trials, new legislation or regulatory proposals.

The gross carrying amount and accumulated amortization as of December 31, 2008 are as follows:

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
	(In thousands)
Branded Prescription Pharmaceuticals
Avinza®	$	285,700	$	48,933	$	236,767
Skelaxin®		278,853		161,874		116,979
Sonata®		61,961		61,961		—
Flector® Patch		130,000		—		130,000
Neuroscience		756,514		272,768		483,746
Synercid®		70,959		41,951		29,008
Other hospital		8,442		6,427		2,015
Hospital		79,401		48,378		31,023
Bicillin®		92,350		31,270		61,080
Other legacy products		324,035		274,817		49,218
Legacy products		416,385		306,087		110,298
Total Branded		1,252,300		627,233		625,067
Animal Health		170,000		—		170,000
Meridian Auto-Injector		179,879		41,281		138,598
Royalties		3,731		3,177		554
Contract manufacturing		—		—		—
All other		—		—		—
Total intangible assets	$	1,605,910	$	671,691	$	934,219

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The amounts for impairments and amortization expense for the twelve months ended December 31, 2008 and 2007 are as follows:

	Year Ended				Year Ended
	December 31,				December 31,
	2008				2007
			Amortization				Amortization
	Impairments		Expense		Impairments		Expense
	(In thousands)				(In thousands)
Branded Prescription Pharmaceuticals
Avinza®	$	—	$	26,553	$	—	$	22,380
Skelaxin®		—		23,620		—		17,427
Sonata®		—		315		—		270
Neuroscience		—		50,488		—		40,077
Synercid®		39,630		7,731		—		9,499
Other hospital		—		304		968		1,231
Hospital		39,630		8,035		968		10,730
Bicillin®		—		3,702		—		3,702
Other legacy products		1,251		41,624		175,703		69,349
Legacy products		1,251		45,326		175,703		73,051
Total Branded		40,881		103,849		176,671		123,858
Animal Health		—		—		—		—
Meridian Auto-Injector		—		7,860		—		8,001
Royalties		—		737		—		279
Contract manufacturing		—		—		—		—
All other		—		—		—		—
Total intangible assets	$	40,881	$	112,446	$	176,671	$	132,138

The remaining patent amortization period compared to the remaining amortization period for trademarks and product rights associated with significant products is as follows:

	Remaining Life at December 31, 2008
Skelaxin®		1 year 6 months
Avinza®		8 years 11 months
Synercid®		5 years
Bicillin®		16 years 6 months
Flector® Patch		11 years

•  Inventories.  Our inventories are valued at the lower of cost or market value. We evaluate our entire inventory for short-dated or slow-moving product and inventory commitments under supply agreements based on projections of future demand and market conditions. For those units in inventory that are so identified, we estimate their market value or net sales value based on current realization trends. If the projected net realizable value is less than cost, on a product basis, we make a provision to reflect the lower value of that inventory. This methodology recognizes projected inventory losses at the time such losses are evident rather than at the time goods are actually sold. We maintain supply agreements with some of our vendors which contain minimum purchase requirements. We estimate future inventory requirements based on current facts and trends. Should our minimum purchase requirements under supply agreements or if our estimated future inventory requirements exceed actual inventory quantities that we will be able to sell to our customers, we record a charge in costs of revenues.

•  Accruals for rebates, returns and chargebacks.  We establish accruals for returns, chargebacks, Medicaid, Medicare and commercial rebates in the same period we recognize the related sales. The

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accruals reduce revenues and are included in accrued expenses. At the time a rebate or chargeback payment is made or a product return is received, which occurs with a delay after the related sale, we record a reduction to accrued expenses and, at the end of each quarter, adjust accrued expenses for differences between estimated and actual payments. Due to estimates and assumptions inherent in determining the amount of returns, chargebacks and rebates, the actual amount of product returns and claims for chargebacks and rebates may be different from our estimates.

Our product returns accrual is primarily based on estimates of future product returns over the period during which customers have a right of return which is in turn based in part on estimates of the remaining shelf life of our products when sold to customers. Future product returns are estimated primarily on historical sales and return rates. We also consider the level of inventory of our products in the distribution channel. We base our estimate of our Medicaid rebate, Medicare rebate and commercial rebate accruals on estimates of usage by rebate-eligible customers, estimates of the level of inventory of our products in the distribution channel that remain potentially subject to those rebates, and the terms of our commercial and regulatory rebate obligations. We base our estimate of our chargeback accrual on our estimates of the level of inventory of our products in the distribution channel that remain subject to chargebacks, and specific contractual and historical chargeback rates. The estimate of the level of our products in the distribution channel is based primarily on data provided by our three key wholesalers under inventory management agreements.

Our accruals for returns, chargebacks and rebates are adjusted as appropriate for specific known developments that may result in a change in our product returns or our rebate and chargeback obligations. In the case of product returns, we monitor demand levels for our products and the effects of the introduction of competing products and other factors on this demand. When we identify decreases in demand for products or experience higher than historical rates of returns caused by unexpected discrete events, we further analyze these products for potential additional supplemental reserves.

•  Revenue recognition.  Revenue is recognized when title and risk of loss are transferred to customers, collection of sales is reasonably assured, and we have no further performance obligations. This is generally at the time products are received by the customer. Accruals for estimated returns, rebates and chargebacks, determined based on historical experience, reduce revenues at the time of sale and are included in accrued expenses. Medicaid and certain other governmental pricing programs involve particularly difficult interpretations of relevant statutes and regulatory guidance, which are complex and, in certain respects, ambiguous. Moreover, prevailing interpretations of these statutes and guidance can change over time. Royalty revenue is recognized based on a percentage of sales (namely, contractually agreed-upon royalty rates) reported by third parties. For additional information, please see Note 2, “Summary of Significant Accounting Policies,” in Part IV, Item 15(a)(1), “Financial Statements”.

Recently Issued Accounting Standards

For information regarding recently issued accounting standards, please see Note 24, “Recently Issued Accounting Standards,” in Part IV, Item 15(a)(1), “Financial Statements”.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk for changes in the market values of some of our investments (“Investment Risk”), the effect of interest rate changes (“Interest Rate Risk”) and the effect of changes in foreign currency exchange rates (“Foreign Currency Exchange Rate Risk”). We have no financial instruments held for trading purposes. Additionally, at December 31, 2008, 2007 and 2006, we held derivative financial instruments associated with utility contracts which qualify as normal purchase and sales and derivatives associated with the convertible senior notes. The quantitative and qualitative disclosures about market risk are set forth below.

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Interest Rate Risk

The fair market value (“fair value”) of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of our convertible debentures is affected by our stock price. The estimated fair value of our total long-term fixed rate debt at December 31, 2008 was $293.0 million, which excludes the Alpharma Notes which were outstanding at the time of our acquisition of Alpharma. Fair values were determined from available market prices, using current interest rates and terms to maturity. If interest rates were to increase or decrease by 1%, the fair value of our long-term debt would increase or decrease by approximately $16.5 million. In connection with the acquisition of Alpharma, holders of the Alpharma Notes were entitled to convert the Alpharma Notes at a premium as a result of a fundamental change . As of December 31, 2008, we had $385.2 million of Alpharma Notes included in the current portion of long-term debt in the accompanying financial statements. During the first quarter of 2009, we paid $385.2 million to redeem the Alpharma notes.

We are subject to interest rate risk on our variable rate debt as changes in interest rates could adversely affect earnings and cash flows. As of December 31, 2008, our variable rate debt totaled $625.0 million and a 1% change in interest rates would have an annualized pre-tax effect of $4.3 million in our consolidated statements of operations and cash flows as of December 31, 2008. While our variable-rate debt may impact earnings and cash flows as interest rates change, it is not subject to changes in fair value.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create fluctuations in U.S. Dollar reported amounts of foreign subsidiaries whose local currencies are their respective functional currencies. We primarily use forward foreign exchange contracts to hedge certain cash flows denominated in currencies other than the foreign subsidiary’s functional currency. Such cash flows are normally represented by actual receivables and payables and anticipated receivables and payables for which there is a firm commitment.

At December 31, 2008, the Company had forward foreign exchange contracts mainly denominated in Euros, Pound Sterling, Canadian Dollar, U.S. Dollar, Mexican Peso and Chinese Yuan with a notional amount of $291.2 million. The fair market value of such contracts has been recognized in the financial statements and is not material. All contracts expire in the first quarter of 2009. The cash flows expected from the contracts will generally offset the cash flows of related non-functional currency transactions. The change in notional value of the foreign currency forward contracts resulting from a 10% movement in foreign currency exchange rates would be approximately $29.0 million and generally would be offset by the change in value of the hedged receivable or payable. Such contracts are not designated hedges for accounting purposes.

Investment Risk

We have marketable securities which are carried at fair value based on current market quotes. Gains and losses on securities are based on the specific identification method. For additional information related to our investment in debt securities, please see “Liquidity and Capital Resources” above.

Item 8.   Financial Statements and Supplementary Data

Our audited consolidated financial statements and related notes as of December 31, 2008 and 2007 and for each of the three years ended December 31, 2008, 2007 and 2006 are included under Item 15 and begin on page F-1.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the

79

SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, 2008.

Based on this evaluation by management, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2008, our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the framework and criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that internal control over financial reporting was effective as of December 31, 2008.

As discussed in Item 1 of this annual report under the caption “Business” and in Note 9 to our consolidated financial statements included in this annual report, on December 29, 2008, we completed our acquisition of Alpharma. As permitted by the rules and regulations of the SEC, we have excluded Alpharma from our evaluation of our internal control over financial reporting as of December 31, 2008. Total assets of Alpharma represent approximately 39.7% of, and are included in, our consolidated total assets as of December 31, 2008. Since we acquired Alpharma at the end of December 2008, the financial results of Alpharma are excluded from our financial results.

The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As set forth above, we excluded Alpharma from our evaluation of internal control over financial reporting for the quarter and year ended December 31, 2008. In the future, the acquired company will be material to our results of operations, financial position, and cash flows, and we are in the process of integrating the internal controls over financial reporting of Alpharma into our internal control structure and evaluation process.

PART III

The information called for by Part III of Form 10-K (Item 10 — Directors, Executive Officers and Corporate Governance, Item 11 — Executive Compensation, Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13 — Certain Relationships and Related Transactions, and Director Independence and Item 14 — Principal Accounting Fees and Services), is incorporated by reference from our proxy statement related to our 2009 annual meeting of shareholders, which will be filed with the SEC not later than April 30, 2009 (120 days after the end of the fiscal year covered by this report).

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PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a) Documents filed as a part of this report:

(1) Financial Statements

	Page Number
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of December 31, 2008 and 2007		F-3
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006		F-4
Consolidated Statements of Shareholders’ Equity and Other Comprehensive Income (Loss) for the years ended December 31, 2008, 2007 and 2006		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006		F-6
Notes to Consolidated Financial Statements		F-7
(2) Financial Statement Schedule Valuation and Qualifying Accounts		S-1

All other schedules have been omitted because of the absence of conditions under which they are required or because the required information is given in the above-listed financial statements or notes thereto.

(b)   Exhibits

The following Exhibits are filed herewith or incorporated herein by reference:

Exhibit
Number			Description
	1	.1(1)	Underwriting Agreement, dated March 15, 2007, between Alpharma Inc. and Banc of America Securities LLC
	2	.1(2)	Stock and Asset Purchase Agreement among Alpharma Inc., Alpharma (Luxembourg) S.ar.l., Alpharma Bermuda G.P., and Alpharma International (Luxembourg) S.ar.l., Alfanor 7152 AS (under change of name to Otnorbidco AS), Otdenholdco ApS and Otdelholdco Inc., dated February 6, 2008
	2	.2(3)	Agreement and Plan of Merger, dated as of November 23, 2008, among King Pharmaceuticals, Inc., Albert Acquisition Corp. and Alpharma Inc.
	3	.1(4)	Third Amended and Restated Charter of King Pharmaceuticals, Inc.
	3	.2(5)	Amended and Restated Bylaws of King Pharmaceuticals, Inc.
	4	.1(5)	Specimen Common Stock Certificate for King Pharmaceuticals, Inc.
	4	.2(1)	First Supplemental Indenture between Alpharma and U.S. Bank National Association, dated as of March 20, 2007
	4	.3(6)	Warrant Certificate, dated October 3, 2007, issued by Alpharma Inc. to IBSA Institut Biochimique SA
	4	.4(7)	Warrant Certificate, dated October 12, 2007, issued by Alpharma Inc. to IDEA AG
	4	.5(7)	Warrant Certificate, dated October 12, 2007, issued by Alpharma Inc. to IDEA AG
	10	.1(8)*	Alpharma Inc. Amended and Restated Deferred Compensation Plan, effective July 1, 1984, amended October 14, 1994
	10	.2(8)*	Amendment No. 1 to the Alpharma Inc. Amended and Restated Deferred Compensation Plan
	10	.3(9)*	Amendment to the Alpharma Inc. Deferred Compensation Plan, effective as of June 22, 2006
	10	.4(10)*	1989 Incentive Stock Option Plan of Jones Medical Industries, Inc.
	10	.5(10)*	Jones Medical Industries, Inc. 1994 Incentive Stock Plan
	10	.6(5)*	1997 Incentive and Nonqualified Stock Option Plan for Employees of King Pharmaceuticals, Inc.

81

Exhibit
Number			Description
	10	.7(10)*	Jones Medical Industries, Inc. 1997 Incentive Stock Plan
	10	.8(11)	King Pharmaceuticals, Inc. 1998 Non-Employee Director Stock Option Plan
	10	.9(12)*	King Pharmaceuticals, Inc. 401(k) Retirement Savings Plan
	10	.10(13)*	The Medco Research, Inc. 1989 Stock Option and Stock Appreciation Rights Plan, as amended through July 29, 1998
	10	.11(14)*	Offer Letter to Brian A. Markison, dated July 15, 2004
	10	.12(15)*	Offer letter to Joseph Squicciarino dated May 25, 2005
	10	.13(15)*	Offer letter to Eric J. Bruce dated May 19, 2005
	10	.14(16)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Stock Certificate and Restricted Stock Grant Agreement
	10	.15(16)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Option Certificate and Nonstatutory Stock Option Grant Agreement
	10	.16(17)	Settlement Agreement, dated as of October 31, 2005, among the United States of America acting through the entities named therein, King Pharmaceuticals, Inc. and Monarch Pharmaceuticals, Inc.
	10	.17(17)	Settlement Agreement, dated as of October 31, 2005, among the state of Massachusetts, King Pharmaceuticals, Inc. and Monarch Pharmaceuticals, Inc. and general description of the other state settlement agreements
	10	.18(17)	Corporate Integrity Agreement, dated as of October 31, 2005, between the Office of Inspector General of the Department of Health and Human Services and King Pharmaceuticals, Inc.
	10	.19(18)*	King Pharmaceuticals, Inc. Incentive Plan
	10	.20(19)†	Collaboration Agreement by and between King Pharmaceuticals, Inc. and Pain Therapeutics, Inc., dated as of November 9, 2005
	10	.21(19)†	License Agreement by and between King Pharmaceuticals, Inc. and Pain Therapeutics, Inc., dated as of December 29, 2005
	10	.22(19)†	License Agreement, by and between King Pharmaceuticals, Inc. and Mutual Pharmaceutical Company, Inc., dated as of December 6, 2005
	10	.23(20)	Amended and Restated Copromotion Agreement between King Pharmaceuticals, Inc. and Wyeth, effective as of January 1, 2006
	10	.24(9)*	Amendment No. 1 to the A.L. Pharma Inc. Supplemental Pension Plan (Amended and Restated as of January 1, 2005), effective March 31, 2006
	10	.25(21)	Indenture, dated as of March 29, 2006, among King Pharmaceuticals, Inc., the Subsidiary Guarantors parties hereto and The Bank of New York Trust Company, N.A., as Trustee
	10	.26(21)	Registration Rights Agreement dated as of March 29, 2006 between King Pharmaceuticals, Inc., the Guarantors and the Initial Purchasers of King’s 1 1 / 4% Convertible Notes due 2026, represented by Citigroup Global Markets Inc.
	10	.27(22)	Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto and Bank of America, N.A., in its capacity as Lender, Issuing Bank, and collateral and administrative agent, dated March 10, 2006
	10	.28(9)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated July 28, 2006
	10	.29(9)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated October 6, 2006
	10	.30(1)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated March 14, 2007

82

Exhibit
Number			Description
	10	.31(7)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated August 24, 2007
	10	.32(7)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated September 3, 2007
	10	.33(7)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated October 22, 2007
	10	.34(23)	Letter Amendment to Amended and Restated Loan and Security Agreement, among Alpharma Inc., certain of its subsidiaries, various financial institutions party thereto from time to time and Bank of America, N.A., in its capacity as collateral and administrative agent, dated October 7, 2008
	10	.35(24)†	Generic Distribution Agreement by and between King Pharmaceuticals, Inc. and Cobalt Pharmaceuticals, Inc., dated as of February 12, 2006
	10	.36(24)†	Product Supply Agreement by and among King Pharmaceuticals, Inc., Selamine Limited, Robin Hood Holdings Limited and Arrow Pharm Malta Limited, dated as of February 12, 2006
	10	.37(24)†	Ramipril Application License Agreement by and among King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc., Arrow International Limited and Robin Hood Holdings Limited, dated as of February 12, 2006
	10	.38(24)†	Ramipril Patent License Agreement by and among King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc., Selamine Limited and Robin Hood Holdings Limited, dated as of February 12, 2006
	10	.39(24)†	Amended and Restated U.S. Product Manufacturing Agreement by and between King Pharmaceuticals, Inc. and Sanofi-Aventis Deutschland GmbH, dated as of February 27, 2006
	10	.40(24)	First Amendment to the U.S. Product Agreement by and between King Pharmaceuticals, Inc., Sanofi-Aventis U.S. LLC and Sanofi-Aventis Deutschland GmbH, dated as of February 27, 2006
	10	.41(24)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term Performance Unit Agreement (One Year Performance Cycle)
	10	.42(24)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term Performance Unit Agreement (Three Year Performance Cycle)
	10	.43(25)	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Unit Certificate and Restricted Unit Grant Agreement
	10	.44(26)	Purchase Agreement between Ligand Pharmaceuticals Incorporated, King Pharmaceuticals, Inc. and King Pharmaceuticals Research and Development, Inc., dated as of September 6, 2006
	10	.45(27)	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Unit Certificate and Restricted Unit Grant Agreement
	10	.46(28)	Amendment No. 1 to Purchase Agreement, Contract Sales Force Agreement and Confidentiality Agreement by and between Ligand Pharmaceuticals Incorporated, King Pharmaceuticals, Inc. and King Pharmaceuticals Research and Development, Inc., dated as of January 3, 2007, effective as of November 30, 2006
	10	.47(29)	Amendment No. 2 to Purchase Agreement, by and between King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc. and Ligand Pharmaceuticals Incorporated, effective as of February 26, 2007
	10	.48(30)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Option and Nonstatutory Stock Option Agreement
	10	.49(30)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Stock Certificate and Restricted Stock Grant Agreement
	10	.50(30)*	King Pharmaceuticals, Inc. Incentive Plan: Form Of Long-Term Performance Unit Award Agreement (One Year Performance Cycle)

83

Exhibit
Number			Description
	10	.51(30)*	King Pharmaceuticals, Inc. Incentive Plan: Form Of Long-Term Performance Unit Award Agreement (Three Year Performance Cycle)
	10	.52(31)*	2007 Executive Management Incentive Awards
	10	.53(32)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Retention Grant Agreement
	10	.54(32)	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Stock Unit Certificate and Restricted Stock Unit Grant Agreement
	10	.55(32)*	King Pharmaceuticals, Inc. Incentive Plan: Form Of Long-Term Performance Unit Award Agreement (One Year Performance Cycle)
	10	.56(32)*	King Pharmaceuticals, Inc. Incentive Plan: Form Of Long-Term Performance Unit Award Agreement (Three Year Performance Cycle)
	10	.57(32)	Director Compensation Policy for Non-Employee Directors, amended May 16, 2007
	10	.58(4)	Credit Agreement dated as of April 19, 2007 among King Pharmaceuticals, Inc.; the Lenders named therein; Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent and Swingline Lender; Bank of America, N.A. and UBS Securities LLC, as Co-Syndication Agents; Citigroup Global Markets Inc., Wachovia Bank, National Association and The Royal Bank of Scotland plc, as Co-Documentation Agents; U.S. Bank National Association as Managing Agent; and Credit Suisse Securities as Sole Lead Arranger and Bookrunner
	10	.59(33)†	Asset Purchase Agreement by and among King Pharmaceuticals, Inc., Monarch Pharmaceuticals, Inc., Parkedale Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc., and JHP Pharmaceuticals, LLC dated as of July 14, 2007
	10	.60(7)	Exclusive License and Distribution Agreement, by and between IBSA Institut Biochimique SA (Switzerland) and Alpharma Pharmaceuticals LLC, dated as of August 16, 2007
	10	.61(7)	Exclusive License and Distribution Agreement for TIROSINT by and between IBSA Institut Biochimique SA (Switzerland) and Alpharma Pharmaceuticals LLC, dated as of August 16, 2007
	10	.62(7)	Exclusive License Agreement, dated September 4, 2007, between IDEA AG and Alpharma Ireland Limited
	10	.63(7)	Registration Rights Agreement, dated October 12, 2007 between Alpharma Inc., IDEA AG and any Stockholders
	10	.64(34)*	Amended and Restated King Pharmaceuticals, Inc. Severance Pay Plan: Tier I, effective October 16, 2007
	10	.65(35)*	License, Development and Commercialization Agreement, between King Pharmaceuticals Research and Development, Inc. and Acura Pharmaceuticals, Inc., dated October 30, 2007
	10	.66(35)	King Pharmaceuticals, Inc. Deferred Compensation Plan
	10	.67(36)*	Amended and Restated King Pharmaceuticals, Inc. Non-Employee Directors’ Deferred Compensation Plan
	10	.68(36)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Stock Certificate and Restricted Stock Grant Agreement
	10	.69(37)*	Alpharma Inc. 2005 Supplemental Savings Plan, Amended and Restated, effective January 1, 2008
	10	.70(37)*	Alpharma Inc. 2007 Supplemental Savings Plan, effective January 1, 2008
	10	.71(37)*	A.L. Pharma Inc. Supplemental Pension Plan (amended and restated, effective January 1, 2008)
	10	.72(37)*	Alpharma Inc. Supplemental Savings Plan (amended and restated, effective January 1, 2008)
	10	.73(38)	Termination of Litigation Agreement, dated January 2, 2008, by and among King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc. and CorePharma LLC
	10	.74(38)	Metaxalone 800 mg Product Agreement, dated January 2, 2008, by and among King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc. and CorePharma LLC
	10	.75(37)*	Alpharma Inc. Severance Plan, Amended and Restated Effective January 25, 2008
	10	.76(37)*	Alpharma Inc. Change in Control Plan, Amended and Restated Effective January 25, 2008

84

Exhibit
Number			Description
	10	.77(39)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Option Certificate and Nonstatutory Stock Option Agreement
	10	.78(39)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Stock Certificate and Restricted Stock Grant Agreement
	10	.79(39)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term Performance Unit Award Agreement (One-Year Performance Cycle)
	10	.80(39)*	King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term Performance Unit Award Agreement (Three-Year Performance Cycle)
	10	.81(40)*†	2008 Executive Management Incentive Awards
	10	.82(41)	King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted Unit Certificate and Restricted Unit Grant Agreement
	10	.83(42)	First Amendment to License Agreement, dated March 31, 2008, between IDEA AG and Alpharma Ireland Limited
	10	.84(43)	Product Development Agreement between King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc. and CorePhrma LLC, dated June 18, 2008
	10	.85(43)	Director Compensation Policy for Non-Employee Directors of King Pharmaceuticals, Inc., amended July 30, 2008
	10	.86(44)	Settlement Agreement, dated August 21, 2008, by and among King Pharmaceuticals, Inc., other defendants, and Representative Plaintiffs related to a certain consolidated shareholder derivative action entitled, In Re: King Pharmaceuticals, Inc. Derivative Litigation
	10	.87(23)	Development and License Agreement between Durect Corporation and Alpharma Ireland Limited, dated as of September 19, 2008
	10	.88(45)	Amendment No. 1, dated as of December 5, 2008, to Credit Agreement, dated as of April 19, 2007, among King Pharmaceuticals, Inc.; the Lenders named therein; Credit Suisse, Cayman Islands Branch, as Administrative Agent, Collateral Agent and Swingline Lender; Bank of America, N.A. and UBS Securities LLC, as Co-Syndication Agents; Citigroup Global Markets Inc., Wachovia Bank, National Association and The Royal Bank of Scotland plc, as Co-Documentation Agents; U.S. Bank National Association as Managing Agent; Credit Suisse Securities (USA) LLC and Wachovia Capital Markets, LLC, as Joint Lead Arrangers and Joint Bookrunners
	10	.89(45)	Asset Purchase Agreement by and between King Pharmaceuticals, Inc. and Actavis Elizabeth, L.L.C., dated as of December 17, 2008.
	10	.90(45)	Term Loan Credit Agreement, dated as of December 29, 2008, among King Pharmaceuticals, Inc., the Lenders party thereto, Credit Suisse, as Administrative Agent and Collateral Agent, Credit Suisse Securities (USA) LLC and Wachovia Capital Markets, LLC as Joint Bookrunners and Joint Lead Arrangers, Wachovia Bank, National Association and SunTrust Bank as Co-Syndication Agents, DNB First Bank and U.S. Bank National Association as Co-Documentation Agents, DZ Bank AG, Deutsche Zentral-Genossenschaftsbank, New York Branch, Siemens Financial Services, Inc., The PrivateBank and Trust Company and Union Bank, N.A. as Senior Managing Agents
	14	.1(46)	Corporate Code of Conduct and Ethics
	21	.1	Subsidiaries of the Registrant as of February 25, 2009
	23	.1	Consent of PricewaterhouseCoopers LLP
	31	.1	Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1	Certificate of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certificate of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Denotes management contract or compensatory plan or arrangement.
†	Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934.

85

(1)	Incorporated by reference to Alpharma Inc.’s Current Report on Form 8-K filed on March 20, 2007.
(2)	Incorporated by reference to Alpharma Inc.’s Current Report on Form 8-K filed on February 7, 2008.
(3)	Incorporated by reference to King’s Current Report on Form 8-K filed November 24, 2008.
(4)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed August 7, 2007.
(5)	Incorporated by reference to King’s Registration Statement on Form S-1 (Registration No. 333-38753) filed October 24, 1997.
(6)	Incorporated by reference to Alpharma Inc.’s Current Report on Form 8-K filed October 10, 2007.
(7)	Incorporated by reference to Alpharma Inc.’s Quarterly Report on Form 10-Q filed on October 30, 2007.
(8)	Incorporated by reference to Alpharma Inc.’s Annual Report on Form 10-K filed on March 16, 2006.
(9)	Incorporated by reference to Alpharma Inc.’s Annual Report on Form 10-K filed on March 1, 2007.
(10)	Incorporated by reference to King’s Registration Statement on Form S-8 (File No. 333-45284) filed September 6, 2000.
(11)	Incorporated by reference to King’s Registration Statement on Form S-8 (File No. 333-45276) filed September 6, 2000.
(12)	Incorporated by reference to King’s Registration Statement on Form S-8 (File No. 333-73053) filed February 26, 1999.
(13)	Incorporated by reference to King’s Registration Statement on Form S-8 (File No. 333-32072) filed March 9, 2000.
(14)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed March 21, 2005.
(15)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed August 9, 2005.
(16)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed November 9, 2005.
(17)	Incorporated by reference to King’s Current Report on Form 8-K filed November 4, 2005.
(18)	Incorporated by reference to King’s Definitive Proxy Statement, filed April 28, 2005, related to the 2005 annual meeting of shareholders.
(19)	Incorporated by reference to King’s Annual Report on Form 10-K filed March 3, 2006.
(20)	Incorporated by reference to King’s Quarterly Report of Form 10-Q filed November 9, 2006.
(21)	Incorporated by reference to King’s Current Report on Form 8-K filed March 30, 2006.
(22)	Incorporated by reference to Alpharma Inc.’s Quarterly Report on Form 10-Q filed on May 2, 2006.
(23)	Incorporated by reference to Alpharma Inc.’s Quarterly Report on Form 10-Q filed on October 29, 2008.
(24)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed May 10, 2006.
(25)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed August 9, 2006.
(26)	Incorporated by reference to King’s Current Report on Form 8-K filed September 12, 2006.
(27)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed November 9, 2006.
(28)	Incorporated by reference to King’s Current Report on Form 8-K filed January 5, 2007.
(29)	Incorporated by reference to King’s Current Report on Form 8-K filed March 2, 2007.
(30)	Incorporated by reference to King’s Current Report on Form 8-K filed March 27, 2007.
(31)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed May 10, 2007.
(32)	Incorporated by reference to King’s Current Report on Form 8-K filed May 21, 2007.
(33)	Incorporated by reference to King’s Current Report on Form 8-K filed July 19, 2007.
(34)	Incorporated by reference to King’s Current Report on Form 8-K filed October 22, 2007.
(35)	Incorporated by reference to King’s Current Report on Form 8-K filed November 5, 2007.
(36)	Incorporated by reference to King’s Current Report on Form 8-K filed December 5, 2007.
(37)	Incorporated by reference to Alpharma Inc.’s Annual Report on Form 10-K filed February 27, 2008.
(38)	Incorporated by reference to King’s Current Report on Form 8-K filed January 8, 2008.

86

(39)	Incorporated by reference to King’s Current Report on Form 8-K filed April 1, 2008.
(40)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed May 8, 2008.
(41)	Incorporated by reference to King’s Current Report on Form 8-K filed May 21, 2008.
(42)	Incorporated by reference to Alpharma Inc.’s Quarterly Report on Form 10-Q filed May 9, 2008.
(43)	Incorporated by reference to King’s Quarterly Report on Form 10-Q filed August 7, 2008.
(44)	Incorporated by reference to King’s Current Report on Form 8-K filed August 27, 2008.
(45)	Filed as an Exhibit to this Report.
(46)	Incorporated by reference to King’s Current Report on Form 8-K filed December 8, 2005.

87

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

King Pharmaceuticals, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of King Pharmaceuticals, Inc. and its subsidiaries (the “Company”) at December 31, 2008 and December 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 17 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2007.

A company’s internal control over financial reporting is a process designed 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting appearing under item 9A, management has excluded Alpharma, Inc. (“Alpharma”) from its assessment of internal control over

F-1

financial reporting as of December 31, 2008 because it was acquired by the Company in a purchase business combination during 2008. We have also excluded Alpharma from our audit of internal control over financial reporting. Alpharma is a wholly-owned subsidiary whose total assets represent 39.7% of the related consolidated financial statement amounts as of and for the year ended December 31, 2008.

/s/  PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Raleigh, North Carolina

February 27, 2009

F-2

KING PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS
as of December 31, 2008 and 2007
(In thousands, except share data)

	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	940,212		$	20,009
Investments in debt securities		6,441			1,344,980
Marketable securities		511			1,135
Accounts receivable, net of allowance of $4,713 and $5,297		245,070			183,664
Inventories		258,303			110,308
Deferred income tax assets		89,513			100,138
Income tax receivable		—			20,175
Prepaid expenses and other current assets		129,214			39,245
Total current assets		1,669,264			1,819,654
Property, plant and equipment, net		421,321			257,093
Intangible assets, net		934,219			780,974
Goodwill		450,548			129,150
Deferred income tax assets		303,722			343,700
Investments in debt securities		353,848			—
Other assets (includes restricted cash of $16,580 and $16,480)		124,774			96,251
Total assets	$	4,257,696		$	3,426,822
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	140,908		$	76,481
Accrued expenses		411,488			376,604
Income taxes payable		10,448			—
Short-term debt		5,230			—
Current portion of long-term debt		439,047			—
Total current liabilities		1,007,121			453,085
Long-term debt		963,222			400,000
Other liabilities		110,022			62,980
Total liabilities		2,080,365			916,065
Commitments and contingencies (Note 19)
Shareholders’ equity:
Preferred stock, 15,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, no par value, 600,000,000 shares authorized, 246,487,232 and 245,937,709 shares issued and outstanding		1,313,321			1,283,440
Retained earnings		892,297			1,225,360
Accumulated other comprehensive income (loss)		(28,287	)		1,957
Total shareholders’ equity		2,177,331			2,510,757
Total liabilities and shareholders’ equity	$	4,257,696		$	3,426,822

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

F-3

KING PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 2008, 2007 and 2006
(In thousands, except share data)

	2008			2007			2006
Revenues:
Net sales	$	1,485,619		$	2,054,293		$	1,908,143
Royalty revenue		79,442			82,589			80,357
Total revenues		1,565,061			2,136,882			1,988,500
Operating costs and expenses:
Costs of revenues, exclusive of depreciation, amortization and impairments shown below		394,825			566,534			419,808
Selling, general and administrative, exclusive of co-promotion fees		408,955			511,303			496,215
Co-promotion fees		37,065			179,731			217,750
Total selling, general and administrative		446,020			691,034			713,965
Research and development		145,173			149,425			143,596
Research and development — in process upon acquisition		598,500			35,310			110,000
Total research and development		743,673			184,735			253,596
Depreciation and amortization		150,713			173,863			147,549
Asset impairments		40,995			223,025			47,842
Restructuring charges		7,098			70,178			3,194
Acquisition related costs		1,382			—			—
Total operating costs and expenses		1,784,706			1,909,369			1,585,954
Operating (loss) income		(219,645	)		227,513			402,546
Other income (expense):
Interest income		36,970			42,491			32,152
Interest expense		(7,943	)		(7,818	)		(9,857	)
Loss on investment		(7,451	)		(11,591	)		—
Gain on early extinguishment of debt		—			—			628
Other, net		(3,635	)		223			(1,157	)
Total other income		17,941			23,305			21,766
(Loss) income from continuing operations before income taxes		(201,704	)		250,818			424,312
Income tax expense		131,359			67,600			135,730
(Loss) income from continuing operations		(333,063	)		183,218			288,582
Discontinued operations:
(Loss) income from discontinued operations		—			(369	)		572
Income tax (benefit) expense		—			(132	)		205
Total (loss) income from discontinued operations		—			(237	)		367
Net (loss) income	$	(333,063	)	$	182,981		$	288,949
(Loss) income per common share:
Basic: (Loss) income from continuing operations	$	(1.37	)	$	0.75		$	1.19
(Loss) income from discontinued operations		—			—			—
Net (loss) income	$	(1.37	)	$	0.75		$	1.19
Diluted: (Loss) income from continuing operations	$	(1.37	)	$	0.75		$	1.19
(Loss) income from discontinued operations		—			—			—
Net (loss) income	$	(1.37	)	$	0.75		$	1.19

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

F-4

KING PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND OTHER COMPREHENSIVE INCOME (LOSS)
for the years ended December 31, 2006, 2007 and 2008
(In thousands, except share data)

												Accumulated
												Other
	Common Stock					Unearned			Retained			Comprehensive
	Shares		Amount			Compensation			Earnings			Income (Loss)			Total
Balance, December 31, 2005		242,493,416	$	1,222,246		$	(8,764	)	$	754,953		$	4,987		$	1,973,422
Adoption of Statement of Financial Accounting Standard 123(R)		—		(8,764	)		8,764			—			—			—
Comprehensive income:
Net income		—		—			—			288,949			—			288,949
Net unrealized loss on marketable securities, net of tax of $2,761		—		—			—			—			(5,067	)		(5,067	)
Foreign currency translation		—		—			—			—			(202	)		(202	)
Total comprehensive income																283,680
Stock-based award activity		657,807		31,504			—			—			—			31,504
Balance, December 31, 2006		243,151,223	$	1,244,986		$	—		$	1,043,902		$	(282	)	$	2,288,606
Comprehensive income:
Net income		—		—			—			182,981			—			182,981
Reclassification of unrealized losses on marketable securities to earnings, net of tax of $377		—		—			—			—			615			615
Foreign currency translation		—		—			—			—			1,624			1,624
Total comprehensive income																185,220
Adoption of Financial Accounting Standards Board Interpretation No. 48		—		—			—			(1,523	)		—			(1,523	)
Stock-based award activity		2,786,486		38,454			—			—			—			38,454
Balance, December 31, 2007		245,937,709	$	1,283,440		$	—		$	1,225,360		$	1,957		$	2,510,757
Comprehensive income:
Net loss		—		—			—			(333,063	)		—			(333,063	)
Net unrealized loss on investments in debt securities, net of taxes of $17,219		—		—			—			—			(28,092	)		(28,092	)
Foreign currency translation		—		—			—			—			(2,152	)		(2,152	)
Total comprehensive loss																(363,307	)
Stock-based award activity		549,523		29,881			—			—			—			29,881
Balance at December 31, 2008		246,487,232	$	1,313,321		$	—		$	892,297		$	(28,287	)	$	2,177,331

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

F-5

KING PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2008, 2007 and 2006
(In thousands)

	2008			2007			2006
Cash flows from operating activities of continuing operations:
Net (loss)/income	$	(333,063	)	$	182,981		$	288,949
Loss (income) from discontinued operations		—			237			(367	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		150,713			173,863			147,549
Amortization of deferred financing costs		2,148			2,057			2,874
Deferred income taxes		37,313			(91,229	)		(39,010	)
Impairment of intangible assets		40,995			176,671			47,842
Loss on sale of assets		—			46,354			—
Inventory write-down		—			79,807			—
In-process research and development charges		598,500			35,310			110,000
Gain on early extinguishment of debt		—			—			(628	)
Loss on investment		7,451			11,591			—
Other non-cash items, net		(530	)		2,591			573
Stock based compensation		34,514			27,652			24,718
Changes in operating assets and liabilities net of effects from acquisitions:
Accounts receivable		37,956			80,106			(41,746	)
Inventories		22,785			55,056			48,275
Prepaid expenses and other current assets		16,785			(43,555	)		(45,796	)
Other assets		27,078			(3,470	)		(20,173	)
Accounts payable		9,673			(16,276	)		(8,568	)
Accrued expenses and other liabilities		(180,960	)		(33,408	)		(50,458	)
Deferred revenue		(4,680	)		(4,680	)		(6,886	)
Income taxes		24,713			(9,009	)		8,479
Net cash provided by operating activities of continuing operations		491,391			672,649			465,627
Cash flows from investing activities of continuing operations:
Purchases of investments in debt securities		(279,175	)		(2,744,575	)		(1,705,517	)
Proceeds from maturity and sale of investments in debt securities		1,207,080			2,289,780			1,309,995
Transfer (to)/from restricted cash		(100	)		(512	)		128,561
Acquisition of Alpharma, net of cash acquired		(1,024,761	)		—			—
Acquisition of Avinza®		(44	)		(296,437	)		—
Purchases of property, plant and equipment		(57,455	)		(49,602	)		(45,816	)
Purchases of product rights and intellectual property		(12,065	)		(98,942	)		(85,795	)
Proceeds from sale of assets		10,410			86,287			—
Loan to Ligand		—			37,750			(37,750	)
Other investing activities		—			—			7
Net cash used in investing activities of continuing operations		(156,110	)		(776,251	)		(436,315	)
Cash flows from financing activities of continuing operations:
Proceeds from exercise of stock options, net		439			10,656			7,338
Net (payments) proceeds related to stock-based award activity		(2,441	)		705			484
Proceeds from issuance of long-term debt		617,000			—			400,000
Payments on long-term debt		—			—			(342,691	)
Debt issuance costs		(30,076	)		(1,527	)		(10,680	)
Net cash provided by financing activities of continuing operations		584,922			9,834			54,451
Increase (decrease) in cash and cash equivalents		920,203			(93,768	)		83,763
Cash and cash equivalents, beginning of year		20,009			113,777			30,014
Cash and cash equivalents, end of year	$	940,212		$	20,009		$	113,777
Supplemental disclosure of cash paid for: Interest	$	5,985		$	6,047		$	8,200
Supplemental disclosure of cash paid for: Taxes	$	69,207		$	171,924		$	163,901

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

F-6

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1.   The Company

King Pharmaceuticals, Inc. (“King” or the “Company”) is a vertically integrated pharmaceutical company that performs basic research and develops, manufactures, markets and sells branded prescription pharmaceutical products and animal health products. King markets its branded prescription pharmaceutical products primarily through a dedicated sales force to general/family practitioners, internal medicine physicians, neurologists, pain specialists, surgeons and hospitals across the United States and in Puerto Rico. The Company’s animal health products are primarily marketed through a staff of trained sales and technical service and marketing employees, many of whom are veterinarians and nutritionists. The Company has sales offices in the U.S., Europe, Canada, Mexico, South America and Asia. Elsewhere the Company’s animal health products are sold primarily through the use of distributors and other third-party sales companies. Through a team of inside sales professionals, the Company markets a portfolio of acute care auto-injector products to the pre-hospital emergency services market, which includes U.S. federal, state and local governments, public health agencies, emergency medical personnel and first responders. The Company is also the exclusive manufacturer and supplier of a commercial auto-injector which is sold worldwide by a third party, except in Canada, where the Company markets, distributes and sells the product. In addition, the Company receives royalties from the rights to certain products (including Adenoscan^®) previously sold.

These consolidated financial statements include the accounts of King and all of its wholly owned subsidiaries. See Note 9. All intercompany transactions and balances have been eliminated in consolidation.

Discontinued operations in these consolidated financial statements represent the effect of the Prefest^® and Nordette^® product rights which the Company divested in 2004.

2.   Summary of Significant Accounting Policies

Use of Estimates.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates for which it is reasonably possible that a material change in estimate could occur in the near term include forecasted future cash flows used in testing for impairments of intangible and tangible assets and loss accruals for excess inventory and fixed purchase commitments under the Company’s supply contracts. Forecasted future cash flows in particular require considerable judgment and are subject to inherent imprecision. In the case of impairment testing, changes in estimates of future cash flows could result in an immediate material impairment charge and, whether they result in an impairment charge, could result prospectively in a reduction in the estimated remaining useful life of tangible or intangible assets, which could be material to the financial statements.

Other significant estimates include accruals for Medicaid, Medicare and commercial rebates; returns; chargebacks; allowances for doubtful accounts; and estimates used in applying the revenue recognition policy. Reserves for returns; chargebacks; Medicaid, Medicare and commercial rebates each use the estimate of the level of inventory of the Company’s branded prescription pharmaceutical products in the distribution channel at the end of the period. The estimate of the level of inventory of the Company’s branded prescription pharmaceutical products in the distribution channel is based primarily on data provided by our three key wholesalers under inventory management agreements.

The Company is subject to risks and uncertainties that may cause actual results to differ from the related estimates, and the Company’s estimates may change from time to time in response to actual developments and new information.

F-7

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue recognition.  Revenue is recognized when title and risk of loss are transferred to customers, collection of sales is reasonably assured, and the Company has no further performance obligations. This is generally at the time products are received by the customer. Accruals for estimated discounts, returns, rebates and chargebacks that are determined based on historical experience, reduce revenues at the time of sale and are included in accrued expenses. Royalty revenue is recognized based on a percentage of sales (namely, contractually agreed-upon royalty rates) reported by third parties.

Intangible Assets and Goodwill.  Intangible assets, which primarily include acquired product rights, trademarks, tradenames and patents, are stated at cost, net of accumulated amortization. Amortization is computed over the estimated useful lives, ranging from one to forty years, using primarily the straight-line method. We estimate the useful lives of the assets by factoring in the characteristics of the products such as: patent protection, competition by products prescribed for similar indications, estimated future introductions of competing products, and other factors. The Company evaluates the remaining useful lives of intangible assets each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. This evaluation is performed through the quarterly evaluation of intangibles for impairment. The Company reviews its intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company reviews goodwill for possible impairment annually, or whenever events or circumstances indicate that the carrying amount may not be recoverable. In evaluating goodwill for impairment, the Company estimates fair value of the Company’s individual business reporting units on a discounted cash flow basis. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and, in some cases, the current fair value of the asset. In addition, the Company’s amortization policies reflect judgments on the estimated useful lives of assets.

Accruals for rebates, returns, and chargebacks.  The Company establishes accruals for returns; chargebacks; and commercial, Medicare and Medicaid rebate obligations in the same period it recognizes the related sales. The accruals reduce revenues and are included in accrued expenses. At the time a rebate or chargeback payment is made or a product return is received, which occurs with a delay after the related sale, the Company records a reduction to accrued expenses and, at the end of each quarter, adjusts accrued expenses for differences between estimated and actual payments. Due to estimates and assumptions inherent in determining the amount of returns, chargebacks and rebates, the actual amount of product returns and claims for chargeback and rebates may differ from the Company’s estimates.

The Company’s product returns accrual is primarily based on estimates of future product returns over the period during which customers have a right of return, which is in turn based in part on estimates of the remaining shelf-life of our products when sold to customers. Future product returns are estimated primarily based on historical sales and return rates. The Company estimates its commercial, Medicare and Medicaid rebate accruals based on estimates of utilization by rebate-eligible customers, estimates of the level of inventory of its products in the distribution channel that remain potentially subject to those rebates, and the terms of its commercial, Medicare and Medicaid rebate obligations. The Company estimates its chargeback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to chargebacks, and specific contractual and historical chargeback rates. The estimate of the level of our branded prescription pharmaceutical products in the distribution channel is based primarily on data provided by our three key wholesalers under inventory management agreements.

The Company’s accruals for returns, chargebacks and rebates are adjusted as appropriate for specific known developments that may result in a change in its product returns or its rebate and chargeback obligations. In the case of product returns, the Company monitors demand levels for its products and the effects of the introduction of competing products and other factors on this demand. When the Company identifies decreases

F-8

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in demand for products or experiences higher than historical rates of returns caused by unexpected discrete events, it further analyzes these products for potential additional supplemental reserves.

Shipping and Handling Costs.  The Company incurred $2,884, $3,527, and $3,777 in 2008, 2007, and 2006, respectively, related to third-party shipping and handling costs classified as selling, general and administrative expenses in the consolidated statements of operations. The Company does not bill customers for such costs.

Cash and Cash Equivalents.  The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash and cash equivalents include institutional money market funds and bank time deposits.

Restricted Cash.  Cash escrowed for a specific purpose is designated as restricted cash.

Investments in Debt Securities.  Tax-exempt auction rate securities are long-term variable rate bonds tied to short-term interest rates that are reset through an auction process generally every seven, 28 or 35 days. The Company classifies auction rate securities as available-for-sale at the time of purchase in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Temporary gains or losses are included in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Other-than-temporary gains or losses are included in income (expense) on the Consolidated Statement of Operations.

As of December 31, 2008, the Company’s investments in debt securities of $360,289 consisted solely of tax-exempt auction rate securities and the Company had not invested in any mortgage-backed securities or any securities backed by corporate debt obligations. The Company’s investment policy requires it to maintain an investment portfolio with a high credit quality. Accordingly, the Company’s investments in debt securities are limited to issues which are rated AA or higher at the time of purchase. The Company has realized no loss of principal with respect to these investments.

On February 11, 2008, the Company began to experience auction failures. In the event of an auction failure, the interest rate on the security is set according to the contractual terms in the underlying indenture. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or a buyer outside the auction process emerges. For additional information regarding investments in debt securities, please see Note 15.

Marketable Securities.  The Company classifies its marketable securities as available-for-sale. These securities are carried at fair market value based on current market quotes, with unrealized gains and losses reported in shareholders’ equity as a component of accumulated other comprehensive income. Gains or losses on securities sold are based on the specific identification method. The Company reviews its investment portfolio as deemed necessary and, where appropriate, adjusts individual securities for other-than-temporary impairments. The Company does not hold these securities for speculative or trading purposes.

Accounts Receivable and Allowance for Doubtful Accounts.  Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Management determines the allowance based on historical experience along with the present knowledge of potentially uncollectible accounts. Management reviews its allowance for doubtful accounts quarterly. Past due balances over 120 days and greater than a specified amount are reviewed individually for collectibility. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when management feels it is probable the receivable will not be recovered. The Company does not have any off-balance-sheet credit exposure related to customers.

Inventories.  Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Product samples held for distribution to physicians and other healthcare providers

F-9

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

represent approximately 3% and 4% of inventory as of December 31, 2008 and 2007, respectively. The Company has fixed purchase commitments under supply contracts for certain raw materials. A loss accrual is recorded when the total inventory for a product is projected to be more than the forecasted demand.

Income Taxes.  Deferred tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized.

Litigation.  At various times the Company may have patent, product liability, consumer, commercial, environmental and tax claims asserted against it and may be subjected to litigation with respect to the claims. In addition, the Company may be the subject of government investigations and a party to other legal proceedings that arise from time to time in the ordinary course of business (see Note 19). The Company accrues for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. If the estimated amount of the liability is a range and some amount within the range appears to be a better estimate than any other amount within the range, that amount is accrued. When no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. The Company capitalizes legal costs in the defense of its patents to the extent there is an evident increase in the value of the patent.

Foreign currency translation and transactions.  The assets and liabilities of the Company’s foreign subsidiaries are translated from their respective functional currencies into U.S. Dollars at rates in effect at the balance sheet date. Results of operations are translated using average rates in effect during the year. Foreign currency transaction gains and losses are included in income. Foreign currency translation adjustments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.

Financial Instruments and Derivatives.  The Company does not use financial instruments for trading purposes. At December 31, 2008 and 2007 the Company had utility contracts which qualify as normal purchase and sales, derivatives associated with the Convertible Senior Notes (see Note 13), and forward foreign exchange contracts. The Company carries its derivative instruments at their fair value on the balance sheet date.

Property, Plant and Equipment.  Property, plant and equipment are stated at cost. Maintenance and repairs are expensed as incurred. Depreciation is computed over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives are principally fifteen to forty years for buildings and improvements and three to fifteen years for machinery and equipment.

The Company capitalizes certain computer software acquisition and development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are amortized over the estimated useful lives of the software which generally range from three to seven years.

In the event that facts and circumstances indicate that the carrying amount of property, plant and equipment may be impaired, evaluation of recoverability is performed using the estimated future undiscounted cash flows associated with the asset compared to the asset’s carrying amount to determine if a write-down is required. To the extent such projection indicates that undiscounted cash flow is not expected to be adequate to recover the carrying amount, the asset would be written down to its fair value using discounted cash flows.

Research and Development Costs.  Research and development costs consist primarily of services performed by third parties, and are expensed as incurred. This includes costs to acquire in-process research and development projects for products that have not received regulatory approval and do not have an alternative future use. Milestone payments made to third parties in connection with a product in development prior to its regulatory approval are also expensed as incurred. Milestone payments made to third parties with

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

respect to a product on or after its regulatory approval are capitalized and amortized over the remaining useful life of the product. Amounts capitalized for these payments are included in intangible assets.

Deferred Financing Costs.  Financing costs related to the $400,000 convertible senior notes are being amortized over seven years to the first date the debt can be put by the holders to the Company. Financing costs related to the senior secured revolving credit facility are being amortized over five years, the term of the facility. Financing costs related to the Term Loan are being amortized over 4 years. See Note 13 for further discussion.

Insurance.  The Company is self-insured with respect to its healthcare benefit program. The Company pays a fee to a third party to administer the plan. The Company has stop loss coverage on a per employee basis as well as in the aggregate. Self-insured costs are accrued based upon reported claims and an estimated liability for claims incurred but not reported.

Advertising.  The Company expenses advertising costs as incurred and these costs are classified as selling, general and administrative expenses in the consolidated statements of operations. Advertising costs for the years ended December 31, 2008, 2007, and 2006 were $88,106, $125,064, and $92,492, respectively.

Promotional Fees to Wyeth.  On June 22, 2000, the Company entered into a Co-Promotion Agreement with Wyeth to promote Altace^® in the United States and Puerto Rico through October 29, 2008, with possible extensions as outlined in the Co-Promotion Agreement. Under the agreement, Wyeth paid an upfront fee of $75,000 to King, which was classified as a liability and is being amortized over the term of the agreement as amended. In connection with the Co-Promotion Agreement, the Company agreed to pay Wyeth a promotional fee based on annual net sales of Altace^®. On July 5, 2006, the Company entered into an Amended and Restated Co-Promotion Agreement (“Amended Co-Promotion Agreement”) with Wyeth regarding Altace^® which extended the term to December 31, 2010. Effective January 1, 2007, the Company assumed full responsibility for selling, marketing and promoting Altace^®. Under the Amended Co-Promotion Agreement, the Company will pay Wyeth a reduced annual fee based on net sales of Altace^®. The annual fee is accrued quarterly based on a percentage of Altace^® net sales at a rate equal to the expected relationship of the expected fee for the year to applicable expected Altace^® net sales for the year. See Note 9 for further discussion.

3.   Invalidation of Altace^® Patent

In September 2007, the U.S. Circuit Court of Appeals for the Federal Circuit (the “Circuit Court”) declared invalid U.S. Patent No. 5,061,722 (the “722 patent”) that covered the Company’s Altace^® product, overruling the decision of the U.S. District Court for the Eastern District of Virginia (the “District Court”), which had upheld the validity of the patent. The Company filed with the Circuit Court a petition for rehearing and rehearing en banc, but this petition was denied in December 2007. The Circuit Court issued the mandate to the District Court on December 10, 2007, beginning the 180-day Hatch-Waxman exclusive marketing period for the first generic competitor who entered the market in December 2007 with a generic substitute for the Company’s Altace^®. Additional competitors entered the market in June 2008 with generic substitutes for our Altace^® product. For additional information regarding this legal proceeding, please see Note 19.

As a result of the entry of generic competition, Altace^® net sales have significantly decreased and the Company expects net sales of Altace^® will continue to decline significantly in the future. As a result, during 2007 the Company recorded charges of $146,444 associated with Altace^® intangible assets, $78,812 associated with Altace^® inventory and $25,755 associated with minimum purchase commitments for excess Altace^® raw material. Net sales of Altace^® were $166,406 in 2008 and $645,989 in 2007. For additional information regarding the Altace^® intangible assets, please see Note 10. For additional information regarding Altace^® inventory, please see Note 7.

F-11

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   Change in Estimate

The Company’s calculation of its product returns reserves is based on historical sales and return rates over the period during which customers have a right of return. The Company also considers current wholesale inventory levels of the Company’s products.

Because actual returns related to sales in prior periods were lower than the Company’s original estimates, it recorded a decrease in its reserve for returns in the first quarter of 2007 and the first quarter of 2006. During the first quarter of 2007, the Company decreased its reserve for returns by approximately $8,000 and increased its net sales from branded prescription pharmaceuticals, excluding the adjustment to sales classified as discontinued operations, by the same amount. The effect of the change in estimate on first quarter 2007 operating income was an increase of approximately $5,000. During the first quarter of 2006, the Company decreased its reserve for returns by approximately $8,000 and increased its net sales from branded prescription pharmaceuticals, excluding the adjustment to sales classified as discontinued operations, by the same amount. The effect of the change in estimate on first quarter 2006 operating income was an increase of approximately $6,000.

During the third quarter of 2006, the Company reduced its rebate expense and increased net sales from branded prescription pharmaceutical products by approximately $9,300 due to the determination that a liability established in 2005 for a government pricing program for military dependents and retirees was no longer probable.

5.   Receivables

Receivables, net of allowance for doubtful accounts, consist of the following:

	2008		2007
Trade	$	218,027	$	159,362
Royalty		18,182		21,753
Other		8,861		2,549
Total Receivables	$	245,070	$	183,664

6.   Concentrations of Credit Risk

A significant portion of the Company’s sales is to wholesaler customers in the branded prescription pharmaceutical industry. The Company monitors the extension of credit to wholesaler customers and has not experienced significant credit losses. The following table represents the relative percentage of accounts receivable from significant wholesaler customers compared to net accounts receivable:

	2008			2007
Customer A		17	%		25	%
Customer B		23	%		26	%
Customer C		12	%		14	%

The following table represents a summary of sales to significant wholesaler customers as a percentage of the Company’s gross sales, including revenues from discontinued operations:

	2008			2007			2006
Customer A		30	%		35	%		32	%
Customer B		28	%		27	%		29	%
Customer C		14	%		13	%		13	%

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.   Inventory

Inventory consists of the following:

	2008			2007
Raw materials	$	82,273		$	129,781
Work-in process		62,836			27,590
Finished goods (including $7,385 and $3,901 of sample inventory, respectively)		176,582			61,324
		321,691			218,695
Less inventory valuation allowance		(63,388	)		(108,387	)
	$	258,303		$	110,308

In December 2007, the Company’s ‘722 patent that covered the Company’s Altace^® product was invalidated by the Circuit Court. For additional information please see Note 3. As a result of the invalidation of the ‘722 patent, the Company undertook an analysis of its potential effect on future net sales of Altace^®. Based upon that analysis, the Company concluded that it had more Altace^® raw material inventory than is required to meet anticipated future demand for the product. Accordingly, during 2007 the Company recorded charges in the amount of (i) $78,812 for an inventory valuation allowance for a portion of the Altace^® raw material inventory on hand; and (ii) $25,755 for a portion of the Company’s estimated remaining minimum purchase requirements for excess Altace^® raw material. These charges are included in cost of revenues during 2007, exclusive of depreciation, amortization and impairments, on the Consolidated Statements of Operations.

8.   Property, Plant and Equipment

Property, plant and equipment consists of the following:

	2008			2007
Land	$	16,415		$	12,072
Buildings and improvements		199,707			123,063
Machinery and equipment		333,510			213,522
Capital projects in progress		59,731			62,638
		609,363			411,295
Less accumulated depreciation		(188,042	)		(154,202	)
	$	421,321		$	257,093

Included in net property, plant and equipment as of December 31, 2008 and 2007 are computer software costs of $14,813 and $18,339, respectively.

Depreciation expense for the years ended December 31, 2008, 2007 and 2006 was $38,267, $41,725 and $41,785, respectively, which includes $10,370, $7,209 and $6,815, respectively, related to computer software.

For the years ended December 31, 2008, 2007 and 2006, the Company capitalized interest of approximately $562, $279 and $1,243, respectively, related to construction in process.

In July 2007, the Company entered into an asset purchase agreement with JHP Pharmaceuticals, LLC (“JHP”), pursuant to which JHP acquired the Company’s Rochester, Michigan sterile manufacturing facility, some of the Company’s legacy products that are manufactured there and the related contract manufacturing business. The Company retained its stand-alone Bicillin^® (sterile penicillin products) manufacturing facility which is also located in Rochester, Michigan. For additional discussion, please see Note 9.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2006, the Company decided to proceed with the implementation of its plan to streamline manufacturing activities in order to improve operating efficiency and reduce costs, including the decision to transfer the production of Levoxyl^® from its St. Petersburg, Florida facility to its Bristol, Tennessee facility, which the Company expects to complete in the first half of 2009. The Company believes that the assets associated with the St. Petersburg facility are not currently impaired based on estimated undiscounted cash flows associated with these assets. However, during 2006, the Company shortened the estimated useful lives of assets at the St. Petersburg facility and therefore accelerated the depreciation of these assets. For additional discussion, please see Note 25.

The net book value of some of the Company’s manufacturing facilities currently exceeds fair market value. Management currently believes that the long-term assets associated with these facilities are not impaired based on estimated undiscounted future cash flows. However, if the Company were to approve a plan to sell or close any of the facilities for which the carrying value exceeds fair market value, the Company would have to write off a portion of the assets or reduce the estimated useful life of the assets which would accelerate depreciation.

9.   Acquisitions, Dispositions, Co-Promotions and Alliances

On December 29, 2008, the Company completed its acquisition of Alpharma Inc. (“Alpharma”). Alpharma is a branded specialty pharmaceutical company with a growing specialty pharmaceutical franchise in the U.S. pain market with its Flector^® Patch (diclofenac epolamine topical patch) 1.3% and a pipeline of new pain medicines led by Embeda^tm, a formulation of long-acting morphine that is designed to provide controlled pain relief and deter certain common methods of misuse and abuse. Alpharma is also a provider of medicated feed additives and water-soluble therapeutics used primarily for poultry, cattle and swine. The Company paid a cash price of $37.00 per share for the outstanding shares of Class A Common Stock, together with the associated preferred stock purchase rights of Alpharma, totaling approximately $1,527,380, $55,527 associated with Alpharma employee stock-based awards (which were paid in the first quarter of 2009), and incurred $29,967 of expenses related to the transaction resulting in a total purchase price of $1,612,874.

Management believes the Company’s acquisition of Alpharma is particularly significant because it strengthens King’s portfolio and development pipeline of pain management products, and increases its capabilities and expertise in this market. The development pipeline provides it with both near-term and long-term revenue opportunities and the animal health business further diversifies its revenue base. As a result, management believes the acquisition of Alpharma creates a stronger foundation for sustainable, long-term growth for the Company.

The accompanying Statements of Operations do not include any activity for Alpharma in 2008, because the Company acquired Alpharma close to the end of 2008 and the Company chose December 31, 2008 as the convenience date for the acquisition.

F-14

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The allocation of the initial purchase price and acquisition costs is as follows:

	Valuation
Current Assets	$	914,083
Current deferred income taxes		27,198
Property, plant and equipment		160,708
Intangible Assets		300,000
Goodwill		321,398
In-Process Research and Development		590,000
Other Long Term Assets		26,680
Current Liabilities		(235,823	)
Convertible Debentures		(385,227	)
Long-term deferred income taxes		(55,076	)
Other Long-Term Liabilities		(51,067	)
	$	1,612,874

The valuation of the intangible assets acquired is as follows:

			Weighted Average
	Valuation		Amortization Period
Flector® Patch	$	130,000		11 years
Animal health intangibles		170,000		19 years
Total	$	300,000

None of the goodwill is expected to be deductible for tax purposes. The goodwill has been allocated to the segments as follows:

Branded prescription pharmaceuticals	$	237,352
Animal health		84,046
Total	$	321,398

The above allocation of the purchase price is not yet finalized as the acquisition was completed close to the end of the year and management is continuing to complete its initial estimate of the valuation of assets and liabilities.

The acquisition was financed with available cash on hand, borrowings under the Senior Secured Revolving Credit Facility of $425,000 and borrowings under the Term Loan of $200,000. For additional information on the borrowings please see Note 13.

As indicated above, $590,000 of the purchase price for Alpharma was allocated to acquired in-process research and development for the Embeda^tm, Oxycodone NT and Hydrocodone NT projects in the amounts of $410,000, $90,000 and $90,000, respectively. The value of the acquired in-process research and development projects was expensed on the date of acquisition, as they had not received regulatory approval and had no alternative future use. The projects were valued through the application of probability-weighted, discounted cash flow approach. The estimated cash flows were projected over periods of 10 to 14 years utilizing a discount rate of 25% to 30%.

The Embeda^tm NDA was submitted to the FDA in June 2008. The success of the project is dependent upon NDA approval by the FDA. The Company currently believes it will obtain approval of the Embeda^tm NDA during 2009.

Oxycodone NT and Hydrocodone NT are long-acting opioids for the treatment of moderate to severe chronic pain that are in the early stages of clinical development. These products are designed to resist certain common methods of misuse and abuse associated with long-acting oxycodone and hydrocodone opioids that are

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

currently available. If the clinical development program is successful, the Company would not expect to commercialize any sooner than 2011. The estimated cost to complete the development of Oxycodone NT and Hydrocodone NT is approximately $35,000 each. The Company believes there is a reasonable probability of completing these projects successfully, however the success of the projects depends on the outcome of the clinical development programs and approval by the FDA.

The following unaudited pro forma summary presents the financial information as if the acquisition of Alpharma had occurred January 1, 2008 for the year ended December 31, 2008 and on January 1, 2007 for the year ended December 31, 2007. These pro forma results have been prepared for comparative purposes and do not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2008 or January 1, 2007, nor are they indicative of future results. The pro forma results for the years ended December 31, 2008 and 2007 include the $590,000 in-process research & development expense noted above.

	Year Ended
	December 31,
	2008			2007
Total revenues	$	2,221,423		$	2,671,685
Net (loss) income		(292,339	)		(471,784	)
Basic (loss) earnings per common share		(1.20	)		(1.94	)
Diluted (loss) earnings per common share		(1.20	)		(1.94	)

In connection with the acquisition of Alpharma, the Company and Alpharma executed a consent order (the “Consent Order”) with the U.S. Federal Trade Commission. The Consent Order required the Company to divest the rights to Alpharma’s branded oral long-acting opioid analgesic drug Kadian^® to Actavis Elizabeth, L.L.C. In accordance with the Consent Order, effective upon the acquisition of Alpharma, on December 29, 2008, the Company divested the Kadian^® product to Actavis. Actavis is entitled to sell Kadian^® as a branded or generic product. Prior to such divestiture, Actavis supplied Kadian^® to Alpharma.

Actavis will pay a purchase price of up to an aggregate of $127,500 in cash based on the achievement of certain Kadian^® quarterly gross profit related milestones for the period beginning January 1, 2009 and ending June 30, 2010. The maximum purchase price payment associated with each calendar quarter is as follows:

	Maximum Purchase
	Price Payment
First Quarter 2009	$	30,000
Second Quarter 2009	$	25,000
Third Quarter 2009	$	25,000
Fourth Quarter 2009	$	20,000
First Quarter 2010	$	20,000
Second Quarter 2010	$	7,500

None of the quarterly payments above, when combined with all prior payments made by Actavis, shall exceed the aggregate amount of gross profits from the sale of Kadian^® in the United States by Actavis and its affiliates for the period beginning on January 1, 2009 and ending on the last day of such calendar quarter. Any quarterly purchase price payment that is not paid by Actavis due to the application of such provision will be carried forward to the next calendar quarter, increasing the maximum quarterly payment in the subsequent quarter. However, the cumulative purchase price payable by Actavis will not exceed the lesser of (a) $127,500 and (b) the gross profits from the sale of Kadian^® in the United States by Actavis and its affiliates for the period from January 1, 2009 through June 30, 2010. As of December 31, 2008 the Company has recorded a receivable of $115,000 million, reflecting the present value of the estimated future purchase price payments from Actavis.

F-16

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2005, the Company entered into a strategic alliance with Pain Therapeutics, Inc. to develop and commercialize Remoxy^® and other opioid painkillers. On June 9, 2008, the Company, together with Pain Therapeutics, Inc., submitted a New Drug Application (“NDA”) for Remoxy^® to the U.S. Food and Drug Administration (“FDA”). Remoxy^® is a unique long-acting formulation of oral oxycodone with a proposed indication for the management of moderate to severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. This formulation uses the Oradur^tm technology which provides a unique physical barrier that is designed to provide controlled pain relief and resist certain common methods used to extract the opioid more rapidly than intended as can occur with currently available products.

The Company has paid the following milestone payments under its alliance with Pain Therapeutics:

•  $15,750 during 2008 as a result of the acceptance by the FDA of the NDA filing for Remoxy^®,

•  $5,100 during 2008 as a result of the acceptance by the FDA of an investigational new drug application for the third opioid painkiller under this alliance, and

•  $5,000 in 2006 as a result of the acceptance of an investigational new drug application for the second opioid painkiller in development under this alliance.

In addition, the Company could make additional milestone payments in the future of up to $125,000 in cash based on the successful clinical and regulatory development of Remoxy^® and other opioid products that are designed to resist certain common methods of misuse and abuse. This includes a $15,000 cash payment upon the approval of Remoxy^® by the FDA.

The Company is responsible for research and development expenses related to its alliance with Pain Therapeutics subject to certain limitations set forth in the agreement. After regulatory approval and commercialization of Remoxy^® or other opioid products developed through this alliance, the Company will pay a royalty of 15% of cumulative net sales up to $1,000,000 and 20% of cumulative net sales over $1,000,000. King is also responsible for the payment of third-party royalty obligations of Pain Therapeutics related to products developed under this collaboration.

In connection with the strategic alliance with Pain Therapeutics, the initial collaboration fee and acquisition costs of $153,711 were classified as in-process research and development. The value of the in-process research and development project was expensed on the date of acquisition as it had not received regulatory approval and had no alternative future use. Pain Therapeutics filed an NDA in the second quarter of 2008. In December 2008, Pain Therapeutics received a Complete Response Letter from the FDA for the Remoxy^® NDA, requiring additional non-clinical information to support approval of Remoxy^®. The Company is working with Pain Therapeutics to complete an assessment of the Complete Response Letter and prepare a written response. The Company, together with PTI, plan to meet with the FDA during the second quarter of 2009 to discuss the response. The Company believes there is a reasonable probability of completing the project successfully. However, the success of the project depends on regulatory approval and the ability to successfully manufacture the product. The in-process research and development is part of the branded prescription pharmaceutical segment.

The Company determined Pain Therapeutics is a variable interest entity, but the Company is not considered to be the primary beneficiary of this entity. Therefore, in accordance with the provisions of FIN No. 46, the Company has not consolidated the financial statements of this entity into the Company’s consolidated financial statements.

In June 2008, the Company and CorePharma LLC (“Core”) entered into a Product Development Agreement to collaborate in the development of new formulations of metaxalone, which the Company currently sells under the brand name Skelaxin^®. Under the agreement, Core and the Company granted each other non-exclusive cross-licenses to certain pre-existing intellectual property. Any intellectual property created as a result of the agreement will belong to the Company, and the Company will grant Core a non-exclusive, royalty-free license to use the

F-17

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

created intellectual property with any product not containing metaxalone. Pursuant to the agreement, the Company made a non-refundable cash payment to Core of $2,500, which was recognized as in-process research and development expense in the branded prescription pharmaceuticals segment in the second quarter of 2008. The success of the project depends on the completion of successful development activities and upon approval by the FDA of any new formulations of metaxalone that are developed as a result of the collaboration. The Company will reimburse Core for the cost to complete the development activities incurred under the agreement, which are expected to be approximately $2,500, subject to a cap. In addition, the Company is required to make milestone payments based on achievement and success of specified development activities and achievement of net sales thresholds relating to new formulations of metaxalone that may result from the collaboration, plus royalty payments based on net sales attributable to these new formulations of metaxalone.

In October 2007, the Company and Acura Pharmaceuticals, Inc. (“Acura”) entered into a License, Development and Commercialization Agreement to develop and commercialize certain opioid analgesic products utilizing Acura’s proprietary Aversion^® Technology in the United States, Canada and Mexico. The agreement provides the Company an exclusive license to Acurox^® Tablets (oxycodone HCl/niacin) and another undisclosed opioid product utilizing Acura’s Aversion^® Technology. Products formulated with the Aversion^® Technology have properties that potentially enable them to deter certain common methods of prescription drug misuse and abuse, including intravenous injection of dissolved tablets, nasal snorting of crushed tablets and intentional swallowing of excessive numbers of tablets. In addition, the agreement provides the Company with an option to license all future opioid analgesic products developed utilizing Acura’s Aversion^® Technology.

In May 2008 and December 2008, the Company exercised its option for a third and fourth immediate-release opioid product under its agreement with Acura. In connection with the exercise of the options, the Company paid non-refundable option exercise fees to Acura of $3,000 for each option. These amounts were expensed as in-process research and development in the branded prescription pharmaceuticals segment during 2008 as these projects had not received regulatory approval and had no alternative future use. The Company believes there is a reasonable probability of completing the projects successfully, however the success of the projects depends on completion of a successful clinical development program and the FDA’s approval to market the product. The estimated cost to complete the projects at the exercise of the applicable option was approximately $16,000 for each project.

In June 2008, the Company, together with Acura, reported positive top-line results from the pivotal Phase III clinical trial evaluating Acurox^® Tablets. Under the agreement, these results triggered a milestone payment to Acura of $5,000 in the second quarter of 2008, which the Company recorded as research and development expense. On December 30, 2008, an NDA for Acurox^® Tablets was submitted to the FDA.

In October 2007, the Company sold its Rochester, Michigan sterile manufacturing facility, some of its legacy products that were manufactured there and the related contract manufacturing business to JHP Pharmaceuticals, LLC (“JHP”) for $91,663, less selling costs of $5,387, resulting in a loss of $46,354. The companies also entered into a manufacturing and supply agreement pursuant to which JHP provides certain fill and finish manufacturing activities with respect to the Company’s hemostatic product, Thrombin-JMI^®. The Company retained its stand-alone Bicillin^® (sterile penicillin products) manufacturing facility, which is also located in Rochester, Michigan.

In August 2004, the Company entered into a Collaborative Development and Marketing Agreement (the “Agreement”) with Palatin Technologies, Inc. (“Palatin”), to jointly develop and, upon obtaining necessary regulatory approvals, commercialize Palatin’s bremelanotide compound for the treatment of male and female sexual dysfunction. Pursuant to the terms of the Agreement, Palatin granted the Company a co-exclusive license with Palatin to bremelanotide in North America and an exclusive right to collaborate in the licensing or sublicensing of bremelanotide with Palatin outside North America.

F-18

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In August 2007, representatives of the FDA communicated serious concerns about the lack of an acceptable benefit/risk ratio to support the progression of the proposed bremelanotide program into Phase III studies for erectile dysfunction (“ED”). After reviewing the data generated in the Phase I and II studies, the FDA questioned the overall efficacy results and the clinical benefit of this product in both the general and diabetic ED populations, and cited blood pressure increases as its greatest safety concern.

In light of the FDA’s comments, and after discussions with Palatin, in September 2007, the Company provided notice to Palatin that the Company was terminating the Agreement. The termination became effective in December 2007.

At December 31, 2008, the Company holds 5,675,461 shares of common stock of Palatin. For additional information, please see Note 15.

In May 2007, the Company entered into a Product Development Agreement with Mutual Pharmaceutical Company (“Mutual”) and United Research Laboratories (“United”) to jointly research and develop one or more improved formulations of metaxalone. Under this agreement, the Company sought Mutual’s expertise in developing improved formulations of metaxalone, including certain improved formulations Mutual developed prior to execution of this agreement and access to Mutual’s and United’s rights in intellectual property pertaining to such formulations. The Company paid $3,100 to Mutual for previously incurred development expenses, which was recorded in the second quarter of 2007 as in-process research and development in the branded prescription pharmaceuticals segment. Development activities under this agreement ceased in December 2007.

In September 2006, the Company entered into a definitive asset purchase agreement and related agreements with Ligand Pharmaceuticals Incorporated (“Ligand”) to acquire rights to Ligand’s product Avinza^® (morphine sulfate long-acting). Avinza^® is a long-acting formulation of morphine and is indicated as a once-daily treatment for moderate to severe pain in patients who require continuous opioid therapy for an extended period of time. The Company completed its acquisition of Avinza^® on February 26, 2007, acquiring all the rights to Avinza^® in the United States, its territories and Canada. Under the terms of the asset purchase agreement the purchase price was $289,732, consisting of $289,332 in cash consideration and $400 for the assumption of a short-term liability. Additionally, the Company incurred acquisition costs of $6,765. Of the cash payments made to Ligand, $15,000 was set aside in an escrow account to fund potential liabilities Ligand could later owe the Company, of which $7,500 of the escrow funds was released to Ligand in each of the third quarter of 2007 and the first quarter of 2008.

As part of the transaction, the Company has agreed to pay Ligand an ongoing royalty and assume payment of Ligand’s royalty obligations to third parties. The royalty the Company pays to Ligand consists of a 15% royalty during the first 20 months after the closing date, until October 2008. Subsequent royalty payments to Ligand are based upon calendar year net sales of Avinza^® as follows:

•  If calendar year net sales are $200,000 or less the royalty payment will be 5% of all net sales.

•  If calendar year net sales are greater than $200,000 then the royalty payment will be 10% of all net sales up to $250,000, plus 15% of net sales greater than $250,000.

In connection with the transaction, in October 2006, the Company entered into a loan agreement with Ligand for the amount of $37,750. The principal amount of the loan was to be used solely for the purpose of paying a specific liability related to Avinza^®. The loan was subject to certain market terms, including a 9.5% interest rate and security interest in the assets that comprise Avinza^® and certain of the proceeds of Ligand’s sale of certain assets. In January 2007, Ligand repaid the principal amount of the loan of $37,750 and accrued interest of $883. Pursuant to the terms of the loan agreement with Ligand, the Company forgave the interest on the loan and repaid Ligand the interest at the time of closing the transaction to acquire Avinza^®. Accordingly, the Company has not recognized interest income on the related note receivable.

F-19

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The allocation of the initial purchase price and acquisition costs is as follows:

Intangible assets	$	285,700
Goodwill		7,997
Inventory		2,800
	$	296,497

At the time of the acquisition, the intangible assets were assigned useful lives of 10.75 years. The acquisition is allocated to the branded prescription pharmaceuticals segment. The goodwill recognized in this transaction is expected to be fully deductible for tax purposes. The Company financed the acquisition using available cash on hand.

In January 2007, the Company obtained an exclusive license to certain hemostatic products owned by Vascular Solutions, Inc. (“Vascular Solutions”), including products which the Company markets as Thrombi-Pad^tm and Thrombi-Gel^®. The license also includes a product the Company expects to market as Thrombi-Paste^tm, which is currently in development. Each of these products includes the Company’s Thrombin-JMI^® topical hemostatic agent product as a component. Vascular Solutions manufactures Thrombi-Pad^tm and Thrombi-Gel^® for the Company and will manufacture Thrombi-Paste^tm. Upon acquisition of the license, the Company made an initial payment to Vascular Solutions of $6,000, a portion of which is refundable in the event certain FDA approvals for some of these products are not obtained. During the second quarter of 2007, the Company made an additional milestone payment of $1,000. The Company could make an additional milestone payment of $1,000.

In March 2006, the Company acquired the exclusive right to market and sell EpiPen^® throughout Canada and other specific assets from Allerex Laboratory LTD (“Allerex”). Under the terms of the agreements, the initial purchase price was $23,924, plus acquisition costs of $682. As an additional component of the purchase price, the Company will pay Allerex an earn-out equal to a percentage of future sales of EpiPen^® in Canada over a fixed period of time. As these additional payments accrue, the Company will increase intangible assets by the amount of the accrual. As of December 31, 2008, the Company has incurred a total of $8,740 for these earn-out payments. The aggregate of these payments will not exceed $13,164.

The allocation of the initial purchase price and acquisition costs is as follows:

Intangible assets	$	23,985
Inventory		618
Fixed assets		3
	$	24,606

At the time of the acquisition, the intangible assets were assigned useful lives of 9.8 years. The assets acquired and liabilities assumed are recorded in the Meridian Auto-Injector segment. The Company financed the acquisition using available cash on hand.

In February 2006, the Company entered into a collaboration with Arrow International Limited and certain of its affiliates, excluding Cobalt Pharmaceuticals, Inc. (collectively, “Arrow”), to commercialize one or more novel formulations of ramipril, the active ingredient in the Company’s Altace^® product. Under a series of agreements, Arrow granted King rights to certain current and future New Drug Applications regarding novel formulations of ramipril and intellectual property, including patent rights and technology licenses relating to these novel formulations.

Upon execution of the agreements, King made an initial payment to Arrow of $35,000. During the fourth quarter of 2006 and the first quarter and second quarters of 2007, the Company made additional payments of $25,000 in each of the three quarters to Arrow.

F-20

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In connection with the agreement with Arrow, the Company recognized the above payments and future payments totaling $110,000 as in-process research and development expense during 2006. This amount was expensed as in-process research and development as the project had not received regulatory approval and had no alternative future use. The in-process research and development project was recorded in the branded prescription pharmaceutical segment. This project included a New Drug Application (“NDA”) filed by Arrow for a tablet formulation of ramipril in January 2006 (the “Ramipril Application”). At the time of the acquisition, the success of the project was dependent on additional development activities and FDA approval. The FDA approved the Ramipril Application on February 27, 2007. Arrow granted the Company an exclusive option to acquire their entire right, title and interest to the Ramipril Application or any future filed amended Ramipril Application for the amount of $5,000. In April 2007, the Company exercised its option and paid $5,000 to Arrow. The Company does not currently anticipate any future revenues associated with its rights to these Ramipril formulations.

In June 2000, the Company entered into a Co-Promotion Agreement with Wyeth to promote Altace^® in the United States and Puerto Rico through October 29, 2008, with possible extensions as outlined in the Co-Promotion Agreement. Under the agreement, Wyeth paid an upfront fee of $75,000 to King, which was classified as a liability and is being amortized over the term of the agreement as amended. In connection with the Co-Promotion Agreement, the Company agreed to pay Wyeth a promotional fee based on annual net sales of Altace^®. In July 2006, the Company entered into an Amended and Restated Co-Promotion Agreement (“Amended Co-Promotion Agreement”) with Wyeth regarding Altace^® which extended the term to December 31, 2010. Effective January 1, 2007, the Company assumed full responsibility for selling and marketing Altace^®. For the full 2006 year, the Wyeth sales force co-promoted the product with King and Wyeth shared in the marketing expenses. Under the Amended Co-Promotion Agreement, the Company will pay or has paid Wyeth a reduced annual fee as follows:

•  For 2006, 15% of Altace^® net sales up to $165,000, 42.5% of Altace^® net sales in excess of $165,000 and less than or equal to $465,000, and 52.5% of Altace^® net sales that are in excess of $465,000 and less than or equal to $585,000.

•  For 2007, 30% of Altace^® net sales, with the fee not to exceed $178,500.

•  For 2008, 22.5% of Altace^® net sales, with the fee not to exceed $134,000.

•  For 2009, 14.2% of Altace^® net sales, with the fee not to exceed $84,500.

•  For 2010, 25% of Altace^® net sales, with the fee not to exceed $5,000.

The annual fee is accrued quarterly based on a percentage of Altace^® net sales at a rate equal to the expected relationship of the expected fee for the year to applicable expected Altace^® net sales for the year.

10.   Intangible Assets and Goodwill

Intangible assets consist primarily of patents, licenses, trademarks and product rights. A summary of the gross carrying amount, accumulated amortization and net book value is as follows:

	2008		2007
Gross carrying amount	$	1,605,910	$	1,339,257
Accumulated amortization		671,691		558,283
Net book value	$	934,219	$	780,974

F-21

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization expense for the years ended December 31, 2008, 2007 and 2006 was $112,446, $132,138 and $105,764, respectively. Estimated annual amortization expense for intangible assets owned by the Company at December 31, 2008 for each of the five succeeding fiscal years is as follows:

Fiscal Year Ended December 31,	Amount
2009	$	152,273
2010		108,462
2011		71,647
2012		71,647
2013		71,647

The table above includes the effect of a Skelaxin^® subsequent event. Please see Note 27.

During 2008, primarily as a result of a decline in end-user demand for Synercid^®, the Company lowered its sales forecast for this product, which decreased the estimated undiscounted future cash flows associated with the Synercid^® intangible assets to a level below their carrying value. Accordingly, the Company recorded an intangible asset impairment charge of $39,630 during 2008 to adjust the carrying value of the Synercid^® intangible assets on the Company’s balance sheet to reflect the estimated fair value of these assets. The Company determined the fair value of the intangible assets associated with Synercid^® based on its estimated discounted future cash flows.

In January 2008, the Company entered into an agreement with Core providing Core with the right to launch an authorized generic version of Skelaxin^® pursuant to a license in December 2012, or earlier under certain conditions. As a result, the Company decreased the estimated remaining useful life of Skelaxin.

In December 2007, the Company’s ‘722 Patent that covered the Company’s Altace^® product was invalidated by the Circuit Court. For additional information please see Note 3. As a result of the invalidation of the ‘722 Patent, the Company undertook an analysis of its potential effect on future net sales of Altace^®. Based upon that analysis, the Company reduced the estimated remaining useful life of this product and forecasted net sales. This decrease in estimated remaining useful life and forecasted net sales reduced the estimated undiscounted future cash flows associated with the Altace^® intangible assets to a level below their carrying value. Accordingly, the Company recorded an intangible asset impairment charge of $146,444 during 2007 to reflect the estimated fair value of these assets. The Company determined the fair value of these assets based on estimated discounted future cash flows.

During the second quarter of 2007, the Company made the decision to no longer pursue the development of a new formulation of Intal^® utilizing hydroflouroalkane as a propellant. As a result, the Company lowered its future sales forecast for this product in the second quarter of 2007 and decreased the estimated remaining useful life of the product. During the fourth quarter of 2006, the Company lowered its future sales forecast for Intal^® and Tilade^® and decreased the estimated remaining useful life of the products as a result of prescriptions not meeting expectations. These decreases reduced the estimated undiscounted future cash flows associated with the Intal^® and Tilade^® intangible assets to a level below their carrying value. Accordingly, the Company recorded intangible asset impairment charges of $29,259 during the second quarter of 2007 and $47,563 during the fourth quarter of 2006 to adjust the carrying value of Intal^® and Tilade^® intangible assets on the Company’s balance sheet to reflect the estimated fair value of these assets. The Company determined the fair value of the intangible assets associated with Intal^® and Tilade^® based on estimated discounted future cash flows.

Altace^®, Intal^® Tilade^® and Synercid^® are included in the Company’s branded prescription pharmaceuticals reporting segment.

As of December 31, 2008, the net intangible assets associated with Synercid^® totals approximately $29,008. The Company believes that these intangible assets are not currently impaired based on estimated

F-22

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

undiscounted cash flows associated with these assets. However, if the Company’s current estimates regarding future cash flows adversely change, the Company may have to reduce the estimated remaining useful life and/or write off a portion or all of these intangible assets.

Goodwill at December 31, 2008 and 2007 is as follows:

	Branded		Animal Health		Meridian
	Segment		Segment		Segment		Total
Goodwill at December 31, 2007	$	20,740	$	—	$	108,410	$	129,150
Acquisition of Alpharma		237,352		84,046		—		321,398
Goodwill at December 31, 2008	$	258,092	$	84,046	$	108,410	$	450,548

11.   Lease Obligations

The Company leases certain office and manufacturing equipment and automobiles under non-cancelable operating leases with terms from one to ten years. Estimated future minimum lease payments as of December 31, 2008 for leases with initial or remaining terms in excess of one year are as follows:

2009	$	14,489
2010		12,536
2011		12,268
2012		12,428
2013		12,546
Thereafter		14,634

Lease expense for the years ended December 31, 2008, 2007 and 2006 was approximately $9,996, $13,182 and $12,610, respectively.

12.   Accrued Expenses

Accrued expenses consist of the following:

	2008		2007
Rebates	$	79,353	$	117,199
Accrued co-promotion fees		3,057		32,720
Product returns		33,471		32,860
Chargebacks		9,965		11,120
Royalties		39,003		41,397
Restructuring		47,878		24,399
Accrued bonuses		41,827		35,969
Alpharma stock compensation		51,201		—
Other		105,733		80,940
	$	411,488	$	376,604

F-23

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13.   Long-Term Debt

Long-term debt consists of the following:

	2008		2007
Convertible senior notes	$	400,000	$	400,000
Senior secured revolving credit facility		425,000		—
Senior secured term facility		192,042		—
Alpharma convertible senior notes		385,227		—
Total long-term debt		1,402,269		400,000
Less current portion		439,047		—
Long-term portion	$	963,222	$	400,000

Convertible Senior Notes

During the first quarter of 2006, the Company issued $400,000 of 11/4% Convertible Senior Notes due April 1, 2026 (“Notes”). The Notes are unsecured obligations and are guaranteed by each of the Company’s U.S. subsidiaries, other than Alpharma and its subsidiaries, on a joint and several basis. The Company expects Alpharma and its U.S. subsidiaries to become guarantors during the first quarter of 2009. The Notes accrue interest at an initial rate of 11/4%. Beginning with the six-month interest period that commences on April 1, 2013, the Company will pay additional interest during any six-month interest period if the average trading price of the Notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of such six-month period equals 120% or more of the principal amount of the Notes. Interest is payable on April 1 and October 1 of each year, beginning October 1, 2006.

On or after April 5, 2013, the Company may redeem for cash some or all of the Notes at any time at a price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest, and liquidated damages, if any, to but excluding the date fixed for redemption. Holders may require the Company to purchase for cash some or all of their Notes on April 1, 2013, April 1, 2016 and April 1, 2021, or upon the occurrence of a fundamental change (such as a change of control or a termination of trading), at 100% of the principal amount of the Notes to be purchased, plus any accrued and unpaid interest, and liquidated damages, if any, to but excluding the purchase date.

Prior to April 1, 2012, the Notes are convertible under the following circumstances:

•  if the price of the Company’s common stock reaches a specified threshold during specified periods,

•  if the Notes have been called for redemption, or

•  if specified corporate transactions or other specified events occur.

The Notes are convertible at any time on and after April 1, 2012, until the close of business on the business day immediately preceding maturity. Subject to certain exceptions, the Company will deliver cash and shares of the Company’s common stock, as follows: (i) an amount in cash equal to the lesser of (a) the principal amount of Notes surrendered for conversion and (b) the product of the conversion rate and the average price of the Company’s common stock (the “conversion value”), and (ii) if the conversion value is greater than the principal amount, a specified amount in cash or shares of the Company’s common stock, at the Company’s election. The initial conversion price is approximately $20.83 per share of common stock. If certain corporate transactions occur on or prior to April 1, 2013, the Company will increase the conversion rate in certain circumstances.

The Company has reserved 23,732,724 shares of common stock in the event the Notes are converted into shares of the Company’s common stock.

F-24

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In connection with the issuance of the Notes, the Company incurred approximately $10,680 of deferred financing costs that are being amortized over seven years.

Senior Secured Revolving Credit Facility

On April 23, 2002, the Company established a $400,000 five-year Senior Secured Revolving Credit Facility which was scheduled to mature in April 2007. On April 19, 2007, this facility was terminated and replaced with a new $475,000 five-year Senior Secured Revolving Credit Facility, as amended on December 5, 2008 (the “Revolving Credit Facility”). The Revolving Credit Facility matures in April 2012 or on September 30, 2011 if the Convertible Senior Notes have not been refinanced. In connection with the Company’s acquisition of Alpharma on December 29, 2008, the Company borrowed $425,000 in principal under the Revolving Credit Facility. The Revolving Credit Facility requires the Company to pledge as collateral 100% of the equity of the Company’s U.S. subsidiaries and 65% of the equity of any material foreign subsidiaries. The Company’s obligations under this facility are unconditionally guaranteed on a senior basis by all of King’s U.S. subsidiaries.

Under the Revolving Credit Facility, the Company is required to make prepayments equal to 50% of the Company’s annual excess cash flows (as defined in the related credit agreement), which can be reduced to 25% upon the occurrence of certain events. In addition, the Company is required to make prepayments upon the occurrence of certain events, such as an asset sale, the issuance of debt or equity or the liquidation of auction rate securities. These mandatory prepayments will be allocated among the Revolving Credit Facility and the Term Facility described below in accordance with their credit agreements and will permanently reduce the commitments under the Revolving Credit Facility. However, commitments under the Revolving Credit Facility, would not be reduced in any event below $150.0 million.

In addition, under the terms of the Revolving Credit Facility, the credit commitments will be automatically and permanently reduced, on a quarterly basis, to the amounts set forth below:

December 31, 2009	$	403,750
December 31, 2010	$	308,750
December 31, 2011	$	213,750
March 31, 2012	$	190,000

The Company has the right to prepay, without penalty (other than customary breakage costs), any borrowing under the Revolving Credit Facility.

The Company’s borrowings under the Revolving Credit Facility bear interest at annual rates that, at the Company’s option, will be either:

•  a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Credit Suisse and (b) the federal funds effective rate plus 0.5% and (ii) an applicable percentage of 4.0%; or

•  an adjusted LIBO rate generally defined as the sum of (i) the product of (a) LIBOR (by reference to the British Banking Association Interest Settlement Rates) and (b) a fraction the numerator of which is one and the denominator of which is the number one minus certain maximum statutory reserves for eurocurrency liabilities and (ii) an applicable percentage of 5.0%.

Interest on the Company’s borrowings are payable quarterly in arrears for base rate loans and at the end of each interest rate period (but not less often than quarterly) for LIBO rate loans. The Company is required to pay an unused commitment fee on the difference between committed amounts and amounts actually borrowed under the Revolving Credit Facility equal to 0.5% per annum. The Company is required to pay a letter of credit participation fee based upon the aggregate face amount of outstanding letters of credit equal to 5.0% per annum.

F-25

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Revolving Credit Facility requires the Company to meet certain financial tests, including, without limitation:

•  maintenance of maximum funded debt to consolidated EBITDA ratios that range from 1.50 to 1 to 3.25 to 1 (depending on dates and the occurrence of certain events relating to certain patents); and

•  maintenance of minimum consolidated EBITDA to interest expense ratios that range from 3.75 to 1 to 4.00 to 1 (depending on dates and the occurrence of certain events relating to certain patents).

In addition, the Revolving Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, sale and leaseback transactions, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments, redemptions and repurchases of other indebtedness, capital expenditures and other matters customarily restricted in such agreements. The Revolving Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, certain impairments to the guarantees, and change in control.

The Revolving Credit Facility requires the Company to maintain hedging agreements that will fix the interest rates on 50% of the Company’s outstanding long term debt beginning 90 days after the amendment to the facility for a period of two years.

The remaining undrawn committed amount under the Revolving Credit Facility after giving effect to the borrowing described above, and after giving effect to outstanding letters of credit totaling approximately $12,105, is approximately $37,895.

In connection with the borrowings, the Company incurred approximately $21,620 of deferred financing costs that are being amortized ratably from the date of the borrowing through the maturity date based on the automatic commitment reductions described above.

Senior Secured Term Facility

On December 29, 2008, the Company entered into a $200,000 term loan credit agreement, comprised of a four-year senior secured loan facility (the “Term Facility”) with a maturity date of December 28, 2012. The Company borrowed $200,000 under the Term Facility and received proceeds of $192,000, net of the discount at issuance. The Term Facility requires the Company to pledge as collateral 100% of the equity of the Company’s U.S. subsidiaries and 65% of the equity of any material foreign subsidiaries. The Company’s obligations under this facility are unconditionally guaranteed on a senior basis by all of King’s U.S. subsidiaries.

Under the terms of the Term Facility, the Company is required to repay the borrowings in equal quarterly payments that total the following annual amounts:

2009	$	30,000
2010		40,000
2011		40,000
2012		90,000

The Company has the right to prepay, without penalty (other than customary breakage costs), any borrowing under the Term Facility.

Under the Term Facility, the Company is required to make prepayments equal to 50% of the Company’s annual excess cash flows (as defined in the related credit agreement), which can be reduced to 25% upon the

F-26

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

occurrence of certain events. In addition, the Company is required to make prepayments upon the occurrence of certain events, such as an asset sale, the issuance of debt or equity or the liquidation of auction rate securities. These mandatory prepayments will be allocated among the Term Facility and the Revolving Credit Facility in accordance with these agreements and will reduce on a pro-rata basis any remaining scheduled payments.

The Company’s borrowings under the Term Facility bear interest at annual rates that, at the Company’s option, will be either:

•  5.00% plus the Adjusted LIBO Rate or

•  4.00% plus the Alternate Base Rate.

The “Alternate Base Rate” is the highest of (x) the federal funds rate plus 0.50%, (y) the prime or base commercial lending rate, and (z) the Adjusted LIBO Rate for a one-month interest period plus 1.00%. The Adjusted LIBO Rate is the higher of (x) 3.00% and (y) the rate per annum, determined by the administrative agent under the Term Facility, in accordance with its customary procedures, at which dollar deposits for applicable periods are offered to major banks in the London interbank market, adjusted by the reserve percentage prescribed by governmental authorities as determined by such administrative agent.

The Term Facility requires the Company to meet certain financial tests, including, without limitation:

•  maintenance of maximum funded debt to consolidated EBITDA ratios that range from 1.50 to 1 to 3.25 to 1 (depending on dates and the occurrence of certain events relating to certain patents); and

•  maintenance of minimum consolidated EBITDA to interest expense ratios that range from 3.75 to 1 to 4.00 to 1 (depending on dates and the occurrence of certain events relating to certain patents).

In addition, the Term Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, sale and leaseback transactions, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments, redemptions and repurchases of other indebtedness, capital expenditures and other matters customarily restricted in such agreements. The Term Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, certain impairments to the guarantees, and change in control.

The Term Facility requires the Company to maintain hedging agreements that will fix the interest rates on 50% of the Company’s outstanding long term debt beginning 90 days after the borrowing under the facility for a period of two years.

In connection with the borrowings, the Company incurred approximately $8,456 of deferred financing costs that are being amortized ratably from the date of the borrowing through the maturity date based on the repayment schedule described above.

Alpharma Convertible Senior Notes

At the time of the acquisition of Alpharma by the Company, Alpharma had $300,000 of Convertible Senior Notes outstanding (“Alpharma Notes”). The Alpharma Notes were convertible into shares of Alpharma’s Class A common stock at an initial conversion rate of 30.6725 Alpharma common shares per $1,000 principal amount. The conversion rate of the Alpharma Notes was subject to adjustment upon the direct or indirect sale of all or substantially all of Alpharma’s assets or more than 50% of the outstanding shares of the Alpharma common stock to a third party (a “Fundamental Change”). In the event of a Fundamental Change, the Alpharma Notes included a make-whole provision that adjusted the conversion rate by a

F-27

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

predetermined number of additional shares of Alpharma’s common stock based on (1) the effective date of the fundamental change; and (2) Alpharma’s common stock market price as of the effective date. The acquisition of Alpharma by the Company was a Fundamental Change. As a result, any Alpharma Notes converted in connection with the acquisition of Alpharma were entitled to be converted at an increased rate equal to the value of 34.7053 Alpharma common shares, at the acquisition price of $37 per share, per $1,000 principal amount of Alpharma Notes at a date no later than 35 trading days after the occurrence of the Fundamental Change. Thus the fair value of the Alpharma Notes at the time of the acquisition was $385,227.

As of December 31, 2008, the Company had $385,227 of Alpharma Notes included in current portion of long-term debt in the accompanying financial statements. See Note 27 for information about the subsequent redemption of the Alpharma Notes.

14.   Other Liabilities

Other liabilities consist of the following:

	2008		2007
Income taxes payable	$	56,375	$	42,353
Restructuring		21,124		—
Pension and postretirement benefits		11,839		—
Other		20,684		20,627
	$	110,022	$	62,980

15.   Fair Value Measurements

Cash and Cash Equivalents.  The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash and cash equivalents totaled $940,212 as of December 31, 2008, with approximately $242,800 located outside the U.S. Cash and cash equivalents include institutional money market funds and bank time deposits. As of December 31, 2008, the Company’s cash equivalents consisted of money market funds and $58,158 in time deposits. As of December 31, 2007, the Company’s cash equivalents consisted solely of money market funds. There were no cumulative unrealized holding gains or losses associated with these money market funds as of December 31, 2008 and December 31, 2007.

Derivatives.  As a result of the acquisition of Alpharma, at December 31, 2008, the Company had forward foreign exchange contracts outstanding with a notional amount of approximately $291,218. These contracts called for the exchange of Scandinavian and other European currencies and in some cases the U.S. Dollar to meet commitments in or sell cash flows generated in non-functional currencies. All outstanding contracts will expire in the first quarter of 2009 and the unrealized gains and losses are not material. Counterparties to these derivative agreements are major financial institutions. Management believes the risk of incurring losses related to credit risk is remote.

Marketable Securities.  As of December 31, 2008 and December 31, 2007, the Company’s investment in marketable securities consisted solely of Palatin Technologies, Inc. common stock with a cost basis of $511 and $1,135, respectively. During 2007, the Company determined that an other-than-temporary impairment had occurred on this investment and recorded a charge of $11,107. The Company also recorded an other-than-temporary impairment of $484 during 2007 on its investment in warrants to purchase common stock. All of the Company’s warrants to purchase Palatin common stock have now expired. There were no cumulative unrealized holding gains or losses in these investments as of December 31, 2008 and December 31, 2007.

F-28

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Investments in Debt Securities.  Tax-exempt auction rate securities are long-term variable rate bonds tied to short-term interest rates that are intended to reset through an auction process generally every seven, 28 or 35 days. The Company classifies auction rate securities as available-for-sale at the time of purchase in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Temporary gains or losses are included in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Other-than-temporary gains or losses are included in income (expense) on the Consolidated Statement of Operations.

As of December 31, 2008 and December 31, 2007, the par value of the Company’s investments in debt securities was $417,075 and $1,344,980, respectively, and consisted solely of tax-exempt auction rate securities associated with municipal bonds and student loans. The Company has not invested in any mortgage-backed securities or any securities backed by corporate debt obligations. The Company’s investment policy requires it to maintain an investment portfolio with a high credit quality. Accordingly, the Company’s investments in debt securities were limited to issues which were rated AA or higher at the time of purchase.

On February 11, 2008, the Company began to experience auction failures with respect to its investments in auction rate securities. In the event of an auction failure, the interest rate on the security is reset according to the contractual terms in the underlying indenture. The funds associated with failed auctions will not be accessible until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or a buyer outside the auction process emerges.

Although the Company has realized no loss of principal with respect to its investments in debt securities, as of December 31, 2008, there were cumulative unrealized holding losses of $56,786 associated with these investments. The Company has recorded $45,311 of the unrealized holding losses in accumulated other comprehensive income on the Consolidated Balance Sheets, as the Company believes the decline is temporary and it is probable that the par amount of these auction rate securities will be collectible under their contractual terms. During the fourth quarter of 2008 the Company accepted an offer from UBS Financial Services, Inc. (“UBS”) providing the Company the right to sell certain auction rate securities with a par value of $40,650 to UBS during the period from June 30, 2010 to July 2, 2012 at par value. The Company has elected to account for this right at fair value in accordance with SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The value of the right to sell certain auction rate securities to UBS was estimated considering the present value of future cash flows, the fair value of the auction rate security and counterparty risk. The right to sell the auction rate securities to UBS at par was valued at $4,024 and has been reflected as an unrealized gain in other income (expense) in the accompanying Consolidated Statement of Operations. In addition, the Company transferred the classification of the auction rate securities that are included in this right from available-for sale securities to trading securities and therefore recognized the unrealized losses related to these securities of $4,643 in other income (expense) on the accompanying Consolidated Statement of Operations.

In addition, the Company has recognized unrealized losses of $6,832 in other income (expense) on the accompanying Consolidated Statement of Operations for a municipal bond for which the holding losses were determined to be other than temporary. There were no cumulative unrealized holding gains or losses as of December 31, 2007.

As of December 31, 2008, the Company has classified $6,441 of auction rate securities as current assets and $353,848 as long-term assets.

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which provides a framework for measuring fair value under Generally Accepted Accounting Principles and expands disclosures about fair value measurements. In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which provides a one-year deferral on the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

least annually. Therefore, the Company has adopted the provisions of SFAS No. 157 with respect to financial assets and financial liabilities only. The Company is in the process of evaluating the effect of SFAS No. 157 as it relates to its non-financial assets and non-financial liabilities. The Company also adopted SFAS No. 159 on January 1, 2008. SFAS No. 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.

The following table summarizes the Company’s assets which are measured at fair value on a recurring basis:

			Fair Value Measurements at December 31, 2008 Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
Description	2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Money Market Funds	$	833,653	$	833,653	$	—	$	—
Marketable Securities		511		511		—		—
Investments in Debt Securities		360,289		—		2,400		357,889
Right to Sell Debt Securities		4,024		—		—		4,024
Total assets	$	1,198,477	$	834,164	$	2,400	$	361,913
Liabilities:
Forward foreign exchange contracts	$	2,582	$	—	$	2,582	$	—

The fair value of marketable securities within the Level 1 classification is based on the quoted price for identical securities in an active market as of December 31, 2008.

The fair value of investments in debt securities within the Level 2 classification is at par based on public call notices from the issuer of the security.

The fair value of investments in debt securities within the Level 3 classification is based on a trinomial discount model. This model considers the probability of three potential occurrences for each auction event through the maturity date of the security. The three potential outcomes for each auction are (i) successful auction/early redemption, (ii) failed auction and (iii) issuer default. Inputs in determining the probabilities of the potential outcomes include, but are not limited to, the security’s collateral, credit rating, insurance, issuer’s financial standing, contractual restrictions on disposition and the liquidity in the market. The fair value of each security is determined by summing the present value of the probability-weighted future principal and interest payments determined by the model. As of December 31, 2008, the Company assumed a weighted average discount rate of 5.5% and an expected term of approximately 3 to 5 years. The discount rate was determined as the loss-adjusted required rate of return using public information such as spreads on near-risk free to risk free assets. The expected term is based on the Company’s estimate of future liquidity. Transfers out of Level 3 classification occur only when public call notices have been announced by the issuer prior to the date of the valuation.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurements Using
	Significant Unobservable
	Inputs (Level 3)
	Investments in Debt
	Securities
Beginning balance, December 31, 2007	$	—
Transfers in and/or out of Level 3		774,099
Total gains or losses (realized/unrealized)
Included in earnings		(11,475	)
Included in other comprehensive income (loss)		(45,311	)
Settlements		(355,400	)
Ending balance, December 31, 2008	$	361,913

16.   Pension Plans and Postretirement Benefits

On December 29, 2008, the Company completed its acquisition of Alpharma (see Note 9). The Company maintains two qualified noncontributory, defined benefit pension plans covering its U.S. (domestic) employees at its Alpharma subsidiary: the Alpharma Inc. Pension Plan, which was frozen effective December 31, 2006, and the previously frozen Faulding Inc. Pension Plan. The benefits payable from these plans are based on years of service and the employee’s highest consecutive five years compensation during the last ten years of service. The Company’s funding policy is to contribute annually an amount that can be deducted for federal income tax purposes. Ideally, the Plan assets will approximate the accumulated benefit obligation (“ABO”). The plan assets are held by two custodians and managed by two investment managers. Plan assets are invested in equities, government securities and bonds. The asset allocation for the Alpharma Inc. Pension Plan was 29% equities and 71% debt securities at the end of 2008.

The Company also has an unfunded postretirement medical and nominal life insurance plan (“postretirement benefits”) covering certain domestic employees who were eligible as of January 1, 1993. The plan has not been extended to any additional employees. Retired eligible employees are required to make premium contributions for coverage as if they were active employees.

The Company has an unfunded benefit for selected executives (“Supplemental Pension Plan”) that provides for the payment of additional benefits upon termination of employment or death.

The Company uses a measurement date of December 31 for its pension plans and other postretirement plans. For both the pension and other postretirement benefit plans, the discount rate is evaluated on the measurement date and modified to reflect the prevailing market rate of a portfolio of high-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Funded Status

The funded status at December 31, 2008, and the related amounts recognized on the Consolidated Balance Sheet are as follows:

				Postretirement
	Pension Benefits			Benefits
Funded status, end of year:
Fair value of plan assets	$	45,787		$	—
Benefit obligations		(51,081	)		(6,816	)
Funded status	$	(5,294	)	$	(6,816	)
Amounts recognized in the Consolidated Balance Sheet consist of:
Current liability	$	(12	)	$	(259	)
Noncurrent liability		(5,282	)		(6,557	)
Liability recognized	$	(5,294	)	$	(6,816	)

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets at December 31, 2008 were as follows:

	December 31,
	2008
Projected Benefit Obligation in Excess of Plan Assets
Projected benefit obligation, end of year	$	(51,081	)
Fair value of plan assets, end of year		45,787

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2008 were as follows:

	December 31,
	2008
Accumulated Benefit Obligation in Excess of Plan Assets
Projected benefit obligation, end of year	$	(51,081	)
Accumulated benefit obligation, end of year		(51,081	)
Fair value of plan assets, end of year		45,787

A one-percentage-point change in the assumed health care cost trend rate would have had the following effect on the accumulated postretirement benefit obligation:

	One-Percentage-Point
	Increase		Decrease
Accumulated postretirement benefit obligation change	$	923	$	(772	)

Expected Cash Flows

	Pension		Postretirement
	Benefits		Benefits
Expected employer contributions in 2009	$	12	$	259

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Expected Benefit Payments

	Pension		Postretirement
	Benefits		Benefits
2009	$	1,143	$	259
2010		1,268		279
2011		1,470		300
2012		1,730		322
2013		1,949		380
2014 - 2018		13,115		2,309

	Pension			Postretirement
	Benefit			Benefit
	Obligation			Obligation
	2008			2008
Weighted-average assumptions used to determine benefit obligations as of December 31:
Discount Rate		6.00	%		6.00	%
Rate of compensation increase		N/A			N/A
Health care cost trend rate
Initial Rate		N/A			8	%
Ultimate Rate		N/A			5	%
Number of years to ultimate rate		N/A			6

17.   Income Taxes

The net income tax expense from continuing operations is summarized as follows:

	2008		2007			2006
Current
Federal	$	83,902	$	144,655		$	169,130
State		8,369		5,453			4,575
Total current	$	92,271	$	150,108		$	173,705
Deferred
Federal	$	37,578	$	(83,690	)	$	(36,281	)
State		1,510		1,182			(1,694	)
Total deferred	$	39,088	$	(82,508	)	$	(37,975	)
Total expense	$	131,359	$	67,600		$	135,730

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the difference between the federal statutory tax rate and the effective income tax rate as a percentage of income from continuing operations before income taxes is as follows:

	2008			2007			2006
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		(4.9	)		2.7			0.7
Research and development in process upon acquisition		(102.4	)		—			—
Charitable donations		—			—			(0.9	)
Domestic Manufacturing Deduction		2.4			(3.7	)		(1.2	)
Tax-exempt interest income		4.3			(5.4	)		(2.0	)
Other		0.5			(1.6	)		0.4
Effective tax rate		(65.1	)%		27.0	%		32.0	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

	2008			2007
Accrued expenses and reserves	$	93,934		$	98,483
Net operating losses		300,057			1,824
Intangible assets		295,400			353,250
Charitable contribution carryover		—			3,576
Other		41,843			31,812
Total deferred tax assets		731,234			488,945
Valuation allowance		(276,416	)		(9,094	)
Net deferred tax assets		454,818			479,851
Property, plant and equipment		(57,530	)		(20,069	)
Other		(4,053	)		(15,944	)
Total deferred tax liabilities		(61,583	)		(36,013	)
Net deferred tax asset	$	393,235		$	443,838

The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recorded a $1,523 increase to the net liability for unrecognized tax positions, which was recorded as a reduction to the opening balance of retained earnings as of January 1, 2007. The total gross liability under FIN 48, as of January 1, 2007, was $44,291, including interest and penalties of $4,842 and $2,702, respectively.

As of December 31, 2008, the total gross liability under FIN 48 was $61,866. The total amount of unrecognized tax benefits excluding the impact of penalties and interest as of December 31, 2008 was $37,336, all of which would benefit the effective tax rate if recognized. In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. During the year ended December 31, 2008, the Company recognized a reduction of approximately $334 in interest and penalties. The Company’s Consolidated Balance Sheet as of December 31, 2008 includes interest and penalties of $8,062 and $3,858, respectively.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Liability For
	Unrecognized
	Tax Benefits
Balance at January 1, 2007	$	36,748
Additions based on tax positions of the current year		5,279
Additions for tax provisions of prior years		51
Reduction for expiration of applicable Statute of Limitations		(7,568	)
Balance at December 31, 2007	$	34,510
Additions based on tax positions of the current year		4,017
Additions for tax positions of prior years		4,101
Reduction for expiration of applicable Statute of Limitations		(4,195	)
Alpharma acquisition		11,514
Balance at December 31, 2008	$	49,947

Included in the balance of gross unrecognized tax benefits at December 31, 2008 was $7,484 related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. This amount is comprised primarily of items related to expiring statutes.

As of December 31, 2008, the Company is subject to U.S. Federal income tax examinations for the tax years 2005 through 2007, and to non-U.S. income tax examinations for the tax years of 2002 through 2007. In addition, the Company is subject to state and local income tax examinations for the tax years 2002 through 2007.

The Company has $111,625 of federal net operating losses and $9,746 of tax credit carryforwards which expire between 2021 and 2028. These carryforwards are subject to limitations under Internal Revenue Code Section 382. The Company has foreign net operating losses of $825,744 which expire from 2009 through an indefinite period. The Company also has state net operating loss carryforwards of $378,302 which will expire between 2009 and 2028. A valuation allowance has been provided for the loss carryforwards for which it is more likely than not that the related deferred tax assets will not be fully realized. Additionally, a valuation allowance has been provided against certain state deferred tax assets where it is more likely than not that the asset will not be fully realized.

As of December 31, 2008, the Company had an aggregate of $218,500 of unremitted earnings of foreign subsidiaries that are intended to be permanently reinvested for continued use in foreign operations and that, if distributed, would result in taxes of approximately $62,775.

18.   Benefit Plans

The Company sponsors a defined contribution employee retirement savings 401(k) plan that covers all employees over 21 years of age. As a result of the acquisition of Alpharma on December 29, 2008, the employees of Alpharma have been enrolled in the Company’s plan. The plan allows for employees’ contributions, which are matched by the Company up to a specific amount under provisions of the plan. Company contributions during the years ended December 31, 2008, 2007 and 2006 were $6,542, $7,806 and $5,904, respectively. The plan also provides for discretionary profit-sharing contributions by the Company. There were no discretionary profit-sharing contributions during the years ended December 31, 2008, 2007 and 2006.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19.   Commitments and Contingencies

Intellectual Property Matters

Altace^®

Lupin Ltd. (“Lupin”) filed an ANDA with the FDA seeking permission to market a generic version of Altace^®. In addition to its Abbreviated New Drug Application (“ANDA”), Lupin filed a Paragraph IV certification challenging the validity and infringement of the ‘722 patent, a composition of matter patent covering Altace^®, and seeking to market its generic version of Altace^® before expiration of the ‘722 patent. The companies litigated the matter and the court ultimately invalidated the Company’s ‘722 patent. On June 9, 2008, Lupin received approval from the FDA to market its generic ramipril product.

The Company was previously involved in patent infringement litigation with Cobalt Pharmaceuticals, Inc. (“Cobalt”), a generic drug manufacturer located in Mississauga, Ontario, Canada, regarding an ANDA it filed with the FDA seeking permission to market a generic version of Altace^®. The parties submitted a joint stipulation of dismissal on April 4, 2006 and the Court granted dismissal. Following the court’s decision in the Company’s litigation with Lupin, Cobalt launched a generic substitute for Altace^® in December 2007. A number of other competitors launched generic substitutes for Altace^® in June 2008.

The Company has received civil investigative demands (“CIDs”) for information from the FTC. The CIDs required the Company to provide information related to the Company’s collaboration with Arrow International Limited (“Arrow”) to develop novel formulations of Altace^®, the dismissal without prejudice of the Company’s patent infringement litigation against Cobalt under the Hatch-Waxman Act of 1984 and other information. Arrow and Cobalt are affiliates of one another. The Company is cooperating with the FTC in this investigation.

Skelaxin^®

Eon Labs, Inc. (“Eon Labs”), CorePharma, LLC (“Core”) and Mutual Pharmaceutical Co., Inc. (“Mutual”) each filed an ANDA with the FDA seeking permission to market a generic version of Skelaxin^® 400 mg tablets. Additionally, Eon Labs’ ANDA seeks permission to market a generic version of Skelaxin^® 800 mg tablets. United States Patent Nos. 6,407,128 (the “128 patent”) and 6,683,102 (the “102 patent”), two method-of-use patents relating to Skelaxin^®, are listed in the FDA’s Orange Book and do not expire until December 3, 2021. Eon Labs and Core each filed Paragraph IV certifications against the ‘128 and ‘102 patents alleging noninfringement, invalidity and unenforceability of those patents. Mutual has filed a Paragraph IV certification against the ‘102 patent alleging noninfringement and invalidity of that patent. A patent infringement suit was filed against Eon Labs on January 2, 2003 in the U.S. District Court for the Eastern District of New York; against Core on March 7, 2003 in the U.S. District Court for the District of New Jersey (subsequently transferred to the U.S. District Court for the Eastern District of New York); and against Mutual on March 12, 2004 in the U.S. District Court for the Eastern District of Pennsylvania concerning their proposed 400 mg products. Additionally, the Company filed a separate suit against Eon Labs on December 17, 2004 in the U.S. District Court for the Eastern District of New York, concerning its proposed generic version of the 800 mg Skelaxin^® product. On May 17, 2006, the U.S. District Court for the Eastern District of Pennsylvania placed the Mutual case on the Civil Suspense Calendar pending the outcome of the FDA activity described below. On June 16, 2006, the U.S. District Court for the Eastern District of New York consolidated the Eon Labs cases with the Core case. In January 2008, the Company entered into an agreement with CorePharma providing, among other things, Core with the right to launch an authorized generic version of Skelaxin^® pursuant to a license in December 2012 or earlier under certain conditions. On January 8, 2008, the Company and Core submitted a joint stipulation of dismissal without prejudice. On January 15, 2008, the Court entered an order dismissing the case without prejudice.

Pursuant to the Hatch-Waxman Act, the filing of the suits against Eon Labs provided the Company with an automatic stay of FDA approval of Eon Labs’ ANDA for its proposed 400 mg and 800 mg products for

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

30 months (unless the patents are held invalid, unenforceable or not infringed) from no earlier than November 18, 2002 and November 3, 2004, respectively. The 30-month stay of FDA approval for Eon Labs’ ANDA for its proposed 400 mg product expired in May 2005 and Eon Labs subsequently withdrew its 400 mg ANDA in September 2006. The 30-month stay of FDA approval for Eon Labs’ 800 mg product was tolled by the Court on January 10, 2005 and has not expired. The Court lifted the tolling of the 30-month stay as of April 30, 2007. Although the Court has reserved judgment on the length of the tolling period, the stay should not expire until early August 2009 unless the Court rules otherwise. Eon Labs asked for a determination of the length of the tolling period in a March 14, 2008 letter to the Court. The Court declined to make any determination. On April 30, 2007, Eon Labs’ 400 mg case was dismissed without prejudice, although Eon Labs’ claim for fees and expenses was severed and consolidated with Eon Labs’ 800 mg case. On August 27, 2007, Eon Labs served a motion for summary judgment on the issue of infringement. The Court granted the Company discovery for purposes of responding to Eon’s motion until March 14, 2008 and set a briefing schedule. On March 7, 2008, the Company filed a letter with the Court regarding Eon Labs’ inability to adhere to the discovery schedule and the Court took Eon Labs’ motion for summary judgment on the issue of infringement off the calendar. Subsequently, Eon Labs filed an amended motion for summary judgment on the issue of infringement on April 4, 2008. Eon Labs also filed a motion for summary judgment on the issue of validity on April 16, 2008. On June 6, 2008, the Company responded to Eon Labs’ motion for summary judgment on the issue of validity. On May 8, 2008, Eon Labs filed amended pleadings. On May 22, 2008, the Company moved to dismiss certain defenses and counterclaims. On January 20, 2009 the Court issued an Order ruling invalid the ‘128 and ‘102 patents. The Order was issued without the benefit of a hearing in response to Eon Labs’ motion for summary judgment. The Company plans to appeal, upon the entry of an appropriate judgment, and intends to vigorously defend its interests.

On December 5, 2008, the Company, along with co-plaintiff Pharmaceutical IP Holding, Inc. (“PIH”) initiated suit in the U.S. District Court of New Jersey against Sandoz Inc. (“Sandoz”) for infringement of U.S. Patent No. 7,122,566 (the “566 patent”). The ‘566 patent is a method-of-use patent relating to Skelaxin^® listed in the FDA’s Orange Book; it expires on February 6, 2026. The ‘566 patent is owned by PIH and licensed to the Company. The Company and PIH sued Sandoz, alleging that Eon Labs’ submission of its ANDA seeking approval to sell a generic version of a 800 mg Skelaxin^® tablet prior to the expiration of the ‘566 patent constitutes infringement of the patent. Sandoz, who acquired Eon Labs, is the named owner of Eon Labs’ ANDA and filed a paragraph IV certification challenging the validity and alleging non-infringement of the ‘566 patent. On January 13, 2009, Sandoz answered the complaint and filed counterclaims of invalidity and non-infringement. The Company filed a reply on February 5, 2009.

On March 9, 2004, the Company received a copy of a letter from the FDA to all ANDA applicants for Skelaxin^® stating that the use listed in the FDA’s Orange Book for the ‘128 patent may be deleted from the ANDA applicants’ product labeling. The Company believes that this decision is arbitrary, capricious and inconsistent with the FDA’s previous position on this issue. The Company filed a Citizen Petition on March 18, 2004 (supplemented on April 15, 2004 and on July 21, 2004), requesting the FDA to rescind that letter, require generic applicants to submit Paragraph IV certifications for the ‘128 patent and prohibit the removal of information corresponding to the use listed in the Orange Book. The Company concurrently filed a petition for stay of action requesting the FDA to stay approval of any generic Skelaxin^® products until the FDA has fully evaluated the Company’s Citizen Petition.

On March 12, 2004, the FDA sent a letter to the Company explaining that the Company’s proposed labeling revision for Skelaxin^®, which includes references to additional clinical studies relating to food, age and gender effects, was approvable and only required certain formatting changes. On April 5, 2004, the Company submitted amended labeling text that incorporated those changes. On April 5, 2004, Mutual filed a petition for stay of action requesting the FDA to stay approval of the Company’s proposed labeling revision until the FDA has fully evaluated and ruled upon the Company’s Citizen Petition, as well as all comments submitted in response to that petition. The Company, CorePharma and Mutual have filed responses and

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

supplements to their pending Citizen Petitions and responses. On December 8, 2005, Mutual filed another supplement with the FDA in which it withdrew its prior petition for stay, supplement and opposition to the Company’s Citizen Petition. On November 24, 2006, the FDA approved the revision to the Skelaxin^® labeling. On February 13, 2007, the Company filed another supplement to the Company’s Citizen Petition to reflect FDA approval of the revision to the Skelaxin^® labeling. On May 2, 2007, Mutual filed comments in connection with the Company’s supplemental submission. These issues are pending. On July 27, 2007 and January 24, 2008, Mutual filed two other Citizen Petitions in which it seeks a determination that Skelaxin^® labeling should be revised to reflect the data provided in its earlier submissions. These petitions were denied on July 18, 2008.

Net sales of Skelaxin^® were $446,243 in 2008. As of December 31, 2008, the Company had net intangible assets related to Skelaxin^® of $116,979. If a generic version of Skelaxin^® enters the market, the Company may have to write off a portion or all of these intangible assets, and the Company’s business, financial condition, results of operations and cash flows could be materially adversely affected. See Note 27 for information regarding a Skelaxin^® subsequent event.

Avinza^®

Actavis, Inc. (“Actavis”) filed an ANDA with the FDA, seeking permission to market a generic version of Avinza^®. U.S. Patent No. 6,066,339 (the “339 patent”) is a formulation patent relating to Avinza^® that is listed in the Orange Book and expires on November 25, 2017. Actavis filed a Paragraph IV certification challenging the validity and alleging non-infringement of the ‘339 patent, and the Company and Elan Pharma International LTD (“EPI”), the owner of the ‘339 patent, filed suit on October 18, 2007 in the United States District Court for the District of New Jersey to defend the rights under the patent. Pursuant to the Hatch-Waxman Act, the filing of the lawsuit against Actavis provided the Company with an automatic stay of FDA approval of Actavis’ ANDA for up to 30 months (unless the patent is held invalid, unenforceable or not infringed) from no earlier than September 4, 2007. On November 18, 2007, Actavis answered the complaint and filed counterclaims of non-infringement and invalidity. The Company and EPI filed a reply on December 7, 2007. The initial scheduling conference was held on March 11, 2008, and fact discovery has formally begun.

The Company intends to vigorously defend its rights under the ‘339 patent to the full extent of the law. Net sales of Avinza^® were $135,452 in 2008. As of December 31, 2008, the Company had net intangible assets related to Avinza^® of $236,767. If a generic form of Avinza^® enters the market, the Company may have to write off a portion or all of these intangible assets, and the Company’s business, financial condition, results of operations and cash flows could be otherwise materially adversely affected.

Adenoscan^®

On February 15, 2008, the Company, along with co-plaintiffs Astellas US LLC and Astellas Pharma US, Inc. (collectively “Astellas”), and Item Development AB (“Item”) initiated suit in the U.S. District Court for the Central District of California against Anazao Health Corp. (“Anazao”), NuView Radiopharmaceuticals, Inc. (“NuView”), Paul J. Crowe (“Crowe”) and Keith Rustvold (“Rustvold”) for the unauthorized sale and attempted sale of generic adenosine to hospitals and outpatient imaging clinics for use in Myocardial Perfusion Imaging procedures for an indication that has not been approved by the FDA. The Company and co-plaintiffs have alleged infringement of U.S. Patent Nos. 5,731,296 (“the ‘296 patent”) and 5,070,877 (“the ‘877 patent”), which cover a method of using adenosine in Myocardial Perfusion Imaging and which Astellas sells under the tradename, Adenoscan^®; unfair competition in violation of the California Business and Professions Code, and violations of various other sections of the California Business and Professions Code, concerning the labeling, advertising and dispensing of drugs; and intentional interference with Company and co-plaintiffs’ prospective economic advantage. On June 30, 2008, NuView, Crowe and Rustvold filed an answer raising defenses and counterclaims of non-infringement, invalidity, unenforceability due to inequitable conduct and patent misuse,

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KING PHARMACEUTICALS, INC.

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and unfair competition under California State Law. On August 28th, the Company filed a reply. On November 20, 2008, the Company and other plaintiffs amended their complaint to add MTS Health Supplies, Inc., Nabil Saba and Ghassan Salaymeg (collectively “MTS”) as defendants. On November 21, 2008, defendant NuView amended its answer and counterclaims to allege patent misuse antitrust violations by plaintiffs. The parties are currently in the midst of fact discovery. Trial is not anticipated until August 2009.

Average Wholesale Price Litigation

In August 2004, the Company and Monarch Pharmaceuticals, Inc. (“Monarch”), a wholly-owned subsidiary of the Company, were named as defendants along with 44 other pharmaceutical manufacturers in an action brought by the City of New York (“NYC”) in Federal Court in the State of New York. NYC claims that the defendants fraudulently inflated their average wholesale prices (“AWP”) and fraudulently failed to accurately report their “best prices” and their average manufacturer’s prices and failed to pay proper rebates pursuant to federal law. Additional claims allege violations of federal and New York statutes, fraud and unjust enrichment. For the period from 1992 to the present, NYC is requesting money damages, civil penalties, declaratory and injunctive relief, restitution, disgorgement of profits and treble and punitive damages. The United States District Court for the District of Massachusetts has been established as the multidistrict litigation court for the case, In re: Pharmaceutical Industry Average Wholesale Pricing Litigation (the “MDL Court”).

Since the filing of the NYC case, 48 New York counties have filed lawsuits against the pharmaceutical industry, including the Company and Monarch. The allegations in all of these cases are virtually the same as the allegations in the NYC case. All of these lawsuits are currently pending in the MDL Court in the District of Massachusetts except for the Erie, Oswego and Schenectady County cases, which were removed in October 2006 and remanded to State Court in September 2007. Motions to dismiss were granted in part and denied in part for all defendants in all New York City and County cases pending in the MDL. The Erie motion to dismiss was granted in part and denied in part by the State Court before removal. Motions to dismiss were filed in October 2007 in the Oswego and Schenectady cases, and these cases were subsequently transferred to Erie County for coordination with the Erie County case. It is not anticipated that any trials involving the Company will be set in any of these cases within the next year.

In January 2005, the State of Alabama filed a lawsuit in State Court against 79 defendants including the Company and Monarch. The four causes of action center on the allegation that all defendants fraudulently inflated the AWPs of their products. A motion to dismiss was filed and denied by the Court, but the Court did require an amended complaint to be filed. The Company filed an answer and counterclaim for return of rebates overpaid to the state. Alabama filed a motion to dismiss the counterclaim, which was granted. The Company appealed the dismissal. The Alabama Supreme Court affirmed the dismissal. In a separate appeal of a motion to sever denied by the trial court, the Alabama Supreme Court severed all defendants into single-defendant cases. Trials against AstraZeneca International, Novartis Pharmaceuticals, SmithKline Beecham Corporation and Sandoz resulted in verdicts for the State. The first three of these defendants have already appealed their verdicts. Several other defendants have had their cases set for trial this year and in 2009. It is not anticipated that a trial involving the Company will be set during 2009.

In October 2005, the State of Mississippi filed a lawsuit in State Court against the Company, Monarch and 84 other defendants, alleging fourteen causes of action. Many of those causes of action allege that all defendants fraudulently inflated the AWPs and wholesale acquisition costs of their products. A motion to dismiss the criminal statute counts and a motion for more definite statement were granted. Mississippi filed an amended complaint dismissing the Company and Monarch from the lawsuit without prejudice. These claims could be refiled.

Over half of the states have filed similar lawsuits but the Company has not been named in any other case except Iowa’s. The Company has filed a motion to dismiss the Iowa complaint. On February 20, 2008, the Iowa case was transferred to the MDL. The relief sought in all of these cases is similar to the relief sought in

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KING PHARMACEUTICALS, INC.

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the NYC lawsuit. The MDL granted in part and denied in part the Company’s motion to dismiss, and the Company has filed its answer. Discovery is proceeding in these cases. The Company intends to defend all of the AWP lawsuits vigorously, but is currently unable to predict the outcome or reasonably estimate the range of potential loss.

Governmental Pricing Investigation and Related Matters

As previously reported, during the first quarter of 2006, the Company paid approximately $129,268 related to underpayment of rebates owed to Medicaid and other governmental pricing programs during the period from 1994 to 2002. On October 31, 2005, the Company also entered into a five-year corporate integrity agreement with HHS/OIG.

Also as previously reported, the Securities and Exchange Commission (the “SEC”) conducted an investigation relating to the Company’s underpayments to governmental programs and to the Company’s previously disclosed errors relating to reserves for product returns. On December 12, 2007, the Company received notice from the Staff of the SEC that the investigation was closed.

Subsequent to the announcement of the SEC investigation described above, beginning in March 2003, a number of purported class action complaints were filed by holders of the Company’s securities against the Company, its directors, former directors, executive officers, former executive officers, a Company subsidiary and a former director of the subsidiary in the United States District Court for the Eastern District of Tennessee, alleging violations of the Securities Act of 1933 and/or the Securities Exchange Act of 1934 in connection with the Company’s underpayment of rebates owed to Medicaid and other governmental pricing programs, and certain transactions between the Company and the Benevolent Fund, a nonprofit organization affiliated with certain former members of the Company’s senior management. These cases were consolidated.

On July 31, 2006, the parties entered into a stipulation of settlement and a supplemental agreement (together, the “Settlement Agreement”) to resolve the litigation. On January 9, 2007, the Court granted final approval of the Settlement Agreement. The Settlement Agreement provided for a settlement amount of $38,250, which was fully funded by the Company’s insurance carriers on the Company’s behalf.

Beginning in March 2003, four purported shareholder derivative complaints were also filed in Tennessee State Court alleging a breach of fiduciary duty, among other things, by some of the Company’s current and former officers and directors, with respect to the same events at issue in the federal securities litigation described above. These cases were consolidated. The parties reached agreement on a stipulation of settlement on August 21, 2008. The settlement requires the Company to maintain and/or adopt certain corporate governance measures and provides for payment of attorneys’ fees and expenses to plaintiffs’ counsel in the amount of $13,500. This amount has been paid by the Company’s insurance carriers. The stipulation of settlement was filed with the Court on August 22, 2008. The Court entered an order approving the settlement on December 17, 2008. A shareholder has appealed the Court’s approval of the settlement, and this appeal is pending.

During the third quarter of 2006, the second quarter of 2007, the second quarter of 2008 and the third quarter of 2008, the Company recorded an anticipated insurance recovery of legal fees in the amount of $6,750, $3,398, $3,001 and $8,000, respectively, for the class action and derivative suits described above. In November 2006, July 2007, August 2008 and October 2008, respectively, the Company received payments from its insurance carriers for the recovery of these legal fees.

The Company is currently unable to predict the outcome of the appeal of the derivative suit settlement described above. If the appeal were to succeed, the Company’s business, financial condition, results of operations and cash flows could be materially adversely affected.

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KING PHARMACEUTICALS, INC.

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Fen/Phen Litigation

Many distributors, marketers and manufacturers of anorexigenic drugs have been subject to claims relating to the use of these drugs. Generally, the lawsuits allege that the defendants (1) misled users of the products with respect to the dangers associated with them, (2) failed to adequately test the products and (3) knew or should have known about the negative effects of the drugs, and should have informed the public about the risks of such negative effects. Claims include product liability, breach of warranty, misrepresentation and negligence. The actions have been filed in various state and federal jurisdictions throughout the United States. A multidistrict litigation court has been established in Philadelphia, Pennsylvania, In re Fen-Phen Litigation. The plaintiffs seek, among other things, compensatory and punitive damages and/or court-supervised medical monitoring of persons who have ingested these products.

The Company’s wholly-owned subsidiary, King Research and Development, is a defendant in approximately 60 multi-plaintiff (approximately 1,100 plaintiffs) lawsuits involving the manufacture and sale of dexfenfluramine, fenfluramine and phentermine. These lawsuits have been filed in various jurisdictions throughout the United States and in each of these lawsuits King Research and Development, as the successor to Jones Pharma Incorporated (“Jones”), is one of many defendants, including manufacturers and other distributors of these drugs. Although Jones did not at any time manufacture dexfenfluramine, fenfluramine or phentermine, Jones was a distributor of a generic phentermine product and, after its acquisition of Abana Pharmaceuticals, was a distributor of Obenix^®, Abana’s branded phentermine product. The manufacturer of the phentermine purchased by Jones filed for bankruptcy protection and is no longer in business. The plaintiffs in these cases, in addition to the claims described above, claim injury as a result of ingesting a combination of these weight-loss drugs and are seeking compensatory and punitive damages as well as medical care and court-supervised medical monitoring. The plaintiffs claim liability based on a variety of theories, including, but not limited to, product liability, strict liability, negligence, breach of warranty, fraud and misrepresentation.

King Research and Development denies any liability incident to Jones’ distribution and sale of Obenix^® or Jones’ generic phentermine product. King Research and Development’s insurance carriers are currently defending King Research and Development in these lawsuits. The manufacturers of fenfluramine and dexfenfluramine have settled many of these cases. As a result of these settlements, King Research and Development has routinely received voluntary dismissals without the payment of settlement proceeds. In the event that King Research and Development’s insurance coverage is inadequate to satisfy any resulting liability, King Research and Development will have to assume defense of these lawsuits and be responsible for the damages, if any, that are awarded against it.

While the Company cannot predict the outcome of these lawsuits, management believes that the claims against King Research and Development are without merit and intends to vigorously pursue all defenses available. The Company is unable to disclose an aggregate dollar amount of damages claimed because many of these complaints are multi-party suits and do not state specific damage amounts. Rather, these claims typically state damages as may be determined by the court or similar language and state no specific amount of damages against King Research and Development. Consequently, the Company cannot reasonably estimate possible losses related to the lawsuits.

In addition, as previously reported, the Company was one of many defendants in six multi-plaintiff lawsuits that claim damages for personal injury arising from its production of the anorexigenic drug phentermine under contract for GlaxoSmithKline. These six lawsuits have been dismissed without payment of settlement proceeds. The Company was being indemnified in the six lawsuits by GlaxoSmithKline, for which the Company manufactured phentermine.

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KING PHARMACEUTICALS, INC.

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Hormone Replacement Therapy

Currently, the Company is named as a defendant by 23 plaintiffs in lawsuits involving the manufacture and sale of hormone replacement therapy drugs. The first of these lawsuits was filed in July 2004. Numerous other pharmaceutical companies have also been sued. The Company was sued by approximately 1,000 plaintiffs, but most of those claims were voluntarily dismissed or dismissed by the Court for lack of product identification. The remaining 23 lawsuits were filed in Alabama, Arkansas, Missouri, Pennsylvania, Ohio, Florida, Maryland, Mississippi and Minnesota. A federal multidistrict litigation court has been established in Little Rock, Arkansas, In re: Prempro Products Liability Litigation, and all of the plaintiffs’ claims have been transferred and are pending in that Court except for one lawsuit pending in Philadelphia, Pennsylvania State Court. Many of these plaintiffs allege that the Company and other defendants failed to conduct adequate research and testing before the sale of the products and post-sale monitoring to establish the safety and efficacy of the long-term hormone therapy regimen and, as a result, misled consumers when marketing their products. Plaintiffs also allege negligence, strict liability, design defect, breach of implied warranty, breach of express warranty, fraud and misrepresentation. Discovery of the plaintiffs’ claims against the Company has begun but is limited to document discovery. No trial has occurred in the hormone replacement therapy litigation against the Company or any other defendants except Wyeth and Pfizer. The trials against Wyeth have resulted in verdicts for and against Wyeth, with several verdicts against Wyeth reversed on post-trial motions. Pfizer has lost two jury verdicts. One of these verdicts was later reversed, and the other is being appealed. The Company does not expect to have any trials set in the next year. The Company intends to defend these lawsuits vigorously but is currently unable to predict the outcome or to reasonably estimate the range of potential loss, if any. The Company may have limited insurance for these claims. The Company would have to assume defense of the lawsuits and be responsible for damages, fees and expenses, if any, that are awarded against it or for amounts in excess of the Company’s product liability coverage.

Alpharma Litigation

The following litigation matters relate to our Alpharma subsidiary and/or certain of its subsidiaries.

Department of Justice Investigation

On February 28, 2007, Alpharma received a subpoena from the U.S. Department of Justice (“DOJ”) requesting certain documents in connection with its investigation into various marketing practices with respect to Kadian^® capsules. The DOJ has requested interviews with former Alpharma employees, and has subpoenaed records from physicians who performed research on Kadian^® and/or wrote articles about Kadian^® and from third-party vendors who were retained to provide services relating to clinical studies of Kadian^®. The DOJ has also asked Alpharma to provide documents relating to post-approval studies of Kadian^® that were submitted to the FDA. Alpharma and its subsidiary, Alpharma Pharmaceuticals, have responded and are continuing to respond to this subpoena and additional information requests and are fully cooperating with the DOJ. On February 2, 2009, the Company was informed by the DOJ that its investigation would be expanded to include Alpharma’s marketing practices with respect to Flector^® Patch.

At this time, the Company cannot predict or determine the outcome of this matter or reasonably estimate the amount or range of amounts of fines or penalties, if any, that might result from an adverse outcome.

Chicken Litter Litigation

Alpharma and one of its subsidiaries are two of multiple defendants that have been named in several lawsuits that allege that one of its animal health products causes chickens to produce manure that contains an arsenical compound which, when used as agricultural fertilizer by chicken farmers, degrades into inorganic arsenic and may have caused a variety of diseases in the plaintiffs (who allegedly live in close proximity to such farm fields). Alpharma provided notice to its insurance carriers and its primary insurance carriers have

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KING PHARMACEUTICALS, INC.

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responded by accepting their obligations to defend or pay Alpharma’s defense costs, subject to reservation of rights to later reject coverage for these lawsuits. In addition, one of the carriers has filed a Declaratory Judgment action in state court in which it has sought a ruling concerning the allocation of its coverage obligations to Alpharma among the several insurance carriers and, to the extent Alpharma does not have full insurance coverage, to Alpharma. In addition, this Declaratory Judgment action requests that the Court rule that certain of the carrier’s policies provide no coverage because certain policy exclusions allegedly operate to limit its coverage obligations under said policies. Furthermore, the insurance carriers may take the position that some, or all, of the applicable insurance policies contain certain provisions that could limit coverage for future product liability claims arising in connection with product sold on and after December 16, 2003.

In addition to the potential for personal injury damages to the approximately 155 plaintiffs, the plaintiffs are asking for punitive damages and requesting that Alpharma be enjoined from the future sale of the product at issue. In September 2006, in the first trial, which was brought by three plaintiffs, the Circuit Court of Washington County, Arkansas, Second Division, entered a jury verdict in favor of Alpharma. The plaintiffs appealed the verdict, challenging certain pretrial expert rulings; however, in May 2008, the Supreme Court of Arkansas denied plaintiffs’ challenges. In its ruling, the Supreme Court of Arkansas also overturned the trial court’s grant of summary judgment that had the effect of dismissing certain poultry company co-defendants from the case. The re-trial of the first case against the poultry company co-defendants is scheduled for April 2009, and subsequent cases are expected to be tried against both the poultry companies and Alpharma together.

While the Company can give no assurance of the outcome of any future trial in this litigation, it believes that it will be able to continue to present credible scientific evidence that its product is not the cause of any injuries the plaintiffs may have suffered. There is also the possibility of an adverse customer reaction to the allegations in these lawsuits, as well as additional lawsuits in other jurisdictions where the product has been sold. Worldwide sales of this product were approximately $19,600, $20,400 and $22,200 in 2008, 2007 and 2006, respectively.

AWP Litigation

Alpharma, and in certain instances one of its subsidiaries, are defendants in connection with various elements of the litigation described above under the heading “Average Wholesale Price Litigation”, primarily related to sale of Kadian^® capsules. At present, Alpharma is involved in proceedings in the following states: Alaska, Florida, Illinois, Iowa, Mississippi, New York, and South Carolina. The Company expects the Mississippi case to be dismissed.

These lawsuits vary with respect to the particular causes of action and relief sought. The relief sought in these lawsuits includes statutory causes of action including civil penalties and treble damages, common law causes of action, and declaratory and injunctive relief, including, in certain lawsuits, disgorgement of profits. The Company believes it has meritorious defenses and intends to vigorously defend its positions in these lawsuits. Numerous other pharmaceutical companies are defendants in similar lawsuits.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Contingencies

The following summarizes the Company’s unconditional purchase obligations at December 31, 2008:

2009	$	201,527
2010		55,638
2011		35,665
2012		27,510
2013		25,860
Thereafter		85,741
Total	$	431,941

The unconditional purchase obligations of the Company are primarily related to minimum purchase requirements under contracts with suppliers to purchase raw materials and finished goods related to the Company’s branded prescription pharmaceutical products and commitments associated with research and development projects.

The Company has a supply agreement with a third party to produce metaxalone, the active ingredient in Skelaxin^®. This supply agreement requires the Company to purchase certain minimum levels of metaxalone and expires in 2010. If sales of Skelaxin^® are not consistent with current forecasts, the Company could incur losses in connection with purchase commitments for metaxalone, which could have a material adverse effect upon the Company’s results of operations and cash flows.

20.   Segment Information

The Company’s business is classified into six reportable segments: branded prescription pharmaceuticals, animal health, Meridian Auto-Injector, royalties, contract manufacturing and all other. The branded prescription pharmaceuticals segment includes a variety of branded prescription products that are separately categorized into neuroscience, hospital and legacy products. These branded prescription products are aggregated because of the similarity in regulatory environment, manufacturing processes, methods of distribution and types of customer. The animal health business is a global leader in the development, registration, manufacture and marketing of medicated feed additives and water soluble therapeutics primarily for poultry, cattle and swine. Meridian Auto-Injector products are sold to both commercial and government markets. The principal source of revenues in the commercial market is the EpiPen^® product, an epinephrine filled auto-injector, which is primarily prescribed for the treatment of severe allergic reactions and which is primarily marketed, distributed and sold by Dey, L.P. Government revenues are principally derived from the sale of nerve agent antidotes and other emergency medicine auto-injector products marketed to the U.S. Department of Defense and other federal, state and local agencies, particularly those involved in homeland security, as well as to approved foreign governments. The contract manufacturing segment consists primarily of pharmaceutical manufacturing services provided to the Company’s branded prescription pharmaceutical segment. Royalties include revenues the Company derives from pharmaceutical products after the Company has transferred the manufacturing or marketing rights to third parties in exchange for licensing fees or royalty payments.

The Company primarily evaluates its segments based on segment profit. Reportable segments were separately identified based on revenues, segment profit (excluding depreciation, amortization and impairments) and total assets. Revenues among the segments are presented in the individual segments and removed through eliminations in the information below. Substantially all of the eliminations relate to sales from the contract manufacturing segment to the branded prescription pharmaceuticals segment.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents selected information for the Company’s reportable segments for the periods indicated. Note that the tables for revenues and segment profit below do not include revenues and segment profit for the animal health segment or Flector^® Patch product within the branded prescription pharmaceuticals segment since these are part of Alpharma, a company that was acquired by King at the end of December 2008.

	For the Years Ended December 31,
	2008			2007			2006
Total revenues:
Branded prescription pharmaceuticals	$	1,263,488		$	1,857,813		$	1,724,701
Meridian Auto-Injector		218,448			183,860			164,760
Royalties		79,442			82,589			80,357
Contract manufacturing(1)		481,044			707,667			555,362
All other		2,356			3,419			2,181
Eliminations(1)		(479,717	)		(698,466	)		(538,861	)
Consolidated total revenues	$	1,565,061		$	2,136,882		$	1,988,500
Segment profit:
Branded prescription pharmaceuticals	$	964,627		$	1,390,306		$	1,407,024
Meridian Auto-Injector		132,898			107,810			90,185
Royalties		69,722			72,431			70,609
Contract manufacturing		647			(233	)		(1,135	)
All other		2,342			34			2,009
Other operating costs and expenses		(1,389,881	)		(1,342,835	)		(1,166,146	)
Other income (expense)		17,941			23,305			21,766
Income from continuing operations before tax	$	(201,704	)	$	250,818		$	424,312

	As of December 31,
	2008		2007
Total assets:
Branded prescription pharmaceuticals	$	3,063,511	$	3,097,153
Animal health		860,524		—
Meridian Auto-Injector		307,425		299,098
Royalties		26,175		30,562
Contract manufacturing		61		9
All other		—		—
Consolidated total assets	$	4,257,696	$	3,426,822

(1) Contract manufacturing revenues include $479,717, $698,466 and $538,861 of intercompany sales for the years ended December 31, 2008, 2007 and 2006, respectively.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents branded prescription pharmaceutical revenues by therapeutic area:

	For the Years Ended December 31,
	2008		2007		2006
Total revenues:
Neuroscience	$	612,853	$	627,244	$	500,982
Hospital		267,913		292,380		274,136
Legacy:
Cardiovascular/metabolic		299,951		809,888		829,166
Other		82,771		128,301		120,417
Consolidated branded prescription pharmaceutical revenues	$	1,263,488	$	1,857,813	$	1,724,701

Capital expenditures of $57,455, $49,602 and $45,816 for the years ended December 31, 2008, 2007 and 2006, respectively, are substantially related to the branded prescription pharmaceuticals and contract manufacturing segments.

Geographic Information:

	Revenues
	For the Years Ended December 31,
	2008		2007		2006
Total revenues:
United States	$	1,514,185	$	2,096,920	$	1,963,398
Other		50,876		39,962		25,102
Total	$	1,565,061	$	2,136,882	$	1,988,500

	Long lived assets
	As of December 31,
	2008		2007		2006
Total long lived assets:
United States	$	1,724,658	$	1,164,114	$	1,276,572
Other		81,430		3,103		3,007
Total	$	1,806,088	$	1,167,217	$	1,279,579

21.   Stock-Based Compensation

For the years ended 2008, 2007 and 2006 the Company incurred $34,514, $27,652 and $21,130, respectively, in compensation costs and $13,041, $10,015 and $6,610, respectively, of income tax benefits related to the Company’s stock-based compensation agreements.

Restricted Stock Awards, Restricted Stock Units and Long-Term Performance Unit Awards

Under its Incentive Plan (which has been approved by the Company’s shareholders) the Company has granted Restricted Stock Awards (“RSAs”) and Long-Term Performance Unit Awards (“LPUs”) to certain employees and has granted Restricted Stock Units (“RSUs”) to its non-employee directors.

RSAs are grants of shares of common stock restricted from sale or transfer for a period of time, generally three years from grant, but may be restricted over other designated periods as determined by the Company’s Board of Directors or a committee of the Board.

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KING PHARMACEUTICALS, INC.

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RSUs represent the right to receive a share of common stock at the expiration of a restriction period, generally three years from grant, but may be restricted over other designated periods as determined by the Company’s Board of Directors or a committee of the Board. The RSUs granted to non-employee directors under the current Compensation Policy for Non-Employee Directors have a restriction period that generally ends one year after grant.

The fair value of RSAs and RSUs is based upon the market price of the underlying common stock as of the date of grant. Compensation expense is recognized on a straight-line basis, including an estimate for forfeitures, over the vesting period.

LPUs are rights to receive common stock of the Company in which the number of shares ultimately received depends on the Company’s performance over time. The Company has granted LPUs with two different performance criteria. LPUs were granted with a one-year performance cycle, followed by a two-year restriction period, at the end of which shares of common stock will be earned based on operating targets. LPUs were also granted based on a three-year performance cycle, at the end of which shares of common stock will be earned based on market-related performance targets over a three-year performance period. At the end of the applicable performance period, the number of shares of common stock awarded is determined by adjusting upward or downward from the performance target in a range between 0% and 200%. The final performance percentage, on which the number of shares of common stock issued is based, considering performance metrics established for the performance period, would be determined by the Company’s Board of Directors or a committee of the Board at its sole discretion.

The fair value of LPUs with a one-year performance cycle is based upon the market price of the underlying common stock as of the date of grant. At each reporting period, compensation expense is recognized based on the most probable performance outcome, including an estimate for forfeitures, on a straight-line basis over the vesting period. Total compensation expense for each award is based on the actual number of shares of common stock that vest multiplied by market price of the common stock as of the date of grant.

The fair value of LPUs with a three-year performance cycle is based on long-term market-based performance targets using a Monte Carlo simulation model which considers the likelihood of all possible outcomes and determines the number of shares expected to vest under each simulation and the expected stock price at that level. The fair value on grant date of the LPU is recognized over the required service period and will not change regardless of the Company’s actual performance versus the long-term market-based performance targets.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following activity has occurred under the Company’s existing plans:

				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Restricted Stock Awards:
Nonvested balance at December 31, 2007		2,757,936		$	13.67
Granted		543,430			8.89
Vested		(528,511	)		15.43
Forfeited		(24,740	)		9.66
Nonvested balance at December 31, 2008		2,748,115		$	12.40
Restricted Stock Units:
Nonvested balance at December 31, 2007		41,069		$	20.45
Granted		96,139			9.96
Vested		(41,069	)		20.45
Forfeited		(490	)		8.91
Nonvested balance at December 31, 2008		95,649		$	9.97
Long-Term Performance Unit Awards (one-year performance cycle):
Nonvested balance at December 31, 2007		1,928,665		$	19.52
Granted		412,200			8.91
Vested		(155,648	)		19.51
Forfeited		(105,106	)		19.47
Nonvested balance at December 31, 2008		2,080,111		$	17.37
Long-Term Performance Unit Awards (three-year performance cycle):
Nonvested balance at December 31, 2007		277,625		$	29.39
Granted		178,570			12.25
Vested		(10,630	)		29.88
Forfeited		—			—
Nonvested balance at December 31, 2008		445,565		$	22.51

As of December 31, 2008, there was $20,791 of total unrecognized compensation costs related to RSAs which the Company expects to recognize over a weighted average period of 2.00 years. The expense recognized over the service period includes an estimate of awards that will be forfeited. As of December 31, 2008, there was $13,381 of total unrecognized compensation costs related to LPUs which the Company expects to recognize over a weighted average period of 1.13 years.

Stock Options

The Company has granted nonqualified and incentive stock options to its officers, employees and directors under its stock option plans. In connection with the plans, options to purchase common stock of the Company are granted at option prices not less than the fair market value of the common stock at the date of grant and either vest immediately or ratably over a designated period, generally one-third on each of the first three anniversaries of the grant date. Compensation expense is recognized on a straight-line basis, including an estimate for forfeitures, over the vesting period.

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KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants:

	2008			2007			2006
Expected volatility		43.9	%		43.7	%		52.4	%
Expected term (in years)		6			6			6
Risk-free interest rate		2.98	%		4.40	%		4.64	%
Expected dividend yield		0.00	%		0.00	%		0.00	%

For the years ended December 31, 2008, 2007 and 2006, the Company utilized the “short-cut” method to estimate the expected term for stock options granted. The expected volatility is determined based on the historical volatility of King common stock over the expected term. The risk-free rate is based on the U.S. Treasury rate for the expected term at the date of grant.

A summary of option activity under the plans for 2008 is as follows:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value
Outstanding options, December 31, 2007		4,964,430		$	18.37		5.72	$	461
Granted		2,152,320			9.31
Exercised		(68,333	)		6.43
Expired		(673,601	)		19.42
Forfeited		(109,676	)		18.14
Outstanding options, December 31, 2008		6,265,140		$	15.44		6.60	$	2,964
Exercisable, December 31, 2008		3,911,387		$	18.27		5.17	$	280
Expected to vest, December 31, 2008		1,921,969		$	10.93		8.96	$	2,283

As of December 31, 2008, there was $8,117 of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 1.97 years.

Cash received from stock option exercises for 2008 was $439. The income tax benefits from stock option exercises for 2008 totaled $30.

During 2008, 2007 and 2006, tax benefits in excess of recognized compensation costs associated with stock option exercises were $82, $705 and $484, respectively, and are reflected as cash inflows from financing activities.

During the year ended December 31, 2008, the following activity occurred under the Company’s plans which cover stock options, RSAs and LPUs:

	2008
Total intrinsic value of stock options exercised	$	224
Total fair value of RSAs vested	$	8,202
Total fair value of LPUs vested	$	3,354

As of December 31, 2008, an aggregate of 18,823,868 shares were available for future grant under the Company’s stock plans. Awards that expire or are cancelled without delivery of shares generally become available for issuance under the King Pharmaceuticals, Inc. Incentive Plan.

F-49

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

22.   Stockholders’ Equity

Preferred Shares

The Company is authorized to issue 15 million shares of “blank-check” preferred stock, the terms and conditions of which will be determined by the Board of Directors. As of December 31, 2008 and 2007, there were no shares issued or outstanding.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income consists of the following components:

	2008			2007
Net unrealized losses on investments in debt securities, net of tax	$	(28,092	)	$	—
Foreign currency translation		(195	)		1,957
	$	(28,287	)	$	1,957

23.   Income per Common Share

The basic and diluted income per common share was determined based on the following share data:

	2008		2007		2006
Basic income per common share:
Weighted average common shares		243,539,157		242,854,421		242,196,414
Diluted income per common share:
Weighted average common shares		243,539,157		242,854,421		242,196,414
Effect of stock options		—		402,208		304,004
Effect of dilutive share awards		—		872,765		298,575
Weighted average common shares		243,539,157		244,129,394		242,798,993

For the year ended December 31, 2008, the dilutive effect of options to purchase 43,656 shares of common stock and 1,811,506 share awards were not included in the computation of diluted loss per share because their inclusion would have reduced the loss per share.

For the year ended December 31, 2008, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share included options to purchase 5,914,275 shares of common stock, 356,240 RSAs and 341,636 LPUs. For the year ended December 31, 2007, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share included options to purchase 3,014,058 shares of common stock, 271,808 RSAs and 673,147 LPUs. For the year ended December 31, 2006, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per share included options to purchase 5,621,470 shares of common stock, 2,573 RSAs and 111,990 LPUs. The 11/4% Convertible Senior Notes due April 1, 2026 could be converted into the Company’s common stock in the future, subject to certain contingencies (see Note 13). Shares of the Company’s common stock associated with this right of conversion were excluded from the calculation of diluted income per share because these notes are anti-dilutive since the conversion price of the notes was greater than the average market price of the Company’s common stock during the 2008, 2007 and 2006 years.

F-50

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

24.   Recently Issued Accounting Standards

In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that May be Settled in Cash Upon Conversion (“FSP APB 14-1”). FSP APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years; early adoption is not permitted. Retrospective application to all periods presented is required except for instruments that were not outstanding during any of the periods that will be presented in the annual financial statements for the period of adoption but were outstanding during an earlier period. Upon adoption of FSP APB 14-1, the Company’s accounting for its $400,000 11/4% Convertible Senior Notes due April 1, 2026 will be affected. The Company is currently evaluating the potential effect of FSP APB 14-1 on its financial statements; but estimates that implementation would result in a reduction in the carrying value of the outstanding $400,000 11/4% Convertible Senior Notes due April 1, 2026 by approximately $130,000, with a corresponding increase in equity. The Company also estimates that upon adoption, the retrospective application of FSP APB 14-1 will result in increased interest expense of approximately $18,000 for the year ending December 31, 2009. The Company will adopt FSP APB 14-1 as of January 1, 2009.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. SFAS No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company does not anticipate SFAS No. 161 will have a material effect on its financial statements and is planning to adopt the standard in the first quarter of 2009.

In December 2007, the Emerging Issues Task Force issued EITF Issue 07-01, Accounting for Collaborative Arrangements (“Issue 07-01”). Issue 07-01 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable Generally Accepted Accounting Principles (“GAAP”) or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational and consistently applied accounting policy election. Issue 07-01 is effective for fiscal years beginning after December 15, 2008. The Company does not anticipate Issue 07-01 will have a material effect on its financial statements and is planning to adopt this standard in the first quarter of 2009.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS No. 141(R)”). This statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. This statement also requires an acquirer to recognize and measure in-process research and development projects as intangible assets at fair value on the acquisition date. SFAS No. 141(R) also sets forth the disclosures required to be made in the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, SFAS No. 141(R) will be applied by the Company to business combinations occurring on or after January 1, 2009.

F-51

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

25.   Restructuring Activities

Fourth Quarter of 2008 Action

As part of the acquisition of Alpharma, management developed a restructuring plan to eliminate redundancies in operations created by the acquisition. This plan includes a reduction in personnel, staff leverage, reductions in duplicate expenses and a realignment of research and development priorities.

The Company has estimated total costs of $66,529 associated with this restructuring plan, $61,174 of which has been included in the liabilities assumed in the purchase price of Alpharma. The restructuring plan includes employee termination costs associated with a workforce reduction of approximately 234 employees. The restructuring plan also includes contract termination costs of $16,801 and other exit costs of $182 as a result of the acquisition. All employee termination costs are expected to be paid by the end of 2011. All contract termination costs are expected to be paid by the end of 2018.

Third Quarter of 2008 Action

During the third quarter of 2008, the Company completed a restructuring initiative at its Rochester, Michigan facility. This initiative is in response to a decline in unit volume of the Company’s Bicillin^® CR product, an anti-infective. As a result of this initiative, the Company incurred employee termination costs of $272 associated with a workforce reduction of approximately 14 employees in the third quarter of 2008. The employee termination costs are expected to be paid by the end of 2009.

Third Quarter of 2007 Action

During 2007, following the Circuit Court’s decision in September 2007 regarding the Company’s ‘722 Patent that covered the Company’s Altace^® product, the Company developed a restructuring initiative. This initiative included a reduction in personnel, staff leverage, expense reductions and additional controls over spending, reorganization of sales teams and a realignment of research and development priorities.

The Company incurred total costs of approximately $67,000 associated with this initiative, including approximately $65,000 in restructuring charges, $1,000 in accelerated depreciation associated with general support assets and approximately $1,000 for implementation costs of reorganizing the sales teams. Expenses related to this initiative were primarily incurred in the third and fourth quarters of 2007.

The restructuring charges include employee termination costs associated with a workforce reduction of approximately 520 employees, including approximately 440 employees in the Company’s sales force. Restructuring charges also include contract termination costs, including the termination of the promotion agreement for Glumetza^tm and other exit costs associated with this initiative.

Specifically, the restructuring charges associated with this initiative included employee termination costs, contract termination costs, and other exit costs of $32,049, $31,238, and $1,200, respectively. Substantially all of the restructuring charges were paid by the end of the first quarter of 2008.

Third Quarter of 2006 Action

During 2006, the Company decided to streamline its manufacturing activities in order to improve operating efficiency and reduce costs, including the decision to transfer the production of Levoxyl^® from its St. Petersburg, Florida facility to its Bristol, Tennessee facility, which the Company expects to complete in 2009. As a result of these steps, the Company expects to incur restructuring charges totaling approximately $16,000 through the end of 2009, of which approximately $11,500 is associated with accelerated depreciation and approximately $4,500 is associated with employee termination costs. The employee termination costs are expected to be fully paid in the first half of 2009.

F-52

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the types of costs accrued and incurred are summarized below:

	Accrued													Accrued
	Balance at		Income											Balance at
	December 31,		Statement			Alpharma		Cash			Non-Cash			December 31,
	2007		Impact in 2008			Acquisition		Payments			Costs			2008
Fourth quarter of 2008 action
Employee separation payments	$	—	$	5,350		$	44,196	$	—		$	109		$	49,437
Contract termination		—		5			16,796		—			—			16,801
Other		—		—			182		—			—			182
Third quarter of 2008 action
Employee separation payments		—		272			—		261			2			9
Third quarter of 2007 action
Employee separation payments		21,144		1,530			—		22,571			—			103
Contract termination		—		(94	)		—		(291	)		197			—
Accelerated depreciation(1)		—		(88	)		—		—			(88	)		—
Other		880		174			—		1,054			—			—
First quarter of 2007 action
Employee separation payments		1,061		(1,061	)		—		—			—			—
Third quarter of 2006 action
Employee separation payments		3,475		180			—		1,009			184			2,462
Accelerated depreciation(1)		—		2,685			—		—			2,685			—
Fourth quarter of 2005 action
Employee separation payments		774		743			—		1,509			—			8
	$	27,334	$	9,696		$	61,174	$	26,113		$	3,089		$	69,002

(1) Included in depreciation and amortization on the Consolidated Statements of Income.

The restructuring charges in 2008 and 2007 primarily relate to the branded prescription pharmaceutical segment. The accrued employee separation payments as of December 31, 2008 are expected to be paid by the end of 2011.

F-53

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

26.   Quarterly Financial Information (unaudited)

The following table sets forth summary financial information for the years ended December 31, 2008 and 2007:

	First		Second		Third		Fourth
2008 By Quarter
Total revenues	$	432,033	$	396,851	$	388,445	$	347,732
Operating income (loss)		121,449		57,839		122,999		(521,932	)
Net income (loss)		87,633		43,021		84,750		(548,467	)
Basic income (loss) per common share(1)	$	0.36	$	0.18	$	0.35	$	(2.25	)
Diluted income (loss) per common share(1)	$	0.36	$	0.18	$	0.34	$	(2.25	)

	First		Second		Third			Fourth
2007 By Quarter
Total revenues	$	516,030	$	542,726	$	544,854		$	533,272
Operating income (loss)		167,855		88,311		(78,127	)		49,474
Net income (loss)		115,913		64,785		(40,538	)		42,821
Basic income (loss) per common share(1)	$	0.48	$	0.27	$	(0.17	)	$	0.18
Diluted income (loss) per common share(1)	$	0.48	$	0.26	$	(0.17	)	$	0.18

(1) Quarterly amounts may not total to annual amounts due to the effect of rounding on a quarterly basis.

27.   Subsequent Events

Skelaxin^®

As previously disclosed, the Company has been involved in multiple legal proceedings over patents relating to its product Skelaxin^® (metaxalone). On January 20, 2009, the U.S. District Court for the Eastern District of New York issued an Order ruling invalid two of these patents, United States Patent Nos. 6,407,128 and 6,683,102. The Order was issued in response to Eon Labs’ motion for summary judgment without the benefit of a hearing. The Company plans to appeal, upon the entry of an appropriate judgment, and intends to vigorously defend its interests. The entry of the Order may lead to generic versions of Skelaxin^® entering the market sooner than previously anticipated, which would likely cause the Company’s sales of Skelaxin^® to decline significantly as a result. Net sales of Skelaxin^® were $446,243 in 2008. For additional information regarding Skelaxin^® litigation, please see Note 19.

Restructuring

Following the decision of the District Court, the Company’s senior management team conducted an extensive examination of the Company and developed a restructuring initiative designed to partially offset the potential decline in Skelaxin^® sales in the event that a generic competitor enters the market. This initiative includes, based on an analysis of the Company’s strategic needs: a reduction in sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams.

The Company estimates that, in connection with the restructuring initiative, it will incur total restructuring costs of between $50,000 and $55,000, all of which are expected to be incurred and expensed during the first half of 2009 and almost all of which will be cash expenditures. These costs all relate to severance pay and other employee termination expenses.

F-54

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The restructuring charges include employee termination costs associated with a workforce reduction of approximately 520 employees, including approximately 380 members of our sales force.

Intangible Assets

As of December 31, 2008, the net intangible assets associated with Skelaxin^® total approximately $116,979. The Company believes that these intangible assets are not currently impaired based on estimated undiscounted cash flows associated with these assets. However, as a result of the Order described above, the Company reduced the estimated remaining useful life of the intangible assets of Skelaxin^® during the first quarter of 2009. If the Company’s current estimates regarding future cash flows adversely change, the Company may have to further reduce the estimated remaining useful life and/or write off a portion or all of these intangible assets.

Alpharma Convertible Senior Notes

During the first quarter of 2009, the Company paid $385,227 to redeem the Alpharma Convertible Senior Notes. See Note 13 for a description of the Alpharma Notes.

28.   Guarantor Financial Statements

Each of the Company’s U.S. subsidiaries, other than Alpharma and its subsidiaries, guaranteed on a full, unconditional and joint and several basis the Company’s performance under the $400,000 aggregate principal amount of the 11/4% Convertible Senior Notes due April 1, 2026 (the “Notes”). We expect Alpharma and its subsidiaries to become guarantors during the first quarter of 2009.

There are no restrictions under the Company’s current financing arrangements on the ability of the Guarantor Subsidiaries to distribute funds to the Company in the form of cash dividends, loans or advances. The following combined financial data provides information regarding the financial position, results of operations and cash flows of the Guarantor Subsidiaries for the $400,000 aggregate principal amount of the Notes (condensed consolidating financial data). Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management has determined that such information would not be material to the holders of the debt.

F-55

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

	December 31, 2008													December 31, 2007
						Non													Non
			Guarantor			Guarantor			Eliminating			King				Guarantor			Guarantor		Eliminating			King
	King		Subsidiaries			Subsidiaries			Entries			Consolidated		King		Subsidiaries			Subsidiaries		Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	401,657	$	52		$	538,503		$	—		$	940,212	$	9,718	$	4,645		$	5,646	$	—		$	20,009
Investments in debt securities		6,441		—			—			—			6,441		1,344,980		—			—		—			1,344,980
Marketable securities		511		—			—			—			511		1,135		—			—		—			1,135
Accounts receivable, net		61		140,502			104,507			—			245,070		9		182,575			1,080		—			183,664
Inventories		59,279		26,406			172,618			—			258,303		76,981		33,361			269		(303	)		110,308
Deferred income tax assets		36,041		26,146			27,326			—			89,513		54,917		45,182			39		—			100,138
Income tax receivable		—		—			—			—			—		18,721		1,454			—		—			20,175
Prepaid expenses and other current assets		14,090		8,283			106,841			—			129,214		28,315		10,926			4		—			39,245
Total current assets		518,080		201,389			949,795			—			1,669,264		1,534,776		278,143			7,038		(303	)		1,819,654
Property, plant, and equipment, net		137,544		122,828			160,949			—			421,321		125,847		131,246			—		—			257,093
Intangible assets, net		—		633,300			300,919			—			934,219		—		778,248			2,726		—			780,974
Goodwill		—		129,150			321,398			—			450,548		—		129,150			—		—			129,150
Marketable securities		—		—			—			—			—		—		—			—		—			—
Deferred income tax assets		18,216		340,404			(54,898	)		—			303,722		4,529		339,107			64		—			343,700
Investments in debt securities		353,848		—			—			—			353,848		—		—			—		—			—
Other assets		74,390		23,704			26,680			—			124,774		42,315		53,936			—		—			96,251
Investments in subsidiaries		2,891,214		—			—			(2,891,214	)		—		1,671,776		—			—		(1,671,776	)		—
Total assets	$	3,993,292	$	1,450,775		$	1,704,843		$	(2,891,214	)	$	4,257,696	$	3,379,243	$	1,709,830		$	9,828	$	(1,672,079	)	$	3,426,822
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	61,255	$	20,107		$	59,546		$	—		$	140,908	$	52,664	$	23,408		$	409	$	—		$	76,481
Accrued expenses		32,456		165,460			213,572			—			411,488		69,849		306,732			23		—			376,604
Income taxes payable		1,288		169			8,991			—			10,448		—		—			—		—			—
Short term debt		—		—			5,230			—			5,230		—		—			—		—			—
Current portion of long term debt		53,820		—			385,227			—			439,047		—		—			—		—			—
Total current liabilities		148,819		185,736			672,566			—			1,007,121		122,513		330,140			432		—			453,085
Long-term debt		963,222		—			—			—			963,222		400,000		—			—		—			400,000
Other liabilities		54,355		4,595			51,072			—			110,022		55,227		7,753			—		—			62,980
Intercompany payable (receivable)		649,565		(655,145	)		5,580			—			—		290,443		(291,114	)		671		—			—
Total liabilities		1,815,961		(464,814	)		729,218			—			2,080,365		868,183		46,779			1,103		—			916,065
Shareholders’ equity		2,177,331		1,915,589			975,625			(2,891,214	)		2,177,331		2,511,060		1,663,051			8,725		(1,672,079	)		2,510,757
Total liabilities and shareholders’ equity	$	3,993,292	$	1,450,775		$	1,704,843		$	(2,891,214	)	$	4,257,696	$	3,379,243	$	1,709,830		$	9,828	$	(1,672,079	)	$	3,426,822

F-56

KING PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS INCOME (LOSS)

	Twelve Months Ended 12/31/2008															Twelve Months Ended 12/31/2007															Twelve Months Ended 12/31/2006
							Non															Non															Non
				Guarantor			Guarantor						King						Guarantor			Guarantor						King						Guarantor			Guarantor						King
	King			Subsidiaries			Subsidiaries			Eliminations			Consolidated			King			Subsidiaries			Subsidiaries			Eliminations			Consolidated			King			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Net sales	$	430,901		$	1,456,260		$	36,770		$	(438,312	)	$	1,485,619		$	578,050		$	2,049,800		$	437		$	(573,994	)	$	2,054,293		$	431,105		$	1,903,630		$	1,478		$	(428,070	)	$	1,908,143
Royalty revenue		—			79,442			—			—			79,442			—			82,589			—			—			82,589			—			80,357			—			—			80,357
Total revenues		430,901			1,535,702			36,770			(438,312	)		1,565,061			578,050			2,132,389			437			(573,994	)		2,136,882			431,105			1,983,987			1,478			(428,070	)		1,988,500
Operating costs and expenses:
Cost of revenues		128,399			690,554			14,488			(438,616	)		394,825			284,626			855,196			403			(573,691	)		566,534			155,472			691,399			1,007			(428,070	)		419,808
Selling, general and administrative		250,830			191,774			3,416			—			446,020			301,522			389,218			294			—			691,034			269,512			445,137			(684	)		—			713,965
Research and development		6,556			147,117			590,000			—			743,673			6,414			178,321			—			—			184,735			4,670			248,926			—			—			253,596
Depreciation and amortization		19,559			130,836			318			—			150,713			19,489			154,134			240			—			173,863			20,818			126,491			240			—			147,549
Asset impairments		114			39,315			1,566			—			40,995			—			223,025			—			—			223,025			—			47,842			—			—			47,842
Restructuring charges		3,750			3,348			—			—			7,098			37,729			32,449			—			—			70,178			202			2,992			—			—			3,194
Acquisition related costs		1,381			1			—			—			1,382			—			—			—			—			—			—			—			—			—			—
Total operating costs and expenses		410,589			1,202,945			609,788			(438,616	)		1,784,706			649,780			1,832,343			937			(573,691	)		1,909,369			450,674			1,562,787			563			(428,070	)		1,585,954
Operating income (loss)		20,312			332,757			(573,018	)		304			(219,645	)		(71,730	)		300,046			(500	)		(303	)		227,513			(19,569	)		421,200			915			—			402,546
Other income (expense):
Interest income		36,873			64			33			—			36,970			42,376			106			9			—			42,491			31,911			239			2			—			32,152
Interest expense		(7,914	)		(29	)		—			—			(7,943	)		(7,764	)		(54	)		—			—			(7,818	)		(9,694	)		(163	)		—			—			(9,857	)
Loss on investment		(7,451	)		—			—			—			(7,451	)		(11,591	)		—			—			—			(11,591	)		—			—			—			—			—
Gain on early extinguishment of debt		—			—			—			—			—			—			—			—			—			—			628			—			—			—			628
Other, net		(2,798	)		150			(987	)		—			(3,635	)		(1,093	)		827			489			—			223			(650	)		(1,022	)		515			—			(1,157	)
Equity in (loss) earnings of subsidiaries		(335,454	)		—			—			335,454			—			211,051			—			—			(211,051	)		—			315,395			—			—			(315,395	)		—
Intercompany interest income (expense)		(11,682	)		28,909			(17,227	)		—			—			(8,729	)		8,807			(78	)		—			—			(49,739	)		50,287			(548	)		—			—
Total other income (expenses)		(328,426	)		29,094			(18,181	)		335,454			17,941			224,250			9,686			420			(211,051	)		23,305			287,851			49,341			(31	)		(315,395	)		21,766
(Loss) income from continuing operations before income taxes		(308,114	)		361,851			(591,199	)		335,758			(201,704	)		152,520			309,732			(80	)		(211,354	)		250,818			268,282			470,541			884			(315,395	)		424,312
Income tax expense (benefit)		24,949			105,389			1,021			—			131,359			(30,764	)		97,669			695			—			67,600			(20,667	)		156,305			92			—			135,730
(Loss) income from continuing operations		(333,063	)		256,462			(592,220	)		335,758			(333,063	)		183,284			212,063			(775	)		(211,354	)		183,218			288,949			314,236			792			(315,395	)		288,582
Discontinued operations:
(Loss) income from discontinued operations		—			—			—			—			—			—			(369	)		—			—			(369	)		—			572			—			—			572
Income tax (benefit) expense		—			—			—			—			—			—			(132	)		—			—			(132	)		—			205			—			—			205
Total (loss) income from discontinued operations		—			—			—			—			—			—			(237	)		—			—			(237	)		—			367			—			—			367
Net (loss) income	$	(333,063	)	$	256,462		$	(592,220	)	$	335,758		$	(333,063	)	$	183,284		$	211,826		$	(775	)	$	(211,354	)	$	182,981		$	288,949		$	314,603		$	792		$	(315,395	)	$	288,949

F-57

KING PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	December 31, 2008														December 31, 2007													December 31, 2006
							Non														Non													Non
				Guarantor			Guarantor					King						Guarantor			Guarantor				King						Guarantor			Guarantor				King
	King			Subsidiaries			Subsidiaries			Eliminations		Consolidated			King			Subsidiaries			Subsidiaries		Eliminations		Consolidated			King			Subsidiaries			Subsidiaries		Eliminations		Consolidated
Cash flows provided by (used in) operating activities of continuing operations	$	104,480		$	383,528		$	3,383		$	—	$	491,391		$	50,989		$	620,503		$	1,157	$	—	$	672,649		$	(20,771	)	$	485,704		$	694	$	—	$	465,627
Cash flows from investing activities of continuing operations:
Purchase of investments in debt securities		(279,175	)		—			—			—		(279,175	)		(2,744,575	)		—			—		—		(2,744,575	)		(1,705,517	)		—			—		—		(1,705,517	)
Proceeds from maturity and sale of investments in debt securities		1,207,080			—			—			—		1,207,080			2,289,780			—			—		—		2,289,780			1,309,995			—			—		—		1,309,995
Transfer (to)/from restricted cash		(100	)		—			—			—		(100	)		(512	)		—			—		—		(512	)		128,561			—			—		—		128,561
Acquisition of Alpharma, net of cash acquired		(1,557,347	)		—			532,586			—		(1,024,761	)		—			—			—		—		—			—			—			—		—		—
Acquisition of Avinza®		(44	)		—			—			—		(44	)		(23	)		(296,414	)		—		—		(296,437	)		—			—			—		—		—
Purchases of property, plant and equipment		(43,676	)		(13,766	)		(13	)		—		(57,455	)		(31,844	)		(17,758	)		—		—		(49,602	)		(22,505	)		(23,311	)		—		—		(45,816	)
Purchases of product rights and intellectual property		—			(12,065	)		—			—		(12,065	)		—			(98,942	)		—		—		(98,942	)		—			(85,795	)		—		—		(85,795	)
Proceeds from sale of marketable securities		—			—			—			—		—			—			—			—		—		—			—			—			—		—		—
Proceeds from sale of assets		10,350			60			—			—		10,410			8			86,279			—		—		86,287			—			—			—		—		—
Loan to Ligand		—			—			—			—		—			37,750			—			—		—		37,750			(37,750	)		—			—		—		(37,750	)
Other investing activities		—			—			—			—		—			—			—			—		—		—			6			1			—		—		7
Net cash used in investing activities of continuing operations		(662,912	)		(25,771	)		532,573			—		(156,110	)		(449,416	)		(326,835	)		—		—		(776,251	)		(327,210	)		(109,105	)		—		—		(436,315	)
Cash flows from financing activities of continuing operations:
Proceeds from exercise of stock options, net		439			—			—			—		439			10,656			—			—		—		10,656			7,338			—			—		—		7,338
Excess tax benefits from stock-based compensation		(2,441	)		—			—			—		(2,441	)		705			—			—		—		705			484			—			—		—		484
Proceeds from issuance of long-term debt		617,000			—			—			—		617,000			—			—			—		—		—			400,000			—			—		—		400,000
Payments on other long-term debt		—			—			—			—		—			—			—			—		—		—			(342,691	)		—			—		—		(342,691	)
Debt issuance costs		(30,076	)		—			—			—		(30,076	)		(1,527	)		—			—		—		(1,527	)		(10,680	)		—			—		—		(10,680	)
Intercompany		365,449			(362,350	)		(3,099	)		—		—			297,101			(297,772	)		671		—		—			367,938			(368,921	)		983		—		—
Net cash provided by financing activities of continuing operations		950,371			(362,350	)		(3,099	)		—		584,922			306,935			(297,772	)		671		—		9,834			422,389			(368,921	)		983		—		54,451
Increase (decrease) in cash and cash equivalents		391,939			(4,593	)		532,857			—		920,203			(91,492	)		(4,104	)		1,828		—		(93,768	)		74,408			7,678			1,677		—		83,763
Cash and cash equivalents, beginning of year		9,718			4,645			5,646			—		20,009			101,210			8,749			3,818		—		113,777			26,802			1,071			2,141		—		30,014
Cash and cash equivalents, end of year	$	401,657		$	52		$	538,503		$	—	$	940,212		$	9,718		$	4,645		$	5,646	$	—	$	20,009		$	101,210		$	8,749		$	3,818	$	—	$	113,777

F-58

SIGNATURES

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

KING PHARMACEUTICALS, INC.

By:  /s/  Brian A. Markison

Brian A. Markison

Chairman of the Board,

President and Chief Executive Officer

February 27, 2009

In accordance with the requirements of the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Capacity	Date
/s/  BRIAN A. MARKISON Brian A. Markison	Chairman of the Board, President and Chief Executive Officer	February 27, 2009
/s/  JOSEPH SQUICCIARINO Joseph Squicciarino	Chief Financial Officer (principal financial and accounting officer)	February 27, 2009
/s/  TED G. WOOD Ted G. Wood	Lead Independent Director	February 27, 2009
/s/  EARNEST W. DEAVENPORT, JR. Earnest W. Deavenport, Jr.	Director	February 27, 2009
/s/  ELIZABETH M. GREETHAM Elizabeth M. Greetham	Director	February 27, 2009
/s/  PHILIP A. INCARNATI Philip A. Incarnati	Director	February 27, 2009
/s/  GREGORY D. JORDAN Gregory D. Jordan	Director	February 27, 2009
/s/  R. CHARLES MOYER R. Charles Moyer	Director	February 27, 2009
/s/  D. GREG ROOKER D. Greg Rooker	Director	February 27, 2009

II-1

KING PHARMACEUTICALS, INC.

Schedule II. Valuation and Qualifying Accounts

Column A	Column B		Column C Additions					Column D		Column E
						Charged
	Balances at		Charged to			(Credited)				Balance at
	Beginning of		Cost and			to Other				End of
Description	Period		Expenses			Accounts		Deductions(1)		Period
	(In thousands)
Allowance for doubtful accounts, deducted from accounts receivable in the balance sheet
Year ended December 31, 2008		5,297		266			863		1,713		4,713
Year ended December 31, 2007		5,437		950			—		1,090		5,297
Year ended December 31, 2006		12,280		(138	)		—		6,705		5,437
Valuation allowance for deferred tax assets, deducted from deferred income tax assets in the balance sheet
Year ended December 31, 2008		9,094		885			267,090		653		276,416
Year ended December 31, 2007		8,085		2,248			—		1,239		9,094
Year ended December 31, 2006		9,214		1,040			—		2,169		8,085

(1)	Amounts represent write-offs of accounts.
(2)	Reserve related to certain state and foreign net operating losses and certain other deferred tax assets of Alpharma.

S-1

EX-10.88

Exhibit 10.88

EXECUTION COPY

AMENDMENT NO. 1 TO CREDIT AGREEMENT

     AMENDMENT dated as of December 5, 2008 to the Credit Agreement dated as of April 19, 2007 among KING PHARMACEUTICALS, INC., as Borrower, the Lenders party thereto (the “Lenders”), CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent, Collateral Agent and Swingline Lender, and the other agents party thereto (as amended prior to the date hereof, the “Existing Credit Agreement”).

PRELIMINARY STATEMENTS

     Pursuant to the Merger Agreement (such term and other terms used but not otherwise defined in these Preliminary Statements having the meanings set forth in Article I of the Existing Credit Agreement as amended hereby (the “Amended Credit Agreement”)) the Borrower intends to acquire (the “Acquisition”) all of the Shares pursuant to a two-step transaction in which (a) Merger Sub will acquire pursuant to the Tender Offer, for a purchase price of $37 per share in cash, those Shares that have been validly tendered and not withdrawn and accepted for payment pursuant to the Tender Offer and (b) on the Merger Date and in accordance with the Merger Agreement, Merger Sub will be merged with and into the Target with the Target being the surviving corporation (the “Merger”), and each Share not acquired in the Tender Offer will be converted into the right to receive $37 in cash pursuant to, and subject to the provisions of, the Merger Agreement. The Borrower also intends to enter into the Term Loan Credit Agreement (the term loan facility set forth therein, the “Term Loan Facility”), the proceeds of which are to be used to enable Merger Sub to pay a portion of the Acquisition Consideration together with fees and expenses incurred in connection with the Transactions.

     In connection with the foregoing, Borrower has requested that the Lenders amend the Existing Credit Agreement to, among other things, permit the Acquisition and the Term Loan Facility. The Lenders have agreed to make such amendments on the terms, and subject to the conditions, set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:

     Section 1. Defined Terms; References. Unless otherwise specifically defined herein, each term used herein that is defined in the Amended Credit Agreement has the meaning assigned to such term in the Amended Credit Agreement. Each reference to “this Agreement”, “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference in the Existing Credit Agreement, and each reference in any other Loan Document to “the Credit Agreement”, “thereof”, “thereunder”, “therein” or “thereby” or other similar reference to the Existing Credit Agreement, shall, after the Amendment No. 1 Effective Date (as defined in Section 3 of this Amendment), refer to the Existing Credit Agreement as amended hereby.

     Section 2. Amendments to Existing Credit Agreement. With effect from the Amendment No. 1 Effective Date, the Existing Credit Agreement (but not the Exhibits

and Schedules attached thereto, which shall be replaced on or prior to the Amendment No. 1 Effective Date as set forth in Section 3(t) below) shall be amended to read in its entirety as set forth in Exhibit A hereto.

     Section 3. Conditions to Effectiveness of Amendments to Existing Credit Agreement. The amendments set forth in Section 2 shall become effective on the date (the “Amendment No. 1 Effective Date”) on which, and only when, each of the following conditions shall have been satisfied:

     (a) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Banks, a favorable written opinion of (a) Dewey & LeBoeuf LLP, counsel for the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, and (b) each other counsel that delivers an opinion in respect of the Term Loan Facility, in form and substance reasonably satisfactory to the Administrative Agent, in each case (A) dated the Amendment No. 1 Effective Date, (B) addressed to the Administrative Agent, the Issuing Banks and the Lenders, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions.

     (b) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Amendment No. 1 Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Amendment No. 1 Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Borrowings under the Amended Credit Agreement, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Lenders, the Issuing Banks or the Administrative Agent, may reasonably request.

     (c) The Administrative Agent shall have received a certificate, dated the Amendment No. 1 Effective Date and signed by a Financial Officer of the Borrower, confirming compliance as of the Amendment No. 1 Effective Date with the conditions precedent set forth in paragraphs (b), (c) and (d) of Section 4.01 of the Amended Credit Agreement and paragraphs (h)(iii), (h)(iv), (h)(v), (i), (j), (m)(ii), (o), (p) and (q) of this Section 3.

     (d) After giving effect to the Transactions occurring on the Amendment No. 1 Effective Date, the Borrower and the Subsidiaries shall have outstanding no Indebtedness for borrowed money or preferred stock other than (i) Indebtedness under the Loan Documents, (ii) the Convertible Notes, (iii) Term Indebtedness and (iv) other Indebtedness permitted under Section 6.01 of the Amended Credit Agreement (other than clause (m) thereof).

     (e) The Collateral Agent shall have received a fully executed copy of the Security Documents which (i) shall be in form and substance substantially identical to the Security Documents delivered on or prior to the Amendment No. 1 Effective Date in connection with the Term Indebtedness, (ii) shall provide that the Obligations are guaranteed by substantially all Domestic Subsidiaries (and other Subsidiaries guaranteeing the Term Indebtedness) as of the Amendment No. 1 Effective Date subject only to exceptions and limitations substantially identical to those applicable to guarantees in favor of the Term Indebtedness and (iii) shall provide that the Obligations and the guarantees thereof shall be secured by a perfected first priority lien on substantially all assets of the Borrower and its Domestic Subsidiaries, which lien shall rank pari passu with the lien securing the Term Indebtedness and which liens shall be subject only to exceptions and limitations substantially identical to those applicable to the liens securing the Term Indebtedness. The Security Documents shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Amendment No. 1 Effective Date. The Collateral Agent on behalf of the Secured Parties shall have a security interest in the Collateral of the type and priority described in each Security Document.

     (f) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Amendment No. 1 Effective Date and duly executed by a Responsible Officer of the Borrower, and shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been or will be contemporaneously released or terminated.

     (g) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, and an insurance broker’s letter with respect to, the insurance policies required by Section 5.02 of the Amended Credit Agreement and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a customary lender’s loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent.

     (h) (i) The definitive documents filed with the SEC with respect to the commencement of the Tender Offer shall have been provided to the Administrative Agent prior to the Amendment No. 1 Effective Date (or, in the case of any amendments, supplements or other modifications that were subsequently filed, prior to the filing thereof), and the terms and conditions thereof and documentation relating thereto (the “Tender Offer Documentation”) shall be in form and substance reasonably satisfactory to

the Agents (it being understood that the Tender Offer Documentation dated September 12, 2008, as extended on October 13, 2008 and as further extended on November 24, 2008 and as amended to reflect the changes thereto set forth in the Merger Agreement as in effect on the date hereof is in form and substance satisfactory to the Agents) and shall be in full force and effect, (ii) the Tender Offer Documentation shall not have been altered, amended or otherwise changed or supplemented, in each case in any respect that could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders, and no condition thereto shall have been waived, altered, amended or otherwise changed or supplemented, in each case without the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), (iii) all material aspects of the Tender Offer shall have been consummated in accordance with applicable laws and the description thereof in the Tender Offer Documentation, (iv) the offer price in the Tender Offer shall not exceed an amount mutually agreed upon by the Administrative Agent and the Borrower, and (v) Merger Sub shall have accepted for payment, pursuant to the Tender Offer, a number of Shares (x) equal to at least a majority of the total number of Shares outstanding and (y) representing at least a majority of the combined voting power of all equity securities of the Target, in each case on a fully diluted basis (the “Minimum Acceptance Condition”).

     (i) The Borrower shall have paid Acquisition Consideration from cash and cash equivalents on hand (and not from the proceeds of the Loans, loans under the Term Loan Credit Agreement or any other Indebtedness) in an amount not less than the greater of (i) $1,000,000,000 and (ii) the amount necessary to purchase Shares in an amount sufficient to satisfy the Minimum Acceptance Condition.

     (j) All shareholder rights plans, “poison pill” or any similar plans or charter or by-law provisions and all anti-takeover or similar statutes, including Section 203 of the Delaware General Corporations Law, are or will be invalid or inapplicable to the acquisition of Shares pursuant to the Transactions and to the Borrower, the Target, Merger Sub and their Affiliates.

     (k) The Administrative Agent shall have received copies of the Merger Agreement and all certificates, opinions and other documents delivered thereunder, certified by a Financial Officer as being complete and correct.

     (l) The Administrative Agent shall have received a fully executed copy of the Term Loan Credit Agreement, which agreement (i) shall have terms (other than pricing and yield), taken as a whole, not less favorable in any material respect to the Loan Parties or the Lenders than the terms set forth on Exhibit B hereto or than the Amended Credit Agreement (as such Amended Credit Agreement may be further amended prior to the Amendment No. 1 Effective Date pursuant to Section 5 below), (ii) shall have a maturity not earlier than the maturity of the Credit Facilities and (iii) shall be in an aggregate committed amount of not greater than $300,000,000 (it being understood that to the extent not satisfying the requirements set forth in clause (i) through (iii) above, such Term Loan Credit Agreement must be in form and substance reasonably satisfactory to the Required Lenders). The Term Loan Credit Agreement shall be in full force and effect on the Amendment No. 1 Effective Date and, simultaneously with the effectiveness of this Amendment, the first drawing under the Term Loan Credit Agreement shall have occurred.

     (m) (i) The Lenders shall have received the financial statements and opinions referred to in Section 3.05 of the Amended Credit Agreement, none of which shall demonstrate a material adverse change in the financial condition of the Borrower or the Target, as applicable, from (and shall not otherwise be materially inconsistent with) the financial statements or forecasts previously provided to the Lenders (it being agreed that the financial statements provided to the Joint Arrangers prior to November 23, 2008 are satisfactory) and (ii) there shall have been no material change to the capital stock of the Borrower or the Target since November 23, 2008.

     (n) The Administrative Agent shall have received a certificate from the chief financial officer of the Borrower certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Transactions to occur on the Amendment No. 1 Effective Date, are solvent.

     (o) The Administrative Agent shall be satisfied, in its reasonable judgment, that the Borrower’s Consolidated EBITDA for the four-fiscal quarter period ended at least 30 days prior to the Amendment No. 1 Effective Date (excluding Consolidated EBITDA of the Target and its subsidiaries) shall not be less than $500,000,000.

     (p) All requisite Governmental Authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required (except to the extent such approvals or consents are not material to the Transactions or the other transactions contemplated hereby), all applicable appeal periods shall have expired and there shall not be any pending or threatened litigation, governmental, administrative or judicial action that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions or the other transactions contemplated hereby. Without limiting the foregoing, the waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act 1976 (as amended, the “HSR Act”) shall have expired or have been terminated.

     (q) The Administrative Agent shall have received evidence reasonably satisfactory to it that the Borrower shall have received a public corporate credit rating of B+ or higher by S&P and a public corporate family rating of B1 or higher by Moody’s, in each case as of the Amendment No. 1 Effective Date and after giving effect to the Transactions.

     (r) The Lenders shall have received, to the extent requested, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

     (s) The Borrower shall have paid to the Administrative Agent, for the account of each Lender delivering an executed counterpart of this Amendment to the Administrative Agent at or prior to 5:00 p.m. New York City time on December 5, 2008, an amendment fee (the “Amendment Fee”) equal to 1.00% of such Lender’s Revolving Credit Commitment (whether used or unused) on such date; provided that no such fee shall be required to be paid to any Lender that agrees, in its sole discretion and in writing, to waive such fee. The Administrative Agent shall also have received all other fees and other amounts due and payable on or prior to the Amendment No. 1 Effective Date, including, to the extent invoiced, reimbursement or payment of all fees and out-of-pocket expenses (including fees, charges and disbursements of outside counsel) required to be

reimbursed or paid by any Loan Party under the Amended Credit Agreement or under any other Loan Document.

     (t) The Borrower shall have delivered to the Administrative Agent (i) Schedules to the Amended Credit Agreement in form and substance reasonably satisfactory to the Required Lenders; provided that the parties hereto agree that (x) Schedule 1.01(b), 1.01(c), 3.08, 3.19(a), 3.19(c), 3.20(a) and 3.20(b) shall be deemed to be satisfactory to the Required Lenders to the extent that they are substantially identical to the corresponding Schedules delivered under the Term Loan Credit Agreement and (y) Schedule 1.01(a), 2.01 and 2.04 shall be deemed to be satisfactory to the Required Lenders to the extent that they are substantially identical to the Schedules attached to the Existing Credit Agreement updated solely with respect to contact information and to reflect an increase, if any, in the Revolving Credit Commitments as described in Section 5(c) below and (ii) Exhibits to the Amended Credit Agreement in form and substance reasonably satisfactory to the Required Lenders; provided that the parties hereto agree that (x) Exhibit D, E and F will be deemed to be satisfactory to the Required Lenders if they satisfy the requirements relating to Security Documents set forth in Section 3(e) above, (y) Exhibits G-1, G-2 and G-3 will not be modified or replaced on the Amendment No. 1 Effective Date and (z) all other Exhibits will be deemed to be satisfactory to the Required Lenders if they are substantially identical in form and substance to the corresponding Exhibits to the Existing Credit Agreement with only such modifications as are necessary to reflect the changes made to the Existing Credit Agreement by this Amendment.

The Administrative Agent shall notify the Borrower and the Lenders of the Amendment No. 1 Effective Date, and such notice shall be conclusive and binding.

     Section 4. Certain Consequences Of Effectiveness. On and after the Amendment No. 1 Effective Date, the rights and obligations of the parties to the Existing Credit Agreement and each other Loan Document (as defined in the Existing Credit Agreement, the “Existing Loan Documents”) shall be governed by the Amended Credit Agreement and each Existing Loan Document as amended pursuant to the terms hereof; provided that the rights and obligations of the parties to the Existing Credit Agreement and the other Existing Loan Documents with respect to the period prior to the Amendment No. 1 Effective Date shall continue to be governed by the provisions of the Existing Credit Agreement and the other Existing Loan Documents prior to giving effect to this Amendment and the amendments contemplated hereby. On and after the Amendment No. 1 Effective Date, the Exhibits and Schedules attached to the Existing Credit Agreement shall be deemed to be replaced in their entirety with the Exhibits and Schedules delivered in accordance with Section 3(t).

     Section 5. Certain Consents.

     (a) Each Lender party hereto hereby authorizes the Administrative Agent and/or the Collateral Agent (as appropriate) on behalf of all Lenders to enter into such Security Documents (including any amendments, modifications or restatements of any existing Security Documents as defined in the Existing Credit Agreement (the “Existing Security Documents”)) and hereby consents to any amendments, modifications or restatements of Existing Security Documents as the Administrative Agent shall deem necessary or advisable to satisfy the condition set forth in Section 3(e) (it being understood and agreed that the same Security Documents and the same granting clause

may secure the Obligations as well as the obligations of the Loan Parties in respect of the Term Loan Facility).

     (b) Each Lender party hereto hereby further authorizes the Administrative Agent to modify Exhibit A hereto (and in so doing to modify the Amended Credit Agreement) at any time prior to the Amendment No. 1 Effective Date to the extent such modifications are necessary or in the reasonable judgment of the Administrative Agent desirable to ensure that the Term Loan Credit Agreement, taken as a whole, is not less favorable to the Loan Parties or the Lenders in any material respect than the Amended Credit Agreement (taking into account customary differences in the facilities documented thereunder).

     (c) Each Lender party hereto hereby authorizes the Administrative Agent to modify Exhibit A hereto (and in so doing to modify the Amended Credit Agreement) at any time prior to the Amendment No. 1 Effective Date to reflect an increase in the Revolving Credit Commitments of not more than $50,000,000 (it being understood that any Lender approached to provide all or any portion of such additional Revolving Credit Commitments may elect, in its sole discretion, to decline or to provide such additional Revolving Credit Commitments). Such modifications shall include changes necessary or in the reasonable judgment of the Administrative Agent desirable to achieve pro rata treatment of such additional Revolving Credit Commitments with the existing Revolving Credit Commitments, including as to participation in Letters of Credit and allocation of outstanding Loans.

     Any such amendment, modification or restatement referred to in this Section 5 shall become effective upon the written agreement of the Administrative Agent, the applicable Loan Parties and any lender providing any portion of the increase in the Revolving Credit Commitments set forth in clause (c) above without any further action or consent from any other Lender being required.

     Section 6. Binding Effect. This Amendment shall become effective and legally binding when it shall have been executed by the Borrower, the Administrative Agent, the Collateral Agent, each Issuing Bank and the Swingline Lender and the Administrative Agent (or its counsel) shall have received from the Required Lenders (as defined in the Existing Credit Agreement) either (i) a counterpart of this Amendment signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include facsimile transmission of a signed signature page of this Amendment) that such party has signed a counterpart of this Amendment. This Amendment shall bind each party’s successors and assigns, including any Person to whom any Lender party hereto assigns any of its interests, rights and obligations under the Existing Credit Agreement.

     Section 7. Governing Law.This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

     Section 8. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery by telecopier of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.

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

KING PHARMACEUTICALS, INC., as      Borrower,
By:	/s/ Brian A. Markison
	Name:	Brian A. Markison
	Title:	Chairman, President and Chief Executive Officer

8

CREDIT SUISSE, CAYMAN ISLANDS      BRANCH, as Lender, Administrative      Agent, Collateral Agent, Swingline       Lender and Issuing Bank,
By:	/s/ John D. Toronto
	Name:	John D. Toronto
	Title:	Director

By:	/s/ Shaheen Malik
	Name:	Shaheen Malik
	Title:	Associate

WACHOVIA BANK, NATIONAL      ASSOCIATION, as Lender,
By:	/s/ David Gillespie
	Name:	David Gillespie
	Title:	Managing Director

BANK HAPOALIM B.M.
By:	/s/ James P. Surless
	Name:	James P. Surless
	Title:	Vice President
By:	/s/ Charles McLaughlin
	Name:	Charles McLaughlin
	Title:	Senior Vice President

BANK OF AMERICA, N.A.
By:	/s/ Robert La Porte
	Name:	Robert La Porte
	Title:	Vice President

CHANG HWA COMMERCIAL BANK, LTD. NEW YORK BRANCH
By:	/s/ Jim C.Y. Chen
	Name:	Jim C.Y. Chen
	Title:	VP & General Manager

CITIBANK, N.A.
By:	/s/ Allen Fisher
	Name:	Allen Fisher
	Title:	Vice President

DnB NOR BANK ASA
By:	/s/ Thomas Tangen
	Name:	Thomas Tangen
	Title:	First Vice President
By:	/s/ Kristin Riise
	Name:	Kristin Riise
	Title:	VP

FIRST COMMERCIAL BANK, LOS ANGELES BRANCH
By:	/s/ Rong-Ko Chen
	Name:	Rong-Ko Chen
	Title:	VP & General Manager

FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, as Lender
By:	/s/ Freddie H. Malone
	Name:	Freddie H. Malone
	Title:	Vice President

FORTIS BANK
By:	/s/ Denis McHugh
	Name:	Denis McHugh
	Title:	Senior Managing Director

JPMORGAN CHASE BANK, NA.
By:	/s/ Barbara R. Marks
	Name:	Barbara R. Marks
	Title:	Executive Director

THE ROYAL BANK OF SCOTLAND PLC
By:	/s/ Scott MacVicar
	Name:	Scott MacVicar
	Title:	Vice President

UBS LOAN FINANCE LLC, as Lender
By:	/s/ Richard L. Tavrow
	Name:	Richard L. Tavrow
	Title:	Director
By:	/s/ /s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Associate Director

U.S BANK, NA.
By:	/s/ Thomas A. Heckman
	Name:	Thomas A. Heckman
	Title:	Vice President

Exhibit A

CREDIT AGREEMENT

Dated as of April 19, 2007,

as amended by Amendment No. 1 dated December 5, 2008

among

KING PHARMACEUTICALS, INC.,

THE LENDERS NAMED HEREIN,

CREDIT SUISSE, CAYMAN ISLANDS BRANCH
as Administrative Agent,
as Collateral Agent and
as Swingline Lender,

BANK OF AMERICA, N.A.,

and

UBS SECURITIES LLC,
as Co-Syndication Agents

CITIGROUP GLOBAL MARKETS INC.,

WACHOVIA BANK, NATIONAL ASSOCIATION,

and

THE ROYAL BANK OF SCOTLAND PLC,
as Co-Documentation Agents

U.S. BANK NATIONAL ASSOCIATION,
as Managing Agent

CREDIT SUISSE SECURITIES (USA) LLC, and
WACHOVIA CAPITAL MARKETS, LLC
as Joint Lead Arrangers and Joint Bookrunners

TABLE OF CONTENTS

	Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms		1
SECTION 1.02. Terms Generally		32
SECTION 1.03. Pro Forma Calculations		33
ARTICLE II
The Credits
SECTION 2.01. Commitments		33
SECTION 2.02. Loans		33
SECTION 2.03. Swingline Loans		36
SECTION 2.04. Letters of Credit		38
SECTION 2.05. Borrowing Procedure		44
SECTION 2.06. Evidence of Debt; Repayment of Loans		45
SECTION 2.07. Fees		45
SECTION 2.08. Interest on Loans		47
SECTION 2.09. Default Interest		47
SECTION 2.10. Alternate Rate of Interest		47
SECTION 2.11. Termination and Reduction of Commitments		48
SECTION 2.12. Conversion and Continuation of Borrowings		48
SECTION 2.13. Voluntary Prepayment; Mandatory Prepayments and Commitment Reductions		50
SECTION 2.14. Reserve Requirements; Change in Circumstances		53
SECTION 2.15. Change in Legality		55
SECTION 2.16. Indemnity		56
SECTION 2.17. Pro Rata Treatment		56
SECTION 2.18. Sharing of Setoffs		57
SECTION 2.19. Payments		57
SECTION 2.20. Taxes		58
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate		60
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers		61

i

	Page
SECTION 3.02. Authorization		62
SECTION 3.03. Enforceability		62
SECTION 3.04. Governmental Approvals		62
SECTION 3.05. Financial Statements		62
SECTION 3.06. No Material Adverse Change		64
SECTION 3.07. Title to Properties; Possession Under Leases		64
SECTION 3.08. Subsidiaries		65
SECTION 3.09. Litigation; Compliance with Laws		65
SECTION 3.10. Agreements		66
SECTION 3.11. Federal Reserve Regulations		66
SECTION 3.12. Investment Company Act		66
SECTION 3.13. Use of Proceeds		66
SECTION 3.14. Tax Returns		66
SECTION 3.15. No Material Misstatements		67
SECTION 3.16. Employee Benefit Plans		67
SECTION 3.17. Environmental Matters		67
SECTION 3.18. Insurance		69
SECTION 3.19. Security Documents		69
SECTION 3.20. Location of Real Property and Leased Premises		70
SECTION 3.21. Labor Matters		70
SECTION 3.22. Solvency		70
SECTION 3.23. Transaction Documents		71
SECTION 3.24. Sanctioned Persons		71
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events		72
SECTION 4.02. Effective Date		73
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Compliance with Laws; Businesses and Properties		75
SECTION 5.02. Insurance		75
SECTION 5.03. Obligations and Taxes		77
SECTION 5.04. Financial Statements, Reports, etc		77
SECTION 5.05. Litigation and Other Notices		80
SECTION 5.06. Information Regarding Collateral		80
SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings		81
SECTION 5.08. Use of Proceeds		81
SECTION 5.09. Employee Benefits		81

ii

	Page
SECTION 5.10. Compliance with Environmental Laws		82
SECTION 5.11. Preparation of Environmental Reports		82
SECTION 5.12. Compliance with Laws		82
SECTION 5.13. Further Assurances		82
SECTION 5.14. Interest Rate Protection		83
SECTION 5.15. Consummation of the Merger		83
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness		84
SECTION 6.02. Liens		87
SECTION 6.03. Sale and Leaseback Transactions		89
SECTION 6.04. Investments, Loans and Advances		89
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions		92
SECTION 6.06. Restricted Payments; Restrictive Agreements		93
SECTION 6.07. Transactions with Affiliates		94
SECTION 6.08. Business of Borrower and Subsidiaries		94
SECTION 6.09. Other Indebtedness and Agreements		94
SECTION 6.10. Capital Expenditures		95
SECTION 6.11. Consolidated Interest Expense Coverage Ratio		96
SECTION 6.12. Maximum Leverage Ratio		97
SECTION 6.13. Fiscal Year		99
SECTION 6.14. Certain Equity Securities		99
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agent and the Collateral Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices		106
SECTION 9.02. Survival of Agreement		109
SECTION 9.03. Binding Effect		109
SECTION 9.04. Successors and Assigns		109

iii

	Page
SECTION 9.05. Expenses; Indemnity		115
SECTION 9.06. Right of Setoff		116
SECTION 9.07. APPLICABLE LAW		117
SECTION 9.08. Waivers; Amendments		117
SECTION 9.09. Interest Rate Limitation		118
SECTION 9.10. Entire Agreement		119
SECTION 9.11. WAIVER OF JURY TRIAL		119
SECTION 9.12. Severability		119
SECTION 9.13. Counterparts		119
SECTION 9.14. Headings		120
SECTION 9.15. Jurisdiction; Consent to Service of Process		120
SECTION 9.16. Confidentiality		121
SECTION 9.17. Lender Action		121
SECTION 9.18. Patriot Act		122
SECTION 9.19. No Fiduciary Duty		122

iv

SCHEDULES:
Schedule 1.01(a)	Existing Letters of Credit
Schedule 1.01(b)	Subsidiary Guarantors
Schedule 1.01(c)	Mortgaged Property
Schedule 2.01	Lenders and Commitments
Schedule 3.08	Subsidiaries
Schedule 3.09	Litigation
Schedule 3.17	Environmental Matters
Schedule 3.18	Insurance
Schedule 3.19(a)	UCC Filing Offices
Schedule 3.19(c)	Mortgage Filing Offices
Schedule 3.20(a)	Owned Real Property
Schedule 3.20(b)	Leased Real Property
Schedule 6.01	Existing Indebtedness
Schedule 6.02	Existing Liens
Schedule 6.04(a)	Existing Investments
EXHIBITS:
Exhibit A	Form of Administrative Questionnaire
Exhibit B	Form of Assignment and Acceptance
Exhibit C	Form of Borrowing Request
Exhibit D	Form of Guarantee and Collateral Agreement
Exhibit E	Form of Mortgage
Exhibit F	Form of Affiliate Subordination Agreement
Exhibit G-1	Form of Opinion of James Elrod, Esq., General Counsel of the Borrower
Exhibit G-2	Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., special counsel to the Borrower
Exhibit G-3	Form of Opinion of Bass, Berry & Sims PLC, Tennessee counsel to the Borrower
Exhibit H	Form of Compliance Certificate

v

     CREDIT AGREEMENT dated as of April 19, 2007 as amended by Amendment No. 1 dated December 5, 2008 (as further amended, supplemented or otherwise modified from time to time, this “Agreement”), among KING PHARMACEUTICALS, INC., a Tennessee corporation (the “Borrower”); the Lenders (as defined in Article I); CREDIT SUISSE, a bank organized under the laws of Switzerland, acting through its Cayman Islands Branch, as administrative agent and collateral agent for the Lenders (in such capacity, the “Administrative Agent” and the “Collateral Agent”), and as swingline lender (in such capacity, the “Swingline Lender”), Bank of America, N.A. and UBS Securities LLC, as co-syndication agents (in such capacity, “Co-Syndication Agents”); Citigroup Global Markets Inc., Wachovia Bank, National Association and The Royal Bank of Scotland plc, as co-documentation agents (in such capacity, the “Co-Documentation Agents”); U.S. Bank National Association, as managing agent (in such capacity, the “Managing Agent”); and the Issuing Banks (as defined in Article I).

               The Borrower has requested the Lenders to extend credit in the form of Revolving Loans at any time and from time to time on or after the Effective Date and prior to the Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $475,000,000. The Borrower has requested the Swingline Lender to extend credit, at any time and from time to time prior to the Maturity Date, in the form of Swingline Loans in an aggregate principal amount at any time outstanding not in excess of $20,000,000. The Borrower has requested that the Issuing Banks issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $40,000,000 to support payment obligations incurred in the ordinary course of business by the Borrower and the Subsidiaries. The proceeds of the Revolving Loans and of the Swingline Loans are to be used by the Borrower and the Subsidiaries to provide working capital and for other general corporate purposes, including permitted acquisitions and the refinancing of amounts outstanding under the Existing Credit Agreement, and the Letters of Credit are to be used by the Borrower and the Subsidiaries for general corporate purposes. The Lenders, the Swingline Lender and the Issuing Banks have agreed to extend such credit on the terms and subject to the conditions set forth herein.

               Accordingly, the parties hereto hereby agree as follows:

ARTICLE I

Definitions

               SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

1

               “ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

               “ABR Loan” shall mean any ABR Revolving Loan or Swingline Loan.

               “ABR Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.

               “Acquired Entity” shall have the meaning assigned to such term in Section 6.04(l).

               “Acquisition” shall mean the acquisition by Borrower of all the Shares pursuant to a two-step transaction in which (a) Merger Sub will acquire pursuant to the Tender Offer, for a purchase price of $37 per share in cash, those Shares that have been validly tendered and not withdrawn and accepted for payment pursuant to the Tender Offer and (b) on the Merger Date and in accordance with the Merger Agreement, Merger Sub will be merged with and into the Target with the Target being the surviving corporation, and each Share not acquired in the Tender Offer will be converted into the right to receive $37 in cash pursuant to, and subject to the provision of, the Merger Agreement.

               “Acquisition Consideration” shall mean the consideration paid in respect of those Shares that have been validly tendered and not withdrawn in the Tender Offer and that have been accepted for payment on the Amendment No. 1 Effective Date, the consideration paid in respect of those additional Shares that are validly tendered and not withdrawn in a subsequent offering period pursuant to the Tender Offer, and the consideration paid on or immediately after the effective date of the Merger and to pay the appraised value of any Shares held by holders who have properly perfected rights to appraisal in accordance with Section 262 of the Delaware General Corporation Law.

               “Acquisition Transactions” shall have the meaning set forth in Section 3.02.

               “Adjusted LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves.

               “Administrative Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.07(b).

2

               “Administrative Questionnaire” shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.

               “Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.

               “Affiliate Subordination Agreement” shall mean an Affiliate Subordination Agreement in the form of Exhibit F pursuant to which intercompany obligations and advances owed by any Loan Party to a person that is not a Loan Party are subordinated to the Obligations.

               “Agents” shall have the meaning assigned to such term in Article VIII.

               “Agreement” shall have the meaning assigned to such term in the preamble hereto.

               “Aggregate Revolving Credit Exposure” shall mean the aggregate amount of the Lenders’ Revolving Credit Exposures.

               “Agreement Value” shall mean, for each Hedging Agreement, on any date of determination, the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any Subsidiary would be required to pay if such Hedging Agreement were terminated on such date.

               “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the inability of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

               “Alpharma Convertible Note Indenture” shall mean the Indenture dated as of March 20, 2007, as supplemented by the First Supplemental Indenture dated March 20, 2007, each between Alpharma Inc. and U.S. Bank National Association, as trustee, as in effect on the Amendment No. 1 Effective Date.

3

               “Alpharma Convertible Notes” shall mean the 2.125% convertible senior notes due 2027 issued by Alpharma Inc. pursuant to the Alpharma Convertible Note Indenture and outstanding on the Amendment No. 1 Effective Date.

               “Alpharma Escrow Account” shall have the meaning assigned to such term in Section 5.16.

               “Amendment No. 1” shall mean Amendment No. 1 to this Agreement, dated as of December 5, 2008, among the Borrower, the Swingline Lender, the Issuing Bank, the Administrative Agent and the Collateral Agent and the lenders party thereto.

               “Amendment No. 1 Effective Date” shall have the meaning assigned to such term in Amendment No. 1.

               “Applicable Commitment Reduction Date” shall mean (a) with respect to the Net Cash Proceeds of any Asset Sale, Equity Issuance, incurrence or issuance of Indebtedness, ARS Liquidation Event or Extraordinary Receipt, the earliest of (i) the third Business Day following the date of receipt by the Borrower or any Subsidiary of such Net Cash Proceeds, (ii) the date designated as the Applicable Commitment Reduction Date by notice in writing from the Borrower to the Administrative Agent and (iii) solely in the case of Net Cash Proceeds from any Asset Sales or ARS Liquidation Event, the date on which any loans outstanding under the Term Loan Credit Agreement are prepaid from the proceeds of such Asset Sale or ARS Liquidation and (b) with respect to any prepayments required to be made pursuant to Section 2.13(g) from Excess Cash Flow, the earliest of (i) the 90^th day following the end of each fiscal year of the Borrower, commencing with the first fiscal year ending after the Term Loan Facility Termination, (ii) the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a) and (iii) the date designated as the Applicable Commitment Reduction Date by notice in writing from the Borrower to the Administrative Agent.

               “Applicable Percentage” shall mean, for any day (a) with respect to any Eurodollar Revolving Loan, 5.00% per annum, (b) with respect to any ABR Loan, 4.00% per annum, and (c) with respect to the Commitment Fees, 0.50% per annum.

               “ARS Liquidation Event” shall mean any event which enables the Borrower or any Subsidiary to convert its auction rate securities into cash or other immediately available funds (whether through incurring Permitted ARS Indebtedness, the redemption of such auction rate securities by the issuer thereof, the repurchase of such auction rate securities by the seller thereof, the sale of such auction rate securities by the Borrower or such Subsidiary, or otherwise).

4

               “Asset Sale” shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries (other than directors’ qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory (including raw material), damaged, obsolete, surplus or worn out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) dispositions between or among Foreign Subsidiaries, (iii) dispositions of Margin Stock for cash and for fair market value as determined in good faith by the board of directors of the Borrower; provided that the cash proceeds received in connection with any such disposition are held in cash or Permitted Investments, (iv) solely for the purpose of Section 2.13(e), any ARS Liquidation Event and (v) any sale, transfer or other disposition or series of related sales, transfers or other dispositions having a value not in excess of $500,000).

               “Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.

               “Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

               “Borrower” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Borrower Materials” shall have the meaning assigned to such term in Section 9.01.

               “Borrowing” shall mean a group of Loans of a single Class and Type made by the Lenders on a single date and as to which a single Interest Period is in effect.

               “Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.05 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent.

               “Breakage Event” shall have the meaning assigned to such term in Section 2.16.

               “Business Day” shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Revolving 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.

5

               “Capital Expenditures” shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its consolidated Subsidiaries during such period, but excluding in each case any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation.

               “Capital Lease Obligations” of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

               A “Change in Control” shall be deemed to have occurred if (a) any “person” or “group” (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934, as amended, as in effect on the date hereof) shall own, directly or indirectly, beneficially or of record, shares representing more than 20% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower, (b) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall at any time be occupied by persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated, or (c) any change in control (or similar event, however denominated) with respect to the Borrower or any of the Subsidiaries shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness to which the Borrower or any Subsidiary is a party.

               “Charges” shall have the meaning assigned to such term in Section 9.09.

               “Class”, when used in respect of any Loan or Borrowing, shall refer to whether such Loan or Borrowing shall be a Revolving Loan or Borrowing or a Swingline Loan, and, in the case of a Revolving Loan or Borrowing and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment or Swingline Commitment.

               “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

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               “Collateral” shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties.

               “Collateral Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Commitment” shall mean a Revolving Credit Commitment or Swingline Commitment.

               “Commitment Fee” shall have the meaning assigned to such term in Section 2.07(a).

               “Communications” shall have the meaning assigned to such term in Section 9.01.

               “Confidential Information” shall have the meaning assigned to such term in Section 9.16.

               “Confidential Information Memorandum” shall mean the Confidential Information Memorandum of the Borrower dated November 2008.

               “Controlled Deposit Account” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

               “Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) the aggregate amount of letter of credit fees paid during such period, (iii) consolidated income tax expense for such period, (iv) all amounts attributable to depreciation and amortization expense for such period, (v) all extraordinary charges for such period, (vi) all other non-cash charges (other than the write-down of current assets) for such period, (vii) all Milestone expenses paid during such period, (viii) Transaction Fees paid in cash during such period, (ix) all other non-recurring cash charges incurred for such period in connection with the Merger (including payments to officers, employees and directors as change of control payments, severance payments, special or retained bonuses and charges for repurchases or rollover of, or modifications to, stock options); provided that no more than $75,000,000 in the aggregate may be added back pursuant to this clause during the term of this Agreement and (x) all other non-recurring cash charges incurred during such period; provided that no more than $125,000,000 in the aggregate may be added back pursuant to this clause during the term of this Agreement and minus (b) without duplication (i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to clause (a)(vi) above in a previous period and (ii) to the extent included in determining such Consolidated Net Income, any extraordinary gains and all non-cash

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items of income for such period, all as determined on a consolidated basis with respect to the Borrower and the Subsidiaries in accordance with GAAP; provided that solely for purposes of calculating the Leverage Ratio in connection with determining compliance with Section 6.12 for any period and the Consolidated Interest Expense Coverage Ratio with respect to the first three full fiscal quarters ended after the Amendment No. 1 Effective Date (A) the Consolidated EBITDA of any Acquired Entity acquired by the Borrower or any Subsidiary pursuant to a Permitted Acquisition during such period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred as of the first day of such period) and (B) the Consolidated EBITDA of any person or line of business sold or otherwise disposed of by the Borrower or any Subsidiary during such period shall be excluded for such period (assuming the consummation of such sale or other disposition and the repayment of any Indebtedness in connection therewith occurred as of the first day of such period). For purposes of determining the Consolidated Interest Expense Coverage Ratio and the Leverage Ratio as of or for the periods ended on March 31, 2009 and June 30, 2009, Consolidated EBITDA will be deemed to be equal to (i) for the fiscal quarter ended June 30, 2008, $175,000,000 and (ii) for the fiscal quarter ended September 30, 2008, $189,000,000.

               “Consolidated Interest Expense” shall mean, for any period, the interest expense, both expensed and capitalized (including the interest component in respect of Capital Lease Obligations and Synthetic Lease Obligations), accrued or paid by the Borrower and the Subsidiaries during such period, determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower and the Subsidiaries with respect to interest rate Hedging Agreements.

               “Consolidated Interest Expense Coverage Ratio” shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period; provided that (i) for the purpose of determining the Consolidated Interest Expense Coverage Ratio, no effect shall be given to FASB Staff Position No. APB 14-1 dated May 9, 2008 and (ii) for the first three consecutive full fiscal quarters ending on or after the Amendment No. 1 Effective Date, Consolidated Interest Expense shall be deemed to be equal to (a) the Consolidated Interest Expense for the first such fiscal quarter, multiplied by 4, (b) the sum of Consolidated Interest Expense for the first and second such fiscal quarters, multiplied by 2 and (c) the sum of Consolidated Interest Expense for the first, second and third fiscal quarters ended, multiplied by 4/3, respectively.

               “Consolidated Net Income” shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period, as determined on a consolidated basis in accordance with GAAP; provided that there

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shall be excluded (a) the income of any person (other than the Borrower) in which any other person (other than the Borrower or a Wholly Owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has a joint equity interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a Wholly Owned Subsidiary by such person during such period, (b) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (c) the income or loss of any person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary, and (d) any gains attributable to sales of assets out of the ordinary course of business.

               “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

               “Convertible Note Indenture” shall mean the Indenture dated as of March 29, 2006, between King Pharmaceuticals, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company, N.A., as trustee.

               “Convertible Notes” shall mean 1¹/₄% convertible senior notes due April 1, 2026, issued pursuant to the Convertible Note Indenture.

               “Co-Documentation Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Co-Syndication Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Credit Event” shall have the meaning assigned to such term in Section 4.01.

               “Credit Facilities” shall mean the revolving credit, swingline and letter of credit facilities provided for by this Agreement.

               “Current Assets” shall mean, at any time, the consolidated current assets (other than cash and Permitted Investments) of the Borrower and the Subsidiaries.

               “Current Liabilities” shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but

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excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b) outstanding Revolving Loans and Swingline Loans.

               “Default” shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.

               “Defaulting Lender” shall mean (a) any Lender that has (i) defaulted in its obligation to make a Loan or to fund its participation in a Letter of Credit or Swingline Loan required to be made or funded by it hereunder, or (ii) notified the Administrative Agent or a Loan Party in writing that it does not intend to satisfy any such obligation, or (b) any Lender that has become insolvent, is the subject of any bankruptcy, insolvency, receivership or similar proceedings or the assets or management of which has been taken over by (or at the direction of) any Governmental Authority; provided that, for the purpose of Sections 2.03(a) and 2.21(a), “Defaulting Lender” shall include any Lender that, in the good faith judgment of the Swingline Lender, is reasonably likely to become a Defaulting Lender; and provided further that, for the purpose of Sections 2.04(a) and 2.21(a), “Defaulting Lender” shall include any Lender that, in the good faith judgment of the Issuing Bank, is reasonably likely to become a Defaulting Lender.

               “Deposit Account Control Agreement” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

               “Disqualified Stock” shall mean any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case at any time on or prior to the first anniversary of the Maturity Date, or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the first anniversary of the Maturity Date; provided that for the purpose of this definition, the Maturity Date shall be determined without regard to the proviso to the definition thereof.

               “dollars” or “$” shall mean lawful money of the United States of America.

               “Domestic Subsidiary” shall mean a Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

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               “Effective Date” shall mean the date on which the conditions set forth in Section 4.02 are satisfied (or waived in accordance with Section 9.08).

               “environment” shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or as otherwise defined in any Environmental Law.

               “Environmental Claim” shall mean any written allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases), (b) exposure to any Hazardous Material, (c) the presence, use, handling, generation, transportation, storage, treatment or disposal of any Hazardous Material or (d) the violation or alleged violation of any Environmental Law or Environmental Permit.

               “Environmental Law” shall mean any and all applicable present and future treaties, laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of or exposure to any Hazardous Material or to health and safety matters, including, but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. (collectively “CERCLA”), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. § 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. § 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. § 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq., and any similar or implementing foreign, state or local law, and all amendments or regulations promulgated under any of the foregoing.

               “Environmental Permit” shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law.

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               “Equity Interests” shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in any person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

               “Equity Issuance” shall mean any issuance or sale by the Borrower or any Subsidiary of any Equity Interests of the Borrower or such Subsidiary, as applicable, except in each case for (a) any issuance or sale to the Borrower or any Subsidiary, (b) any issuance of directors’ qualifying shares, and (c) sales or issuances of common stock of the Borrower to management or employees of the Borrower or any Subsidiary under any employee stock incentive, stock option or stock purchase plan (or other equity-based compensation plan or arrangement) or employee benefit plan in existence from time to time.

               “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

               “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

               “ERISA Event” shall mean (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; and (h) the occurrence of a “prohibited transaction” with respect to which the Borrower or any of the Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) with respect to which the Borrower or any such Subsidiary could otherwise have or incur material liabilities.

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               “Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Revolving Loans.

               “Eurodollar Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.

               “Event of Default” shall have the meaning assigned to such term in Article VII.

               “Excess Cash Flow” shall mean, for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year and (ii) reductions to non-cash working capital of the Borrower and the Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) over (b) the sum, without duplication, of (i) the amount of any Taxes payable in cash by the Borrower and the Subsidiaries with respect to such fiscal year, (ii) Consolidated Interest Expense for such fiscal year paid in cash, (iii) Capital Expenditures made in cash in accordance with Section 6.10 during such fiscal year, except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated EBITDA, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13) made in cash by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness, (v) the aggregate amount of letter of credit fees paid in cash by the Borrower and the Subsidiaries during such fiscal year, (vi) the aggregate amount of Milestone payments made in cash by the Borrower and the Subsidiaries during such fiscal year, (vii) to the extent added to Consolidated Net Income in the calculation of Consolidated EBITDA for such fiscal year, (x) all Transaction Fees paid in cash during such fiscal year, (y) the aggregate amount of other non-recurring cash charges incurred during such fiscal year in connection with the Merger (including payments to officers, employees and directors as change of control payments, severance payments, special or retained bonuses and charges for repurchases or rollover of, or modifications to, stock options); provided that no more than $75,000,000 in the aggregate may be deducted pursuant to this clause (y) during the term of this Agreement and (z) the aggregate amount of other non-recurring cash charges incurred by the Borrower and the Subsidiaries during such fiscal year; provided that no more than $125,000,000 in the aggregate may be deducted pursuant to this clause (z) during the term of this Agreement and (viii) additions to non-cash working capital for such fiscal year (i.e., the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year).

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               “Excluded Taxes” shall mean, with respect to the Administrative Agent, any Lender or Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located (provided, however, that none of any Lender or Issuing Bank or any other recipient shall be deemed to be located in any jurisdiction solely as a result of receiving any payments under, or taking any other action related to, any loan under this or any other agreement), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section  2.21(a)), any withholding tax that (i) is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to any withholding tax pursuant to Section 2.20(a) or (ii) is attributable to such Foreign Lender’s failure to comply with Section 2.20(e).

               “Existing Credit Agreement” shall mean the Credit Agreement dated as of April 23, 2002, as amended by the First Amendment dated as of March 22, 2006, among the Borrower, the lenders named therein, and Credit Suisse, as administrative agent and collateral agent.

               “Existing Letters of Credit” means the existing letters of credit issued under the Existing Credit Agreement and listed on Schedule 1.01(a). The Borrower shall be deemed to have requested the issuance of each Existing Letter of Credit for the purpose hereof.

               “Extraordinary Receipt” shall mean any cash received by or paid to or for the account of the Borrower or any Subsidiary in respect of any purchase price adjustments or indemnity payments payable in connection with the Acquisition.

               “Federal Funds Effective Rate” shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

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               “Fee Letter” shall mean the Fee Letter dated March 5, 2007, among the Borrower, the Administrative Agent and Credit Suisse.

               “Fees” shall mean the Commitment Fees, the Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.

               “Financial Officer” of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.

               “Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

               “Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

               “Fronting Fee” shall have the meaning assigned to such term in Section 2.07(c).

               “GAAP” shall mean United States generally accepted accounting principles applied on a consistent basis.

               “Governmental Authority” shall mean any Federal, state, local, foreign or transnational court or governmental agency, authority, instrumentality or regulatory body.

               “Granting Lender” shall have the meaning assigned to such term in Section 9.04(i).

               “Guarantee” of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

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               “Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral Agreement, substantially in the form of Exhibit D, among the Borrower, the Subsidiaries party thereto and the Collateral Agent.

               “Guarantors” shall mean the Subsidiary Guarantors.

               “Hazardous Materials” shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls (“PCBs”) or PCB containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law.

               “Health Care Laws” shall mean any and all applicable current and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by the Food and Drug Administration, the Center for Medicare and Medicaid Services, the Department of Health and Human Services (“HHS”), the Office of Inspector General of HHS, the Drug Enforcement Administration or any other Governmental Authority (including any professional licensing laws, certificate of need laws and state reimbursement laws), relating in any way to the manufacture, distribution, marketing, sale, supply or other disposition of any product or service of the Borrower or any Subsidiary, the conduct of the business of the Borrower or any Subsidiary, the provision of health care services generally, or to any relationship among the Borrower and the Subsidiaries, on the one hand, and their suppliers and customers and patients and other end-users of their products and services, on the other hand.

               “Hedging Agreement” shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

               “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvement Act of 1970.

               “Indebtedness” of any person shall mean, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others secured

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by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all Synthetic Lease Obligations of such person, (j) net obligations of such person under any Hedging Agreements, valued at the Agreement Value thereof, (k) all obligations of such person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests of such person or any other person or any warrants, rights or options to acquire such equity interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (l) all obligations of such person as an account party in respect of letters of credit and (m) all obligations of such person in respect of bankers’ acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner.

               “Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

               “Indemnitee” shall have the meaning assigned to such term in Section 9.05(b).

               “Interest Payment Date” shall mean (a) with respect to any ABR Loan (including any Swingline Loan), the last Business Day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing.

               “Interest Period” shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is 1, 2, 3 or 6 (or, if agreed to by each Lender, 9) months thereafter, as the Borrower may elect; provided, however, that, (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) 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 end on the last Business Day of the calendar month at the end of such Interest Period and (c) no Interest Period for any Loan shall extend beyond the maturity date of such Loan. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such

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Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

               “Issuing Bank” shall mean, at any time, Credit Suisse and each other person that is listed on Schedule 2.04 or that shall have become an Issuing Bank hereunder as provided in Section 2.04(j) (other than any person that shall have ceased to be an Issuing Bank as provided in Section 2.04(i)), each in its capacity as an issuer of Letters of Credit hereunder.

               “Issuing Bank Agreement” shall have the meaning assigned to such term in Section 2.04(j).

               “Issuing Bank Fees” shall have the meaning assigned to such term in Section 2.07(c).

               “Joint Arrangers” shall mean Credit Suisse Securities (USA) LLC and Wachovia Capital Markets, LLC.

               “L/C Commitment” shall mean, as to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit pursuant to Section 2.04. The initial amount of each Issuing Bank’s L/C Commitment is specified on Schedule 2.04 or in the Issuing Bank Agreement pursuant to which it shall have become an Issuing Bank.

               “L/C Disbursement” shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit.

               “L/C Exposure” shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Lender at any time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.

               “L/C Participation Fee” shall have the meaning assigned to such term in Section 2.07(c).

               “Lenders” shall mean the financial institutions listed on Schedule 2.01 and any other financial institution that has become a party hereto pursuant to an Assignment and Acceptance, other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance. Unless the context clearly indicates otherwise, the term “Lenders” shall include the Swingline Lender.

               “Letter of Credit” shall mean (i) any letter of credit issued pursuant to Section 2.04 and (ii) the Existing Letters of Credit.

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               “Leverage Ratio” shall mean, on any date, the ratio of (a) Total Funded Debt on such date to (b) Consolidated EBITDA for the most recently ended period of four fiscal quarters, all as determined on a consolidated basis in accordance with GAAP.

               “LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date which is two Business Days prior to the beginning of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by any service selected by the Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates) for a period equal to such Interest Period, provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” shall be the interest rate per annum determined by the Administrative Agent equal to the average of the rates per annum (rounded upwards, if necessary, to the next 1/16 of 1%) at which deposits in dollars are offered for such Interest Period by two major banks selected by the Administrative Agent in the London interbank market at approximately 11:00 a.m., London time, on the date two Business Days prior to the beginning of such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of an amount equal to the applicable Loans and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

               “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

               “Loan Documents” shall mean this Agreement, the Letters of Credit, the Security Documents, any promissory notes issued pursuant to Section 2.06 and any other document executed in connection with the foregoing.

               “Loan Parties” shall mean the Borrower and the Subsidiary Guarantors.

               “Loans” shall mean the Revolving Loans and the Swingline Loans.

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               “Managing Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Margin Stock” shall have the meaning assigned to such term in Regulation U.

               “Material Adverse Effect” shall mean one or more events, changes or effects which, individually or in the aggregate, have had or could reasonably be expected to have a material adverse effect on (a) the business, assets, results of operations, condition (financial or otherwise) or prospects of the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Borrower or any other Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (c) the validity or enforceability of any of the Loan Documents or any other documents entered into in connection with the Transactions or other transactions contemplated thereby or the rights, remedies and benefits available to the parties thereunder; provided that solely for the purposes of determining whether the condition in Section 4.01(b) has been satisfied on the Amendment No. 1 Effective Date, a “Material Adverse Effect” shall be deemed to have occurred for purposes of Section 3.06(a) if (x) there shall have occurred any event, change or condition since December 31, 2007 that, individually or in the aggregate, has had, or could reasonably be expected to have, a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise), operating results, projections or prospects of the Target and its subsidiaries, taken as a whole, or (y) there shall have occurred any event, change or condition since December 31, 2007 that, individually or in the aggregate, has had, or could reasonably be expected to have, a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise), operating results, projections or prospects of the Borrower and its subsidiaries, taken as a whole. For the avoidance of doubt, neither a Skelaxin Expiration Event nor a Skelaxin Trigger Event shall constitute a Material Adverse Effect.

               “Material Foreign Subsidiary” shall mean any Foreign Subsidiary (a) the consolidated revenues of which for the most recent period of four fiscal quarters of the Borrower for which audited financial statements have been delivered pursuant to Section 5.04 were greater than 2.5% of the Borrower’s total consolidated revenues for such period or (b) the consolidated assets of which as of the end of such period were greater than 2.5% of the Borrower’s total consolidated assets as of such date.

               “Material Indebtedness” shall mean Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower or any Subsidiary in an aggregate principal amount exceeding $35,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the Agreement Value of such Hedging Agreement at such time.

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               “Material Leased Property” shall have the meaning assigned to such term in Section 3.20(b).

               “Maturity Date” shall mean April 19, 2012; provided that, notwithstanding the foregoing, the Maturity Date shall be October 1, 2011 (or, if such date is not a Business Day, the immediately preceding Business Day) unless (a) the Convertible Notes shall have been refinanced in full on terms reasonably satisfactory to the Administrative Agent on or prior to October 1, 2011 and (b) the Administrative Agent shall have notified the Borrower in writing on or prior to October 1, 2011 of the satisfaction of clause (a).

               “Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

               “Merger” shall mean the merger on the Merger Date of Merger Sub with and into Target, with Target being the surviving entity, in accordance with the Merger Agreement.

               “Merger Agreement” shall mean the Agreement and Plan of Merger dated as of November 23, 2008 among the Borrower, Merger Sub and the Target, as amended from time to time in compliance with Section 6.09(b).

               “Merger Date” shall mean the date on which the Merger is consummated.

               “Merger Sub” shall mean Albert Acquisition Corp., a wholly owned Delaware subsidiary of the Borrower.

               “Milestone” shall mean all in-process research and development costs and payments due upon achievement of certain clinical, regulatory and sales conditions.

               “Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

               “Mortgaged Properties” shall mean, initially, the owned real properties and leasehold and subleasehold interests of the Loan Parties specified on Schedule 1.01(c), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.13.

               “Mortgages” shall mean the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other security documents delivered pursuant to Section 3(e) of Amendment No. 1 or pursuant to Section 5.13, each substantially in the form of Exhibit E.

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               “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

               “Non-Consenting Lender” means any Lender that withholds its consent to any proposed amendment, modification or waiver that cannot become effective without the consent of such Lender under Section 9.08, and that has been consented to by the Required Lenders.

               “Net Cash Proceeds” shall mean (a) with respect to any Asset Sale, the cash proceeds thereof (including cash proceeds subsequently received (as and when received) in respect of non-cash consideration initially received), net of (i) selling expenses (including actual broker’s fees or commissions, legal fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money (other than Term Indebtedness) which is secured by the asset sold in such Asset Sale and which is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); provided, however, that, if (x) the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent at the time of receipt thereof setting forth the Borrower’s intent to reinvest such proceeds in productive assets of a kind then used or usable in the business of the Borrower and its Subsidiaries within 180 days of receipt of such proceeds, (y) no Default or Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, and (z) such proceeds are not proceeds of any Required Divestiture, such proceeds shall not constitute Net Cash Proceeds except to the extent that either (A) such proceeds are not so used, and no legally binding commitment to so use such proceeds has been entered into with an entity that is not an Affiliate of the Borrower or its Subsidiaries, on or prior to the end of such 180-day period or (B) a legally binding commitment to so use such proceeds has been entered into on or prior to the end of such 180-day period with an entity that is not an Affiliate of the Borrower or its Subsidiaries, but such proceeds are not so used on or prior to the 90th day following the end of such 180-day period, in either case, at which time such proceeds shall be deemed to be Net Cash Proceeds; provided further that no cash proceeds of an Asset Sale shall constitute Net Cash Proceeds until the aggregate amount of all Net Cash Proceeds from Asset Sales (without giving effect to this proviso) exceeds $5,000,000; (b) with respect to any issuance or incurrence of Indebtedness or any Equity Issuance or with respect to any ARS Liquidation Event, the cash proceeds thereof, net of all taxes and customary fees, commissions, costs and other expenses incurred in connection therewith (and, in

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the case of any ARS Liquidation Event, net of the principal amount, premium or penalty, if any, interest or other amount on any Permitted ARS Indebtedness which is required to be paid with such proceeds); and (c) with respect to any Extraordinary Receipt, the cash proceeds thereof; provided further that for purposes of this definition, an ARS Liquidation Event shall be governed by clause (b).

               “Obligations” shall mean all obligations defined as “Revolving Secured Obligations” in the Guarantee and Collateral Agreement and the guarantees thereof set forth in the Guarantee and Collateral Agreement.

               “OFAC” shall have the meaning assigned to such term in Section 3.24.

               “Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

               “Patriot Act” shall have the meaning assigned to such term in Section 9.18.

               “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

               “Perfection Certificate” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

               “Permitted Acquisition” shall have the meaning assigned to such term in Section 6.04(l).

               “Permitted ARS Indebtedness” shall mean any Indebtedness of the Borrower or any other Loan Party that is secured solely by Liens permitted under Section 6.02(o) and that is otherwise on terms and conditions reasonably satisfactory to the Administrative Agent.

               “Permitted Investments” shall mean:

     (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of issuance thereof;

     (b) investments in commercial paper maturing within 270 days from the date of issuance thereof and having, at the date of acquisition, a

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rating of at least “Prime 1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P;

     (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent, the Collateral Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and that issues (or the parent of which issues) commercial paper rated at least “Prime 1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P;

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (c) above;

     (e) investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above;

     (f) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing; and

     (g) other investment instruments approved in writing by the Required Lenders.

          For the avoidance of doubt, auction rate securities shall not constitute Permitted Investments.

               “person” shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

               “Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

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               “Platform” shall have the meaning assigned to such term in Section 9.01.

               “Prime Rate” shall mean the rate of interest per annum announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City, New York; each change in the Prime Rate shall be effective on the date such change is announced as being effective.

               “Properties” shall have the meaning assigned to such term in Section 3.17(a).

               “Pro Rata Percentage” of any Lender at any time shall mean the percentage of the Total Revolving Credit Commitment represented by such Lender’s Revolving Credit Commitment. In the event the Revolving Credit Commitments shall have been terminated, the Pro Rata Percentages of the Lenders shall be determined by reference to the Revolving Credit Commitments most recently in effect (giving effect to any assignments pursuant to Section 9.04).

               “Public Lender” shall have the meaning assigned to such term in Section 9.01.

               “Qualified Capital Stock” of any person shall mean any Equity Interest of such person that is not Disqualified Stock.

               “Register” shall have the meaning assigned to such term in Section 9.04(d).

               “Regulation T” shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

               “Regulation U” shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

               “Regulation X” shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

               “Related Fund” shall mean, with respect to any Lender that is a fund that invests in loans, any other fund that invests in loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

               “Related Parties” shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, officers, employees, trustees, agents and advisors of such person and such person’s Affiliates.

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               “Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the environment.

               “Remedial Action” shall mean (a) “remedial action” as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the environment; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above.

               “Required Divestiture” means any Asset Sale required by the applicable Governmental Authority as a condition to obtaining any approval to, or as a condition to not objecting to, restraining or preventing, the Acquisition under the HSR Act.

               “Required Lenders” shall mean, at any time, Lenders having Revolving Loans, L/C Exposures, Swingline Exposures and unused Revolving Credit Commitments representing a majority of the sum of all outstanding Revolving Loans, L/C Exposures, Swingline Exposures and unused Revolving Credit Commitments.

               “Responsible Officer” of any person shall mean the chief executive officer, the president or any Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

               “Restricted Indebtedness” shall mean Indebtedness of the Borrower or any Subsidiary, the payment, prepayment, repurchase or defeasance of which is restricted under Section 6.09.

               “Restricted Payment” shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in the Borrower or any Subsidiary.

               “Revolving Borrowing” shall mean a Borrowing comprised of Revolving Loans.

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               “Revolving Credit Commitment” shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.11 or 2.13 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.

               “Revolving Credit Exposure” shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender’s L/C Exposure, plus the aggregate amount at such time of such Lender’s Swingline Exposure.

               “Revolving Loans” shall mean the revolving loans made by the Lenders to the Borrower pursuant to Section 2.01. Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.

               “S&P” shall mean Standard & Poor’s Ratings Services, or any successor thereto.

               “SEC” shall mean the U.S. Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

               “Secured Parties” shall mean the “Revolving Secured Parties” as defined in the Guarantee and Collateral Agreement.

               “Security Documents” shall mean the Mortgages, the Guarantee and Collateral Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.13.

               “Shares” shall mean all of the issued and outstanding shares of Class A Common Stock, par value $0.20 per share, together with the associated preferred stock purchase rights, of the Target.

               “Skelaxin Expiration Event” shall mean that any one or more of the following shall have occurred: (i) U.S. Patent Nos. 6,407,128, 6,683,102 or any other United States Patent listed in the Food and Drug Administration’s Orange Book with reference to Skelaxin (the “Skelaxin Patents”) shall have expired, (ii) any final non-appealable judgment of any court of competent jurisdiction shall have been entered holding that any Skelaxin Patent is non-infringed, invalid or unenforceable or (iii) any authorized sale in the United States of a Food and Drug Administration approved generic product of the same dosage, form and strength as Skelaxin (metaxalone) shall have occurred.

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               “Skelaxin Trigger Event” shall mean that, as a result of a Skelaxin Expiration Event, the revenue of the Borrower and the Subsidiaries for any fiscal quarter shall be more than 20% less than the revenue of the Borrower and the Subsidiaries for the corresponding fiscal quarter of the prior fiscal year, in each case as determined on a consolidated basis in accordance with GAAP.

               “SPC” shall have the meaning assigned to such term in Section 9.04(i).

               “Specified Share” shall mean (i) at any time following the Term Loan Facility Termination, 100% and (ii) at any time prior to the Term Loan Facility Termination, a fraction expressed as a percentage, the numerator of which is the outstanding Revolving Credit Commitment at such time and the denominator of which is the sum of (x) the outstanding Revolving Credit Commitment at such time whether used or unused plus (y) the aggregate outstanding amounts of loans and unused commitment under the Term Loan Credit Agreement at such time.

               “Statutory Reserves” shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board for Eurocurrency Liabilities (as defined in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Revolving Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

               “subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

               “Subsidiary” shall mean any and all subsidiaries of the Borrower.

               “Subsidiary Guarantor” shall mean each Subsidiary listed on Schedule 1.01(b), and each other Subsidiary that is or becomes a party to the Guarantee and Collateral Agreement.

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               “Swingline Commitment” shall mean the commitment of the Swingline Lender to make loans pursuant to Section 2.03, as the same may be reduced from time to time pursuant to Sections 2.11 or 2.13.

               “Swingline Exposure” shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time.

               “Swingline Lender” shall have the meaning assigned to such term in the preamble to this Agreement.

               “Swingline Loan” shall mean any loan made by the Swingline Lender pursuant to Section 2.03.

               “Swingline Maturity Date” shall mean, as to any Swingline Loan, the earlier of the Maturity Date and the date that is 30 days after the date on which such Loan was made.

               “Synthetic Lease” shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

               “Synthetic Lease Obligations” shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

               “Synthetic Purchase Agreement” shall mean any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than the Borrower or any Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest or Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.

               “Target” shall mean Alpharma Inc., a Delaware corporation.

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               “Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

               “Tender Offer” shall mean the offer to purchase for cash all of the Shares by Merger Sub pursuant to the Tender Offer Documentation and in accordance with the Merger Agreement.

               “Tender Offer Documentation” shall mean the definitive documents filed with the SEC with respect to the Tender Offer, including (x) the Offer to Purchase for Cash all outstanding Shares dated as of September 12, 2008 as extended on October 13, 2008 and further extended on November 24, 2008 and as modified to reflect the changes thereto set forth in the Merger Agreement and (y) the related Letter of Transmittal, each as amended from time to time in compliance with Section 6.09(b).

               “Term Indebtedness” shall mean Indebtedness of the Borrower under the Term Loan Credit Agreement and all guarantees thereof by any Subsidiary Guarantor and all refinancings, renewals and extensions thereof that are permitted by Section 6.01(l).

               “Term Liens” shall have the meaning assigned to such term in Section 6.02(r).

               “Term Loan Credit Agreement” shall mean the Term Loan Credit Agreement dated as of the Amendment No. 1 Effective Date among the Borrower, Credit Suisse as Administrative Agent, and the other agents and lenders party thereto from time to time, as amended from time to time in accordance with Section 6.09 and any term loan credit agreement governing any refinancing, renewal or extension of Indebtedness thereunder as permitted by Section 6.01(l).

               “Term Loan Documents” shall mean the “Loan Documents” under, and as defined in, the Term Loan Credit Agreement, and any documents governing refinancings, renewals and extensions of the Indebtedness under the Term Loan Credit Agreement that are permitted by Section 6.01(l).

               “Term Loan Facility Termination” shall occur when all commitments under the Term Loan Credit Agreement shall have terminated or expired, and the principal of all loans outstanding under the Term Loan Credit Agreement, and all interest on such loans and all other amounts outstanding under the Term Loan Credit Agreement (other than contingent indemnification and expense reimbursement obligations as to which no claim shall have been asserted) shall have been paid in full.

               “Term Refinanced Indebtedness” shall have the meaning assigned to such term in Section 6.01(l).

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               “Term Refinancing Indebtedness” shall have the meaning assigned to such term in Section 6.01(l).

               “Total Funded Debt” shall mean, as of any date of determination, without duplication, the aggregate principal amount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date (other than Indebtedness of the type referred to in clauses (i), (j), (k) and (l) of the definition of such term, except, (x) in the case of such clause (j), to the extent of the Agreement Value of any Hedging Agreement that has been terminated and (y) in the case of such clause (l), to the extent of any unreimbursed drawings thereunder).

               “Total Revolving Credit Commitment” shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time.

               “Transaction Fees” means fees or expenses in an aggregate amount not exceeding $70,000,000 for the term of this Agreement incurred or paid by Borrower or any Subsidiary in connection with the Transactions.

               “Transactions” shall mean, collectively, (a) the execution, delivery and performance by the Borrower and Merger Sub of the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby, (b) the consummation of the Tender Offer, (c) the execution, delivery and performance by the Loan Parties of the Loan Documents and the Term Loan Documents to which they are a party and the making of the borrowings hereunder or thereunder and (d) the payment of related fees and expenses.

               “Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall include the Adjusted LIBO Rate and the Alternate Base Rate.

               “Uniform Commercial Code” shall mean the Uniform Commercial Code in effect from time to time in the State of New York; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

               “Uniform Customs” shall have the meaning assigned to such term in Section 9.07.

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          “Wholly Owned Subsidiary” of any person shall mean a subsidiary of such person of which securities (except for directors’ qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, Controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.

          “Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

          “Withdrawal Certificate” shall have the meaning assigned to such term in Section 5.16.

          SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time, in each case in accordance with the express terms of this Agreement, (b) any reference to any statute, regulation or other law shall be construed (i) as referring to such statute, regulation or other law as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor statutes, regulations or other laws) and (ii) to include all official rulings and interpretations thereunder, (c) any reference herein to any person shall be construed to include such person’s successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) the words “assets” or “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (f) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Amendment No. 1 Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the

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application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

          SECTION 1.03. Pro Forma Calculations. All computations required to be made hereunder to demonstrate pro forma compliance with any covenant after giving effect to any acquisition, investment, sale, disposition or similar event shall reflect on a pro forma basis such event and, to the extent applicable, the historical earnings and cash flows associated with the assets acquired or disposed of and any related incurrence or reduction of Indebtedness, but shall not take into account any projected synergies or similar benefits expected to be realized as a result of such event; provided that projected synergies or similar benefits may be included to the extent permitted to be recognized in pro forma statements prepared in accordance with Regulation S-X under the Securities Act.

ARTICLE II

The Credits

          SECTION 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Revolving Loans to the Borrower, at any time and from time to time on or after the Effective Date and until the earlier of the Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Credit Commitment. Within the limits set forth in the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans.

          SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to paragraph (f) below, the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $1,000,000 or (ii) equal to the remaining available balance of the Revolving Credit Commitments.

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          (b) Subject to Sections 2.10 and 2.15, each Borrowing (other than Swingline Loans) shall be comprised entirely of ABR Loans or Eurodollar Revolving Loans as the Borrower may request pursuant to Section 2.05. Each Swingline Loan shall be an ABR Loan. Each Lender may at its option make any Eurodollar Revolving Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings being outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

          (c) Except with respect to Loans made pursuant to paragraph (f) below, each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 12:00 (noon), New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account in the name of the Borrower designated by the Borrower in the applicable Borrowing Request (or, in the case of Loans made on the Effective Date, first apply such amounts to pay amounts outstanding under the Existing Credit Agreement) or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

          (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing (which payment shall not

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constitute a waiver of, or otherwise adversely affect, the Borrower’s rights against such Lender, if any) and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.

          (e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Borrowing or the conversion or continuation of any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

          (f) If the applicable Issuing Bank shall not have received from the Borrower the payment required to be made by Section 2.04(e) in respect of any L/C Disbursement within the time specified in such Section, such Issuing Bank will promptly notify the Administrative Agent of the amount of such L/C Disbursement and the Administrative Agent will promptly notify each Lender of such amount and its Pro Rata Percentage thereof. Each Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Lender shall have received such notice later than 12:00 (noon), New York City time, on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Lender’s Pro Rata Percentage of such L/C Disbursement (it being understood that (i) if the conditions precedent to borrowing set forth in Sections 4.01(b) and 4.01(c) have been satisfied, such amount shall be deemed to constitute an ABR Revolving Loan of such Lender and, to the extent of such payment, the obligations of the Borrower in respect of such L/C Disbursement shall be discharged and replaced with the resulting ABR Borrowing, and (ii) if such conditions precedent to borrowing have not been satisfied, then any such amount paid by any Lender shall not constitute a Loan and shall not relieve the Borrower from its obligation to reimburse such L/C Disbursement), and the Administrative Agent will promptly pay to such Issuing Bank amounts so received by it from the Lenders. The Administrative Agent will promptly pay to such Issuing Bank any amounts received by it from the Borrower pursuant to Section 2.04(e) prior to the time that any Lender makes any payment pursuant to this paragraph (f); any such amounts received by the Administrative Agent thereafter will be promptly remitted by the Administrative Agent to the Lenders that shall have made such payments and to such Issuing Bank, as their interests may appear. If any Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Lender and the Borrower severally agree to pay interest on such amount, for each day from and including the date such

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amount is required to be paid in accordance with this paragraph to but excluding the date such amount is paid, to the Administrative Agent for the account of such Issuing Bank at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable to ABR Revolving Loans pursuant to Section 2.08(a) (which payment shall not constitute a waiver of, or otherwise adversely affect, the Borrower’s rights against such Lender, if any) and (ii) in the case of such Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate.

          SECTION 2.03. Swingline Loans. (a) Swingline Commitment. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, the Swingline Lender agrees to make loans to the Borrower at any time and from time to time on and after the Effective Date and until the earlier of the Maturity Date and the termination of the Revolving Credit Commitments in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all Swingline Loans exceeding $20,000,000 or (ii) the Aggregate Revolving Credit Exposure, after giving effect to any Swingline Loan, exceeding the Total Revolving Credit Commitment; provided that the Swingline Lender shall not make a Swingline Loan to refinance an outstanding Swingline Loan. Each Swingline Loan shall be in a principal amount that is an integral multiple of $500,000. Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow Swingline Loans hereunder, subject to the terms, conditions and limitations set forth herein. Notwithstanding anything to the contrary contained in this Section 2.03 or elsewhere in this Agreement, (i) the Swingline Lender shall not be obligated to make any Swingline Loan at a time when a Lender is a Defaulting Lender unless the Swingline Lender has entered into arrangements satisfactory to it and the Borrower to eliminate the Swingline Lender’s risk with respect to the Defaulting Lender’s or Defaulting Lenders’ participation in such Swingline Loans, including by cash collateralizing such Defaulting Lender’s or Defaulting Lenders’ Pro Rata Percentage of the outstanding Swingline Loans, and (ii) the Swingline Lender shall not make any Swingline Loan after it has received written notice from the Borrower, any other Loan Party or the Required Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice (A) of rescission of all such notices from the party or parties originally delivering such notice or notices or (B) of the waiver of such Default or Event of Default in accordance with Section 9.08(b).

          (b) Swingline Loans. The Borrower shall notify the Swingline Lender (with a copy to the Administrative Agent) by facsimile, or by telephone (promptly confirmed by facsimile), not later than 10:00 a.m., New York City time, on the day of a proposed Swingline Loan. Such notice shall be delivered on a Business Day, shall be irrevocable, shall refer to this Agreement and shall specify the requested date (which shall be a Business

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Day) and amount of such Swingline Loan. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender by 2:00 p.m., New York City time, on the day such Swingline Loan is so requested.

          (c) Prepayment. The Borrower shall have the right at any time and from time to time to prepay any Swingline Loan, in whole or in part, upon giving irrevocable written or facsimile notice (or telephone notice promptly confirmed by written, or facsimile notice) to the Swingline Lender (with a copy to the Administrative Agent) before 12:00 (noon), New York City time, on the date of prepayment at the Swingline Lender’s address for notices specified on Schedule 2.01.

          (d) Interest. Each Swingline Loan shall be an ABR Loan and, subject to the provisions of Section 2.09, shall bear interest as provided in Section 2.08(a).

          (e) Participations. The Swingline Lender may, by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day, in its sole discretion, require the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding; provided that such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Article VII(g) or Article VII(h)) or upon the exercise of any of the remedies provided in the last paragraph of Article VII. Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate. The Administrative Agent will, promptly upon receipt of such notice, give notice to each Lender, specifying in such notice such Lender’s Pro Rata Percentage of such Swingline Loan or Loans. In furtherance of the foregoing, each Lender hereby irrevocably, absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s Pro Rata Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is irrevocable, absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default or the termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(c) with respect to Loans made by such Lender (and Section 2.02(c) shall apply, with the necessary changes, to the payment obligations of the Lenders) and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the

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Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

          SECTION 2.04. Letters of Credit. (a) General. (i) The Borrower may request the issuance of a Letter of Credit (A) for its own account or (B) for the account of any Subsidiary, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time on and after the Effective Date while the Revolving Credit Commitments remain in effect. This Section shall not be construed to impose an obligation upon any Issuing Bank to issue any Letter of Credit that is inconsistent with the terms and conditions of this Agreement. Notwithstanding anything to the contrary contained in this Section 2.04 or elsewhere in this Agreement, in the event that a Lender is a Defaulting Lender, no Issuing Bank shall be required to issue any Letter of Credit unless such Issuing Bank has entered into arrangements satisfactory to it and the Borrower to eliminate such Issuing Bank’s risk with respect to the participation in Letters of Credit by all such Defaulting Lenders, including by cash collateralizing each such Defaulting Lender’s Pro Rata Percentage of each L/C Disbursement. The Borrower unconditionally and irrevocably agrees that, in connection with any Letter of Credit referred to in clause (B) of the first sentence of this paragraph, it will be fully responsible for the reimbursement of L/C Disbursements, the payment of interest thereon and the payment of L/C Participation Fees and other fees due under Section 2.07 to the same extent as if it were the sole account party in respect of such Letter of Credit (the Borrower hereby irrevocably waiving any defenses that might otherwise be available to it as a guarantor of the obligations of any Subsidiary that shall be an account party in respect of any such Letter of Credit).

          (ii) On the Effective Date, each Issuing Bank that has issued an Existing Letter of Credit shall be deemed, without further action by any party hereto, to have granted to each Lender and each Lender shall be deemed to have purchased from such Issuing Bank a participation in such Existing Letter of Credit in accordance with paragraph (d) below. On and after the Effective Date, each Existing Letter of Credit shall constitute a Letter of Credit for all purposes hereof. Any Lender that issued an Existing Letter of

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Credit but shall not have entered into an Issuing Bank Agreement shall have the rights of an Issuing Bank as to such Letter of Credit for purposes of this Section 2.04.

          (b) Notice of Issuance; Amendment, Renewal, Extention; Certain Conditions. In order to request the issuance of a Letter of Credit (or to amend, renew or extend an existing Letter of Credit), the Borrower shall hand deliver or facsimile to the applicable Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) below), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed $40,000,000, (B) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment and (C) the portion of the L/C Exposure attributable to Letters of Credit of the Issuing Bank requested to issue or amend, renew or extend such Letter of Credit shall not exceed the L/C Commitment of such Issuing Bank.

          (c) Expiration Date. Each Letter of Credit shall expire at the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit and (ii) the date that is five Business Days prior to the Maturity Date, unless such Letter of Credit expires by its terms on an earlier date; provided that any Letter of Credit may provide for renewal thereof under customary “evergreen” provisions reasonably satisfactory to the applicable Issuing Bank for additional one-year periods (which shall in no event extend beyond the date referred to in clause (ii) above).

          (d) Participations. By the issuance of a Letter of Credit and without any further action on the part of the applicable Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Lender, and each such Lender hereby acquires from the applicable Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby irrevocably, absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such

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Lender’s Pro Rata Percentage of each L/C Disbursement made by each Issuing Bank and not reimbursed by the Borrower forthwith on the date due as provided in Section 2.02(f). Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is irrevocable, absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default or the termination of the Revolving Credit Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

          (e) Reimbursement. If an Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall pay or cause the Subsidiary for whose account such Letter of Credit shall have been issued to pay to the Administrative Agent an amount equal to such L/C Disbursement not later than two hours after the Borrower shall have received notice from the Issuing Bank that payment of such draft will be made, or, if the Borrower shall have received such notice later than 10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m., New York City time, on the immediately following Business Day.

          (f) Obligations Absolute. The Borrower’s obligations to reimburse L/C Disbursements as provided in paragraph (e) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of:

     (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;

     (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;

     (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, any Issuing Bank, the Administrative Agent or any Lender or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;

     (iv) any draft or other document presented under a 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;

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     (v) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and

     (vi) any other act, or omission to act, or delay of any kind of any Issuing Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.

          Without limiting the generality of the foregoing, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or willful misconduct of the Issuing Banks. However, the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof; it is understood that any Issuing Bank may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit, without responsibility for further investigation, and make payment under such Letter of Credit, unless, in the Issuing Bank’s judgment, it has received information that proves any such documents to be forged or fraudulent; provided that the Issuing Bank shall not be liable in any respect for any error made as a result of, or damages resulting from, the exercise of its judgment with regard to any such documents if such judgment is made in good faith. The parties hereto expressly agree that (i) such Issuing Bank’s exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under a Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to the Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in substantial compliance with the terms of the Letter of Credit, and whether or not any other statement or any other document presented pursuant to the Letter of Credit proves to be forged, fraudulent or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under the Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the applicable Issuing Bank.

          (g) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents

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purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall as promptly as possible give telephonic notification, confirmed by facsimile, to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Lender notice thereof.

          (h) Interim Interest. If an Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of the Issuing Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment by the Borrower or the date on which interest shall commence to accrue thereon as provided in Section 2.02(f), at the rate per annum that would apply to such amount if such amount were an ABR Loan.

          (i) Resignation or Removal of an Issuing Bank. An Issuing Bank may resign at any time by giving 90 days’ prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to such Issuing Bank, the Administrative Agent and the Lenders. Upon the acceptance of any appointment as an Issuing Bank hereunder by a Lender that shall agree to serve as a successor Issuing Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of such retiring Issuing Bank. Upon the resignation or removal of an Issuing Bank hereunder, such Issuing Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such resignation or removal shall become effective, the Borrower shall pay all fees accrued for the account of the Issuing Bank under Section 2.07(c)(ii) and not yet paid. After the resignation or removal of an Issuing Bank hereunder, such Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit.

          (j) Designation of Additional Issuing Banks. From time to time, the Borrower may by notice to the Administrative Agent and the Lenders designate one or more Lenders (with the consent of each such Lender) reasonably acceptable to the Administrative Agent as additional Issuing Banks. The acceptance by a Lender of any appointment as an Issuing Bank hereunder shall be evidenced by an agreement (an “Issuing

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Bank Agreement”), which shall be in a form satisfactory to the Borrower and the Administrative Agent, shall set forth the L/C Commitment and Issuing Bank Fees of such Lender and shall be executed by such Lender, the Borrower and the Administrative Agent and, from and after the effective date of such agreement, (i) such Lender shall have all the rights and obligations of an Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term “Issuing Bank” shall be deemed to include such Lender in its capacity as an Issuing Bank. Any Lender designated as an issuing bank pursuant to this paragraph (j) shall be deemed to be an “Issuing Bank” (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Bank and such Lender.

          (k) Cash Collateralization. If any Event of Default shall occur and be continuing, the Borrower shall, on the Business Day it receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit) thereof, deposit in an account with the Collateral Agent, for the benefit of the Lenders, an amount in cash equal to the L/C Exposure as of such date; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable in immediately available funds, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g) or (h) of Article VII. Such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Collateral Agent, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Administrative Agent to reimburse the Issuing Banks for L/C Disbursements for which they have not been reimbursed, (ii) be held for the satisfaction of the reimbursement obligations of the Borrower for the L/C Exposure at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Lenders holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Letters of Credit), be applied to satisfy the Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent

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not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

          (l) Issuing Bank Reports. Unless otherwise agreed by the Administrative Agent, each Issuing Bank shall report in writing to the Administrative Agent (i) on or prior to each Business Day on which such Issuing Bank issues, amends, renews or extends any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the face amounts of the Letters of Credit issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension (and whether the amounts thereof shall have changed), it being understood that such Issuing Bank shall not effect any issuance, renewal, extension or amendment resulting in an increase in the aggregate amount of the Letters of Credit issued by it without first obtaining written confirmation from the Administrative Agent that such increase is then permitted under this Agreement, (ii) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date, currency and amount of such L/C Disbursement, (iii) on any Business Day on which the applicable Borrower fails to reimburse an L/C Disbursement required to be reimbursed to such Issuing Bank on such day, the date of such failure and the currency and amount of such L/C Disbursement and (iv) on any other Business Day, such other information as the Administrative Agent shall reasonably request as to the Letters of Credit issued by such Issuing Bank.

          SECTION 2.05. Borrowing Procedure. In order to request a Borrowing (other than a Swingline Loan, or a deemed Borrowing pursuant to Section 2.02(f), as to which this Section 2.05 shall not apply), the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York City time, one Business Day before a proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable, and shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business Day), (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of

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one month’s duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.05 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

          SECTION 2.06. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender (i) the then unpaid principal amount of each Revolving Loan on the Maturity Date and (ii) the then unpaid principal amount of each Swingline Loan on the applicable Swingline Maturity Date.

          (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

          (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and, if a Eurodollar Revolving Loan, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender’s share thereof.

          (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with their terms.

          (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.

          SECTION 2.07. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year and on the date on which the last of

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the Commitments of such Lender shall expire or be terminated as provided herein, a commitment fee (a “Commitment Fee”) equal to the Applicable Percentage per annum on the daily unused amount of the Revolving Credit Commitment of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the date on which the last of the Commitments of such Lender shall expire or be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall commence to accrue on the date hereof and shall cease to accrue on the date on which the last of the Commitments of such Lender shall expire or be terminated as provided herein. For purposes of calculating Commitment Fees only, no portion of the Revolving Credit Commitments shall be deemed utilized by virtue of any Swingline Loan being outstanding.

          (b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein (the “Administrative Agent Fees”).

          (c) The Borrower agrees to pay (i) to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Credit Commitment of such Lender shall be terminated as provided herein, a fee (an “L/C Participation Fee”) calculated on such Lender’s Pro Rata Percentage of the daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate equal to the Applicable Percentage from time to time used to determine the interest rate on Borrowings comprised of Eurodollar Revolving Loans pursuant to Section 2.08 and (ii) to each Issuing Bank with respect to each Letter of Credit issued thereby (A) on the last Business Day of March, June, September and December of each year and on the date on which all Letters of Credit issued by such Issuing Bank have been canceled or have expired, a fronting fee equal to a percentage per annum (as shall be agreed upon by the Borrower and such Issuing Bank) of the average daily aggregate face amount, during the preceding quarter (or shorter period, as provided above), of all outstanding Letters of Credit issued by such Issuing Bank (the “Fronting Fee”) and (B) the standard, issuance, drawing and amendment fees specified from time to time by such Issuing Bank (together with the Fronting Fee, the “Issuing Bank Fees”). All L/C Participation Fees and Fronting Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

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          (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall be refundable under any circumstances; provided, however, that the foregoing shall in no event constitute a waiver of or otherwise affect any claims the Borrower may have against any other party to this Agreement.

          SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section 2.09, the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage.

          (b) Subject to the provisions of Section 2.09, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage.

          (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate for any day or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

          SECTION 2.09. Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) (a) in the case of overdue principal, at the rate otherwise applicable to such Loan pursuant to Section 2.08 plus 2% per annum and (b) in all other cases, at the rate per annum applicable at such time to ABR Loans plus 2% per annum.

          SECTION 2.10. Alternate Rate of Interest. In the event and on each occasion that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not exceed the cost to any Lender of making or maintaining its Eurodollar Revolving

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Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or facsimile notice (which, in the case of a facsimile notice, shall be followed by a written notice) of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.05 or 2.12 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error.

          SECTION 2.11. Termination and Reduction of Commitments. (a)The Revolving Credit Commitments, the Swingline Commitment and the L/C Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Maturity Date.

          (b) Upon at least three Business Days’ prior irrevocable written or facsimile notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce the Revolving Credit Commitments; provided, however, that (i) each partial reduction of the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time.

          SECTION 2.12. Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing (other than a Swingline Loan) into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:

     (i) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;

     (ii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting

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Borrowing shall satisfy the limitations specified in Sections 2.02(a) and (b) regarding the principal amount and maximum number of Borrowings of the relevant Type;

     (iii) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Revolving Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;

     (iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;

     (v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;

     (vi) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing;

     (vii) upon notice to the Borrower from the Administrative Agent, which may be given at the request of any Lender, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued at the end of the applicable Interest Period as, a Eurodollar Revolving Loan.

          Each notice pursuant to this Section shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section and of each Lender’s portion of any converted or continued Borrowing.

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If the Borrower shall not have given notice in accordance with this Section to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued into a new Interest Period as an ABR Borrowing.

          SECTION 2.13. Voluntary Prepayment; Mandatory Prepayments and Commitment Reductions. (a)The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days’ prior written or facsimile notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000.

          (b) Each notice of voluntary prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments (whether voluntary or mandatory) under this Section shall be subject to Section 2.16 but otherwise without premium or penalty. All prepayments (whether voluntary or mandatory) under this Section 2.13 shall be accompanied by accrued and unpaid interest on the principal amount being prepaid to but excluding the date of payment.

          (c) In the event of any termination of all the Revolving Credit Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Loans and all outstanding Swingline Loans and replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and each Issuing Bank with respect to) all outstanding Letters of Credit issued by such Issuing Bank. If, after giving effect to any partial reduction of the Revolving Credit Commitments (including for the avoidance of doubt, any mandatory or scheduled commitment reduction pursuant to this Section 2.13) or at any other time, the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment, then the Borrower shall, on the date of such reduction or at such other time, repay or prepay Revolving Borrowings or Swingline Loans (or a combination thereof) and, after the Revolving Borrowings and Swingline Loans shall have been repaid or prepaid in full, replace or cause to be canceled (or make other arrangements satisfactory to the Administrative Agent and each Issuing Bank with respect to) Letters of Credit issued by such Issuing Bank in an amount sufficient to eliminate such excess.

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          (d) Subject to clause (l) below, on each date set forth below or, if such date is not a Business Day, on the next preceding Business Day, the Revolving Credit Commitments shall be automatically and permanently reduced to the amount set forth below for such date (in each case unless permanently reduced to or below such amount prior to such date).

Step-Down Date	Amount
March 31, 2009	$	457,187,500
June 30, 2009	$	439,375,000
September 30, 2009	$	421,562,500
December 31, 2009	$	403,750,000
March 31, 2010	$	380,000,000
June 30, 2010	$	356,250,000
September 30, 2010	$	332,500,000
December 31, 2010	$	308,750,000
March 31, 2011	$	285,000,000
June 30, 2011	$	261,250,000
September 30, 2011	$	237,500,000
December 31, 2011	$	213,750,000
March 31, 2012	$	190,000,000

          (e) Subject to clause (l) below, in the event and on each occasion that Borrower or any Subsidiary receives Net Cash Proceeds from any Asset Sale, the Revolving Credit Commitments shall be automatically and permanently reduced on the Applicable Commitment Reduction Date by an amount equal to (i) the Specified Share multiplied by (ii) the amount of such Net Cash Proceeds.

          (f) Subject to clause (l) below, in the event and on each occasion that, following the Term Loan Facility Termination, the Borrower or any Subsidiary receives Net Cash Proceeds from any Equity Issuance, the Revolving Credit Commitments shall be automatically and permanently reduced on the Applicable Commitment Reduction Date by an amount equal to 50% of the amount of such Net Cash Proceeds.

          (g) Subject to clause (l) below, on each Applicable Commitment Reduction Date with respect to Excess Cash Flow prepayments, the Revolving Credit Commitments shall be automatically and permanently reduced by an amount equal to 50% of Excess Cash Flow for

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the fiscal year then ended; provided that the percentage referred to above shall be reduced to 25% if (1) the Leverage Ratio at the end of such fiscal year is less than 1.75 to 1.0 and (2) no Default or Event of Default shall have occurred and be continuing on such Applicable Commitment Reduction Date.

          (h) Subject to clause (l) below, in the event and on every occasion that, following the Term Loan Facility Termination, the Borrower or any Subsidiary receives Net Cash Proceeds from the issuance or incurrence of Indebtedness for money borrowed (other than any cash proceeds from the issuance of Indebtedness for money borrowed permitted pursuant to Section 6.01), the Revolving Credit Commitments shall be automatically and permanently reduced on the Applicable Commitment Reduction Date by an amount equal to the amount of such Net Cash Proceeds.

          (i) Subject to clause (l) below, in the event and on every occasion that the Borrower or any Subsidiary shall receive Net Cash Proceeds from any ARS Liquidation Event, the Revolving Credit Commitments shall be automatically and permanently reduced on the Applicable Commitment Reduction Date by an amount equal to (i) the Specified Share multiplied by (ii) 100% of such Net Cash Proceeds.

          (j) Subject to clause (l) below, in the event and on every occasion that, following the Term Loan Facility Termination, the Borrower or any Subsidiary shall receive Net Cash Proceeds from any Extraordinary Receipt, the Revolving Credit Commitments shall be automatically and permanently reduced on the Applicable Commitment Reduction Date by an amount equal to the amount of such Net Cash Proceeds.

          (k) The Borrower shall deliver to the Administrative Agent, at the time of each Commitment reduction required under clauses (e) through (j) of this Section 2.13, a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such reduction and any prepayment of Loans or arrangements with respect to Letters of Credit required pursuant to clause (c) hereof in connection with such reduction. The Borrower shall provide at least three days’ prior written notice of such reduction and prepayment specifying the Applicable Commitment Reduction Date and, if applicable, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid or arrangements required to be made with respect to Letters of Credit.

          (l) No reduction in Revolving Credit Commitments shall be required pursuant to clauses (d) through (j) of this Section 2.13 to the extent that immediately after giving effect to such reduction the aggregate

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amount of the Revolving Credit Commitments would be less than $150,000,000.

          SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender or Issuing Bank of the principal of or interest on any Eurodollar Revolving Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of taxes imposed on the overall net income of such Lender or Issuing Bank by the jurisdiction in which such Lender or Issuing Bank has either its principal office or applicable lending office or by any political subdivision or taxing authority therein), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or Issuing Bank (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Revolving Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender or Issuing Bank of making or maintaining any Eurodollar Revolving Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise) by an amount determined in good faith by such Lender or Issuing Bank to be material, then the Borrower will pay to such Lender or Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

          (b) If any Lender or Issuing Bank shall have determined that the adoption after the date hereof of any law, rule, regulation, agreement or guideline regarding capital adequacy, or any change after the date hereof in any such law, rule, regulation, agreement or guideline (whether such law, rule, regulation, agreement or guideline has been adopted) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or Issuing Bank or any Lender’s or Issuing Bank’s holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any Governmental Authority has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence

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of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by such Issuing Bank pursuant hereto to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy) by an amount deemed by such Lender or Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.

          (c) A certificate of a Lender or Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above, together with an explanation in reasonable detail, shall be delivered to the Borrower. In determining any additional amounts owing under this SectionSECTION 2.14, each Lender or Issuing Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; provided that such Lender’s or Issuing Bank’s determination of compensation owing under this SectionSECTION 2.14 shall, absent manifest error, unreasonableness or bad faith, be final and conclusive and binding on all parties hereto. The Borrower shall pay such Lender or Issuing Bank the amount shown as due on any such certificate delivered by it within 15 days after its receipt of the same; provided that if the Borrower shall reasonably dispute such amount, the amount due shall be paid within three Business Days after such dispute is resolved.

          (d) Failure or delay on the part of any Lender or Issuing Bank to demand compensation for any increased costs or reductions in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the change in law or other circumstance giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided further that, if the change in law or other circumstance giving rise to such increased costs or reductions is retroactive, then the 90 day period referred to above shall be extended to include the period of retroactive effect thereof. The protection of this Section shall be available to each Lender and Issuing Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation,

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agreement, guideline or other change or condition that shall have occurred or been imposed.

          SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if, after the date hereof, any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Revolving Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Revolving Loan, then, by written notice to the Borrower and to the Administrative Agent:

     (i) such Lender may declare that Eurodollar Revolving Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods) and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Revolving Loans, whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Revolving Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and

     (ii) such Lender may require that all outstanding Eurodollar Revolving Loans made by it be converted to ABR Loans, in which event all such Eurodollar Revolving Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.

In the event any Lender shall exercise its rights under clause (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Revolving Loans that would have been made by such Lender or the converted Eurodollar Revolving Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Revolving Loans.

          (b) For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Revolving Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Revolving Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

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          SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against any actual loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Revolving Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Revolving Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Revolving Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Revolving Loan to be made by such Lender (including any Eurodollar Revolving Loan to be made pursuant to a conversion or continuation under Section 2.12) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a “Breakage Event”) or (b) any default in the making of any payment or prepayment of any Eurodollar Revolving Loan required to be made hereunder. In the case of any Breakage Event, such actual loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its actual cost (which may be determined by such Lender by any reasonable method) of obtaining funds for the Eurodollar Revolving Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.16, together with an explanation in reasonable detail, shall be delivered to the Borrower. In determining any additional amounts owing under this Section 2.16, each Lender or Issuing Bank will act reasonably and in good faith; provided that such Lender’s or Issuing Bank’s determination of compensation owing under this Section 2.16 shall, absent manifest error, unreasonableness or bad faith, be final and conclusive and binding on all parties hereto.

          SECTION 2.17. Pro Rata Treatment. Except as provided below in this Section 2.17 with respect to Swingline Loans and as required under Section 2.15, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans of any Class, each payment of commitment fees with respect to Commitments of any Class, each reduction of the Commitments of any Class and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans of the applicable Class). For purposes of determining the available Revolving Credit Commitments of the Lenders at any time, each outstanding Swingline Loan shall be deemed to have utilized the Revolving Credit Commitments of the Lenders

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(including those Lenders which shall not have made Swingline Loans) pro rata in accordance with such respective Revolving Credit Commitments. Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole dollar amount.

          SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker’s lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result of which the unpaid principal portion of its Loans and participations in Swingline Loans and L/C Disbursements shall be proportionately less than the unpaid principal portion of the Loans and participations in Swingline Loans and L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans, participations in Swingline Loans and L/C Exposure, as the case may be, of such other Lender, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate unpaid principal amount of the Loans and L/C Exposure and participations in Loans and L/C Exposure held by all the Lenders; provided, however, that (i) if any such participations are purchased pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such participations shall be rescinded to the extent of such recovery and the purchase price restored without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Swingline Loans or L/C Disbursements to any assignee or participant, other than to the Borrower or any of the Subsidiaries or any Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason of such participation as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.

          SECTION 2.19. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due

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in immediately available dollars, without setoff, defense or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. Each such payment (other than (i) Issuing Bank Fees, which shall be paid directly to the applicable Issuing Banks, (ii) principal of and interest on Swingline Loans, which shall be paid directly to the Swingline Lender except as otherwise provided in Section 2.03(e) and (iii) payments pursuant to Sections 2.14, 2.16, 2.20 and 9.05 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein) shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, New York 10010, or as otherwise directed.

          (b) The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof. Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.

          (c) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and Fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and Fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and Fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed L/C Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such parties.

          SECTION 2.20. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that, if the Borrower or any other Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, each Lender and each Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount

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deducted to the relevant Governmental Authority in accordance with applicable law.

          (b) In addition, the Borrower or any other Loan Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

          (c) The Borrower or any other Loan Party shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or Issuing Bank, shall be conclusive absent manifest error. The Administrative Agent, Lender or Issuing Bank may, at its sole reasonable discretion, take such steps as the Borrower reasonably requests to assist the Borrower, at the Borrower’s own expense, to minimize or, as applicable, recover such Indemnified Taxes or Other Taxes.

          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or any other Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the United States, or any treaty to which the United States is a party, with respect to payments under this Agreement shall, after having received from the Borrower or any other Loan Party notice of the availability of such exemptions from or reductions of withholding tax, as well as all such appropriate documentation prescribed by applicable law, deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower or any other Loan Party as will permit such payments to be made without withholding or at a reduced rate; provided

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that such Foreign Lender is lawfully able to do so and that complying with such requirements would not require such Lender Party to disclose any confidential or proprietary information or be otherwise materially disadvantageous to such Lender Party (in form, in procedure or in the substance of information disclosed).

          SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or Issuing Bank delivers a notice described in Section 2.15, (iii) the Borrower is required to pay any amount to any Lender or Issuing Bank or any Governmental Authority on account of any Lender or Issuing Bank pursuant to Section 2.20, (iv) any Lender becomes a Non-Consenting Lender, or (v) any Lender becomes a Defaulting Lender the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(e)), upon notice to such Lender or Issuing Bank, and the Administrative Agent, require such Lender or Issuing Bank to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (w) with respect to clauses (i) to (iii) above, such assignment will result in a reduction in the claim for compensation under Section 2.14 or in the withdrawal of the notice under Section 2.15 or in the reduction of payments under Section 2.20, as the case may be, (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of each Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, and (z) the Borrower or such assignee shall have paid to the affected Lender or Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or Issuing Bank, respectively, plus all Fees and other amounts accrued for the account of such Lender or Issuing Bank hereunder (including any amounts under Section 2.14 and Section 2.16); provided further that, if prior to any such transfer and assignment (A) in the case of clauses (i) to (iii) above, the circumstances or event that resulted in such Lender’s or Issuing Bank’s claim for compensation under Section 2.14 or notice under Section 2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause such Lender or Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.20, as the case may be (including as a result of any action taken by such Lender or Issuing Bank pursuant to paragraph (b) below), or if such Lender or Issuing Bank shall waive its right to

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claim further compensation under Section 2.14 in respect of such circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event, (B) in the case of clause (iv) above, such Non-Consenting Lender ceases to be a Non-Consenting Lender and (C) in the case of clause (v) above, such assigning Lender ceases to be a Defaulting Lender as the case may be, then such Lender or Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder.

          (b) If (i) any Lender or Issuing Bank shall request compensation under Section 2.14, (ii) any Lender or Issuing Bank delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any amount to any Lender, the Issuing Bank or any Governmental Authority on account of any Lender or Issuing Bank, pursuant to Section 2.20 then such Lender or Issuing Bank shall use reasonable efforts (which shall not require such Lender or Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or Issuing Bank in connection with any such filing or assignment, delegation and transfer.

ARTICLE III

Representations and Warranties

          The Borrower represents and warrants to the Administrative Agent, the Collateral Agent, each Issuing Bank and each of the Lenders that:

          SECTION 3.01. Organization; Powers. The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument

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contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder.

          SECTION 3.02. Authorization. The Transactions have been duly authorized by all requisite corporate and, if required, stockholder action. The Transactions will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents) except, with respect to clauses (i)(C) and (ii), any defaults arising under any Indebtedness of the Target or any subsidiary of the Target as a direct result of (i) the execution, delivery and performance by the Borrower and the Merger Sub of the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby or (ii) the consummation of the Tender Offer (together the “Acquisition Transactions”), in each case to the extent that such defaults would not reasonably be expected to have a Material Adverse Effect.

          SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of the Borrower or such Loan Party enforceable against the Borrower or such Loan Party in accordance with its terms.

          SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) recordation of the Mortgages, (c) such as have been made or obtained and are in full force and effect and (d) in the case of any such action required to be taken in connection with the Acquisition Transactions, to the extent the failure to take any such action could not reasonably be expected to have a Material Adverse Effect.

          SECTION 3.05. Financial Statements. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related

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statements of income, stockholders’ equity and cash flows (i) as of the end of and for each fiscal year in the three-fiscal year period ended December 31, 2007, audited by and accompanied by the opinion of PricewaterhouseCoopers LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2008, certified by its chief financial officer and (iii) as of and for the fiscal months and the portion of the fiscal year ended after the date of the most recently ended fiscal quarter and not less than 30 days prior to the Amendment No. 1 Effective Date, certified by its chief financial officer. Such financial statements present fairly in all material respects the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof. Such financial statements (other than such monthly financial statements) were prepared in accordance with GAAP applied on a consistent basis and are in compliance with the requirements of Regulation S-X under the Securities Act of 1933, as amended, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes.

          (b) The Borrower has heretofore furnished to the Lenders the consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Target (i) as of the end of and for each fiscal year in the three-fiscal year period ended December 31, 2007, audited by and accompanied by the opinion of BDO Seidman, LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2008 and (iii) as of and for the fiscal months and the portion of the fiscal year ended after the date of the most recently ended fiscal quarter and not less than 30 days prior to the Amendment No. 1 Effective Date. Such financial statements present fairly in all material respects the financial condition and results of operations and cash flows of the Target and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Target and its consolidated Subsidiaries as of the dates thereof. Such financial statements (other than such monthly financial statements) were prepared in accordance with GAAP applied on a consistent basis and are in compliance with the requirements of Regulation S-X under the Securities Act of 1933, as amended, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes.

          (c) The Borrower has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and related pro forma statements of income, stockholder’s equity and cash flows as of September 30, 2008, prepared giving effect to the Transactions as if they had occurred, with respect to such balance sheet, on such date and, with respect to such

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other financial statements, on the first day of the twelve-month period ending on such date. Such pro forma financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the Amendment No. 1 Effective Date to be reasonable), are based on the best information available to the Borrower as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions and present fairly in all material respects on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date and for such period, assuming that the Transactions had actually occurred at such date or at the beginning of such period, as the case may be.

          SECTION 3.06. No Material Adverse Change. (a) There has been no Material Adverse Effect since December 31, 2007.

          (b) No Default or Event of Default has occurred and is continuing.

          SECTION 3.07. Title to Properties; Possession Under Leases. (a) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries has good and marketable title to, or valid leasehold interests in, or easements or other limited property rights in, or is licensed to use, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02.

          (b) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries has complied with all material obligations under all material leases to which it is a party and all such leases are in full force and effect. The Borrower and each Subsidiary enjoys peaceful and undisturbed possession under all such material leases.

          (c) As of the Amendment No. 1 Effective Date, the Borrower has not received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation.

          (d) Except as disclosed on Schedule 3.20(a) or 3.20(b), as of the Amendment No. 1 Effective Date, none of the Borrower or any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein.

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          SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Amendment No. 1 Effective Date a list of all Subsidiaries and the direct or indirect ownership interests of the Borrower therein, and identifies each Subsidiary that is a Material Foreign Subsidiary on the Amendment No. 1 Effective Date. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and, as of the Amendment No. 1 Effective Date, are owned by the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents, the Term Liens and statutory nonconsensual Liens expressly permitted by Section 6.02).

          SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.09, there are no actions, suits, proceedings or investigations at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

          (b) Since the Amendment No. 1 Effective Date, there has been no change in the status of the matters disclosed on Schedule 3.09 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

          (c) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries is in compliance with all laws, regulations, consent decrees and orders of any Governmental Authority applicable to it (including, without limitation, the Patriot Act, ERISA, employee health and safety, margin regulations, Environmental Laws and Health Care Laws) or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

          (d) None of the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.

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          (e) Certificates of occupancy and permits (in each case, to the extent required by applicable law) are in effect for each Mortgaged Property as currently constructed, and true and complete copies of such certificates of occupancy have been delivered to the Collateral Agent as mortgagee with respect to each Mortgaged Property.

          SECTION 3.10. Agreements. (a) Neither the Borrower nor any of the Domestic Subsidiaries or Material Foreign Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect.

          (b) Neither the Borrower nor any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.11. Federal Reserve Regulations. (a) Neither the Borrower nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

          (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.

          SECTION 3.12. Investment Company Act. Neither the Borrower nor any of the Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

          SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans and request the issuance of Letters of Credit only to provide working capital and for other general corporate purposes, including permitted acquisitions and the payment of the Acquisition Consideration and the Letters of Credit are to be used by the Borrower and the Subsidiaries for general corporate purposes

          SECTION 3.14. Tax Returns. Each of the Borrower and the Subsidiaries has filed or caused to be filed all Federal and all other material state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all Federal and all other material taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such

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Subsidiary, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP.

          SECTION 3.15. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto taken as a whole contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions (based upon accounting principles consistent with the historical audited financial statements of the Borrower) and due care in the preparation of such information, report, financial statement, exhibit or schedule (it being understood that any such forecast or projection is not a guarantee of future performance and that actual results during the period covered by such forecast or projection may materially differ from the projected results thereof).

          SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in material liability of the Borrower or any of its ERISA Affiliates. The present value of all benefit liabilities under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the last annual valuation date applicable thereto, exceed the fair market value of the assets of such Plan.

          SECTION 3.17. Environmental Matters. (a) Except as set forth in Schedule 3.17:

     (i) To the knowledge of the Borrower, the properties and facilities currently or formerly owned, leased or operated by the Borrower and the Subsidiaries (the “Properties”) do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted, a violation of, (ii) require Remedial Action under, or (iii) could reasonably be expected to give rise to liability under, Environmental Laws, which violations, Remedial Actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

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     (ii) The Borrower, the Subsidiaries and their respective operations are in compliance, and in the last five years have been in compliance, with all Environmental Laws, and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such noncompliance or failure to obtain any necessary permits, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect;

     (iii) To the knowledge of the Borrower, there have been no Releases or threatened Releases at, from, on, to or under the Properties or otherwise in connection with the operations of the Borrower or the Subsidiaries, which Releases or threatened Releases, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

     (iv) Neither the Borrower nor any of the Subsidiaries has received any Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, nor do the Borrower or the Subsidiaries have any reasonable basis to believe that any such Environmental Claim is being threatened; and

     (v) (A) To the knowledge of the Borrower, Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in a manner that could give rise to any liability under any Environmental Law which in the aggregate could be expected to result in a Material Adverse Effect, nor (B) have the Borrower or the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise with respect to the generation, treatment, storage or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect.

          (b) Since the Amendment No. 1 Effective Date, there has been no change in the status of the matters disclosed on Schedule 3.17 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

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          SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the Amendment No. 1 Effective Date. As of such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice.

          SECTION 3.19. Security Documents. (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the Collateral Agent, the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent for the ratable benefit of the Secured Parties shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case, pari passu with the Term Liens and prior and superior in right to any other person, and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent for the ratable benefit of the Secured Parties will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case pari passu with the Term Liens and prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02.

          (b) Upon the recordation of the Guarantee and Collateral Agreement (or a short-form security agreement in form and substance reasonably satisfactory to the Borrower and the Collateral Agent) with the United States Patent and Trademark Office and the United States Copyright Office, together with the financing statements in appropriate form filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent for the ratable benefit of the Secured Parties shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guarantee and Collateral Agreement) in which a security interest may be perfected by filing in the United States and its territories and possessions, in each case pari passu with the Term Liens and prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and

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registered copyrights acquired by the Loan Parties after the Amendment No. 1 Effective Date).

          (c) The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case pari passu with the Term Liens and prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02.

          SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule 3.20(a) lists completely and correctly as of the Amendment No. 1 Effective Date all real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in fee all the real property set forth on Schedule 3.20(a).

          (b) Schedule 3.20(b) lists completely and correctly as of the Amendment No. 1 Effective Date all Material Leased Property (defined below) and the addresses thereof. The Borrower and the Subsidiaries have valid leases in all the real property set forth on Schedule 3.20(b). For the purpose of the foregoing, “Material Leased Property” means real property leased by the Borrower or any Subsidiary with respect to which such property lease (i) has more than twelve (12) months remaining in the lease term and (ii) requires the Borrower or any Subsidiary to make lease payments in excess of $500,000 in any year or $1,000,000 in the aggregate over the remaining term of such lease.

          SECTION 3.21. Labor Matters. As of the Amendment No. 1 Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries, or for which any claim may be made against the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or the applicable Subsidiary.

          SECTION 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Amendment No. 1 Effective Date and

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immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of the Borrower and the Subsidiaries on a consolidated basis, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Borrower and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability in respect of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and the Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and the Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Amendment No. 1 Effective Date.

          SECTION 3.23. Transaction Documents. (a) The Borrower has delivered to the Administrative Agent a complete and correct copy of the Merger Agreement (including all schedules, exhibits, amendments, supplements and modifications thereto). Neither the Borrower nor any Loan Party or, to the knowledge of the Borrower or each Loan Party, any other person party thereto is in default in the performance or compliance with any material provisions thereof. The Merger Agreement complies in all material respects with all applicable laws. All representations and warranties set forth in the Merger Agreement were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made).

          (b) The Borrower has delivered to the Administrative Agent a complete and correct copy of the Tender Offer Documentation (including all schedules, exhibits, amendments, supplements and modifications thereto). The Tender Offer complies in all material respects with all applicable laws.

          SECTION 3.24. Sanctioned Persons. None of the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of the Borrower or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Borrower will not directly or indirectly use the proceeds of the Loans or the Letters of Credit or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

ARTICLE IV

Conditions of Lending

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          The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions:

          SECTION 4.01. All Credit Events. On (x) the date of each Borrowing (other than a conversion or a continuation of a Borrowing), including each Borrowing of a Swingline Loan, and on the date of each issuance, amendment, extension or renewal of a Letter of Credit and (y) solely for the purpose of paragraph (b) and (c) below, the Amendment No. 1 Effective Date (each such event or date being called a “Credit Event”):

          (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.05 (or such notice shall have been deemed given in accordance with Section 2.02) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.04(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a notice requesting such Swingline Loan as required by Section 2.03(b).

          (b) The representations and warranties set forth in Article III and in each Loan Document shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

          (c) Borrower and each other Loan Party shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing.

          (d) Other than in the case of a Borrowing for the purpose of paying the Acquisition Consideration, immediately after giving effect to any such Borrowing of Loans and the use of proceeds thereof, the aggregate amount of unrestricted cash and Permitted Investments on hand at the Borrower and the Domestic Subsidiaries shall not exceed $200,000,000.

          (e) Immediately prior to giving effect to any such Borrowing of Loans the proceeds of which are to be used to pay the Acquisition Consideration, the full amount of the Term Loan Credit Agreement as in effect on the Amendment No. 1 Effective Date shall have been drawn.

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          Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the satisfaction of the conditions set forth in paragraphs (b), (c), (d) and (e) of this Section.

          SECTION 4.02. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder, and the incorporation of Existing Letters of Credit as Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.08).

          (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include facsimile transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

          (b) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Banks, (i)(A) a favorable written opinion of James Elrod, Esquire, General Counsel of the Borrower, substantially to the effect set forth in Exhibit G-1, (B) a favorable written opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., special counsel to the Borrower, substantially to the effect set forth in Exhibit G-2, and (C) a favorable written opinion of Bass, Berry & Sims PLC, Tennessee counsel to the Borrower, substantially to the effect set forth in Exhibit G-3, in each case (1) dated the date hereof, (2) addressed to the Administrative Agent, the Issuing Banks and the Lenders, and (3) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions.

          (c) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Effective Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Borrowings hereunder, and that such resolutions have not been modified,

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rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above; and (iv) such other documents as the Lenders, the Issuing Banks or the Administrative Agent, may reasonably request.

          (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01.

          (e) After giving effect to the Transactions occurring on the Effective Date, the Borrower and the Subsidiaries shall have outstanding no Indebtedness for borrowed money or preferred stock other than (i) Indebtedness under the Loan Documents, (ii) the Convertible Notes, and (iii) other Indebtedness permitted under Section 6.01 (other than clause (h) thereof of this Agreement (as in effect prior to the Amendment No. 1 Effective Date)).

          (f) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the date hereof, including, to the extent invoiced, reimbursement or payment of all fees and out-of-pocket expenses (including fees, charges and disbursements of outside counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document or under the Fee Letter.

          (g) The Administrative Agent and each Lender shall have received all such information as shall have been reasonably requested by it in order to enable it to comply with the requirements of the Patriot Act and any other “know your customer” or similar laws or regulations.

          (h) The commitments under the Existing Credit Agreement shall have been or shall simultaneously be terminated, the principal of and all accrued interest on all Loans outstanding under such agreement and all fees and other amounts accrued for the accounts of or owed to the lenders thereunder shall have been or shall simultaneously be paid in full (except that the Existing Letters of Credit shall remain outstanding as Letters of Credit hereunder) and all Liens securing the obligations of the Borrower and the Subsidiaries thereunder shall have been released.

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The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at or prior to 5:00 p.m., New York City time, on April 27, 2007 subject to extension (by not more than 10 Business Days) by the Administrative Agent in its sole discretion (and, in the event that such conditions are not so satisfied, waived or extended, the Commitments shall terminate at such time).

ARTICLE V

Affirmative Covenants

          The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:

          SECTION 5.01. Existence; Compliance with Laws; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05.

          (a) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect its rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names; maintain and operate its business in substantially the manner in which it is presently conducted and operated; comply with all applicable laws, rules, regulations, decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times, in each case to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

          SECTION 5.02. Insurance. (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers (or, if any insurer no longer qualifies as such, promptly thereafter enter into replacement

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insurance with a financially sound and reputable insurer); maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law.

          (b) Cause all such policies covering any Collateral to be endorsed or otherwise amended to include a customary lender’s loss payable endorsement, in form and substance satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Amendment No. 1 Effective Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement,” without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver original or certified copies of all such policies to the Collateral Agent; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent) together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.

          (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require, and otherwise comply with

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the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require.

          (d) With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the “broad form CGL endorsement” and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than that which is customary for companies in the same or similar businesses operating in the same or similar locations, naming the Collateral Agent as an additional insured, on forms satisfactory to the Collateral Agent.

          (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by any Loan Party; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies.

          SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations promptly when due and in accordance with their terms (it being understood that nothing in this Section shall require the payment of amounts for which the Borrower or any Subsidiary is in good faith disputing its liability so long as the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP) and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk of forfeiture of such property.

          SECTION 5.04. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent, which shall furnish to each Lender:

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          (a) no later than the date that is the earlier of (i) the date by which the Annual Report on Form 10-K of the Borrower for each fiscal year is required to be filed under the rules and regulations of the SEC and (ii) 90 days after the end of such fiscal year, its consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all audited by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing reasonably acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect (it being agreed that any “going concern” or like qualification or exception or exception as to the scope of such audit shall be deemed to be a material qualification)) to the effect that such consolidated financial statements fairly present in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, together with a customary “management discussion and analysis” provision;

          (b) no later than the date that is the earlier of (i) the date by which the Quarterly Report on Form 10-Q of the Borrower for each of the first three fiscal quarters of each fiscal year is required to be filed under the rules and regulations of the SEC and (ii) 45 days after the end of such fiscal quarter, its consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and, other than with respect to quarterly reports during the remainder of the first fiscal year after the Amendment No. 1 Effective Date, comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments, together with a customary “management discussion and analysis” provision;

          (c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer in the form of Exhibit H (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to

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be taken with respect thereto and (ii) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 and, in the case of a certificate delivered with the financial statements required by paragraph (a) above, setting forth the Borrower’s calculation of Excess Cash Flow;

          (d) concurrently with any delivery of financial statements under paragraph (a) above, a certificate of the accounting firm that reported on such statements (which certificate may be prepared in accordance with professional accounting standards and may be limited to accounting matters and disclaim responsibility for legal interpretations) stating that in performing the audit necessary therefor, no knowledge was obtained of the existence of any Event of Default or Default with respect to Sections 6.10, 6.11 or 6.12 or, if such knowledge was obtained, specifying the existence thereof in reasonable detail;

          (e) on or prior to each date of delivery of financial statements under paragraph (a) above, the Borrower shall provide to each Lender a business plan for the following two years, in a form satisfactory to the Administrative Agent;

          (f) promptly after the same become publicly available, copies of all reports (excluding, in any event, copies of press releases) which the Borrower sends to its stockholders, and copies of all registration statements, reports on Form 10-K, Form 10-Q or Form 8-K (or, in each case, any successor form) and other material reports which the Borrower or any Subsidiary files with the SEC or any successor or analogous Governmental Authority (other than public offerings of securities under employee benefit plans or dividend reinvestment plans);

          (g) promptly after the receipt thereof by the Borrower or any Subsidiary, a copy of any “management letter” received by any such person from its certified public accountants and the management’s response thereto;

          (h) promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act; and

          (i) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

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          SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent, each Issuing Bank and each Lender prompt written notice of the following:

          (a) promptly after the Borrower obtains knowledge thereof, any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

          (b) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof, as to which there is a reasonable likelihood of an adverse result and that could reasonably be expected to result in a Material Adverse Effect;

          (c) promptly after the Borrower obtains knowledge thereof, any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; and

          (d) any change in the Borrower’s corporate rating by S&P, in the Borrower’s corporate family rating by Moody’s or in the ratings of the Credit Facilities by S&P or Moody’s, or any notice from either such agency indicating its intent to effect such a change or to place the Borrower or the Credit Facilities on a “CreditWatch” or “WatchList” or any similar list, in each case with negative implications, or its cessation of, or its intent to cease, rating the Borrower or the Credit Facilities.

          SECTION 5.06. Information Regarding Collateral. (a) Furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s corporate name, (ii) in the jurisdiction of organization or formation of any Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

          (b) In the case of the Borrower, each year commencing with the year ended December 31, 2009, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04(a), deliver to the Administrative Agent a certificate of a Financial Officer setting forth the information required pursuant to Section 1 or 2 of the Perfection Certificate or confirming that there has been no change

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in such information since the date of the Perfection Certificate delivered on the Amendment No. 1 Effective Date or the date of the most recent certificate delivered pursuant to this Section 5.06.

          SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all material dealings and transactions in relation to its business and activities. Subject to the provisions of Section 9.16, each Loan Party will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of the Borrower or any of the Subsidiaries upon reasonable prior notice to the Borrower (and, unless a Default or Event of Default shall have occurred and be continuing, on not more than two occasions during any fiscal year) and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrower or any of the Subsidiaries with the officers thereof and independent accountants therefor; provided that whether or not a Default or Event of Default shall have occurred and be continuing, the Borrower shall have the right to participate in all such discussions.

          (b) Use commercially reasonable efforts to cause the Credit Facilities to be continuously rated by S&P and Moody’s on a public basis, and in the case of the Borrower, use commercially reasonable efforts to maintain a public corporate rating from S&P and a public corporate family rating from Moody’s, in each case in respect of the Borrower.

          SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request the issuance of Letters of Credit only to provide working capital and for other general corporate purposes, including permitted acquisitions and the payment of the Acquisition Consideration, and the Letters of Credit are to be used by the Borrower and the Subsidiaries for general corporate purposes.

          SECTION 5.09. Employee Benefits. (a) Comply in all material respects with the applicable provisions of ERISA and the Code and (b) furnish to the Administrative Agent as soon as possible after, and in any event within 10 days after any Responsible Officer of the Borrower knows that, any ERISA Event has occurred that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and/or the Subsidiaries in an aggregate amount exceeding $5,000,000, a statement of a Financial Officer of the Borrower setting forth details as to such ERISA Event and the action, if any, that the Borrower proposes to take with respect thereto.

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          SECTION 5.10. Compliance with Environmental Laws. Comply, and use reasonable efforts to cause all lessees and other persons occupying its then current Properties to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and then current Properties; obtain and renew all Environmental Permits necessary for its operations and then current Properties except for such non-compliance as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; and conduct any Remedial Action in accordance with Environmental Laws; provided, however, that neither the Borrower nor any of the Subsidiaries shall be required to undertake any Remedial Action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained by the Borrower with respect to such circumstances in accordance with GAAP.

          SECTION 5.11. Preparation of Environmental Reports. If a Default caused by reason of a breach of Section 3.17 or Section 5.10 shall have occurred and be continuing for more than 20 days without the Borrower or any Subsidiary commencing activities reasonably likely to cure such Default, at the written request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of the Loan Parties, an environmental site assessment report regarding the matters which are the subject of such Default prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or remedial action in connection with such Default.

          SECTION 5.12. Compliance with Laws. Comply with all laws, regulations, consent decrees and orders of any Governmental Authority applicable to it or its property, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

          SECTION 5.13. Further Assurances. Execute any and all further documents, financing statements, agreements, amendments, supplements and instruments, and take all further actions (including filing Uniform Commercial Code and other financing or continuation statements, mortgages and deeds of trust) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents in favor of the Collateral Agent for the ratable benefit of the Secured Parties. The Borrower will cause any subsequently acquired or organized Domestic Subsidiary to become a Loan Party (in the case of the Target and each Domestic Subsidiary of the Target, by no later than the Merger Date) by executing the Guarantee and Collateral Agreement and each applicable Security Document in favor of the

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Collateral Agent. In addition, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of the assets and properties of the Loan Parties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the Obligations shall be secured by substantially all the assets of the Borrower and its Domestic Subsidiaries (in the case of the Target and each Domestic Subsidiary of the Target, such security to be granted by no later than the Merger Date) (including real and other properties acquired subsequent to the Amendment No. 1 Effective Date but subject to limitations and exceptions expressly set forth in the Security Documents)). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance reasonably satisfactory to the Collateral Agent, and the Borrower shall deliver or cause to be delivered to the Lenders all such instruments and documents (including legal opinions, title insurance policies and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrower agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, the Borrower will give prompt notice to the Administrative Agent of the acquisition by it or any of the Subsidiaries of any real property (or any interest in real property) having a value in excess of $1,000,000.

          SECTION 5.14. Interest Rate Protection. No later than the 90th day after the Amendment No. 1 Effective Date, enter into, and for a minimum of two years thereafter maintain, Hedging Agreements acceptable to the Administrative Agent that result in at least 50% of the aggregate principal amount of its funded long-term Indebtedness being effectively subject to a fixed or maximum interest rate acceptable to the Administrative Agent.

          SECTION 5.15. Consummation of the Merger. Use commercially reasonable efforts to complete the Merger (which efforts shall include voting, or causing to be voted, all of the Shares then owned by the Borrower or any of its Subsidiaries in favor of the Merger, to the extent any such vote is taken pursuant to the Merger Agreement) in accordance with the terms of the Merger Agreement as promptly as practicable following the consummation of the Tender Offer.

          SECTION 5.16. Alpharma Escrow Account. If, on the date that is 45 days after the Amendment No. 1 Effective Date, any principal remains outstanding under the Alpharma Convertible Notes, deposit an amount equal to such unpaid principal amount into a Controlled Deposit Account subject to a Deposit Account Control Agreement in form and substance reasonably satisfactory to the Collateral Agent (such account, the “Alpharma Escrow Account”). The Deposit Account Control Agreement governing the Alpharma Escrow Account shall provide that the amounts on deposit in the Alpharma Escrow Account may only be withdrawn by the Borrower (and withdrawals shall be subject to receipt by the Collateral Agent and

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the applicable depositary bank of a certification from the Borrower (the “Withdrawal Certificate”) that the amounts withdrawn shall be applied) for the following purposes: (i) to make principal payments with respect to the Alpharma Convertible Notes, (ii) to pay Acquisition Consideration (including Merger Consideration) due upon the conversion of the Alpharma Convertible Notes in accordance with their terms or (iii) to voluntarily prepay (x) loans under the Term Loan Credit Agreement or (y) following payment in full of the principal amount of the loans under the Term Loan Credit Agreement, to repay Loans hereunder (which repayment shall be accompanied by a permanent reduction in the Revolving Credit Commitments in an amount equal to such repayment). Borrower agrees that any amounts withdrawn from the Alpharma Escrow Account shall be applied for the purpose specified in the Withdrawal Certificate promptly and in any event not later than 3 Business Days following such withdrawal.

ARTICLE VI

Negative Covenants

          The Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been cancelled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any of the Subsidiaries to:

          SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except:

          (a) Indebtedness for borrowed money existing on the Amendment No. 1 Effective Date and set forth in Schedule 6.01 and any extensions, renewals or replacements of such Indebtedness to the extent that the principal amount of such Indebtedness is not increased, neither the final maturity nor the weighted average life to maturity of such Indebtedness is decreased, such Indebtedness, if subordinated to the Obligations, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;

          (b) Indebtedness of the Borrower outstanding from time to time hereunder and all guarantees thereof by the Subsidiary Guarantors;

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          (c) intercompany Indebtedness of the Borrower and the Subsidiaries to the extent permitted by Section 6.04(c) so long as any such Indebtedness owed by any Loan Party to a person that is not a Loan Party is subordinated to the Obligations pursuant to an Affiliate Subordination Agreement;

          (d) Guarantees by any Loan Party of Indebtedness of any other Loan Party;

          (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(e), when combined with the aggregate principal amount of all Capital Lease Obligations incurred pursuant to Section 6.01(f) shall not exceed $25,000,000 at any time outstanding;

          (f) Capital Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(e), not in excess of $25,000,000 at any time outstanding;

          (g) Indebtedness under performance bonds or with respect to workers’ compensation claims, in each case incurred in the ordinary course of business;

          (h) Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not exceeding $25,000,000 at any time outstanding;

          (i) Indebtedness of any person that becomes a Subsidiary after the Amendment No. 1 Effective Date; provided that (i) such Indebtedness exists at the time such person becomes a Subsidiary and is not created in contemplation of or in connection with such person becoming a Subsidiary, (ii) immediately before and after such person becomes a Subsidiary, no Default or Event of Default shall have occurred and be continuing and (iii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(i) shall not exceed $25,000,000 at any time outstanding;

          (j) Indebtedness created under Hedging Agreements that (i) are required by Section 5.14 or (ii) are entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any

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Subsidiary is exposed in the conduct of its business or the management of its liabilities and not for speculative purposes or entered into to take advantage of reduced interest rates by converting fixed rate obligations into floating rate obligations;

          (k) Permitted ARS Indebtedness; provided that the Specified Share of the Net Cash Proceeds of such Indebtedness shall be applied as set forth in Section 2.13(i);

          (l) Indebtedness of the Borrower outstanding from time to time under the Term Loan Credit Agreement in an aggregate principal amount not to exceed $200,000,000, all guarantees thereof by any Subsidiary Guarantor and any refinancing, renewals or extensions of all or any part thereof; provided that (i) the amount of the Indebtedness under the Term Refinanced Indebtedness (defined below) at the time of such refinancing, renewal or extension is not increased by the Term Refinancing Indebtedness (defined below) except by an amount equal to reasonable fees and expenses incurred in connection with such refinancing, renewal or extension, (ii) the maturity date of such refinancing, renewing or extending indebtedness (the “Term Refinancing Indebtedness”) is no earlier than the maturity date of the Indebtedness being refinanced, renewed or extended (“Term Refinanced Indebtedness”) and the average life to maturity of such Term Refinancing Indebtedness is at least equal to that of the Term Refinanced Indebtedness, (iii) the terms (other than pricing and yield) of such Term Refinancing Indebtedness or of any agreement entered into or of any instrument issued in connection therewith are not less favorable in any material respect to the Loan Parties or the Lenders than the terms of Term Refinanced Indebtedness or any agreement or instrument governing the Term Refinanced Indebtedness, (iv) the obligors of the Term Refinancing Indebtedness shall not include any person that is not an obligor on the Term Refinanced Indebtedness (unless such obligor is or becomes at such time a Loan Party), and (v) if the Term Refinancing Indebtedness is secured, it is secured on an equal and ratable or junior basis to the Obligations on substantially the same terms as the Term Indebtedness is secured on the Amendment No. 1 Effective Date and otherwise on terms reasonably acceptable to the Administrative Agent;

          (m) other Indebtedness of the Borrower or the Subsidiaries in an aggregate principal amount not exceeding $50,000,000 at any time outstanding; provided that the aggregate principal amount of Indebtedness of Subsidiaries that are not Subsidiary Guarantors permitted by this clause shall not exceed $25,000,000 at any time outstanding; and

          (n) Indebtedness outstanding under the Alpharma Convertible Notes.

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          SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect thereof, or assign or transfer any such income or revenues or rights in respect thereof, except:

          (a) Liens on property or assets of the Borrower and the Subsidiaries existing on the Amendment No. 1 Effective Date and set forth in Schedule 6.02; provided that such Liens shall extend only to those assets to which they extend on the Amendment No. 1 Effective Date and shall secure only those obligations which they secure on the Amendment No. 1 Effective Date;

          (b) any Lien (i) created under the Loan Documents or (ii) granted in favor of the Swingline Lender or Issuing Bank pursuant to arrangements designed to eliminate such Swingline Lender’s or Issuing Bank’s risk with respect to any Defaulting Lender’s or Defaulting Lenders’ participation in Swingline Loans or Letters of Credit, respectively, as contemplated by Section 2.03(a) or Section 2.04(a), respectively;

          (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or assets of any person that becomes a Subsidiary after the Amendment No. 1 Effective Date prior to the time such person becomes a Subsidiary, as the case may be; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary, (iii) such Lien secures only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be and (iv) such Lien does not materially interfere with the intended use, occupancy and operation of any asset or property subject thereto;

          (d) Liens for taxes, assessments, charges or levies not yet due or which are being contested in compliance with Section 5.03;

          (e) carriers’, warehousemen’s, mechanics’, landlord’s (or lessor’s under operating leases), materialmen’s, repairmen’s, custom and revenue authorities’, or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable beyond the applicable grace period therefor or that are being contested in compliance with Section 5.03;

          (f) pledges and deposits made in the ordinary course of business in compliance with workmen’s compensation, unemployment insurance and other social security laws or regulations;

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          (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, liability to insurance carriers under insurance or self-insurance arrangements, surety and appeal bonds, performance bonds, statutory bankers’ liens on moneys held in bank accounts and other obligations of a like nature, in each case incurred in the ordinary course of business;

          (h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of the Subsidiaries;

          (i) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 180 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 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 (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;

          (j) Liens deemed to exist in connection with Capital Lease Obligations permitted under Section 6.01;

          (k) attachment or judgment Liens not constituting an Event of Default under Article VII;

          (l) Liens on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets that constitute Collateral or the Equity Interests of any of the Subsidiaries, and (ii) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness incurred by such Foreign Subsidiary pursuant to Section 6.01(h);

          (m) Liens in favor of any Governmental Authority with respect to progress payments under any governmental contract entered into in the ordinary course of business;

          (n) Liens on Margin Stock if and to the extent that the value of all such Margin Stock exceeds 25% of the value of the total assets subject to the restrictions on Liens set forth in this Section 6.02;

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          (o) Liens on auction rate securities of the Borrower or any other Loan Party (or on the securities account to which such auction rate securities are credited (so long as no other securities are credited thereto) and proceeds thereof); provided that (i) such Liens secure Permitted ARS Indebtedness and (ii) such Liens do not apply to any other property or assets of the Borrower or any Subsidiary;

          (p) licenses, sublicenses, leases and subleases not relating to any financing, granted to third persons in the ordinary course of business and not interfering in any material respect with the business of the Borrower and the Subsidiaries;

          (q) Liens attaching to assets (other than Collateral) with an aggregate fair market value at the time of attachment not in excess of, and securing liabilities not in excess of, $20,000,000 in the aggregate at any time outstanding; and

          (r) Liens securing obligations under the Term Loan Documents or securing Term Refinancing Indebtedness permitted by Section 6.01(l) covering Collateral that is also subject to Liens in favor of the Collateral Agent for the benefit of the Secured Parties (“Term Liens”); provided that such Liens are pari passu with, or junior to, the Liens securing the Obligations on terms substantially the same as those applicable to the Liens securing the obligations under the Term Loan Documents on the Amendment No. 1 Effective Date or otherwise on terms reasonably acceptable to the Administrative Agent.

          SECTION 6.03. Sale and Leaseback Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred unless (a) the sale or transfer of such property is permitted by Section 6.05 and (b) any Capital Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.01 and 6.02, as the case may be.

          SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any similar investment or any other similar interest in, any other person, except:

          (a) (i) investments by the Borrower and the Subsidiaries existing on the Amendment No. 1 Effective Date in the Equity Interests of the Subsidiaries and other investments existing on the Amendment No. 1 Effective Date and set forth on Schedule 6.04(a) and (ii) additional

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investments by the Borrower and the Subsidiaries in the Equity Interests of the Subsidiaries; provided that (A) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Guarantee and Collateral Agreement (subject to the limitations referred to therein) and (B) the aggregate amount of investments made after the Amendment No. 1 Effective Date by Loan Parties in, and loans and advances made after the Amendment No. 1 Effective Date by Loan Parties to, Subsidiaries that are not Loan Parties (determined without regard to any write-downs or write-offs of such investments, loans and advances) shall not exceed $20,000,000 at any time outstanding;

          (b) Permitted Investments;

          (c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement, (ii) such loans and advances made to any Loan Party by any Subsidiary that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to an Affiliate Subordination Agreement and (iii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above;

          (d) repurchases by the Borrower of its common stock to the extent permitted under Section 6.06;

          (e) Guarantees by any Loan Party of the Convertible Notes;

          (f) extensions of trade credit in the ordinary course of business;

          (g) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

          (h) loans and advances to officers and employees of the Borrower or any Subsidiary in the ordinary course of business (including for travel, entertainment, payroll advances and relocation expenses) in an aggregate principal amount outstanding at any time when taken together with the aggregate principal amount outstanding of investments made under clause (i) below (in each case determined without regard to any write-downs or write-offs of such loans and advances) not to exceed $20,000,000 at such time;

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          (i) promissory notes or other evidences of Indebtedness received by the Borrower from officers or employees of the Borrower or any Subsidiary (or any loan or advance made to any Plan) in connection with the purchase of Equity Interests in the Borrower in an aggregate principal amount outstanding at any time when taken together with the aggregate principal amount outstanding of investments made under clause (h) above (in each case determined without regard to any write-downs or write-offs of such loans and advances) not to exceed $20,000,000 at such time;

          (j) the Borrower and the Subsidiaries may enter into Hedging Agreements permitted under Section 6.01(j);

          (k) the Acquisition;

          (l) the Borrower or any Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than 100% of the Equity Interests (other than directors’ qualifying shares) of a person (referred to herein as the “Acquired Entity”); provided that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, the Borrower or any Subsidiary; (ii) the Acquired Entity shall be in a similar line of business as that of the Borrower or any of its Subsidiaries as conducted during the current and most recent calendar year (or business activities reasonably incidental thereto); and (iii) at the time of such transaction (A) both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (B) the Borrower would be in compliance with the covenants set forth in Sections 6.11 and 6.12 as of the most recently completed period of four consecutive fiscal quarters ending prior to such transaction for which the financial statements and certificates required by Section 5.04(a) or 5.04(b), as the case may be, and 5.04(c) have been delivered or for which comparable financial statements have been filed with the SEC, after giving pro forma effect to such transaction and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any other transaction described in this Section 6.04(l) occurring after such period) as if such transaction had occurred as of the first day of such period (assuming, for purposes of pro forma compliance with Section 6.12, that the maximum Leverage Ratio permitted at the time by such Section was in fact 0.25 to 1.00 less than the ratio actually provided for in such Section at such time); (C) after giving effect to such acquisition, the aggregate amount of unused and available Revolving Credit Commitments, cash and Permitted Investments of the Borrower and the Subsidiaries must be at least $50,000,000; (D) the total consideration paid in connection with such acquisition and any other acquisitions pursuant to this Section 6.04(l) (including any Indebtedness of the Acquired Entity that is assumed by the Borrower or any Subsidiary following such acquisition and any payments following such acquisition pursuant to earn-out provisions or similar

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obligations) shall not in the aggregate exceed $200,000,000 during the term of this Agreement; (E) the Borrower shall have delivered a certificate of a Financial Officer, certifying as to the foregoing and containing reasonably detailed calculations in support thereof, in form and substance satisfactory to the Administrative Agent and (F) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.13 and the Security Documents (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.04(l) being referred to herein as a “Permitted Acquisition”);

          (m) investments, loans or advances made in connection with the license, development, manufacture or distribution of pharmaceutical compounds or products or medical devices, in each case from or through third parties (including other pharmaceutical companies) by collaborative efforts or otherwise and in the ordinary course of business;

          (n) investment received as consideration for Asset Sales permitted by Section 6.05(b); and

          (o) additional investments, loans and advances by the Borrower and the Subsidiaries (other than an investment of the type described in clause (h) or (i) above) so long as the aggregate amount invested, loaned or advanced pursuant to this paragraph (o) (determined without regard to any write-downs or write-offs of such investments, loans and advances) does not exceed $50,000,000 in the aggregate.

          SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower or less than all the Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or assets that are substantial in relation to the Borrower and the Subsidiaries taken as a whole, except that (i) the Borrower and any Subsidiary may purchase and sell inventory in the ordinary course of business and (ii) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing, (A) any Wholly Owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (B) any Wholly Owned Subsidiary may merge into or consolidate with any other Wholly Owned Subsidiary in a transaction in which the surviving entity is a Wholly Owned Subsidiary and no person other than the Borrower or a Wholly Owned Subsidiary receives any consideration (provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party), (C) the

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Acquisition shall be permitted and (D) the Borrower and the Subsidiaries may make Permitted Acquisitions.

               (b) Make any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 85% of which is cash; provided that (x) any Asset Sales constituting licenses of intellectual property relating to pharmacological products or medical devices may be for consideration at least 85% of which is cash or royalty payments and (y) any Asset Sale constituting a Required Divestiture may be for consideration at least 85% of which is cash payable within 20 months following the date of consummation of such Asset Sale, (ii) such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of and (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) (other than auction rate securities and other than Required Divestitures) shall not exceed $200,000,000 in the aggregate during the term of this Agreement.

          SECTION 6.06. Restricted Payments; Restrictive Agreements. (a) Declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment (including pursuant to any Synthetic Purchase Agreement), or incur any obligation (contingent or otherwise) to do so; provided, however, that (i) the Borrower may declare and pay dividends or make other distributions on its capital stock to the extent made solely with common stock of the Borrower, (ii) any Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders, (iii) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may repurchase its Equity Interests owned by employees of the Borrower or the Subsidiaries or make payments to employees of the Borrower or the Subsidiaries upon termination of employment in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such employees in an aggregate amount not to exceed $5,000,000 in any fiscal year, (iv) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may make additional Restricted Payments in an aggregate amount not to exceed $5,000,000 in any fiscal year and (v) the Borrower may pay the Acquisition Consideration.

               (b) Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (A) the foregoing shall not apply to restrictions and conditions imposed by law,

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any Loan Document, the Term Loan Credit Agreement or any agreement governing Term Refinancing Indebtedness (subject to clause (iii) of Section 6.01(l)), (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (C) the foregoing shall not apply to restrictions and conditions imposed on any Foreign Subsidiary by the terms of any Indebtedness of such Foreign Subsidiary permitted to be incurred hereunder, (D) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (E) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

          SECTION 6.07. Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that (a) this Section shall not apply to transactions solely between or among Loan Parties and (b) the Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties.

          SECTION 6.08. Business of Borrower and Subsidiaries. Engage to any material extent at any time in any business or business activity other than the business currently conducted by it and business activities reasonably incidental thereto.

          SECTION 6.09. Other Indebtedness and Agreements. (a) Permit (i) any waiver, supplement, modification or amendment of the Convertible Notes, the Convertible Note Indenture or any other document relating to the Convertible Notes, (ii) except in connection with a refinancing permitted by Section 6.01(l), any waiver, supplement, modification or amendment of the Term Loan Documents or of documents governing Term Refinancing Indebtedness, if such waiver, supplement, modification or amendment would (A) increase the amount of Term Indebtedness thereunder except by an amount equal to reasonable fees and expenses incurred in connection with such waiver, supplement, modification or amendment (B) change the maturity date to a date that is earlier than the maturity date in effect immediately prior to such amendment, (C) shorten the average life to maturity of such Term Indebtedness, (D) result in the terms of such Term Indebtedness or of any agreement entered into or of any instrument issued in connection therewith to be less favorable in any material respect to the Loan Parties or the Lenders, (E) add any obligor (unless such obligor is or becomes at such time a Loan Party) or (F) cause the Term Indebtedness to be secured on a

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basis other than equally and ratably with, or junior to, the Obligations on substantially the same terms as the Term Indebtedness is secured on the Amendment No. 1 Effective Date except as shall be acceptable to the Administrative Agent, (iii) any waiver, supplement, modification, amendment, termination or release of any other indenture, instrument or agreement pursuant to which any other Material Indebtedness of the Borrower or any of the Subsidiaries is outstanding if the effect of such waiver, supplement, modification, amendment, termination or release would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to the Borrower, any of the Subsidiaries or the Lenders or (iv) any waiver, supplement, modification or amendment of (A) its certificate of incorporation, bylaws, operating, management or partnership agreement or other organizational documents or (B) any other agreement that is material to the conduct of its business, to the extent any such waiver, supplement, modification or amendment would be adverse to the Lenders in any material respect.

               (b) (i) Permit any alteration, amendment or other change or supplement to the Tender Offer Documentation or the Merger Agreement that could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders or (ii) permit any waiver, alteration, amendment or other change or supplement to any condition to the Tender Offer Documentation or the Merger Agreement without the prior written consent of the Joint Arrangers (such consent not to be unreasonably withheld or delayed).

               (c) (i) Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or commit to pay, or directly or indirectly (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any Indebtedness except (A) the payment of the Indebtedness created hereunder, (B) the payment of the Term Indebtedness, (C) refinancings of Indebtedness permitted by Section 6.01(a), (D) the payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, (E) any payment of Indebtedness owed by Foreign Subsidiaries that is not subordinated in right of payment to the Obligations , (F) so long as no Default or Event of Default shall have occurred and be continuing, any payments with respect to Indebtedness that (x) has an aggregate outstanding principal amount not greater than $25,000,000 and (y) is not subordinated in right of payment to the Obligations and (G) the payment of the Indebtedness under Alpharma Convertible Notes or (ii) pay in cash any amount in respect of any Indebtedness or preferred Equity Interests that may at the obligor’s option be paid in kind or in other securities.

          SECTION 6.10. Capital Expenditures. (a) Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any

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fiscal year set forth below to exceed the amount set forth below for such fiscal year:

Period	Amount
Fiscal year ended 12/31/09	$	95,000,000
Fiscal year ended 12/31/10	$	95,000,000
Fiscal year ended 12/31/11	$	100,000,000
Fiscal year ended 12/31/12	$	105,000,000

          The amount of permitted Capital Expenditures set forth above in respect of any fiscal year commencing with the fiscal year ending on December 31, 2010, shall be increased (but not decreased) by (a) an amount equal to 50% of the amount of unused permitted Capital Expenditures for the immediately preceding fiscal year less (b) an amount equal to unused Capital Expenditures carried forward to such preceding fiscal year.

          SECTION 6.11. Consolidated Interest Expense Coverage Ratio. Permit the Consolidated Interest Expense Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ending on a date set forth below (excluding any such date occurring prior to the last day of the first full fiscal quarter following the Amendment No. 1 Effective Date) to be less than:

          (a) for any such date occurring on or prior to the last day of the fiscal quarter in which the Skelaxin Trigger Event occurs, the ratio set forth below opposite such date:

Date	Ratio
03/31/09		4.00:1
06/30/09		4.00:1
09/30/09		4.00:1
12/31/09		4.00:1
03/31/10		4.00:1
06/30/10		4.00:1
09/30/10		4.00:1
12/31/10		4.00:1
03/31/11		4.00:1
06/30/11		4.00:1

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Date	Ratio
09/30/11		4.00:1
12/31/11		4.00:1
03/31/12		4.00:1

          (b) thereafter, the ratio set forth below opposite such date:

Date	Ratio
03/31/09		3.75:1
06/30/09		3.75:1
09/30/09		3.75:1
12/31/09		3.75:1
03/31/10		3.75:1
06/30/10		3.75:1
09/30/10		4.00:1
12/31/10		4.00:1
03/31/11		4.00:1
06/30/11		4.00:1
09/30/11		4.00:1
12/31/11		4.00:1
03/31/12		4.00:1

          SECTION 6.12. Maximum Leverage Ratio. Permit the Leverage Ratio on any date during a period set forth below (excluding any such date prior to the last day of the first full fiscal quarter to end following the Amendment No. 1 Effective Date) to be greater than:

          (a) for any such date prior to the last day of the fiscal quarter in which the Skelaxin Trigger Event occurs, the ratio set forth below opposite such period:

Period	Ratio
03/31/09 through 06/29/09		2.25:1
06/30/09 through 09/29/09		2.50:1

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Period	Ratio
09/30/09 through 12/30/09		2.65:1
12/31/09 through 03/30/10		2.30:1
03/31/10 through 06/29/10		2.10:1
06/30/10 through 09/29/10		2.00:1
09/30/10 through 12/30/10		1.75:1
12/31/10 through 03/30/11		1.50:1
03/31/11 through 06/29/11		1.50:1
06/30/11 through 09/29/11		1.50:1
09/30/11 through 12/30/11		1.50:1
12/31/11 through 03/30/12		1.50:1
03/31/12 through Maturity Date		1.50:1

          (b) thereafter, the ratio set forth below opposite such period:

Period	Ratio
03/31/09 through 06/29/09		2.25:1
06/30/09 through 09/29/09		2.50:1
09/30/09 through 12/30/09		3.25:1
12/31/09 through 03/30/10		3.25:1
03/31/10 through 06/29/10		3.25:1
06/30/10 through 09/29/10		3.15:1
09/30/10 through 12/30/10		2.70:1
12/31/10 through 03/30/11		2.10:1
03/31/11 through 06/29/11		2.00:1
06/30/11 through 09/29/11		2.00:1
09/30/11 through 12/30/11		2.00:1
12/31/11 through 03/30/12		2.00:1
03/31/12 through Maturity Date		1.50:1

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          SECTION 6.13. Fiscal Year. Change the end of its fiscal year from December 31 to any other date.

          SECTION 6.14. Certain Equity Securities. Issue any Equity Interest that is not Qualified Capital Stock.

ARTICLE VII

Events of Default

          In case of the happening of any of the following events (“Events of Default”):

          (a) any representation or warranty made or deemed made in or in connection with any Loan Document or the Borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

          (b) default shall be made in the payment of any principal of any Loan or any reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

          (c) default shall be made in the payment of any interest on any Loan or any Fee or L/C Disbursement or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

          (d) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.02, 5.05, 5.08 or 5.16 or in Article VI;

          (e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Administrative Agent or any Lender to the Borrower or (ii) knowledge thereof of the Borrower;

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          (f) (i) the Borrower or any Subsidiary shall fail to pay any principal or interest, regardless of amount, due in respect of any Material Indebtedness, when and as the same shall become due and payable, (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness (other than any Term Indebtedness) or any trustee or agent on its or their behalf to cause any Material Indebtedness (other than any Term Indebtedness) to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness or (iii) any “Event of Default” (as defined in the Term Loan Credit Agreement) shall occur;

          (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Subsidiary, or of a substantial part of the property or assets of the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or a Subsidiary or (iii) the winding-up or liquidation of the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

          (h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

          (i) one or more judgments shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which

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execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Subsidiary to enforce any such judgment and such judgment either (i) is for the payment of money in an aggregate amount in excess of $35,000,000 or (ii) is for injunctive relief and could reasonably be expected to result in a Material Adverse Effect;

          (j) an ERISA Event shall have occurred that, when taken together with all other such ERISA Events, could reasonably be expected to result in liability of the Borrower and its ERISA Affiliates in an aggregate amount exceeding $35,000,000;

          (k) any Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with its terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);

          (l) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to (i) maintain possession of certificates representing securities pledged under the Guarantee and Collateral Agreement or (ii) file or record any financing statement delivered to the Collateral Agent by the Borrower; or

          (m) there shall have occurred a Change in Control;

then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments

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shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

ARTICLE VIII

The Administrative Agent and the Collateral Agent

          Each Lender and each Issuing Bank hereby irrevocably appoints the Administrative Agent and the Collateral Agent (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the “Agents”) its agent and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents and (ii) negotiate, enforce or settle any claim, action or proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which negotiation, enforcement or settlement will be binding upon each Lender. The institution serving as the Administrative Agent and/or the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

          Neither Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is instructed in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08), and (c) except as expressly set forth in the Loan Documents, neither Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent and/or Collateral Agent or any of its

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Affiliates in any capacity. Neither Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08) or in the absence of its own gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by the Borrower or a Lender, and neither Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

          Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. Each Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

          Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Credit Facilities as well as activities as Agent.

          Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders, the Issuing Banks and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor (subject to any restriction on appointing a successor Collateral Agent set forth in the Security Documents). If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Banks, appoint a

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successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has been appointed pursuant to the immediately preceding sentence by the 30^th day after the date such notice of resignation was given by such Agent, such Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent and/or Collateral Agent, as the case may be (subject to any restriction on appointing a successor Collateral Agent set forth in the Security Documents). Any such resignation by such Agent hereunder shall also constitute, to the extent applicable, its resignation as an Issuing Bank and the Swingline Lender, in which case such resigning Agent (x) shall not be required to issue any further Letters of Credit or make any additional Swingline Loans hereunder and (y) shall maintain all of its rights as Issuing Bank or Swingline Lender, as the case may be, with respect to any Letters of Credit issued by it, or Swingline Loans made by it, prior to the date of such resignation. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

          Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder.

          Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, each of the Joint Arrangers, the Co-Syndication Agents, the Co-Documentation Agents and the Managing Agent are named as such for recognition purposes only, and in their respective capacities as such shall have no duties, responsibilities or liabilities with respect to this Agreement or any other Loan Document; it being understood and agreed that each of the Joint Arrangers, the Co-Syndication Agents, the Co-Documentation Agents and the Managing Agent shall be entitled to all indemnification and reimbursement rights in favor of the Agents provided herein and in the other Loan

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Documents. Without limitation of the foregoing, neither the Joint Arrangers, the Co-Syndication Agents, the Co-Documentation Agents nor the Managing Agent in their respective capacities as such shall, by reason of this Agreement or any other Loan Document, have any fiduciary relationship in respect of any Lender, Loan Party or any other person.

          In furtherance of the foregoing, each Lender and each Issuing Bank hereby irrevocably authorize the Agents, at their option and in their discretion, to:

     (a) release any Lien on any property granted or held by the Agents under the Loan Documents (i) upon termination or expiration of the Total Revolving Credit Commitments and payment in full of all Obligations (other than contingent indemnification and expense reimbursement obligations as to which no claim shall have been asserted) and the expiration or termination of Letters of Credit (or entry into arrangements satisfactory to the Issuing Banks with respect thereto), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document or (iii) if approved, authorized or ratified in writing in accordance with Section 9.08; and

     (b) release any Guarantor from its obligations under its guaranty if such person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

          Upon request by either Agent, the Required Lenders will confirm in writing such Agent’s authority to release its interests in particular types of collateral or to release any Guarantor from its obligations to guarantee pursuant to this Article VIII (it being understood that any Agent’s failure to make such a request shall not affect the authority expressly granted to the Agent by the terms hereof or any other Loan Document).

          Each Lender (and each person that becomes a Lender hereunder pursuant to Section 9.04) and each Issuing Bank hereby (i) acknowledges that Credit Suisse (and any successor to Credit Suisse in such capacities) is acting under the Security Documents in multiple capacities as the Administrative Agent, the Collateral Agent and the administrative agent and the collateral agent for the lenders party to the Term Loan Credit Agreement pursuant to the Term Loan Documents and (ii) waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against Credit Suisse (and such successor) any claims, causes of action, damages or liabilities of whatever kind or nature relating thereto. Each Lender (and each person that becomes a Lender hereunder pursuant to Section 9.04) and each Issuing Bank hereby authorizes and directs Credit Suisse (and such successor) to enter into the Security Documents on behalf of such Lender and such Issuing Bank and agrees that Credit Suisse (and such successor), in its various capacities thereunder, may

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take such actions on its behalf as is contemplated by the terms of the Security Documents.

ARTICLE IX

Miscellaneous

          SECTION 9.01. Notices. Notices and other communications provided for herein and in the other Loan Documents shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

          (a) if to the Borrower, to it at 501 Fifth Street, Bristol, TN 37620, Attention of Randy Sharrow (Facsimile No.                       ), with a copy to James Elrod at the above address (Facsimile No.                       );

          (b) if to the Administrative Agent, to Credit Suisse, Agency Manager, One Madison Avenue, New York, NY 10010, Facsimile No.                       , Email:                       ;

          (c) if to a Lender, to it at its address (or facsimile number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto; and

          (d) if to an Issuing Bank, to it at its address (or facsimile number) set forth on Schedule 2.01 or in the Issuing Bank Agreement pursuant to which such person became an Issuing Bank.

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service, or sent by facsimile, or on the date that is five (5) Business Days after dispatch by certified or registered mail, if mailed, in each case delivered, sent or mailed (properly addressed) to such party, as provided in this Section or in accordance with the latest unrevoked direction from such party in accordance with this Section.

          As agreed to among the Borrower, the Administrative Agent and the applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person.

          The Borrower hereby agrees, unless directed otherwise by the Administrative Agent or unless the electronic mail address referred to below has not been provided by the Administrative Agent to the Borrower, that it will, or will cause its Subsidiaries to, provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative

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Agent pursuant to the Loan Documents or to the Lenders under Article V, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) is or relates to a Borrowing Request, a notice pursuant to Section 2.12 or a notice requesting the issuance, amendment, extension or renewal of a Letter of Credit pursuant to Section 2.04, (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 Default or Event of Default under this Agreement or any other Loan Document or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium that is properly identified in a format acceptable to the Administrative Agent to an electronic mail address as directed by the Administrative Agent. In addition, the Borrower agrees, and agrees to cause its Subsidiaries, to continue to provide the Communications to the Administrative Agent or the Lenders, as the case may be, in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.

          The Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders and the Issuing Bank materials and/or information provided by or on behalf of the Borrower hereunder (collectively, the “Borrower Materials”) by posting the Borrower Materials on Intralinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Confidential Information, they shall be treated as set forth in Section 9.16); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor”; and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the following Borrower Materials shall be marked “PUBLIC,” unless the Borrower notifies the Administrative Agent promptly that any such document contains material non-public information: (1)

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the Loan Documents and (2) notification of changes in the terms of the Loan Documents.

          Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable law, including United States Federal and state securities laws, to make reference to Communications that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

          THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND EACH EXPRESSLY DISCLAIMS 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 ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL RULING BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSON’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

          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 receipt of 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

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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 that the foregoing notice may be sent to such e-mail address.

          Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

          SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Banks and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Banks, regardless of any investigation made by the Lenders or the Issuing Banks or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments or the L/C Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent, any Lender or Issuing Bank.

          SECTION 9.03. Binding Effect. This Agreement shall become effective and legally binding on the parties hereto when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

          SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, the Administrative Agent, the Collateral Agent, the Issuing Banks or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

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          (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided, however, that (i) except in the case of an assignment to another Lender or an Affiliate or Related Fund of the assigning Lender or another Lender, (x) each of the Borrower, the Administrative Agent, each Issuing Bank and the Swingline Lender must give its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed); provided, that the consent of the Borrower shall not be required to any such assignment made (A) to another Lender or an Affiliate or Related Fund of the assigning Lender or another Lender or (B) after the occurrence and during the continuance of any Default or Event of Default and (y) the amount of the Commitments of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the entire remaining amount of such Lender’s Commitments); provided that simultaneous assignments by or to two or more Related Funds shall be combined for the purpose of determining whether the minimum assignment requirement is met, (ii) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any tax form as required by the Internal Revenue Service and (iii) the parties to each assignment shall (A) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (B) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent and Assignment and Acceptance. Upon acceptance and recording pursuant to paragraph (e) of this Section and payment of the processing and recording fee referred to therein, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement, other than any claims by the Borrower for violations by such Lender of the provisions of this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).

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          (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows:  (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitments, and the outstanding balances of its Loans, without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any of the Subsidiaries or the performance or observance by the Borrower or any of the Subsidiaries of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

          (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, all L/C Disbursements, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be prima facie evidence of the matters recorded therein and the Borrower, the Administrative Agent, the

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Issuing Banks, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register and any Assignments and Acceptances delivered to the Administrative Agent pursuant to this Section 9.04(d) shall be available for inspection by the Borrower, the Issuing Banks, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

          (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder) and any tax form required by the Internal Revenue Service, a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent) and, if required, the written consent of the Borrower, the Swingline Lender, each Issuing Bank and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower, Lenders, each Issuing Bank and the Swingline Lender. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).

          (f) Each Lender may without the consent of the Borrower, the Swingline Lender, any Issuing Bank or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders; provided that no participant shall be entitled to receive any greater amount pursuant to Section 2.14 or 2.20 than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred and (iv) the Borrower, the Administrative Agent, the Issuing Banks and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans or L/C Disbursements and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is

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payable on the Loans, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans, increasing or extending the Commitments or releasing all or substantially all the Guarantors or the Collateral).

          (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16 and, in the case of any assignee, the Administrative Agent shall provide the Borrower with an execution copy of such agreement.

          (h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder.

          (i) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees

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(which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary in this Section, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section may not be amended without the written consent of the SPC.

               (j) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent, each Issuing Bank and each Lender, and any attempted assignment without such consent shall be null and void.

               (k) In the event that any Lender shall become a Defaulting Lender or S&P, Moody’s or Thompson’s Bank Watch (or Insurance Watch Ratings Service, in the case of Lenders that are insurance companies (or Best’s Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall, after the date that any Lender becomes a Lender, downgrade the long-term certificate deposit ratings of such Lender, and the resulting ratings shall be below BBB, Baa3 and C (or BB, in the case of a Lender that is an insurance company (or B, in the case of an insurance company not rated by Insurance Watch Ratings Service)) (or, with respect to any Lender that is not rated by any such ratings service or provider, any Issuing Bank or the Swingline Lender shall have reasonably determined that there has occurred a material adverse change in the financial condition of any such Lender, or a material impairment of the ability of any such Lender to perform its obligations hereunder, as compared to such condition or ability as of the date that any such Lender became a Lender) then such Issuing Bank or the Swingline Lender shall have the right, but not the obligation, at its own expense, upon notice to such Lender and the Administrative Agent, to replace such Lender with an assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its

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Revolving Credit Commitment to such assignee; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any Governmental Authority and (ii) such Issuing Bank, the Swingline Lender or such assignee, as the case may be, shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender’s account or owed to it hereunder.

          SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Joint Arrangers, the Administrative Agent, the Collateral Agent, the Issuing Banks and the Swingline Lender in connection with the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated) or incurred by the Joint Arrangers, the Administrative Agent, the Collateral Agent or any Issuing Bank or Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Davis Polk & Wardwell, counsel for the Joint Arrangers, the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any counsel for the Joint Arrangers, the Administrative Agent, the Collateral Agent or any Lender.

          (b) The Borrower agrees to indemnify the Joint Arrangers, the Administrative Agent, the Collateral Agent, each Lender and Issuing Bank, the Swingline Lender and each Related Party of any of the foregoing persons (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses, including reasonable outside counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby, (ii) the use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective shareholders or Affiliates) or (iv) any actual or alleged presence, Release or threatened Release of Hazardous Materials on any property or facility presently or

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formerly owned, leased or operated by the Borrower or any of the Subsidiaries, or any Environmental Claim related in any way to the Borrower or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee.

          (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Collateral Agent, any Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Collateral Agent, such Issuing Bank or the Swingline Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Collateral Agent, such Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure and unused Commitments at the time (in each case, determined as if no Lender were a Defaulting Lender).

          (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

          (e) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender or Issuing Bank. All amounts due under this Section shall be payable on written demand therefor.

          SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, but

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excluding payroll and related trust fund accounts) at any time held and other indebtedness at any time owing by such Lender (or its Affiliates) to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

          SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE “UNIFORM CUSTOMS”) AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

          SECTION 9.08. Waivers; Amendments. (a) No failure or delay of the Borrower, the Administrative Agent, the Collateral Agent or any Issuing Bank or Lender in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Borrower, the Administrative Agent, the Collateral Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice 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.

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          (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified other than pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, in the case of any other Loan Document, by the Loan Parties party thereto and the Administrative Agent or the Collateral Agent, as the case may be, with the consent of the Required Lenders. No agreement referred to in the preceding sentence shall (i) decrease the principal amount, or extend the maturity, of any scheduled date of payment or date for reimbursement of or any date for the payment of any interest on, any Loan or L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement or decrease the amount, or extend any scheduled date of payment, of any Fees, without the prior written consent of each Lender affected thereby, (ii) increase or extend any Commitment or decrease or extend the date for payment of the Commitment Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 2.17 or 9.04(j), the provisions of this Section (other than to impose additional restrictions on amendments) or the definition of the term “Required Lenders” without the prior written consent of each Lender, (iv) release any Guarantor (A) whose total assets represent at the time of such release more than 10% of the total assets of the Borrower and its consolidated Subsidiaries or (B) whose total revenues represent at the time of such release more than 10% of the total revenues of the Borrower and its consolidated Subsidiaries or all or substantially all the Collateral without the prior written consent of each Lender or (v) amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, any Issuing Bank or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Collateral Agent, such Issuing Bank or the Swingline Lender.

          SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest

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thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

          SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents, except as expressly agreed therein. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

          SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

          SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in

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Section 9.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

          SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

          SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or its properties in the courts of any jurisdiction.

          (b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

          (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

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          SECTION 9.16. Confidentiality.

          Each of the Administrative Agent, the Collateral Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Confidential Information (as defined below), except that Confidential Information may be disclosed (i) to its and its Affiliates’ officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential), (ii) to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (v) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (x) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (y) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (vi) with the consent of the Borrower or (vii) to the extent such Confidential Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, “Confidential Information” shall mean all information received from the Borrower and related to the Borrower or its business, other than any such information that was available to the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure by the Borrower; provided that, in the case of Confidential Information received from the Borrower after the Amendment No. 1 Effective Date, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Confidential Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Confidential Information as such person would accord its own confidential information.

          SECTION 9.17. Lender Action. Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, unless expressly provided for herein or in any other Loan Document, without the prior written consent of the Administrative Agent. The provisions of this Section 9.17 are for

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the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

          SECTION 9.18. Patriot Act. Each Lender and the Administrative Agent(for itself and not on behalf of any Lender) hereby notifies the Borrower, for itself and the Subsidiaries, that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower and the Subsidiaries, which information includes the name and address of the Borrower and the Subsidiaries and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower and the Subsidiaries in accordance with the Patriot Act.

          SECTION 9.19. No Fiduciary Duty. The Borrower, on behalf of itself and the Subsidiaries, agrees that in connection with all aspects of the transactions contemplated hereby or by any other Loan Document and any communications in connection therewith, the Borrower, the Subsidiaries and their Affiliates, on the one hand, and the Administrative Agent, the Issuing Banks, the Lenders and their Affiliates, on the other hand, will have a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Administrative Agent, the Issuing Banks, the Lenders or their Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications.

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EX-10.89

Exhibit 10.89

ASSET PURCHASE AGREEMENT

by and between

KING PHARMACEUTICALS, INC.

and

ACTAVIS ELIZABETH, L.L.C.

dated as of December 17, 2008

TABLE OF CONTENTS

Article I. Definitions		1
Section 1.01	Defined Terms	1
Section 1.02	Construction of Certain Terms and Phrases.	12
Article II. Purchase and Sale of Assets		12
Section 2.01	Purchase and Sale of Assets	12
Article III. Assumption of Liabilities		13
Section 3.01	Assumption of Assumed Liabilities	13
Section 3.02	Excluded Liabilities	13
Article IV. Purchase Price and Payment		13
Section 4.01	Purchase Price	13
Section 4.02	Inventory Payment	14
Section 4.03	Allocation of Purchase Price	14
Section 4.04	Payment of Sales, Use and Other Taxes	15
Section 4.05	Statements and Audit Rights	15
Article V. Closing		16
Section 5.01	Time and Place	16
Section 5.02	Deliveries at Closing	16
Article VI. Representations and Warranties of Seller		16
Section 6.01	Organization, Etc.	17
Section 6.02	Authority of Seller	17
Section 6.03	Consents and Approvals	17
Section 6.04	Non-Contravention	18
Section 6.05	Solvency	18
Section 6.06	Title	18
Section 6.07	Litigation	18
Section 6.08	Purchased Assets	19
Section 6.09	Regulatory	19
Section 6.10	Brokers	20
Section 6.11	No Other Representations and Warranties	20
Article VII. Representations and Warranties of Buyer		20
Section 7.01	Corporate Organization	20
Section 7.02	Authority of Buyer	20

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Section 7.03	Consents and Approvals	21
Section 7.04	Non-Contravention	21
Section 7.05	Solvency	21
Section 7.06	Brokers	21
Section 7.07	No Other Representations and Warranties	22
Article VIII. Covenants of the Parties		22
Section 8.01	Reasonable Best Efforts	22
Section 8.02	Cooperation and Transition	22
Section 8.03	Public Announcements	22
Section 8.04	Bulk Sales	23
Section 8.05	Corporate Names	23
Section 8.06	Regulatory Matters	23
Section 8.07	Product Returns	24
Section 8.08	Further Assurances	24
Section 8.09	Government Price Reporting Obligations	25
Section 8.10	Kadian Patent License	25
Section 8.11	DEA Notification	28
Section 8.12	Representations True	28
Section 8.13	Confidentiality; Non-Public Purchased Assets	28
Section 8.14	Filings	29
Section 8.15	Recalls.	29
Section 8.16	Rebates and Coupons	30
Section 8.17	Chargeback and Rebate Period	30
Section 8.18	Chargebacks	31
Section 8.19	GPO Administration Fees and IFF Payments	31
Section 8.20	Manufacturing Agreements	32
Section 8.21	Sale of Product	32
Section 8.22	Delivery of Inventory	32
Section 8.23	Assumed Contracts	32
Section 8.24	Regulatory Actions	32
Article IX. Conditions to the Obligations of Seller		33
Section 9.01	Alpharma Acquisition	33
Section 9.02	No Legal Prohibition	33
Article X. Conditions to the Obligations of Buyer		33
Section 10.01	No Legal Prohibition	33
Section 10.02	Alpharma Acquisition	33
Article XI. Additional Post-Closing Covenants		33
Section 11.01	Access to Information	33
Article XII. Indemnification		34

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Section 12.01	Survival of Representations and Warranties	34
Section 12.02	Indemnification	34
Section 12.03	Limitations	37
Section 12.04	Remedies Exclusive	37
Article XIII. Termination and Abandonment		37
Section 13.01	Methods of Termination	37
Section 13.02	Procedure upon and Effect of Termination	38
Article XIV. Miscellaneous		38
Section 14.01	Notices	38
Section 14.02	Entire Agreement	39
Section 14.03	Waiver	40
Section 14.04	Amendment	40
Section 14.05	Third Party Beneficiaries	40
Section 14.06	Assignment; Binding Effect	40
Section 14.07	Headings	40
Section 14.08	Severability	40
Section 14.09	Governing Law	41
Section 14.10	Consent to Jurisdiction and Forum Selection	41
Section 14.11	Expenses	41
Section 14.12	Counterparts	42

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ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (this “Agreement”) is made and entered into as of December 17, 2008 (the “Execution Date”), by and between Actavis Elizabeth, L.L.C., a Delaware limited liability company (“Buyer”), and King Pharmaceuticals, Inc., a Tennessee corporation (“King”).

RECITALS

     WHEREAS, King is party to an Agreement and Plan of Merger, dated as of November 23, 2008, by and among King, Albert Acquisition Corp. and Alpharma Inc. (the “Merger Agreement”) pursuant to which, subject to the terms and conditions set forth therein, King has agreed to acquire Alpharma Inc. (“Alpharma”);

     WHEREAS, Alpharma is engaged in the business of selling in the Territory the Product that contains morphine sulfate as its sole active ingredient that is approved for distribution as of the Closing Date in the Territory under the Regulatory Approval (the “Business”);

     WHEREAS, effective upon the acquisition by King of Alpharma pursuant to the Merger Agreement, King desires to sell to Buyer the Product and certain related assets, and Buyer desires to purchase the Product and such assets from Seller and to assume certain related obligations; and

     WHEREAS, this Agreement and the consummation of the transactions contemplated hereby are not in consideration of, or intended to induce or encourage, the settlement or other resolution of the litigation captioned King Pharmaceuticals, Inc., King Pharmaceuticals Research and Development, Inc., Elan Corporation plc and Elan Pharma International Ltd. v. Actavis, Inc. and Actavis Elizabeth LLC, Civil Action No. 07-CV-5041 (JMA, SDW) (DNJ).

AGREEMENT

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

Article I.
Definitions

Section 1.01 Defined Terms

     As used in this Agreement, the following defined terms have the meanings described below:

     (a) “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the

possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or general partnership or managing member interests, by contract or otherwise. Without limiting the generality of the foregoing, a Person shall be deemed to control any other Person in which it owns, directly or indirectly, a majority of the ownership interests.

     (b) “AG Distributor” shall mean a third party pharmaceutical company that is taking on the role of distributing Authorized Generic Versions to trade customers (e.g. wholesalers, retail chains, managed care organizations, government agencies, pharmacy benefit managers, etc.), which third party pharmaceutical company shall exclude ordinary trade customers such as wholesalers.

     (c) “Aggregate Inventory Amount” has the meaning set forth in Section 4.02(b).

     (d) “Aggregate Wholesaler Amount” has the meaning set forth in Section 8.17(a).

     (e) “Aggregate Wholesale/Retail Amount” has the meaning set forth in Section 8.17(b).

     (f) “Agreement” has the meaning set forth in the Preamble to this Agreement.

     (g) “Alpharma” has the meaning set forth in the Recitals to this Agreement.

     (h) “Alpharma Subsidiary” means each subsidiary of Alpharma owning or controlling assets or having liabilities relating to the Business.

     (i) “API” means active pharmaceutical ingredient.

     (j) “Assets and Properties” of any Person means all assets and properties of any kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including cash, cash equivalents, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods and intellectual property.

     (k) “Assumed Contract” means (i) each Contract relating to the Product, as in effect on the Closing Date that is set forth in Section 1.01(k) of the Seller’s Disclosure Schedule, and (ii) each Contract (or any portion thereof) that is assumed by the Buyer after the Closing Date pursuant to Section 8.23, excluding any Excluded Rights under any such Contract (or portion thereof).

     (l) “Assumed Liabilities” means (i) all Liabilities and obligations that Buyer has expressly assumed or agreed to assume or perform under this Agreement, (ii) all Liabilities and obligations under or pursuant to the Assumed Contracts arising after the Closing, other than the Liabilities and obligations listed in items (ii)-(iv) of the Excluded Liabilities, (iii)

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any obligations of Seller under an Assumed Contract to deliver Product following the Closing under purchase orders of Persons entered into prior to the Closing in the ordinary course of business for delivery of Product within thirty (30) days of the Closing Date and for which Buyer shall receive payment, (iv) all Liabilities and obligations to pay Rebates attributable to Product bearing any of Buyer’s NDC numbers, (v) all Liabilities and obligations to pay GPO Administration Fees and IFF payments attributable to Product bearing any of Buyer’s NDC numbers, (vi) all Liabilities and obligations to pay Chargebacks that are submitted to Buyer, Seller, or their respective Affiliates, with respect to Product bearing any of Buyer’s NDC numbers, (vii) all Liabilities and obligations relating to recalls or product liability claims or threatened claims or injuries caused by Product sold by Buyer after the Closing, except to the extent that such Product was included in Inventory and was defective when delivered by Seller to Buyer hereunder, (viii) Seller’s obligations under the Federal Supply Schedule to supply the Product at the prices set forth in the Federal Supply Schedule after the Closing for the period required by applicable Law, (ix) Seller’s obligations under Section 340B of the Public Health Services Act to sell Product at the prices required by applicable Law with respect to Product sold after the Closing Date, and (x) all other Liabilities and obligations that (A) arise out of or are related to the Purchased Assets (including the Regulatory Approval), the Product or the ownership, operation or conduct of the Business by or on behalf of Buyer, its Affiliates or (sub)licensees, or their respective successors or assigns, (B) arise after the Closing, and (C) are not otherwise expressly excluded under this definition.

     (m) “Authorized Generic Version” means any Product that is distributed under no trademark or under a trademark other than Kadian^®.

     (n) “Books and Records” means all files, documents, instruments, papers, books and records (scientific, developmental, distribution, marketing, financial or other) owned by Seller and relating to the Product or the Business in the Territory, including any pricing lists, customer lists, vendor lists, financial data (including sales histories, sales force call activities and market studies), Regulatory Documentation, clinical data, safety data, research and testing data and pharmacology and toxicology data, validation documents and data, quality control histories, litigation, adverse claims or demands, investigation information or files, trademark registration certificates, trademark renewal certificates, and other documentation relating to the Purchased Assets, the Product or the Regulatory Approval, but excluding any such items (i) to the extent that any applicable Law prohibits their transfer, (ii) that were specifically prepared by Seller for the negotiation of this Agreement, and (iii) to the extent such items are included in the definition of “Marketing Materials”. The Parties acknowledge and agree that to the extent that any such Books and Records contain information that relates to any product other than the Product or to any business or operations of Seller other than the Business, such Books and Records may be copies and in any event shall be redacted to delete such information.

     (o) “Business” has the meaning set forth in the Recitals to this Agreement.

     (p) “Business Day” means a calendar day other than Saturday, Sunday or any other calendar day on which banks located in New York are authorized or obligated to close.

     (q) “Buyer” has the meaning set forth in the Preamble to this Agreement.

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     (r) “Calendar Quarter” means each successive period of three consecutive calendar months commencing on January 1, April 1, July 1 and October 1.

     (s) “Chargeback” means a credit, chargeback, reimbursement, purchase discount or other payment to any pharmaceutical wholesaler or distributor in connection with the sale of a Product in the United States by such wholesaler or distributor to a customer at a discount price pursuant to a Contract between such customer and Seller or Buyer or pursuant to the Federal Supply Schedule or Section 340B of the Public Health Service Act, 42 U.S.C. Section 201 et. seq..

     (t) “Chargeback Period” has the meaning set forth in Section 8.17(a).

     (u) “Closing” has the meaning set forth in Section 5.01.

     (v) “Closing Date” means the date that the Closing actually occurs as provided in Section 5.01.

     (w) “Consultant” has the meaning set forth in Section 8.17(a).

     (x) “Contract” means any and all legally binding commitments, contracts, purchase orders, leases, licenses, security agreements or other agreements, whether written or oral, including any amendments, supplements or modifications thereto.

     (y) “Corporate Names” has the meaning set forth in Section 8.05(a).

     (z) “Costs of Goods Sold” means, with respect to any period, Buyer’s actual direct costs to manufacture, or purchase from a third party, the Product sold in the Territory during such period, excluding the Purchase Price.

     (aa) “Coupons” means any coupons, vouchers, co-pay cards or similar promotional incentives distributed by Alpharma or any subsidiary of Alpharma prior to the Closing Date pursuant to which Alpharma or such subsidiary of Alpharma is obligated to reimburse or pay a portion of the purchase price of the Product directly or indirectly to an eligible patient.

     (bb) “Daily Sales Amount” has the meaning set forth in Section 8.17(a).

     (cc) “Daily Utilization Amount” has the meaning set forth in Section 8.17(b).

     (dd) “Damages” has the meaning set forth in Section 12.02(a).

     (ee) “DEA” means the United States Drug Enforcement Administration, and any successor agency thereto.

     (ff) “Detail” means a face-to-face contact in which a Buyer sales representative makes a presentation, including selling message and features and benefits of the Product, to a medical professional with prescribing authority.

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     (gg) “Direct Cost” means the cost of direct labor and direct materials used to provide the relevant assistance or service.

     (hh) “Embeda NDA” means New Drug Application 22-321 filed pursuant to the Federal Food, Drug, and Cosmetic Act and applicable FDA rules and regulations for marketing authorization of the pharmaceutical product containing morphine sulfate as an active ingredient, known as Embeda, within the United States (including all additions, amendments, supplements, extensions and modifications thereto and the official regulatory files relating thereto).

     (ii) “Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, option, right of first refusal, preemptive right, community property interest or restriction of any nature (including any restriction on any other asset and any restriction on the possession or exercise of any attribute or ownership of any asset).

     (jj) “Excluded Assets” means all Assets and Properties of Seller, including the Licensed Intellectual Property, except the Purchased Assets.

     (kk) “Excluded Liabilities” means all Liabilities of Seller except the Assumed Liabilities, including (i) all Liabilities and obligations under any Contract other than the Assumed Contracts, (ii) all Liabilities and obligations of Seller to pay Rebates and Coupons pursuant to Section 8.16, (iii) all Liabilities and obligations of Seller to pay GPO Administration Fees and IFF payments pursuant to Section 8.19, (iv) all Liabilities and obligations of Seller to pay Chargebacks pursuant to Section 8.18, (v) all Liabilities of Seller for Taxes with respect to any taxable period, and all Liabilities for Taxes relating or attributable to the Product, the Business, the Purchased Assets or the sale, operating or use of any of the foregoing with respect to any taxable period or portion thereof ending on or prior to the Closing Date, with any property, ad valorem or similar Taxes allocated to any period that includes but does not end on the Closing Date on a per diem basis and (vi) any and all Liabilities of Seller accruing or arising prior to the Closing, including Liabilities with respect to any claim or action asserted after the Closing to the extent the conduct giving rise to such claim or action occurred prior to the Closing.

     (ll) “Excluded Rights” means, with respect to any Assumed Contract, any rights of any Seller Indemnified Party to seek and obtain defense and indemnification thereunder from any indemnifying party pursuant to the terms and conditions of the applicable Assumed Contract based on any Damages incurred by any Seller Indemnified Party, whether prior to, on or after the Closing Date, to the extent that such Damages (i) are attributable to occurrences and circumstances arising prior to the Closing, and (ii) are otherwise subject, prior to the Closing, to an obligation of defense or indemnity by any indemnifying party.

     (mm) “Execution Date” has the meaning set forth in the Preamble to this Agreement.

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

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     (oo) “GAAP” means generally accepted accounting principles, consistently applied, as applied in the United States.

     (pp) “Generic Product” means a drug product containing morphine sulfate as its sole active ingredient that refers to the Licensed Product as the reference-listed drug in an Abbreviated New Drug Application or pursuant to an application under 21 U.S.C. § 355(b)(2).

     (qq) “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or other country, or any supra-national organization, state, county, city or other political subdivision.

     (rr) “GPO Administration Fee” means any administration, service or similar fee paid to a group purchasing organization, buying group or similar organization pursuant to a Contract between Seller or Buyer and such group purchasing organization, buying group or similar organization relating to the sale of Product to members of or participants in such group purchasing organization, buying group or similar organization.

     (ss) “Gross Profit” means, with respect to any period, (i) Net Sales for such period, less (ii) Cost of Goods Sold for such period, less (iii) an amount equal to five percent (5%) of Net Sales for such period (as an allowance for handling and distribution costs).

     (tt) “IFF” means the industrial funding fee payable to the United States Department of Veterans Affairs in connection with the sale of the Product to the United States Department of Veterans Affairs under the Federal Supply Schedule, as in effect from time to time.

     (uu) “Indemnification Claim Notice” has the meaning set forth in Section 12.02(c).

     (vv) “Indemnified Party” has the meaning set forth in Section 12.02(c).

     (ww) “Indemnifying Party” has the meaning set forth in Section 12.02(c).

     (xx) “Inventory” means all inventory in whole lots of Product owned as of the Closing by Seller in finished, packaged form, whether held at a location or facility of Seller (or of any other Person on behalf of Seller) in the Territory, or in transit within the Territory to or from Seller (or any such other Person).

     (yy) “Kadian” means pharmaceutical product (i) approved for distribution under the Regulatory Approval in the Territory in any dosage or form, whether or not distributed under the Trademark Kadian^® or (ii) otherwise marketed or sold by Seller in the Territory under the Trademark Kadian^® as of the Closing Date.

     (zz) “Kadian Patents” means United States patent number 5,202,128, United States patent number 5,378,474, and United States patent number 5,330,766, and any continuations, continuations-in-part, divisionals, reexaminations, reissues and extensions thereof.

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     (aaa) “Knowledge of King” means the actual knowledge of those employees who hold the position of vice president or are more senior at King that were engaged in the diligence of acquisition of Alpharma by King, including but not limited to, the following people, without any duty to conduct an investigation: Eric Carter, Ken Touw, Brad Knoll, Chris McClendon, James Elrod and Mary Flipse.

     (bbb) “Law” means any federal, state or local law, statute or ordinance, or any rule, regulation, or published guidelines or pronouncements promulgated by any Governmental or Regulatory Authority.

     (ccc) “Liability” means any debt, liability, losses, damages, cost, expenses and obligations of every kind (whether fixed or contingent, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), including any liability for Taxes.

     (ddd) “License Term” means the period commencing on the Closing Date and ending on the earlier of (i) the date of expiration of the last to expire of the Licensed Patents and (ii) the date on which a court enters a final decision from which no appeal has been or can be taken holding that all claims of the Licensed Patents that would otherwise be infringed by the making, having made, using, selling, offering for sale or importation of any Licensed Product or Generic Product are unenforceable or invalid.

     (eee) “Licensed Intellectual Property” means all Product Patents (including the Kadian Patents), unpatented inventions, know-how, trade secrets, technical data (including the Seller Data), trade dress, and package designs owned or controlled by Sellers and their Affiliates that are not exclusively related to the Product and that would be infringed or violated by the making, having made, using, selling, offering for sale or importation of the Licensed Product in the Territory.

     (fff) “Licensed Patents” means United States patent number 5,202,128 and United States patent number 5,378,474, and any continuations, continuations-in-part, divisionals, reexaminations, reissues and extensions thereof.

     (ggg) “Licensed Product” means the Product in the dosage strengths and formulations approved for distribution in the Territory pursuant to the Regulatory Approval as of the Closing Date and manufactured in accordance with the manufacturing process used as of the Closing Date, including, after the Closing Date, any Minor Changes.

     (hhh) “Marketing Materials” means all market research, marketing plans and strategies, media plans, advertising, form letters, sales force training materials, advertising, promotional and marketing data and materials (including competitor information, product data, market intelligence reports and marketing and sales statistical programs), advertising and promotional materials and literature, mailing lists, sales data and detailing reports, reimbursement data, customer information (including customer sales information, sales forecasting models, medical educational materials, website content and advertising and display materials and speakers lists), packaging artwork and television masters, in each case (i) owned by Seller and used exclusively in connection with the marketing, advertising and promotion of

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the Product in the Territory that Seller, in its sole discretion, determines to transfer to Buyer and (ii) to the extent that Seller is able to share such materials with Buyer without violation of any third party agreement; provided that “Marketing Materials” shall exclude the labeling of the Product, which shall be deemed part of the Regulatory Approval.

     (iii) “Material Adverse Effect” means an effect, condition or change that individually or in the aggregate is materially adverse to the Purchased Assets taken as a whole or the business, results of operations, or financial condition of the Business taken as a whole, other than changes in general economic or market conditions or changes or developments generally affecting the pharmaceutical industry.

     (jjj) “Merger Agreement” has the meaning set forth in the Recitals to this Agreement.

     (kkk) “Minor Changes” means changes to the Licensed Product that would not cause the manufacture, use or sale of the Licensed Product to fall within the Licensed Intellectual Property owned or controlled by Seller or its Affiliates after the Closing Date, other than the Kadian Patents.

     (lll) “NDC” means the unique identifying number assigned to a drug product, including the labeler code, product code and package code, in connection with the drug listing requirements of Section 510(j) of the Federal Food, Drug, and Cosmetic Act and applicable FDA rules and regulations.

     (mmm) “Net Sales” means, with respect to any period, the gross sales recorded by Buyer and its Affiliates or sublicensees, on its books and records, in accordance with GAAP, for sales of the Product to third parties in the Territory during such period, less (if not already deducted or reflected in the amount recorded and to the extent actually allowed by Buyer) (i) trade and quantity discounts, Rebates, Chargebacks paid by Buyer, GPO Administrative Fees paid by Buyer, and IFF paid by Buyer and other ordinary course administrative or promotional fees, (ii) repayments, credits and allowances to customers on account of ordinary course promotional allowances, rejection, withdrawal, recall, or return of the Product or on account of retroactive price reductions affecting the Product, and (iii) customary cash discounts (“fast pay”), which, in each case ((i), (ii), and (iii)), for the avoidance of doubt, shall be paid in accordance with GAAP and shall not include write-offs, bad debts or freight, insurance and handling costs, Taxes and expenses for all activities related to the distribution of the Product incurred by Buyer. Net Sales with respect to sales of the Product that are not made on an arm’s length basis or that are made for consideration other than cash shall be calculated based on the average per-unit Net Sales of the Product during the applicable period without regard to such non-arm’s length or non-cash sales. If the Product is sold with other products on a portfolio basis, any commercially reasonable discounts or other adjustments with respect to the Product shall be allocated pro rata across all products in such portfolio based on the non-discounted, non-adjusted price for each such product. In the event that one or more Authorized Generic Versions are sold by an AG Distributor, (A) sales from Buyer or its Affiliates to an AG Distributor shall not be included in Net Sales and (B) such AG Distributor’s sales to third parties shall be included in Net Sales.

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     (nnn) “Order” means any writ, judgment, decree, injunction, charge, ruling or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

     (ooo) “Party” means either Buyer or Seller. “Parties” means Buyer and Seller, collectively.

     (ppp) “Patent” means (i) all patents, patent applications and statutory invention registrations, (ii) any substitutions, divisions, continuations, continuations-in-part, reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like, and any provisional applications, of any such patents, patent application or statutory invention registrations, (iii) all inventions disclosed in the foregoing, (iv) all rights therein provided by international treaties and conventions, and (v) all rights to obtain and file for patents and registrations thereto anywhere in the Territory.

     (qqq) “Permitted Encumbrance” means (i) any Encumbrance for Taxes not yet due or delinquent or for those Taxes being contested in good faith by appropriate proceedings for which adequate reserves have been established and (ii) any Encumbrance that does not materially detract from the value of, or interfere with the present use of, the properties or assets it affects.

     (rrr) “Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

     (sss) “Product” means Kadian.

     (ttt) “Product Copyrights” means any and all copyrights owned by Seller relating exclusively to the Product, including copyrights in Marketing Materials for the Product.

     (uuu) “Product Domain Names” means (i) the domain names set forth in Section 1.01(uuu) of the Seller’s Disclosure Schedule and (ii) any other domain name owned by Seller as of the Closing Date the includes the word “Kadian”.

     (vvv) “Product IND” means Investigational New Drug Application 35,553 filed in accordance with Section 505(i) of the Federal Food, Drug, and Cosmetic Act, as amended, and applicable FDA rules and regulations (including all additions, amendments, supplements, extensions and modifications thereto and the official regulatory files relating thereto).

     (www) “Product Intellectual Property” means the Product Copyrights, Product Know-How, Product Marks and Product Trade Dress, in each case relating to the Territory, and the Product Domain Names.

     (xxx) “Product Know-How” means any research and development information, validation methods and procedures, unpatented inventions, know-how, trade secrets or technical data (including clinical data and safety data) or information that exclusively relate to the Product or the Business and are owned by Seller, other than such know-how that is or becomes the subject of a Patent.

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     (yyy) “Product Mark(s)” means (i) the Trademark “Kadian^®” and (ii) such other Trademark(s) owned by Seller and exclusively used in connection with the Product.

     (zzz) “Product Patent” means all Patents in the Territory owned or controlled by Seller that claim the Product or the manufacture, use or sale of the Product.

     (aaaa) “Product Trade Dress” means the trade dress, package designs, product inserts, labels and associated artwork owned by Seller that is used exclusively in connection with the Product, the packaging thereof or the Business, excluding all Seller Brands used thereon other than the Product Marks.

     (bbbb) “Public Filings” means all of Alpharma’s periodic reports and registration statements filed or furnished on EDGAR with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or Securities Act of 1933.

     (cccc) “Purchase Price” shall have the meaning set forth in Section 4.01(a).

     (dddd) “Purchased Assets” means: (i) the Assumed Contracts; (ii) the Marketing Materials; (iii) the Books and Records; (iv) the Regulatory Approval; (v) the Inventory, (vi) the Product Intellectual Property and (vii) the Product IND. The Purchased Assets do not include any fixed assets, entities, the Seller Data or the Licensed Intellectual Property.

     (eeee) “Reasonable Best Efforts” means such prompt, substantial and persistent efforts as a prudent Person desirous of achieving a result would use in similar circumstances; provided, that the Parties shall be required to expend only such resources to achieve such results as are commercially reasonable in similar circumstances.

     (ffff) “Rebate” means any rebate payable pursuant to (i) state Medicaid or other state and governmental pharmaceutical assistance programs or (ii) Contracts between Seller or Buyer and managed care organizations (including pharmacy benefit management companies, health plans and insurance companies), in each case relating to utilization of the Product in the United States during any particular period.

     (gggg) “Rebate Period” has the meaning set forth in Section 8.17(b).

     (hhhh) “Regulatory Approval” means the New Drug Application 20-616 filed pursuant to Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act and applicable FDA rules and regulations for marketing authorization of the Product within the United States (including all additions, amendments, supplements, extensions and modifications thereto and the official regulatory files relating thereto).

     (iiii) “Regulatory Documentation” means (i) registrations or applications for, or other filings or submissions with respect to, the Regulatory Approval or the Product, including regulatory compliance reports and other reports, and other written materials filed as part of or referenced in, the Regulatory Approval, and the risk management plan with respect to the Product, (ii) any other filings or submissions with respect to the Product with any Governmental or Regulatory Authority in the Territory other than the FDA and (iii) written communications,

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and written summaries and minutes of other communications, with the FDA or other Governmental or Regulatory Authorities to the extent relating to any of the foregoing.

     (jjjj) “Seller” means King and, from and after the Closing, shall also include Alpharma and any subsidiary of Alpharma owning or controlling assets or having liabilities relating to the Business, jointly and severally, or if the context so requires individually.

     (kkkk) “Seller Brands” means all Trademarks owned by, licensed to, controlled by or used by Seller, whether or not registered, including the name “King”, but excluding the Product Marks and excluding any trade dress rights in the shape, configuration, coloring or appearance of the Product or its packaging as sold by Seller before the Closing Date.

     (llll) “Seller Data” means the clinical data, safety data and other information that is included or referenced in the Regulatory Approval as of the Closing Date, but excluding the Product Know-How.

     (mmmm) “Seller’s Disclosure Schedule” has the meaning set forth in Article VI.

     (nnnn) “Seller Indemnified Parties” has the meaning set forth in Section 12.02(b).

     (oooo) “Solvent” means, with respect to any Person on a particular date, that at fair valuations, the sum of such Person’s assets is greater than all of such Person’s debts.

     (pppp) “Tax” means any and all taxes, customs, duties, fees or other like assessments, charges or Liabilities imposed by any governmental, regulatory or administrative entity or agency responsible for the imposition of any amount, including (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, excise, severance, stamp, occupation, premium, property, withholding, employment, payroll, recapture, environmental or windfall profit tax; (ii) any Liability for the payment of any amounts of the type described in clause (i) above as a result of being a member of any affiliated, consolidated, combined, unitary or other group for any Taxable period; and (iii) any Liability for the payment of any amounts of the type described in clause (i) or (ii) above as a result of any express or implied obligation to indemnify any other Person, and including any liability for taxes of a predecessor or transferor or otherwise by operation of law.

     (qqqq) “Tax Return” means any return, form, estimate, information statement or report relating to Taxes, including any attachment, appendix, addendum or amendment.

     (rrrr) “Territory” means the United States.

     (ssss) “Third Party Claim” has the meaning set forth in Section 12.02(d).

     (tttt) “Toll Manufacturing Agreement” has the meaning set forth in Section 8.20(a).

     (uuuu) “Trademark” means trademarks, service marks, certification marks, trade dress, Internet domain names, trade names, product names, company names and any other source

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identifying symbols, designs, slogans, logos or insignia, whether registered or unregistered, and all common law rights, applications and registrations therefor, and all goodwill associated therewith.

     (vvvv) “United States” means the United States of America, its territories and possessions, including Washington, D.C. and Puerto Rico.

Section 1.02 Construction of Certain Terms and Phrases.

     Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (d) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (e) the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”; (f) the terms “including” and “includes” mean “including without limitation” and “includes without limitation,” respectively; and (g) a reference to a Law includes any amendments or modifications to such Law. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.

Article II.
Purchase and Sale of Assets

Section 2.01 Purchase and Sale of Assets

     (a) Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, free and clear of any Encumbrance, other than a Permitted Encumbrance, all of Seller’s right, title and interest, as of the Closing, in and to the Purchased Assets.

     (b) From and after the Closing, Seller shall retain all of its right, title and interest in and to the Excluded Assets and Seller may retain an archival copy of all Assumed Contracts, Books and Records (or with respect to any Books and Records that contain information that relates to any product other than the Product or to any business or operation of Seller and its applicable subsidiaries other than the Business, the original Books and Records), Marketing Materials and other documents or materials conveyed hereunder.

     (c) King shall cause Alpharma and each Alpharma Subsidiary to perform all obligations required of it as a Seller under this Agreement.

     (d) Prior to the Closing, Seller shall use commercially reasonable efforts to obtain all consents required for the assignment to Buyer of the Contracts listed on Schedule 1.01(k). If such consent is not obtained prior to the Closing, (a) Seller shall continue to use commercially reasonable efforts to obtain such consent and (b) Seller and Buyer shall cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations under such Contract in accordance with this Agreement, and under which Seller would enforce for the benefit of the Buyer, with Buyer assuming Seller’s obligations, any and all rights of Seller against a third party thereto. To the extent, and only to the extent, that the

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benefits arising therefrom and obligations thereunder have been provided by alternative arrangements as provided above, such Contract (or any portion thereof) shall be deemed an Assumed Contract, provided that Buyer shall not be responsible for any Liabilities (i) arising out of a claim of breach of such Contract due to the establishment of the alternative arrangements, or (ii) arising out of such Contract as a result of Seller’s action without Buyer’s approval in a manner inconsistent with the alternative arrangements.

Article III.
Assumption of Liabilities

Section 3.01 Assumption of Assumed Liabilities

     Subject to the terms and conditions of this Agreement, as of the Closing Date, Buyer agrees to assume, satisfy, perform, pay and discharge only the Assumed Liabilities.

Section 3.02 Excluded Liabilities

     Seller shall retain and remain solely responsible for, and shall satisfy, perform, pay and discharge when due, any and all Excluded Liabilities.

Article IV.
Purchase Price and Payment

Section 4.01 Purchase Price

     As full and complete consideration for the Purchased Assets, Buyer shall:

     (a) pay, or cause to be paid the following amounts (together, the “Purchase Price”) in immediately available funds by wire transfer into an account designated by Seller not later than three Business Days prior to the date such payment is due:

                    (i) not later than forty-five (45) days (or, upon the certification by Buyer to Seller prior to such forty-fifth (45th) day that it has not collected sufficient receivables with respect to the Product to enable it to pay such amount by such forty-fifth (45th) day, fifty-five (55) days) following the last day of the first Calendar Quarter of 2009, $30,000,000;

                    (ii) not later than thirty (30) days following the last day of the second Calendar Quarter of 2009, $25,000,000, plus any unpaid amounts previously payable pursuant to Section 4(a)(i);

                    (iii) not later than thirty (30) days following the last day of the third Calendar Quarter of 2009, $25,000,000, plus any unpaid amounts previously payable pursuant to Section 4(a)(ii);

                    (iv) not later than thirty (30) days following the last day of the fourth Calendar Quarter of 2009, $20,000,000, plus any unpaid amounts previously payable pursuant to Section 4(a)(iii);

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                    (v) not later than thirty (30) days following the last day of the first Calendar Quarter of 2010, $20,000,000, plus any unpaid amounts previously payable pursuant to Section 4(a)(iv); and

                    (vi) not later than thirty (30) days following the last day of the second Calendar Quarter of 2010, $7,500,000, plus any unpaid amounts previously payable pursuant to Section 4(a)(v);

provided, however, that no payment pursuant to any of Sections 4.01(a)(i) through 4.01(a)(vi) following any single Calendar Quarter shall, when combined with all prior payments made by Buyer pursuant to Section 4.01(a), exceed the aggregate amount of Gross Profits for the period beginning on January 1, 2009 and ending on the last day of such Calendar Quarter; provided further, however, that any amount that is not paid by reason of the foregoing proviso shall be deemed to be “payable” but “unpaid” for the purposes of Section 4(a)(ii) through Section 4(a)(vi), but in no case shall the application of this proviso cause the cumulative Purchase Price to exceed the lesser of (A) $127,500,000 and (B) the Gross Profits for the period from January 1, 2009, through June 30, 2010;

     (b) not later than the date on which the payment in Section 4.01(a)(i) is due, pay the Aggregate Inventory Amount as determined in accordance with Section 4.02; and

     (c) assume the Assumed Liabilities at Closing.

Section 4.02 Inventory Payment

     (a) On the day immediately following the Closing Date, representatives of Buyer and Seller shall count the number of finished packages of the Product included in Inventory where such Inventory is located.

     (b) The “Aggregate Inventory Amount” shall mean the aggregate cost paid or payable by Seller to the manufacturer of the Inventory (other than Inventory with a remaining shelf life of less than twelve (12) months) for all of the Inventory included in the Purchased Assets.

     (c) Not later than the date on which the payment in Section 4.01(a)(i) is due, Buyer shall pay to Seller the Aggregate Inventory Amount in immediately available funds by wire transfer into an account designated by Seller not later than three (3) Business Days after such count.

Section 4.03 Allocation of Purchase Price

     Promptly following the Closing, Seller and Buyer shall agree in good faith on an allocation of the Purchase Price among the Purchased Assets. Buyer and Seller agree (a) to report the sale and purchase of the Purchased Assets for Tax purposes in accordance with such allocations and (b) not to take any position inconsistent with such allocations on any of their respective tax returns. All payments made pursuant to Article XII shall be deemed adjustments to the Purchase Price.

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Section 4.04 Payment of Sales, Use and Other Taxes

     Buyer shall be solely responsible for all sales, use, transfer, value added, gross receipts and other similar Taxes, if any, arising out of the sale by Seller of the Purchased Assets to Buyer pursuant to this Agreement.

Section 4.05 Statements and Audit Rights

     (a) Any payment under Section 4.01(a) that is based upon Gross Profits shall be accompanied by a statement of the amount of Gross Profits during the applicable period represented by such payment.

     (b) Buyer shall, and shall cause its sublicensees and AG Distributors, to maintain at a location in the United States, complete and accurate books and records in such detail as is necessary to accurately calculate the amounts payable to Seller under this Agreement. Such books and records shall be maintained for a period of at least five (5) years after the end of the Calendar Quarter in which they were generated, or for such longer period as may be required by applicable Law. Once per each calendar year and for a period of two (2) years after the end of the second Calendar Quarter of 2010, Seller shall have the right upon reasonable prior notice to have an independent accounting firm reasonably acceptable to Buyer audit and examine the relevant books and records as may be reasonably necessary to determine and/or verify the amount of payments due hereunder and Buyer’s compliance with its obligations hereunder; provided, however, that Seller shall not have the right to conduct such an audit until the expiration of the Licensed Patents. Such audit and examination shall be conducted and shall take place, and Buyer shall, and shall cause its Affiliates, sublicensees, AG Distributors and third party distributors of Authorized Generic Versions to, make such books and records available, during normal business hours at the facility(ies) where such books and records are maintained. Each such audit and examination shall be limited to pertinent books and records for any Calendar Quarter ending not more than twenty-four (24) months prior to the date of the audit. Before permitting such independent accounting firm to have access to such books and records, Buyer may require such independent accounting firm and its personnel involved in such audit to sign a customary confidentiality agreement in form and substance reasonably acceptable to Buyer as to any confidential information which is to be provided to such accounting firm or to which such accounting firm will have access while conducting the audit under this Section. The independent accounting firm will prepare and provide to Seller and Buyer a written report stating only whether the reports submitted and amounts paid pursuant to this Agreement were correct or incorrect, and the amounts of any discrepancies. In the event that such report indicates that there was an underpayment or overpayment by Buyer of any amount to Seller hereunder, Buyer or Seller, as the case may be, shall promptly (but in no event later than thirty (30) days after its receipt of the independent accountant’s report so concluding) make payment to the other of the amount of such underpayment or overpayment. Seller shall bear all costs and expenses of any such audit, except that if any audit discloses an underpayment or overpayment by Buyer with respect to any audit period in excess of five percent (5%) of the aggregate amount required to be paid with respect to such audit period, all costs and expenses of the audit, including the expenses of the independent accounting firm, shall be borne and promptly paid by Buyer.

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Article V.
Closing

Section 5.01 Time and Place

     Unless this Agreement is earlier terminated pursuant to Article XIII, the closing of the transactions contemplated by this Agreement, including the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities (the “Closing”), shall take place automatically, and the conveyances to be made at Closing are hereby made by the parties and shall be effective without any further action by any party, immediately following the satisfaction or waiver of the conditions set forth in Articles IX and X.

Section 5.02 Deliveries at Closing

     (a) Closing Deliveries by Seller. Effective as of the Closing, Seller hereby sells, assigns and conveys to Buyer the Purchased Assets and assigns to the Seller the Assumed Liabilities. Effective as of the Closing, Buyer hereby accepts the Purchased Assets and assumes and agrees to perform the Assumed Liabilities. At the Closing, Seller shall deliver or cause to be delivered to Buyer: a letter from Seller to the FDA duly executed by Seller transferring the rights to the Regulatory Approval to Buyer; and such bills of sale, assignment and assumption agreements and other instruments of assignment, conveyance and transfer as are necessary to effect and confirm the sale, transfer, conveyance, and assignment of the Purchased Assets and the assumption of the Assumed Liabilities (provided, however, that the failure to execute or deliver any such agreement or instrument shall not affect the effectiveness of any sale, assignment and conveyance and assumption effected hereby, or the obligations of the parties at Closing). As soon as reasonably practicably following the Closing, and in any event no later than ten (10) days after the Closing, Seller shall deliver the Marketing Materials and the Books and Records.

     (b) Closing Deliveries by Buyer. At the Closing, Buyer shall deliver or cause to be delivered to Seller: a letter from Buyer to the FDA duly executed by Buyer agreeing to assume certain obligations with respect to the Regulatory Approval; and such bills of sale, assignment and assumption agreements and other instruments of assignment, conveyance and transfer as are necessary to effect and confirm the sale, transfer, conveyance, and assignment of the Purchased Assets and the assumption of the Assumed Liabilities (provided, however, that the failure to execute or deliver any such agreement or instrument shall not affect the effectiveness of any sale, assignment and conveyance and assumption effected hereby or the obligations of the parties at Closing).

Article VI.
Representations and Warranties of Seller

     Seller represents and warrants to Buyer as of the date of this Agreement, subject to such exceptions as are specifically disclosed in the disclosure schedules supplied by Seller to Buyer and attached to this Agreement (the “Seller’s Disclosure Schedule”), as follows:

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Section 6.01 Organization, Etc.

     King is a corporation duly organized, validly existing and in good standing under the laws of Tennessee and has all requisite power and authority to own its assets and carry on its business as currently conducted by it. Alpharma and each Alpharma Subsidiary is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite power and authority to own its assets and carry on the Business as currently conducted by it. King, Alpharma and each Alpharma Subsidiary is duly authorized to conduct its business and is in good standing in each jurisdiction where such qualification is required, except for any jurisdiction where failure to so qualify would not reasonably be expected to have a Material Adverse Effect or materially impair or delay Seller’s ability to perform its obligations hereunder.

Section 6.02 Authority of Seller

     King has, and at the Closing Alpharma and each Alpharma Subsidiary will have, all necessary power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. The execution, delivery and performance by King of its obligations under this Agreement have been duly and validly authorized and no additional corporate or shareholder authorization or consent is required in connection with the execution, delivery and performance by King of this Agreement. This Agreement has been duly and validly executed and delivered by King and, when executed and delivered by Buyer, will constitute a legal, valid and binding obligation of King enforceable against it in accordance with its terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors rights generally, and (b) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

Section 6.03 Consents and Approvals

     (a) No consents, waivers, approvals, Orders or authorizations of, or registrations, declarations or filings with, any Governmental or Regulatory Authority are required by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the performance of its obligations hereunder, except for such consents, waivers, approvals, Orders or authorizations the failure to obtain which, and such registrations, declarations or filings the failure to make which, would not reasonably be expected to have a Material Adverse Effect on the Business or materially impair or delay Seller’s ability to perform its obligations hereunder.

     (b) No consents, waivers, approvals, or authorizations of, or notices to, any third party (other than a Governmental or Regulatory Authority) that are required by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the performance of its obligations hereunder, except for such consents, waivers, approvals, or authorizations the failure to obtain which, and such notices the failure to give which, would not reasonably be expected to have a Material Adverse Effect or materially impair or delay Seller’s ability to perform its obligations hereunder.

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Section 6.04 Non-Contravention

     The execution and delivery by King of this Agreement does not, and the performance by Seller of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:

     (a) conflict with or violate any provisions of the organization documents of Seller;

     (b) conflict with or result in a violation or breach of any term or provision of any Law applicable to King, Alpharma and each Alpharma Subsidiary, the Business or the Purchased Assets, other than breaches and violations that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect or materially impair or delay Seller’s ability to perform its obligations hereunder; or

     (c) conflict with or result in a breach or default (or an event that, with notice or lapse of time or both, would constitute a breach or default) under, or termination of, any Assumed Contract or any other Contract to which Seller is a party or by which Seller or any of its assets is bound, other than such conflicts, breaches or defaults as would not reasonably be expected to have a Material Adverse Effect.

Section 6.05 Solvency

     (a) King, Alpharma and each Alpharma Subsidiary is Solvent.

     (b) No transfer of property is being made by Seller and no obligation is being incurred by Seller pursuant to this Agreement with the intent to hinder, delay or defraud either present or future creditors of Seller.

Section 6.06 Title

     Seller will have as of Closing, and upon transfer of the Purchased Assets to Buyer at Closing as contemplated by this Agreement Buyer shall acquire, good and marketable title thereto free and clear of any Encumbrance, other than Permitted Encumbrances.

Section 6.07 Litigation

     To the Knowledge of King, (a) there are no material claims, actions, suits or proceedings pending or, any investigation by any Governmental or Regulatory Authority pending against any Seller or any of their respective properties or rights in connection with the Business or the Purchased Assets, (b) neither Seller nor any of its respective properties or rights is subject to any outstanding Order in connection with the Purchased Assets and (c) no third party, including any of its employees, has any cause for filing, threatening or contemplating any material claim, action, suit or proceeding or investigation against any of them in connection with the Business or the Purchased Assets.

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Section 6.08 Purchased Assets

     (a) To the Knowledge of King, there are no pending claims, disputes, litigation or proceedings challenging any of Seller’s right, title or interest in, or Seller’s use of, the Purchased Assets and there are no facts which would provide a basis for any other Person to claim that it owns, possesses or controls any rights in any of the Purchased Assets.

     (b) A true and complete copy of the executed version of each agreement listed in Section 1.01(k) of the Seller’s Disclosure Schedule has been provided to the Buyer prior to execution of this Agreement.

     (c) To the Knowledge of King, Seller is not in breach of any of the Assumed Contracts listed in Section 1.01(k) of the Seller’s Disclosure Schedule, and no third party has notified Seller of any breach thereof.

     (d) Except to the extent resulting from any action or inaction by Buyer or its Affiliates, at the time of delivery to Buyer or its designee, all Inventory (i) conforms in all respects to the specifications and requirements of the Regulatory Approval for the Product, (ii) has been stored, transported and handled in compliance with all current Good Manufacturing Practices applicable to pharmaceutical products sold in the Territory and (ii) is not adulterated or misbranded.

Section 6.09 Regulatory

     (a) To the Knowledge of King, and except as disclosed in the Public Filings, the operation of the Business, including the manufacture, import, export, testing, development, processing, packaging, labeling, storage, marketing, and distribution of the Product in the Territory, is and has been in material compliance for the last three (3) years with all applicable Laws.

     (b) To the Knowledge of King, during the three (3) year period ending on December 10, 2008, Seller has not had any Product or manufacturing site for the Product subject to a Governmental or Regulatory Authority (including FDA) shutdown or import or export prohibition, nor received any FDA Form 483 or other material Governmental or Regulatory Authority notice of inspectional observations, “warning letters,” or “untitled letters” with respect to the Product or the Business or any requests or requirements to make changes to the Products that if not complied with would reasonably be expected to result in a material liability to the Seller or the Business.

     (c) To the Knowledge of King, Seller has filed, or caused to be filed, with the applicable Governmental and Regulatory Authorities all material required notices and reports, including adverse experience reports, with respect to manufacture, development, marketing and other commercial exploitation of the Product in or for the Territory.

     (d) To the Knowledge of King, neither Seller, nor any Person working for or with Seller in performing or rendering, any activities or services related to the Business, including the development, use or commercialization of the Product, has ever been or is currently debarred by the FDA or any other Governmental or Regulatory Authority, nor has any such

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Person been convicted of any crime or engaged in any conduct that would reasonably be expected to result in exclusion under 42 U.S.C. Section 1320a-7 or any similar state law or regulation.

Section 6.10 Brokers

     Seller has not retained any broker in connection with the transactions contemplated hereunder. Buyer has no, and will have no, obligation to pay any brokers, finders, investment bankers, financial advisors or similar fees in connection with this Agreement or the transactions contemplated hereby by reason of any action taken by or on behalf of Seller.

Section 6.11 No Other Representations and Warranties

     EXCEPT FOR THE REPRESENTATIONS OR WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH REGARD TO THE PRODUCT, THE PURCHASED ASSETS AND THE BUSINESS, INCLUDING THE FUTURE PROFITABILITY OF THE PURCHASED ASSETS, THE PRODUCT OR THE BUSINESS, AND WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.

Article VII.
Representations and Warranties of Buyer

     Buyer represents and warrants to Seller as of the date of this Agreement, subject to such exceptions as are specifically disclosed in the disclosure schedule supplied by Buyer to Seller and dated as of the date of this Agreement, if any, as follows:

Section 7.01 Corporate Organization

     Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has all requisite power and authority to own its assets and carry on its business as currently conducted by it. Buyer is duly authorized to conduct its business and is in good standing in each jurisdiction where such qualification is required, except for any jurisdiction where failure to so qualify could not reasonably be expected, individually or in the aggregate, to materially impair or delay Buyer’s ability to perform its obligations hereunder.

Section 7.02 Authority of Buyer

     Buyer has all necessary power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. The execution, delivery and performance by Buyer of this Agreement have been duly and validly authorized and no additional corporate or shareholder authorization or consent is required in connection with the execution, delivery and performance by Buyer of this Agreement. This Agreement has been duly and validly executed and delivered by Buyer and, when executed and delivered by Seller, will constitute a legal, valid and binding obligation of Buyer enforceable against it in accordance with its terms except (a) as

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limited by applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

Section 7.03 Consents and Approvals

     No consents, waivers, approvals, Orders or authorizations of, or registrations, declarations or filings with, any Governmental or Regulatory Authority are required by Buyer in connection with the execution and delivery of this Agreement by Buyer or the performance of its obligations hereunder.

Section 7.04 Non-Contravention

     The execution and delivery by Buyer of this Agreement does not, and the performance by it of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:

     (a) conflict with or violate any provision of the organizational documents of Buyer;

     (b) assuming the receipt of all Buyer governmental consents, conflict with or result in a violation or breach of any term or provision of any Law applicable to Buyer; or

     (c) conflict with or result in a breach or default (or an event that, with notice or lapse of time or both, would constitute a breach or default) under, or termination of, any Contract to which Buyer is a party or by which Buyer or any of its assets is bound, other than such conflicts, breaches or defaults as would not reasonably be expected to or materially impair or delay Buyer’s ability to perform its obligations hereunder.

Section 7.05 Solvency

     (a) Buyer is Solvent.

     (b) No transfer of property is being made by Buyer and no obligation is being incurred by Buyer pursuant to this Agreement with the intent to hinder, delay or defraud either present or future creditors of Buyer.

Section 7.06 Brokers

     Buyer has not retained any broker in connection with the transactions contemplated hereunder. Seller has no, and will have no, obligation to pay any brokers, finders, investment bankers, financial advisors or similar fees in connection with this Agreement or the transactions contemplated hereby by reason of any action taken by or on behalf of Buyer.

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Section 7.07 No Other Representations and Warranties

     EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, BUYER HEREBY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN.

Article VIII.
Covenants of the Parties

Section 8.01 Reasonable Best Efforts

     Each Party shall use its Reasonable Best Efforts to take, or cause to be taken, all action, or to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement and to cause the conditions to the obligations of the other Party to consummate the transactions contemplated hereby to be satisfied, including (a) obtaining all consents and approvals of all Persons and Governmental or Regulatory Authorities and removing any injunctions or other impairments or delays that are necessary, proper or advisable to the consummation of the transactions contemplated by this Agreement and (b) furnishing upon request to each other such information as is required in connection with the foregoing.

Section 8.02 Cooperation and Transition

     (a) Each Party shall cooperate fully with the other in preparing and filing all notices, applications, submissions, reports and other instruments and documents that are necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement, including Seller’s cooperation in the efforts of Buyer to obtain any consents and approvals of any Governmental or Regulatory Authority required for Buyer to be able to own the Purchased Assets.

     (b) For a period of seventy (70) days following the Closing, Seller shall provide to Buyer, at Seller’s expense, (i) such services in connection with the transition of the marketing and sale of the Product from Seller to Buyer as Buyer may reasonably request, including with respect to regulatory affairs, pharmacovigilance, customer service, and risk management programs and related processes, provided that such services can be provided by Seller without unreasonable burden (such as the engagement of additional employees or securing of services from independent contractors) to Seller and without unreasonable interference with Seller’s ongoing operations, and (ii) reasonable access to appropriate personnel in order to effect an orderly and rapid transition of material commercial information related to the conduct by Seller of the Business.

Section 8.03 Public Announcements

     Each of Seller and Buyer agrees that, prior and subsequent to the Closing, it and its representatives shall keep the terms of this Agreement confidential and shall not disclose such information to any other Person (except as necessary to carry out the express terms of this Agreement or to the extent such information becomes public information or generally available

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to the public through no fault of such Party or its Affiliates) without the prior written consent of the other Party (which shall not be unreasonably withheld), unless such Party has been advised by counsel that disclosure is required to be made under applicable Law or the requirements of a national securities exchange or another similar regulatory body (in which event such Party shall, upon request of the non-disclosing Party, exercise its Reasonable Best Efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded to the information so disclosed).

Section 8.04 Bulk Sales

     Buyer and Seller waive compliance with all bulk sales Laws applicable to the transactions contemplated by this Agreement.

Section 8.05 Corporate Names

     (a) Buyer shall have the right, but not the obligation, to sell the Inventory using applicable NDC numbers of Seller or Seller Brands that are incorporated into the Inventory or otherwise included on the label or labeling for the Inventory at time of delivery to Buyer or its designee (“Corporate Names”), and Seller hereby grants Buyer a limited, non-exclusive, royalty-free license under Seller’s right, title and interest in the Corporate Names, effective from and after the Closing Date until the first anniversary of the Closing Date, to market, promote and sell the Inventory. Buyer shall use its Reasonable Best Efforts to obtain its own NDC numbers for the Product promptly following the Closing. For clarity, Buyer shall not use any Corporate Names on any Product other than Inventory.

     (b) Buyer may use, copy, reproduce, modify, display, perform, execute, distribute, translate into any language or form, and prepare derivative works (and take all of the above actions with respect to such derivative works) of any Marketing Materials included in the Purchased Assets (and Buyer shall be the owner of, and have all title to any copyrights in such derivative works created by or for Buyer); provided, that Buyer uses its own name (or the name of its licensee or designee) on such materials and completely removes all Seller Corporate Names and logos from, or completely covers all Corporate Names on, such materials; and provided further, that Buyer acknowledges and agrees that Seller shall have no Liability arising out of or in connection with Buyer’s or its Affiliates’ use of such Marketing Materials.

Section 8.06 Regulatory Matters

     (a) As soon as practicable following the Closing Date, but in any event no later than ten (10) days after the Closing Date, Seller shall transfer the Regulatory Documentation to Buyer, at Seller’s expense. In addition to closing deliveries in accordance with Section 5.02, each Party shall promptly after Closing submit to the FDA and any other Governmental or Regulatory Authorities any other documentation and applications required to effect or provide notice of such transfer required under applicable Laws, including 21 C.F.R. § 314.72.

     (b) Subject to Section 8.07(a), and except as otherwise provided in Section 8.02, from and after the Closing, Buyer, at its cost, shall be solely responsible and liable (provided, however, that Seller shall remain responsible and liable for all Excluded Liabilities)

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for (i) taking all actions, paying all fees and conducting all communication with the appropriate Governmental or Regulatory Authority required by Law in respect of the Regulatory Approvals or the Regulatory Documentation, including preparing and filing all reports (including adverse drug experience reports) with the appropriate Governmental or Regulatory Authority, (ii) taking all actions and conducting all communication with third parties in respect of the Product (whether sold before or after Closing), including responding to (A) complaints in respect thereof, including complaints related to tampering or contamination, and (B) all medical information requests, and (iii) investigating all complaints and adverse drug experiences in respect of the Product (whether sold before or after Closing).

Section 8.07 Product Returns

     (a) Buyer shall accept and process all returns of Product following the Closing and disburse refunds and credits in respect thereof to third parties (whether such Product was sold before or after Closing) in accordance with the return policy in place for the Product at the time of sale and applicable Laws. Seller shall reimburse Buyer for all reasonable, documented costs and expenses incurred by Buyer in connection with (i) Product sold prior to Closing (as determined by lot numbers) that is returned any time after Closing due to defect, damage or shipping errors or (ii) Product sold prior to Closing (as determined by lot numbers) that is returned due to expiration during the period commencing on the Closing Date and ending twenty-four (24) months thereafter. For purposes of this Section 8.07, the calculation of Buyer’s reasonable costs and expenses incurred in connection with Products returned shall be equal to Buyer’s actual costs and expenses of Products returned (including refunds and credits). From and after the date of this Agreement, neither Buyer nor Seller shall initiate or encourage any acceleration of or delay in the return of the Product.

     (b) Promptly after the Closing, and except as may otherwise be provided in Section 8.02, Seller and Buyer shall provide written notice to all Persons to which Product was sold by Seller during the twelve (12) months prior to Closing stating that the Business has been purchased by Buyer and that Seller no longer accepts returns of Product, and directing such Persons to contact Buyer in connection with returns, purchase orders and all other inquiries regarding the Product.

Section 8.08 Further Assurances

     (a) On and after the Closing, Seller shall from time to time, at the request of Buyer, execute and deliver, or cause to be executed and delivered, such other documents or instruments of conveyance and transfer and take such other actions as Buyer may reasonably request, in order to carry out the provisions of this Agreement or more effectively consummate the transactions contemplated hereby and to vest in Buyer good and marketable title to the Purchased Assets (including assistance in the collection or reduction to possession of any of the Purchased Assets).

     (b) On and after the Closing, Buyer shall from time to time, at the request of Seller, take such actions as Seller may reasonably request, in order to more effectively consummate the transactions contemplated hereby, including Buyer’s assumption of the Assumed Liabilities.

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Section 8.09 Government Price Reporting Obligations

     (a) As soon as practicable following the Closing, Seller will modify its Pharmaceutical Pricing Agreement with the Department of Veterans Affairs to remove the Product, and post-Closing Buyer will be responsible for all Veterans Health Care Act obligations related to the Product. The Parties shall cooperate fully to add the Product to Buyer’s agreement with the Department of Veterans Affairs. Seller will provide all information needed by the Buyer to price its product for the remainder of calendar year 2008, as well as all information needed to calculate and report the quarterly and annual non-FAMP and the annual Federal Ceiling Price for the Product pursuant to the Veterans Health Care Act of 1992. Seller shall indemnify Buyer pursuant to Article 12 from and against any and all Damages incurred by any or all of the Buyer Indemnified Parties to the extent arising or resulting from errors or omissions in such information.

     (b) Buyer agrees to provide to Seller, on a monthly and quarterly basis, all pricing submissions, fully calculated, that are required under applicable Law to be submitted by Seller to comply with its price reporting obligations with respect to the Product pursuant to Section 1927 of the Social Security Act, as amended by the Deficit Reduction Act of 2005 (Pub. L. No. 109-171). Buyer shall provide such submissions to Seller no later than twenty (20) days following the end of each month. Further, the parties agree to cooperate to facilitate compliance with such price reporting obligations with respect to the Product, including any price reporting obligations that may be enacted subsequent to the Closing Date under applicable Law. Seller agrees to hold confidential and not to disclose to any third party (except as required by applicable Law) pricing data and submissions furnished by Buyer pursuant to this Section 8.09(b). Further, Seller agrees not to use such data or submissions for any purpose other than meeting its price reporting obligations under applicable Law and shall implement procedures to limit the personnel who may have access to such data to those employees, contractors and agents of Seller who have a need to know such information and solely to the extent reasonably necessary to facilitate such reporting, which employees, contractors or agents shall in no event include any employee, contractor or agent with responsibility for the pricing, marketing or sale of Avinza. Nothing herein shall be construed to relieve Buyer of any duty that it may have to report pricing data with respect to the Product pursuant to applicable Law. Buyer shall certify to Seller that, to the best of Buyer’s knowledge, the results included in each such submission fall with the applicable guidelines provided by the Centers for Medicare and Medicaid Services (CMS), to the extent such a certification is required to accompany their submission to CMS by the Seller, and Buyer shall indemnify Seller pursuant to Article 12 from and against any and all Damages incurred by any or all of the Seller Indemnified Parties to the extent arising or resulting from errors or omissions in such information.

Section 8.10 Kadian Patent License

     (a) Effective upon the Closing:

                    (i) Seller hereby grants to Buyer and its Affiliates an exclusive, irrevocable, perpetual, sublicensable, fully paid up, royalty-free license under the Licensed Intellectual Property solely to use, make, distribute, offer for sale, promote, advertise, sell,

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import, export, or have used, made, distributed, offered for sale, promoted, advertised, sold, imported, or exported the Licensed Product in the Territory; and

                    (ii) Seller hereby grants to Buyer and its Affiliates an exclusive, irrevocable, perpetual, sublicensable, fully paid up, royalty-free license under the Kadian Patents solely to use, make, distribute, offer for sale, promote, advertise, sell, import, export, or have used, made, distributed, offered for sale, promoted, advertised, sold, imported, or exported the Product in the Territory.

     (b) In furtherance of the foregoing:

                    (i) Seller shall not, and shall cause its Affiliates not to, grant to any third party a license under the Licensed Patents to make, have made, import, use, sell, or offer for sale any Licensed Product or Generic Product in the Territory during the License Term.

                    (ii) During the License Term, each Party shall promptly notify the other Party in writing of (A) any declaratory judgment action or other proceeding asserting the non-infringement, invalidity or unenforceability of any Licensed Patent in the Territory in connection with a Licensed Product or Generic Product by a third party, or (B) any “Paragraph IV Certification” under the Hatch-Waxman Act, including any certification under 21 U.S.C. § 355(b)(2)(A)(iv) or § 355(j)(2)(A)(vii)(IV) (or any amendment or successor statute thereto) of which it becomes aware asserting that any Licensed Patent is invalid, unenforceable or will not be infringed by the manufacture use or sale of any Generic Product in the Territory by a third party. Seller shall have the sole right to and, during the License Term shall be obligated to, bring and prosecute in good faith, on behalf of Seller and Buyer, for purposes of protecting Buyer’s exclusive rights under the exclusive license, an infringement action against such third party and/or defend such declaratory judgment action or other proceeding brought by the third party through counsel of Seller’s choosing, and Buyer, at its expense, agrees to provide all reasonable cooperation in connection with such an action as Seller may request. With regard to such foregoing infringement action that Seller is obligated to bring, Seller shall, in each instance, bring such action within forty-five (45) days of receiving a notification of a “Paragraph IV Certification” under 21 U.S.C. § 355(j)(2)(A)(vii)(IV). All recoveries from such an action that Seller is obligated to bring that are attributable to an infringement related to Licensed Products or Generic Products shall be first allocated to reimburse the Seller for its costs and expenses in bringing or defending such action, and the remainder shall belong to Buyer and, to the extent attributable to lost sales of Products, constitute Net Sales. All other recoveries from any such action that Seller is obligated to bring shall be retained by Seller. In no case during the License Term may Seller enter into any settlement or consent judgment or other voluntary disposition of such an action that Seller is obligated to bring without Buyer’s prior written consent, which shall not be unreasonably withheld or delayed, that: (1) limits Buyer’s rights under the Licensed Patents, (2) makes any admission of the invalidity, unenforceability or non-infringement of the Licensed Patents with respect to any Licensed Product or Generic Product, (3) subjects Buyer to an injunction or other equitable relief, (4) purports to grant a license under the Licensed Patents to any third party to make, use or sell any Licensed Product or Generic Product.

     (c) Effective upon the Closing, Seller hereby grants to Buyer and its Affiliates a non-exclusive, irrevocable, perpetual, fully paid-up, royalty-free right and license to use and

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reference the Seller Data to the extent necessary to maintain the Regulatory Approval, which right and license shall be transferable to any subsequent owner of the Regulatory Approval.

     (d) Seller hereby covenants to Buyer that from and after the Closing Seller and its Affiliates shall not join, file, prosecute or maintain any suit, in law or equity, against Buyer or its Affiliates claiming that the research, development, manufacture, use, import, export, distribution or sale of the Product by Buyer or its Affiliates infringes the Kadian Patents.

     (e) Seller hereby covenants to Buyer that from and after the Closing Seller and its Affiliates shall not join, file, prosecute or maintain any suit, in law or equity, against Buyer or its Affiliates claiming that the research, development, manufacture, use, import, export, distribution or sale of the Licensed Product by Buyer or its Affiliates infringes the Product Patents.

     (f) As a condition to the assignment, transfer or license of any of the Product Patents to a third party by Seller or its Affiliates, such third party shall agree to provide to Buyer a covenant not to sue at least as protective as those set forth in the foregoing clauses (d) and (e).

     (g) With respect to any Product Patents licensed to Seller or its Affiliates as to which Seller or its Affiliates do not control the right of prosecution of any legal action, from and after the Closing Seller and its Affiliates shall not actively induce, assist or participate in any legal action or proceeding relating to the Licensed Product against Buyer unless required by Law or Contract (which Contract shall not be solicited or entered into for the purpose of circumventing any rights granted to Buyer hereunder).

     (h) Upon the reasonable request of Buyer and with reasonable notice to Seller, from and after the Closing, Seller shall provide in a timely manner to Buyer, at no greater than Seller’s Direct Cost, assistance of knowledgeable employees of Seller and its Affiliates in defending against, responding to or otherwise participating in any litigation related to the Product Intellectual Property.

     (i) Effective upon the Closing, Buyer hereby grants to Seller and its Affiliates a non-exclusive, irrevocable, perpetual, fully paid-up, royalty-free right and license to reference the Regulatory Approval and other Regulatory Documentation in the Embeda NDA solely to the extent that the Regulatory Approval and other Regulatory Documentation are referenced in the Embeda NDA as of the Closing Date (the “Right of Reference”). As a condition to the assignment, transfer or license of any of the Regulatory Approval or other Regulatory Documentation to a third party by Buyer or its Affiliates, such third party shall agree to grant to Seller and its Affiliates the foregoing right and license. Any and all use of the Right of Reference is without any representation or warranty of any kind from Buyer, and Seller waives any and all warranties of any kind including any express or implied warranty, whether oral or written, including any implied warranty of the merchantability or fitness for a particular purpose.

     (j) Except as expressly set forth herein, no right or license is granted hereby with respect to any Trademark, copyright, Patent or other intellectual property of Seller or its Affiliates.

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     (k) Except as expressly set forth herein, no right or license is granted hereby with respect to any Trademark, copyright, Patent or other intellectual property of Buyer or its Affiliates.

Section 8.11 DEA Notification

     Buyer and Seller shall, as required by Law, notify the DEA that, as of the Closing Date, Buyer is or will be marketing and selling the Product in the United States either directly or indirectly through one or more authorized distributors. As required by Law, each of Buyer and each such authorized distributor, as applicable, shall obtain a valid registration(s) with the DEA permitting Buyer or such authorized distributor, as applicable, to receive, hold, store, ship and sell the Product in the United States.

Section 8.12 Representations True

     King shall not knowingly or intentionally take any action or knowingly or intentionally omit to take any action to the extent such action or omission would result in any of its representations or warranties being inaccurate or incorrect in any material respect as if given on and as of the Closing Date.

Section 8.13 Confidentiality; Non-Public Purchased Assets

     (a) Each Party shall use its Reasonable Best Efforts to maintain and assure the confidentiality of the confidential information of the other Party hereto. In the event that a Party receives a request to disclose all or any part of the other Party’s confidential information under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction or by any other Governmental or Regulatory Authority, such Party agrees to: (i) promptly notify the other Party of the existence, terms and circumstances surrounding such a request, so that the other Party may seek an appropriate protective order and/or waive compliance with the provisions of this Agreement; (ii) provide the other Party full and complete cooperation to seek an appropriate order or remedy; (iii) cooperate with the other Party in obtaining reliable assurances that confidential treatment will be accorded to the disclosed confidential information if disclosure of such confidential information is required; and (iv) limit disclosure of the confidential information to only that part necessary to comply with the request.

     (b) Notwithstanding that Seller disclosed the Purchased Assets to Buyer, all non-public information within the Purchased Assets shall be considered, from and after the Closing Date, the confidential information of Buyer. Unless and until this Agreement terminates or expires without Closing, (i) Seller will keep all non-public information in its possession within the Purchased Assets or related to Buyer and disclosed to Seller pursuant to this Agreement or in connection with the negotiation hereof confidential and will not disclose such non-public information within the Purchased Assets or related to Buyer and disclosed to Seller pursuant to this Agreement or in connection with the negotiation hereof to third parties who are not under confidentiality obligations adequate to maintain the confidentiality thereof, except for such disclosures as may be required to comply with applicable Laws or the rules of a national securities exchange, and (ii) before permitting any Person to receive non-public information or undertake any activity in connection with Purchased Assets, Seller shall obtain a signed

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agreement from each Person undertaking to maintain the confidentiality of all non-public information within the Purchased Assets.

Section 8.14 Filings

     (a) The Parties specifically agree to promptly prepare and file any required filings under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, with respect to the transactions contemplated hereby to the extent required by applicable Law.

     (b) Each of the Parties shall furnish to the other such information and assistance as the other Party may reasonably request in connection with the preparation of any filings or submissions contemplated in Section 8.14(a) and provide the other with copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between such Party or any of its representatives, on the one hand, and the applicable Governmental or Regulatory Authority, on the other, with respect to this Agreement and the transactions contemplated hereby.

Section 8.15 Recalls.

     (a) From and after the Closing Date, Buyer, at its cost (subject to clause (c) below), shall be solely responsible and liable for conducting all voluntary and involuntary recalls or market withdrawals of units of the Product (whether sold before or after Closing), including (i) recalls required by any Governmental or Regulatory Authority and (ii) voluntary recalls and market withdrawals of Product sold prior to Closing or Product included in Inventory that was defective when delivered to Buyer hereunder that are deemed necessary by Seller in its reasonable discretion. Seller promptly shall notify Buyer in the event that a recall of Product sold prior to Closing or Product included in Inventory that was defective when delivered to Buyer hereunder is necessary and Seller shall, and shall cause its relevant Affiliates to, cooperate with Buyer’s reasonable requests and use Reasonable Best Efforts to assist Buyer in implementing and effecting such recall or market withdrawal.

     (b) Notwithstanding the foregoing, Seller (or an Affiliate designated by Seller) shall have the right at its expense to conduct any recall or market withdrawal of Product sold prior to Closing or Product included in Inventory if Seller determines that significant health and safety concerns require that Seller or its Affiliates conduct such recall or market withdrawal; provided that prior to initiating any such recall or market withdrawal, Seller shall consult in good faith with Buyer to determine how such recall or market withdrawal shall be implemented. Buyer shall use Reasonable Best Efforts to cooperate with Seller’s and its Affiliates’ reasonable requests and assist Seller and its Affiliates in implementing and effecting such recall or market withdrawal.

     (c) Seller promptly shall reimburse Buyer for all reasonable, documented costs incurred by Buyer in connection with any recall or market withdrawal (i) of Product sold prior to Closing or Product included in Inventory that was defective when delivered to Buyer hereunder or (ii) otherwise required by Seller pursuant to Sections 8.15(a) or (b) above.

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Section 8.16 Rebates and Coupons

     (a) As between Buyer and Seller, Seller shall be responsible for and pay all Rebates relating to utilization of the Product prior to and during the Rebate Period; provided that if the Rebate Period ends on a day other than the last day of a Calendar Quarter, the amount of Rebates payable by Seller pursuant to this Section 8.16 with respect to utilization of the Product during the Calendar Quarter in which the Rebate Period ends shall be equal to (a) the aggregate amount of all Rebates relating to utilization of the Product during such Calendar Quarter, multiplied by (b) a fraction, the numerator of which is the number of days from and including the first day of such Calendar Quarter through and including the last day of the Rebate Period and the denominator of which is the total number of days in such Calendar Quarter. As between Buyer and Seller, Buyer shall be responsible for and pay all Rebates relating to utilization of the Product after the Rebate Period; provided that if the Rebate Period ends on a day other than the last day of a Calendar Quarter, the amount of Rebates payable by Buyer pursuant to this Section 8.16 with respect to utilization of the Product during the Calendar Quarter in which the Rebate Period ends shall be equal to (x) the aggregate amount of all Rebates relating to utilization of the Product during such Calendar Quarter, multiplied by (y) a fraction, the numerator of which is the number of days from and including the day immediately following the last day of the Rebate Period through and including the last day of such Calendar Quarter and the denominator of which is the total number of days in such Calendar Quarter. Buyer shall not enter into any Contract requiring payment of a Rebate during the Rebate Period except in the ordinary course of business and consistent with Seller’s past practices regarding the amount of Rebates. Notwithstanding anything herein to the contrary, in no event shall Seller be liable for, and Buyer shall be solely responsible for and shall pay all rebates relating to utilization of any Product bearing Buyer’s NDC number.

     (b) As between Buyer and Seller, Seller shall be responsible for and pay all obligations under and pursuant to Coupons relating to utilization of the Product prior to and during the Rebate Period. As between Buyer and Seller, Buyer shall be responsible for and pay all obligations under and pursuant to Coupons relating to utilization of the Product after the Rebate Period; provided that Buyer’s aggregate liability pursuant to Coupons shall not exceed $60,000.

Section 8.17 Chargeback and Rebate Period

     (a) Promptly after the Closing Date, Buyer and Seller jointly shall select a third party consultant (the “Consultant”) which shall determine the quantity of Product owned by all wholesalers in the Territory as of the Closing Date (the “Aggregate Wholesaler Amount”) and the average amount of Product sold by such wholesalers per day in the thirteen (13) weeks immediately preceding the Closing Date (the “Daily Sales Amount”). The “Chargeback Period” means the period commencing on the Closing Date and ending the number of days thereafter equal to the Aggregate Wholesaler Amount divided by the Daily Sales Amount.

     (b) The Consultant also shall determine the quantity of Product owned by all wholesalers and retailers in the Territory as of the Closing Date (the “Aggregate Wholesale/Retail Amount”) and the average amount of Product utilized per day in the thirteen (13) weeks immediately preceding the Closing Date (the “Daily Utilization Amount”). The

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Rebate Period” means the period commencing on the Closing Date and ending the number of days thereafter equal to the Aggregate Wholesale/Retail Amount divided by the Daily Utilization Amount.

     (c) The Parties shall bear equally the fees and expenses of the Consultant.

Section 8.18 Chargebacks

     As between Buyer and Seller, Seller shall be responsible for and pay all Chargebacks that are submitted by wholesalers and other distributors to either Seller and its Affiliates or Buyer prior to and during the Chargeback Period. As between Buyer and Seller, Buyer shall be responsible for and pay all Chargebacks submitted by wholesalers and other distributors to either Seller and its Affiliates or Buyer after the Chargeback Period. Buyer shall not enter into any Contract requiring payment of a Chargeback during the Chargeback Period except in the ordinary course of business and consistent with Seller’s past practices regarding the amount of Chargebacks. Notwithstanding anything herein to the contrary, in no event shall Seller be liable for, and Buyer shall be solely responsible for and shall pay, any and all Chargebacks with respect to Product bearing Buyer’s NDC number.

Section 8.19 GPO Administration Fees and IFF Payments

     As between Buyer and Seller, Seller shall be responsible for and pay all GPO Administration Fees and IFF payments relating to sales of the Product during the Chargeback Period; provided that if the Chargeback Period ends on a day other than the last day of a Calendar Quarter, the amount of GPO Administration Fees and IFF payments payable by Seller pursuant to this Section 8.19 with respect to sales of the Product during the Calendar Quarter in which the Chargeback Period ends shall be equal to (a) the aggregate amount of all GPO Administration Fees and IFF payments relating to sales of the Product during such Calendar Quarter, multiplied by (b) a fraction, the numerator of which is the number of days from and including the first day of such Calendar Quarter through and including the last day of the Chargeback Period and the denominator of which is the total number of days in such Calendar Quarter. As between Buyer and Seller, Buyer shall be responsible for and pay all GPO Administration Fees and IFF payments relating to sales of the Product after the Chargeback Period; provided that if the Chargeback Period ends on a day other than the last day of a Calendar Quarter, the amount of GPO Administration Fees and IFF payments payable by Buyer pursuant to this Section 8.19 with respect to sales of the Product during the Calendar Quarter in which the Chargeback Period ends shall be equal to (x) the aggregate amount of all GPO Administration Fees and IFF payments relating to sales of the Product during such Calendar Quarter, multiplied by (y) a fraction, the numerator of which is the number of days from and including the day immediately following the last day of the Chargeback Period through and including the last day of such Calendar Quarter and the denominator of which is the total number of days in such Calendar Quarter. Buyer shall not enter into any Contract requiring payment of a GPO Administration Fee during the Chargeback Period except in the ordinary course of business and consistent with Seller’s past practices regarding the amount of GPO Administration Fees. Notwithstanding anything herein to the contrary, in no event shall Seller be liable for, and Buyer shall be solely responsible for and shall pay any and all GPO Administration Fees and IFF payments relating sales of any Product bearing Buyer’s NDC number.

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Section 8.20 Manufacturing Agreements

     (a) Effective as of the Closing, the Toll Manufacturing Agreement, dated as of December 19, 2005, by and between Alpharma Branded Products Division Inc. and Buyer (formerly Purepac Pharmaceutical Co.), as amended (the “Toll Manufacturing Agreement”) shall terminate; provided that to the extent any surviving provisions therein are inconsistent with the terms of this Agreement, the terms of this Agreement shall govern. Additionally, following the Closing the Parties agree to negotiate in good faith to amend any surviving provisions of the Toll Manufacturing Agreement or other provisions of the Toll Manufacturing Agreement in order to address issues impacted by this Agreement.

     (b) Effective as of the Closing, the Development and Manufacturing Services Agreement, dated as of February 1, 2008, by and between Actavis Elizabeth LLC and Alpharma Pharmaceuticals LLC, as amended shall continue in force; provided that following the Closing the Parties agree to negotiate in good faith to amend such Development and Manufacturing Services Agreement to address issues impacted by this Agreement.

Section 8.21 Sale of Product

     Buyer, through the second Calendar Quarter of 2010, shall use commercially reasonable efforts to sell the Product and maximize Gross Profits of the Product; provided, however that Buyer shall not have any obligation under this Section 8.21 to perform Details or to sell the Product if in the reasonable view of Buyer such sales expose Buyer to material third party liability.

Section 8.22 Delivery of Inventory

     On the Closing Date, Seller shall tender Inventory at the place where it is located as requested by Buyer to either Buyer or a third party designated by Buyer.

Section 8.23 Assumed Contracts

     Promptly following the Execution Date, Seller shall provide to Buyer a copy of any Contract to which Seller is a party that relates to the Product or the Business. Buyer shall designate from among such Contracts (a) those Contracts (if relating exclusively to the Products or the Business) and (b) the portion of those Contracts (if relating to the Products or the Business but not exclusively thereto), to be added, at Buyer’s request, to Section 1.01(k) of the Seller’s Disclosure Schedule. Seller shall cooperate in good faith with Buyer to effect the transfer and assignment to Buyer of such Contract, or portion thereof, subject to any required third party consent. Any Contract or portion of a Contract that has been designated by Buyer pursuant to this Section shall be deemed added to Section 1.01(k) of the Seller’s Disclosure Schedule as of the date of such designation and shall be subject to Section 2.01(d).

Section 8.24 Regulatory Actions

     Seller hereby covenants to Buyer that from and after the Closing Seller and its Affiliates shall not file any Citizen’s Petition with the FDA against Buyer or its Affiliates based

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on any non-public information contained in the Regulatory Approval or other Regulatory Documentation.

Article IX.
Conditions to the Obligations of Seller

     The obligation of Seller to effect the transactions contemplated hereby is subject to the satisfaction (or waiver by Seller), at or before the Closing, of each of the following conditions:

Section 9.01 Alpharma Acquisition

     The acquisition of Alpharma by King shall have been consummated pursuant to the Merger Agreement.

Section 9.02 No Legal Prohibition

     No provision of applicable Law and no Order shall prohibit the consummation of the Closing.

Article X.
Conditions to the Obligations of Buyer

     The obligation of Buyer to effect the transactions contemplated hereby is subject to the satisfaction (or waiver by Buyer), at or before the Closing, of the following conditions:

Section 10.01 No Legal Prohibition

     No provision of applicable Law and no Order shall prohibit the consummation of the Closing.

Section 10.02 Alpharma Acquisition

     The acquisition of Alpharma by King shall have been consummated pursuant to the Merger Agreement.

Article XI.
Additional Post-Closing Covenants

Section 11.01 Access to Information

     (a) Upon the request of Seller, from and after the Closing, to the extent permitted by applicable Law, Buyer shall permit Seller and its representatives to have access, during regular business hours and upon reasonable advance notice, to inspect and copy the Books and Records and other documents in Buyer’s possession to the extent pertaining to the operation of the Business prior to the Closing Date for Tax purposes and in connection with any action, suit, proceeding, arbitration, Order, inquiry, hearing, assessment with respect to fines or

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penalties or litigation commenced, brought, conducted or heard by or before, any Governmental or Regulatory Authority.

     (b) To the extent relevant to the Product, Purchased Assets or the Business prior to the Closing Date, Seller shall provide Buyer with such assistance as may be reasonably be required in connection with the preparation of any Tax Return and the conduct of any audit or other examination by any taxing authority or in connection with judicial or administrative proceedings relating to any liability for Taxes, and shall retain and provide Buyer with all records or other information that may be related to the preparation of any Tax Returns, or the conduct of any audit or examination or other Tax proceeding. Seller shall retain all relevant documents, including prior year’s Tax Returns, supporting work schedules and other records or information that may be relevant to such Tax Returns and shall not destroy or otherwise dispose of any such records without the prior written consent of Buyer.

     (c) In the event that Seller transfers to Buyer copies of any Books and Records in accordance with the last sentence of Section 1.01(n), Seller shall provide Buyer access to the original documents under circumstances where copies of such documents are insufficient for regulatory or evidentiary purposes.

Article XII.
Indemnification

Section 12.01 Survival of Representations and Warranties

     The representations and warranties of Seller or Buyer contained in this Agreement shall terminate twenty four (24) months following the Closing.

Section 12.02 Indemnification

     (a) By Seller. Subject to Section 12.03, from and after the Closing, Seller shall indemnify, reimburse, defend and hold harmless Buyer, its Affiliates, and their respective officers, directors, employees, agents, successors and assigns (the “Buyer Indemnified Parties”) from and against any and all costs, losses, Liabilities, damages, lawsuits, deficiencies, claims, fines, demands, penalties, interest and expenses (including reasonable fees and disbursements of attorneys) (collectively, the “Damages”), incurred in connection with, arising out of, or resulting from (i) any breach of any covenant or agreement of Seller herein, (ii) the inaccuracy or breach of any representation or warranty made by Seller in this Agreement, (iii) the failure of Seller to assume, pay, perform and discharge any Excluded Liabilities, (iv) the ownership and operation of the Purchased Assets or the conduct of the Business prior to the Closing, (v) the use by Seller or its Affiliates of the Marketing Materials prior to the Closing, (vi) Third Party Claims in connection with, arising out of, or resulting from the use of the Regulatory Approval and other Regulatory Documentation in the Embeda NDA and Books and Records, including any Damages associated with the promotion, marketing, distribution, sale or use of any products associated with the use of the Regulatory Approval and other Regulatory Documentation in the Embeda NDA, and Books and Records pursuant to Section 8.10(i) and (vii) the enforcement by the Buyer Indemnified Parties of their rights under this Section 12.02(a).

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     (b) By Buyer. Subject to Section 12.03, from and after the Closing, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and their respective officers, directors, employees, agents, successors and assigns (the “Seller Indemnified Parties”) from and against any and all Damages incurred in connection with, arising out of, or resulting from (i) any breach of any covenant or agreement of Buyer herein, (ii) the inaccuracy or breach of any representation or warranty made by Buyer in this Agreement, (iii) the failure of Buyer to assume, pay, perform and discharge any Assumed Liabilities, (iv) the ownership and operation of the Purchased Assets or the conduct of the Business after Closing, (v) the use by Buyer or its Affiliates of the Marketing Materials after Closing, and (vi) the enforcement by the Seller Indemnified Parties of their rights under this Section 12.02(b).

     (c) Procedures. The Person entitled to indemnification under this Agreement (the “Indemnified Party”), shall give the indemnifying Party (the “Indemnifying Party”) prompt written notice (an “Indemnification Claim Notice”) of any Damages or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under Section 12.02(a) or Section 12.02(b), provided, however, that any failure to give such notice shall not waive any rights of an Indemnified Party except to the extent that the rights of the Indemnifying Party are actually prejudiced or to the extent that any applicable period contemplated by Section 12.01 has expired without notice being given. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Damages (to the extent that the nature and amount of such Damages are known at such time). The Indemnified Party shall furnish promptly to the Indemnifying Party copies of all papers and official documents received in respect of any Damages.

     (d) Third Party Claims. The obligations of an Indemnifying Party under this Section 12.02 with respect to Damages arising from claims, lawsuits, demands or other proceedings by any third party (each, a “Third Party Claim”) that are subject to indemnification as provided for in Section 12.02(a) or Section 12.02(b) shall be governed by and be contingent upon the following additional terms and conditions:

                    (i) At its option, the Indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within fifteen (15) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify any Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against any Indemnified Party’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying Party, subject to the consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed. In the event the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the Indemnifying Party all original notices and documents (including court papers) received by any Indemnified Party in connection with the Third Party Claim. Should the Indemnifying Party assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim. In the event that it is ultimately determined that the

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Indemnifying Party is not obligated to indemnify, defend or hold harmless an Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including reasonable attorneys’ fees and costs of suit) and any Damages incurred by the Indemnifying Party in its defense of the Third Party Claim with respect to such Indemnified Party.

                    (ii) Without limiting Section 12.02(d)(i), any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Indemnified Party’s own expense unless (A) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (B) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 12.02(d)(i) (in which case the Indemnified Party shall control the defense), or (C) the interests of the Indemnified Party and the Indemnifying Party with respect to such Third Party Claim are sufficiently adverse to prohibit the representation by the same counsel of both parties under applicable Law, ethical rules or equitable principles.

                    (iii) With respect to any Damages relating solely to the payment of money damages in connection with a Third Party Claim and that will not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affect the business of the Indemnified Party in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages, on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Damages in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 12.02(d)(i), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Damages; provided that it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The Indemnifying Party shall not be liable for any settlement or other disposition of Damages by an Indemnified Party in connection with a Third Party Claim that is reached without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). No Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

                    (iv) If the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall cooperate in the defense or prosecution thereof and promptly shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making relevant employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the

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Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

     (e) Expenses. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a quarterly basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party

Section 12.03 Limitations

     (a) In no event shall the aggregate liability of Seller for Damages pursuant to Section 12.02(a)(i) and 12.02(a)(ii) exceed the Purchase Price.

     (b) EXCEPT FOR AND ONLY TO THE EXTENT OF ANY AMOUNTS PAID UNDER AN INDEMNIFIABLE THIRD PARTY CLAIM UNDER SECTION 12.02, OR IN THE CASE OF A PARTY’S WILLFUL MISCONDUCT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, EXEMPLARY, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUSINESS INTERRUPTION OR LOST PROFITS, OR PUNITIVE DAMAGES.

Section 12.04 Remedies Exclusive

     From and after the Closing, the remedies set forth in this Article XII shall be exclusive and in lieu of any other remedies that may be available to the Indemnified Parties under any theory of liability and pursuant to any statutory or common law with respect to any Damages of any kind or nature directly or indirectly resulting from or arising out of any breach of this Agreement (including alleged breaches or inaccuracies of any representation, warranty or covenant or for any alleged misrepresentation) or the transactions contemplated hereby.

Article XIII.
Termination and Abandonment

Section 13.01 Methods of Termination

     Except as provided in Section 13.02 below, the transactions contemplated herein may be terminated and abandoned at any time prior to the Closing:

     (a) by mutual written consent executed and delivered by Seller and Buyer; or

     (b) by either Seller or Buyer if (i) the Closing shall not have occurred by December 31, 2008; provided that the terminating Party is not then in material breach of its representations, warranties, or obligations hereunder; (ii) there shall be a final nonappealable Order of a federal or state court in effect preventing consummation of the transactions contemplated hereby; or (iii) there shall be any statute, rule, regulation or order enacted,

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promulgated or issued or deemed applicable to the transactions contemplated hereby by any governmental entity that would make consummation of the transactions contemplated hereby illegal.

     A termination pursuant to this Section 13.01 shall be effected by delivery of written notice of such termination by the terminating party to the other Party. Where action is taken to terminate this Agreement pursuant to this Section 13.01, it shall be sufficient for such action to be authorized by the board of the Party taking such action.

Section 13.02 Procedure upon and Effect of Termination

     In the event of termination and abandonment under Section 13.01, written notice thereof shall forthwith be given to the other Party and the transactions, conveyances, and other actions contemplated by this Agreement shall be terminated and abandoned immediately, without further action by the Parties. If the transactions contemplated by this Agreement are terminated as provided herein, no Party and none of the directors, officers, stockholders, affiliates or controlling Persons of such Party shall have any further liability or obligation to any other Party to this Agreement except for a willful failure of a Party to fulfill a condition to the performance of the obligations of the other Party or a willful breach of a covenant or representation or warranty. The provisions of Article XIII and Article XIV shall survive any termination of this Agreement.

Article XIV.
Miscellaneous

Section 14.01 Notices

     All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission with answer back confirmation or mailed (postage prepaid by certified or registered mail, return receipt requested) or by nationally recognized overnight courier that maintains records of delivery to the Parties at the following addresses or facsimile numbers:

     If to Buyer to:

Actavis Elizabeth, L.L.C.
60 Columbia Road, Building, B
Morristown, NJ 07960
Attention: Chief Legal Officer
Facsimile:

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     With copies to:

Wilson Sonsini Goodrich & Rosati, P.C.
1301 Avenue of the Americas
40^th Floor
New York, NY 10019
Attention: Arthur L. Hoag
Facsimile:

     If to Seller to:

King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attention: General Counsel
Facsimile:

     With a copy to:

King Pharmaceuticals, Inc.
400 Crossing Boulevard
8^th Floor
Bridgewater, New Jersey 08807
Attention: General Counsel
Facsimile:

     All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section, be deemed given upon receipt, (b) if delivered by facsimile to the facsimile number as provided in this Section, be deemed given upon receipt by the sender of the answer back confirmation and (c) if delivered by mail in the manner described above or by overnight courier to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). Either Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice specifying such change to the other Party in accordance with the terms of this Section.

Section 14.02 Entire Agreement

     This Agreement (and all schedules attached hereto and all other documents delivered in connection herewith) contains the sole and entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior discussions and agreements between the Parties with respect to the subject matter hereof. Except as expressly provided herein, nothing in this Agreement shall modify or amend any provision of the Toll Manufacturing Agreement or the Development and Manufacturing Services Agreement, dated as of February 1, 2008, by and between Alpharma Pharmaceuticals LLC and Buyer.

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Section 14.03 Waiver

     Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by either Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by law or otherwise afforded, will be cumulative and not alternative.

Section 14.04 Amendment

     This Agreement may be amended, supplemented or modified only by a written instrument duly executed by each Party.

Section 14.05 Third Party Beneficiaries

     The terms and provisions of this Agreement are intended solely for the benefit of each Party and its respective successors or permitted assigns and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.

Section 14.06 Assignment; Binding Effect

     Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed, and any attempt to do so will be void. This Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and permitted assigns.

Section 14.07 Headings

     The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

Section 14.08 Severability

     If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties.

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Section 14.09 Governing Law

     THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK EXCLUDING ANY CONFLICTS OR CHOICE OF LAW RULE OR PRINCIPLE THAT MIGHT OTHERWISE REFER CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT TO THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.

Section 14.10 Consent to Jurisdiction and Forum Selection

     THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT (OTHER THAN APPEALS THEREFROM) SHALL BE INITIATED AND TRIED EXCLUSIVELY IN THE LOCAL AND FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK. THE AFOREMENTIONED CHOICE OF VENUE IS INTENDED BY THE PARTIES TO BE MANDATORY AND NOT PERMISSIVE IN NATURE, THEREBY PRECLUDING THE POSSIBILITY OF LITIGATION BETWEEN THE PARTIES WITH RESPECT TO OR ARISING OUT OF THIS AGREEMENT IN ANY JURISDICTION OTHER THAN THAT SPECIFIED IN THIS SECTION. EACH PARTY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR SIMILAR DOCTRINE OR TO OBJECT TO VENUE WITH RESPECT TO ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS SECTION, AND STIPULATES THAT THE LOCAL AND FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK SHALL HAVE PERSONAL JURISDICTION AND VENUE OVER EACH OF THEM FOR PURPOSES OF LITIGATING ANY DISPUTE, CONTROVERSY OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH PARTY HEREBY AUTHORIZES AND AGREES TO ACCEPT SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION IN ANY ACTION AGAINST IT AS CONTEMPLATED BY THIS SECTION BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID TO ITS ADDRESS FOR THE GIVING OF NOTICES AS SET FORTH IN THIS AGREEMENT, OR IN THE MANNER SET FORTH IN SECTION 14.01 OF THIS AGREEMENT FOR THE GIVING OF NOTICE. ANY FINAL JUDGMENT RECEIVED AGAINST A PARTY IN ANY ACTION OR PROCEEDING SHALL BE CONCLUSIVE AS TO THE SUBJECT OF SUCH FINAL JUDGMENT AND MAY BE ENFORCED IN OTHER JURISDICTIONS IN ANY MANNER PROVIDED BY LAW.

Section 14.11 Expenses

     Except as otherwise expressly provided in this Agreement, each Party shall pay its own expenses and costs incidental to the preparation of this Agreement and to the consummation of the transactions contemplated hereby.

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Section 14.12 Counterparts

     This Agreement may be executed in any number of counterparts and by facsimile or other electronic transmission, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(The remainder of this page is left blank intentionally.)

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     IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first above written.

KING PHARMACEUTICALS, INC.
By:	/s/ Brian A. Markison
	Name:	Brian A. Markison
	Title:	Chairman, President and CEO

ACTAVIS ELIZABETH, L.L.C.
By:	/s/ Douglas S. Boothe
	Name:	Douglas S. Boothe
	Title:	President and CEO

EX-10.90

Exhibit 10.90

EXECUTION COPY

TERM LOAN CREDIT AGREEMENT

Dated as of

December 29, 2008,

among

KING PHARMACEUTICALS, INC.,
as Borrower,

THE LENDERS PARTY HERETO

and

CREDIT SUISSE,
as Administrative Agent and as Collateral Agent

CREDIT SUISSE SECURITIES (USA) LLC

and

WACHOVIA CAPITAL MARKETS, LLC,
as Joint Bookrunners and Joint Lead Arrangers,

WACHOVIA BANK, NATIONAL ASSOCIATION,

and

SUNTRUST BANK
as Co-Syndication Agents

DNB FIRST BANK

and

U.S. BANK NATIONAL ASSOCIATION
as Co-Documentation Agents,

DZ BANK AG, DEUTSCHE ZENTRAL-GENOSSENSCHAFTSBANK, NEW
YORK BRANCH,
SIEMENS FINANCIAL SERVICES, INC,

THE PRIVATEBANK AND TRUST COMPANY

and

UNION BANK, N.A.
as Senior Managing Agents

TABLE OF CONTENTS

Page

ARTICLE 1
Definitions

Section 1.01. Defined Terms	2
Section 1.02. Terms Generally	28
Section 1.03. Pro Forma Calculations	29

ARTICLE 2
The Credits

Section 2.01. Commitments	29
Section 2.02. Loans	29
Section 2.03. Borrowing Procedure	31
Section 2.04. Evidence of Debt; Repayment of Loans	31
Section 2.05. Fees	32
Section 2.06. Interest on Loans	33
Section 2.07. Default Interest	33
Section 2.08. Alternate Rate of Interest	33
Section 2.09. Termination and Reduction of Commitments	34
Section 2.10. Conversion and Continuation of Borrowings	34
Section 2.11. Repayment of Borrowings	36
Section 2.12. Voluntary Prepayment	37
Section 2.13. Mandatory Prepayments	38
Section 2.14. Reserve Requirements; Change in Circumstances	39
Section 2.15. Change in Legality	41
Section 2.16. Breakage	41
Section 2.17. Pro Rata Treatment	42
Section 2.18. Sharing of Setoffs	42
Section 2.19. Payments	43
Section 2.20. Taxes	44
Section 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate	45

ARTICLE 3
Representations and Warranties

Section 3.01. Organization; Powers	47
Section 3.02. Authorization	47
Section 3.03. Enforceability	47

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Section 3.04. Governmental Approvals	47
Section 3.05. Financial Statements	48
Section 3.06. No Material Adverse Change	49
Section 3.07. Title to Properties; Possession Under Leases	49
Section 3.08. Subsidiaries	50
Section 3.09. Litigation; Compliance with Laws	50
Section 3.10. Agreements	51
Section 3.11. Federal Reserve Regulations	51
Section 3.12. Investment Company Act	51
Section 3.13. Use of Proceeds	51
Section 3.14. Tax Returns	51
Section 3.15. No Material Misstatements	51
Section 3.16. Employee Benefit Plans	52
Section 3.17. Environmental Matters	52
Section 3.18. Insurance	53
Section 3.19. Security Documents	53
Section 3.20. Location of Real Property and Leased Premises	54
Section 3.21. Labor Matters	55
Section 3.22. Solvency	55
Section 3.23. Transaction Documents	55
Section 3.24. Sanctioned Persons	56

ARTICLE 4
Conditions of Lending

Section 4.01. All Credit Events	56
Section 4.02. First Credit Event	57
Section 4.03. Conditions to Merger Borrowing Credit Events	61

ARTICLE 5
Affirmative Covenants

Section 5.01. Existence; Compliance with Laws; Businesses and Properties	62
Section 5.02. Insurance	63
Section 5.03. Obligations and Taxes	64
Section 5.04. Financial Statements, Reports, etc	65
Section 5.05. Litigation and Other Notices	67
Section 5.06. Information Regarding Collateral	67
Section 5.07. Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings	68
Section 5.08. Use of Proceeds	68
Section 5.09. Employee Benefits	68
Section 5.10. Compliance with Environmental Laws	68
Section 5.11. Preparation of Environmental Reports	69
Section 5.12. Compliance with Laws	69
Section 5.13. Further Assurances	69
Section 5.14. Interest Rate Protection	71

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Section 5.15. Consummation of the Merger	71
Section 5.16. Alpharma Escrow Account	71

ARTICLE 6
Negative Covenants

Section 6.01. Indebtedness	72
Section 6.02. Liens	74
Section 6.03. Sale and Leaseback Transactions	76
Section 6.04. Investments, Loans and Advances	76
Section 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions	79
Section 6.06. Restricted Payments; Restrictive Agreements	80
Section 6.07. Transactions with Affiliates	80
Section 6.08. Business of Borrower and Subsidiaries	81
Section 6.09. Other Indebtedness and Agreements	81
Section 6.10. Capital Expenditures	82
Section 6.11. Consolidated Interest Expense Coverage Ratio	82
Section 6.12. Maximum Leverage Ratio	83
Section 6.13. Fiscal Year	84
Section 6.14. Certain Equity Securities	84

ARTICLE 7
Events of Default

ARTICLE 8
The Administrative Agent and the Collateral Agent; Etc.

ARTICLE 9
Miscellaneous

Section 9.01. Notices; Electronic Communications	91
Section 9.02. Survival of Agreement	94
Section 9.03. Binding Effect	94
Section 9.04. Successors and Assigns	94
Section 9.05. Expenses; Indemnity	98
Section 9.06. Right of Setoff	100
Section 9.07. Applicable Law	100
Section 9.08. Waivers; Amendment	100
Section 9.09. Interest Rate Limitation	102
Section 9.10. Entire Agreement	102
Section 9.11. WAIVER OF JURY TRIAL	102
Section 9.12. Severability	103
Section 9.13. Counterparts	103
Section 9.14. Headings	103
Section 9.15. Jurisdiction; Consent to Service of Process	103

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Section 9.16. Confidentiality	104
Section 9.17. Lender Action	105
Section 9.18. Patriot Act	105
Section 9.19. No Fiduciary Duty	105

SCHEDULES

Schedule 1.01(b)	-	Subsidiary Guarantors
Schedule 1.01(c)	-	Mortgaged Property
Schedule 2.01	-	Lenders and Commitments
Schedule 3.08	-	Subsidiaries
Schedule 3.09	-	Litigation
Schedule 3.17	-	Environmental Matters
Schedule 3.18	-	Insurance
Schedule 3.19(a)	-	UCC Filing Offices
Schedule 3.19(c)	-	Mortgage Filing Offices
Schedule 3.20(a)	-	Owned Real Property
Schedule 3.20(b)	-	Leased Real Property
Schedule 4.02(b)	-	Local Counsel
Schedule 6.01	-	Existing Indebtedness
Schedule 6.02	-	Existing Liens
Schedule 6.04(a)	-	Existing Investments

EXHIBITS

Exhibit A	-	Form of Administrative Questionnaire
Exhibit B	-	Form of Assignment and Acceptance
Exhibit C	-	Form of Borrowing Request
Exhibit D	-	Form of Guarantee and Collateral Agreement
Exhibit E	-	Form of Mortgage
Exhibit F	-	Form of Affiliate Subordination Agreement
Exhibit G-1	-	Form of Opinion of Dewey & LeBoeuf LLP
Exhibit G-2	-	Form of Local Counsel Opinion
Exhibit H	-	Form of Compliance Certificate

iv

     TERM LOAN CREDIT AGREEMENT dated as of December 29, 2008 (as amended, supplemented or otherwise modified from time to time, this “Agreement”) among KING PHARMACEUTICALS, INC., a Tennessee corporation (the “Borrower”), the Lenders (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article 1), and CREDIT SUISSE, as administrative agent (in such capacity, including any successor thereto, the “Administrative Agent”) and as collateral agent (in such capacity, including any successor thereto, the “Collateral Agent”) for the Lenders.

PRELIMINARY STATEMENTS:

     Pursuant to the Merger Agreement, the Borrower intends to acquire (the “Acquisition”) all of the Shares pursuant to a two-step transaction in which (a) Merger Sub will acquire pursuant to the Tender Offer, for a purchase price of $37 per share in cash, those Shares that have been validly tendered and not withdrawn and accepted for payment pursuant to the Tender Offer (the “Tender Consideration”) and (b) on the Merger Date and in accordance with the Merger Agreement, Merger Sub will be merged with and into the Target with the Target being the surviving corporation (the “Merger”), and pursuant to the Merger each Share not acquired in the Tender Offer will be converted into the right to receive $37 in cash pursuant to, and subject to the provisions of, the Merger Agreement (the “Merger Consideration”).

     In connection with the foregoing, the Borrower has requested the Lenders to extend credit in the form of term Loans during the Availability Period in an aggregate principal amount not in excess of $200,000,000. The proceeds of the Loans are to be used solely (a) to enable Merger Sub to pay the Tender Consideration in respect of those Shares that have been validly tendered and not withdrawn in the Tender Offer and that have been accepted for payment on the Closing Date, the Tender Consideration in respect of those additional Shares that are validly tendered and not withdrawn in a subsequent offering period pursuant to the Tender Offer, and the Merger Consideration on or immediately after the effective date of the Merger and to pay the appraised value of any Shares held by holders who have properly perfected rights to appraisal in accordance with Section 262 of the Delaware General Corporation Law (together, the “Acquisition Consideration”) and (b) to pay fees and expenses incurred in connection with the foregoing.

     The Lenders have agreed to extend such credit on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto hereby agree as follows:

ARTICLE 1
Definitions

     Section 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

     “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

     “Acquired Entity” shall have the meaning assigned to such term in Section 6.04(l).

     “Acquisition” shall have the meaning assigned to such term in the Preliminary Statements.

     “Acquisition Consideration” shall have the meaning assigned to such term in the Preliminary Statements.

     “Acquisition Transactions” shall have the meaning set forth in Section 3.02.

     “Adjusted LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the greater of (a) 3.00% and (b) the product of (i) the LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves.

     “Administrative Agent” shall have the meaning assigned to such term in the introductory statement to this Agreement.

     “Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.05(b).

     “Administrative Questionnaire” shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.

     “Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.

     “Affiliate Subordination Agreement” shall mean an Affiliate Subordination Agreement in the form of Exhibit F pursuant to which intercompany obligations and advances owed by any Loan Party to a person that is not a Loan Party are subordinated to the Obligations.

     “Agents” shall have the meaning assigned to such term in Article 8.

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     “Agreement” shall have the meaning assigned to such term in the preamble hereto.

     “Agreement Value” shall mean, for each Hedging Agreement, on any date of determination, the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any Subsidiary would be required to pay if such Hedging Agreement were terminated on such date.

     “Alpharma Convertible Note Indenture” shall mean the Indenture dated as of March 20, 2007, as supplemented by the First Supplemental Indenture dated March 20, 2007, each between Alpharma Inc. and U.S. Bank National Association, as trustee, as in effect on the Closing Date.

     “Alpharma Convertible Notes” shall mean the 2.125% convertible senior notes due 2027 issued by Alpharma Inc. pursuant to the Alpharma Convertible Note Indenture and outstanding on the Closing Date.

     “Alpharma Escrow Account” shall have the meaning assigned to such term in Section 5.16.

     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.00%; provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate determined on such day at approximately 11 a.m. (London time) by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers’ Association as an authorized vendor for the purpose of displaying such rates) on such day.

     “Applicable Percentage” shall mean, for any day (a) with respect to any Eurodollar Loan, 5.0% per annum and (b) with respect to any ABR Loan, 4.0% per annum.

     “ARS Liquidation Event” shall mean any event which enables the Borrower or any Subsidiary to convert its auction rate securities into cash or other immediately available funds (whether through incurring Permitted ARS Indebtedness, the redemption of such auction rate securities by the issuer thereof, the repurchase of such auction rate securities by the seller thereof, the sale of such auction rate securities by the Borrower or such Subsidiary, or otherwise).

     “Asset Sale” shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Subsidiary Guarantor of (a) any Equity Interests of any of the Subsidiaries (other than directors’

3

qualifying shares) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory (including raw material), damaged, obsolete, surplus or worn out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) dispositions between or among Foreign Subsidiaries, (iii) dispositions of Margin Stock for cash and for fair market value as determined in good faith by the board of directors of the Borrower; provided that the cash proceeds received in connection with any such disposition are held in cash or Permitted Investments, (iv) solely for the purpose of Section 2.13(a), any ARS Liquidation Event and (v) any sale, transfer or other disposition or series of related sales, transfers or other dispositions having a value not in excess of $500,000).

     “Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.

     “Availability Period” shall mean the period commencing on the Closing Date and ending on (and including) the earliest of (a) the date that is 120 days after the Closing Date (or, if not a Business Day, the next succeeding Business Day), (b) the date on which the Merger is consummated and (c) the date on which the Commitments shall have been terminated in accordance with the terms hereof.

     “Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

     “Borrower” shall have the meaning assigned to such term in the introductory statement to this Agreement.

     “Borrower Materials” shall have the meaning assigned to such term in Section 9.01.

     “Borrowing” shall mean Loans of the same Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

     “Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent.

     “Breakage Event” shall have the meaning assigned to such term in Section 2.16.

     “Business Day” shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term

4

“Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.

     “Capital Expenditures” shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its consolidated Subsidiaries during such period, but excluding in each case any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation.

     “Capital Lease Obligations” of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     A “Change in Control” shall be deemed to have occurred if (a) any “person” or “group” (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934, as amended, as in effect on the Closing Date) shall own, directly or indirectly, beneficially or of record, shares representing more than 20% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower, (b) a majority of the seats (other than vacant seats) on the board of directors of the Borrower shall at any time be occupied by persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated, or (c) any change in control (or similar event, however denominated) with respect to the Borrower or any of the Subsidiaries shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness to which the Borrower or any Subsidiary is a party.

     “Change in Law” shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.14, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     “Charges” shall have the meaning assigned to such term in Section 9.09.

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     “Closing Date” shall mean the date of the first Credit Event.

     “Co-Documentation Agents” shall mean U.S. Bank National Association and DNB First Bank.

     “Co-Syndication Agent” shall mean Wachovia Bank, National Association and SunTrust Bank.

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

     “Collateral” shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties.

     “Collateral Agent” shall have the meaning assigned to such term in the introductory statement to this Agreement.

     “Commitment” shall mean, with respect to each Lender, the commitment of such Lender to make Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.

     “Communications” shall have the meaning assigned to such term in Section 9.01.

     “Confidential Information” shall have the meaning assigned to such term in Section 9.16.

     “Confidential Information Memorandum” shall mean the Confidential Information Memorandum of the Borrower dated November 2008.

     “Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) the aggregate amount of letter of credit fees paid during such period, (iii) consolidated income tax expense for such period, (iv) all amounts attributable to depreciation and amortization expense for such period, (v) all extraordinary charges for such period, (vi) all other non-cash charges (other than the write-down of current assets) for such period, (vii) all Milestone expenses paid during such period, (viii) Transaction Fees paid in cash during such period, (ix) all other non-recurring cash charges incurred for such period in connection with the Merger (including payments to officers, employees and directors as change of control payments, severance payments, special or retained bonuses and charges for repurchases or rollover of, or modifications to, stock options); provided that no more than $75,000,000 in the aggregate may be added

6

back pursuant to this clause during the term of this Agreement and (x) all other non-recurring cash charges incurred during such period; provided that no more than $125,000,000 in the aggregate may be added back pursuant to this clause during the term of this Agreement and minus (b) without duplication (i) all cash payments made during such period on account of reserves, restructuring charges and other non-cash charges added to Consolidated Net Income pursuant to clause (a)(vi) above in a previous period and (ii) to the extent included in determining such Consolidated Net Income, any extraordinary gains and all non-cash items of income for such period, all as determined on a consolidated basis with respect to the Borrower and the Subsidiaries in accordance with GAAP; provided that solely for purposes of calculating the Leverage Ratio in connection with determining compliance with Section 6.12 for any period and the Consolidated Interest Expense Coverage Ratio with respect to the first three full fiscal quarters ended after the Closing Date (A) the Consolidated EBITDA of any Acquired Entity acquired by the Borrower or any Subsidiary pursuant to a Permitted Acquisition during such period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred as of the first day of such period) and (B) the Consolidated EBITDA of any person or line of business sold or otherwise disposed of by the Borrower or any Subsidiary during such period shall be excluded for such period (assuming the consummation of such sale or other disposition and the repayment of any Indebtedness in connection therewith occurred as of the first day of such period). For purposes of determining the Consolidated Interest Expense Coverage Ratio and the Leverage Ratio as of or for the periods ended on March 31, 2009 and June 30, 2009, Consolidated EBITDA will be deemed to be equal to (i) for the fiscal quarter ended June 30, 2008, $175,000,000 and (ii) for the fiscal quarter ended September 30, 2008, $189,000,000.

     “Consolidated Interest Expense” shall mean, for any period, the interest expense, both expensed and capitalized (including the interest component in respect of Capital Lease Obligations and Synthetic Lease Obligations), accrued or paid by the Borrower and the Subsidiaries during such period, determined on a consolidated basis in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined after giving effect to any net payments made or received by the Borrower and the Subsidiaries with respect to interest rate Hedging Agreements.

     “Consolidated Interest Expense Coverage Ratio” shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period; provided that (i) for the purpose of determining the Consolidated Interest Expense Coverage Ratio, no effect shall be given to FASB Staff Position No. APB 14-1 dated May 9, 2008 and (ii) for the first three consecutive full fiscal quarters ending on or after the Closing Date, Consolidated Interest Expense shall be deemed to be equal to (a) the Consolidated Interest Expense for the first such fiscal quarter, multiplied by 4, (b) the sum of

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Consolidated Interest Expense for the first and second such fiscal quarters, multiplied by 2 and (c) the sum of Consolidated Interest Expense for the first, second and third fiscal quarters ended, multiplied by 4/3, respectively.

     “Consolidated Net Income” shall mean, for any period, the net income or loss of the Borrower and the Subsidiaries for such period, as determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any person (other than the Borrower) in which any other person (other than the Borrower or a Wholly Owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has a joint equity interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a Wholly Owned Subsidiary by such person during such period, (b) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (c) the income or loss of any person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary, and (d) any gains attributable to sales of assets out of the ordinary course of business.

     “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

     “Controlled Deposit Account” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

     “Convertible Note Indenture” shall mean the Indenture dated as of March 29, 2006, between King Pharmaceuticals, Inc., the subsidiary guarantors party thereto and The Bank of New York Trust Company, N.A., as trustee.

     “Convertible Notes” shall mean the 1¹/4% convertible senior notes due April 1, 2026 issued by the Borrower pursuant to the Convertible Note Indenture.

     “Credit Event” shall have the meaning assigned to such term in Section 4.01.

     “Current Assets” shall mean, at any time, the consolidated current assets (other than cash and Permitted Investments) of the Borrower and the Subsidiaries.

     “Current Liabilities” shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b)

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outstanding revolving loans and swingline loans under the Revolving Loan Credit Agreement.

     “Default” shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.

     “Defaulting Lender” shall mean (a) any Lender that has (i) defaulted in its obligation to make a Loan required to be made by it hereunder, or (ii) notified the Administrative Agent or a Loan Party in writing that it does not intend to satisfy any such obligation, or (b) any Lender that has become insolvent, is the subject of any bankruptcy, insolvency, receivership or similar proceedings or the assets or management of which has been taken over by (or at the direction of) any Governmental Authority.

     “Delayed Draw Fee” shall have the meaning assigned to such term in Section 2.05(a).

     “Deposit Account Control Agreement” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

     “Disqualified Stock” shall mean any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case at any time on or prior to the first anniversary of the Maturity Date, or (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interest referred to in clause (a) above, in each case at any time prior to the first anniversary of the Maturity Date; provided that for the purpose of this definition, the Maturity Date shall be determined without regard to the proviso to the definition thereof.

     “Dollars” or “$” shall mean lawful money of the United States of America.

     “Domestic Subsidiary” shall mean a Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

     “Eligible Assignee” shall mean (i) a Lender, (ii) an Affiliate of a Lender, (iii) a Related Fund of a Lender and (iv) any other person (other than a natural person) approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates.

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     “environment” shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or as otherwise defined in any Environmental Law.

     “Environmental Claim” shall mean any written allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon (a) the existence, or the continuation of the existence, of a Release (including sudden or non-sudden, accidental or non-accidental Releases), (b) exposure to any Hazardous Material, (c) the presence, use, handling, generation, transportation, storage, treatment or disposal of any Hazardous Material, or (d) the violation or alleged violation of any Environmental Law or Environmental Permit.

     “Environmental Law” shall mean any and all applicable present and future treaties, laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of or exposure to any Hazardous Material or to health and safety matters, including, but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. (collectively “CERCLA”), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C. § 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. § 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. § 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. § 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq., and any similar or implementing foreign, state or local law, and all amendments or regulations promulgated under any of the foregoing.

     “Environmental Permit” shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law.

     “Equity Interests” shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in any person, and any option, warrant or other

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right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

     “Equity Issuance” shall mean any issuance or sale by the Borrower or any Subsidiary of any Equity Interests of the Borrower or such Subsidiary, as applicable, except in each case for (a) any issuance or sale to the Borrower or any Subsidiary, (b) any issuance of directors’ qualifying shares, and (c) sales or issuances of common stock of the Borrower to management or employees of the Borrower or any Subsidiary under any employee stock incentive, stock option or stock purchase plan (or other equity-based compensation plan or arrangement) or employee benefit plan in existence from time to time.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

     “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

     “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; and (h) the occurrence of a “prohibited transaction” with respect to which the Borrower or any of the Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) with respect to which the Borrower or any such Subsidiary could otherwise have or incur material liabilities.

     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate (other than pursuant to clause (c) of the definition of Alternate Base Rate).

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     “Events of Default” shall have the meaning assigned to such term in Article 7.

     “Excess Cash Flow” shall mean, for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year and (ii) reductions to non-cash working capital of the Borrower and the Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) over (b) the sum, without duplication, of (i) the amount of any Taxes payable in cash by the Borrower and the Subsidiaries with respect to such fiscal year, (ii) Consolidated Interest Expense for such fiscal year paid in cash, (iii) Capital Expenditures made in cash in accordance with Section 6.10 during such fiscal year, except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated EBITDA, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13) made in cash by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness, (v) the aggregate amount of letter of credit fees paid in cash by the Borrower and the Subsidiaries during such fiscal year, (vi) the aggregate amount of Milestone payments made in cash by the Borrower and the Subsidiaries during such fiscal year, (vii) to the extent added to Consolidated Net Income in the calculation of Consolidated EBITDA for such fiscal year, (x) all Transaction Fees paid in cash during such fiscal year, (y) the aggregate amount of other non-recurring cash charges incurred by the Borrower and the Subsidiaries during such fiscal year in connection with the Merger (including payments to officers, employees and directors as change of control payments, severance payments, special or retained bonuses and charges for repurchases or rollover of, or modifications to, stock options); provided that no more than $75,000,000 in the aggregate may be deducted pursuant to this clause (y) during the term of this Agreement and (z) the aggregate amount of other non-recurring cash charges incurred by the Borrower and the Subsidiaries during such fiscal year; provided that no more than $125,000,000 in the aggregate may be deducted pursuant to this clause (z) during the term of this Agreement and (viii) additions to non-cash working capital for such fiscal year (i.e., the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year).

     “Excess Cash Flow Prepayment Date” shall have the meaning assigned to such term in Section 2.13(c).

     “Excluded Taxes” shall mean, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable

12

lending office is located (provided, however, that none of any Lender or any other recipient shall be deemed to be located in any jurisdiction solely as a result of receiving any payments under, or taking any other action related to, any loan under this or any other agreement), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.21(a)), any withholding tax that (i) is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to any withholding tax pursuant to Section 2.20(a) or (ii) is attributable to such Foreign Lender’s failure to comply with Section 2.20(e).

     “Extraordinary Receipt” shall mean any cash received by or paid to or for the account of the Borrower or any Subsidiary in respect of any purchase price adjustments or indemnity payments payable in connection with the Acquisition.

     “Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

     “Fee Letter” shall mean the second amended and restated Fee Letter dated December 17, 2008 among the Borrower, Credit Suisse, Credit Suisse Securities (USA) LLC, Wachovia Capital Markets, LLC and Wachovia Bank, National Association.

     “Fees” shall mean the Delayed Draw Fees and the Administrative Agent Fees.

     “Financial Officer” of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.

     “Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

     “Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

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     “GAAP” shall mean United States generally accepted accounting principles applied on a consistent basis.

     “Governmental Authority” shall mean any Federal, state, local, foreign or transnational court or governmental agency, authority, instrumentality or regulatory body.

     “Granting Lender” shall have the meaning assigned to such term in Section 9.04(i).

     “Guarantee” of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

     “Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral Agreement, substantially in the form of Exhibit D, among the Borrower, the Subsidiaries party thereto and the Collateral Agent.

     “Guarantors” shall mean the Subsidiary Guarantors.

     “Hazardous Materials” shall mean all explosive or radioactive substances or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls (“PCBs”) or PCB containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law.

     “Health Care Laws” shall mean any and all applicable current and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by the Food and Drug Administration, the Center for Medicare and Medicaid Services, the Department of Health and Human Services (“HHS”), the Office of Inspector General of HHS, the Drug Enforcement Administration or any other Governmental Authority (including any professional licensing laws, certificate of need laws and state reimbursement laws), relating in any way to the manufacture, distribution, marketing, sale, supply or other disposition of any product or service

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of the Borrower or any Subsidiary, the conduct of the business of the Borrower or any Subsidiary, the provision of health care services generally, or to any relationship among the Borrower and the Subsidiaries, on the one hand, and their suppliers and customers and patients and other end users of their products and services, on the other hand.

     “Hedging Agreement” shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

     “HSR Act” shall have the meaning assigned to such term in Section 4.02(r).

     “Indebtedness” of any person shall mean, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid, (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all Synthetic Lease Obligations of such person, (j) net obligations of such person under any Hedging Agreements, valued at the Agreement Value thereof, (k) all obligations of such person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests of such person or any other person or any warrants, rights or options to acquire such equity interests, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (l) all obligations of such person as an account party in respect of letters of credit and (m) all obligations of such person in respect of bankers’ acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner.

     “Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

     “Indemnitee” shall have the meaning assigned to such term in Section 9.05(b).

     “Interest Payment Date” shall mean (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December (commencing with March, 2009), and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and,

15

in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing.

     “Interest Period” shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is 1, 2, 3 or 6 (or, if agreed to by each Lender, 9) months thereafter, as the Borrower may elect; provided, however, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) 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 end on the last Business Day of the calendar month at the end of such Interest Period and (c) no Interest Period for any Loan shall extend beyond the Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

     “Joint Arrangers” shall mean Credit Suisse Securities (USA) LLC and Wachovia Capital Markets, LLC.

     “Lenders” shall mean the persons listed on Schedule 2.01 and any other person that has become a party hereto pursuant to an Assignment and Acceptance, other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance.

     “Leverage Ratio” shall mean, on any date, the ratio of (a) Total Funded Debt on such date to (b) Consolidated EBITDA for the most recently ended period of four fiscal quarters, all as determined on a consolidated basis in accordance with GAAP.

     “LIBO Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date which is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” shall be the interest rate

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per annum determined by the Administrative Agent to be the average of the rates per annum (rounded upwards, if necessary, to the next 1/16 of 1%) at which deposits in Dollars are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the beginning of such Interest Period.

     “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

     “Loan Documents” shall mean this Agreement, the Security Documents, the Fee Letter, the promissory notes, if any, executed and delivered pursuant to Section 2.04(e) and any other document executed in connection with the foregoing.

     “Loan Parties” shall mean the Borrower and the Subsidiary Guarantors.

     “Loans” shall mean the term loans made by the Lenders to the Borrower pursuant to Section 2.01.

     “Margin Stock” shall have the meaning assigned to such term in Regulation U.

     “Material Adverse Effect” shall mean one or more events, changes or effects which, individually or in the aggregate, have had or could reasonably be expected to have a material adverse effect on (a) the business, assets, results of operations, condition (financial or otherwise) or prospects of the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Borrower or any other Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (c) the validity or enforceability of any of the Loan Documents or any other documents entered into in connection with the Transactions or other transactions contemplated thereby or the rights, remedies and benefits available to the parties thereunder; provided that solely for the purposes of determining whether the condition in Section 4.01(b) has been satisfied in connection with the first Credit Event on the Closing Date, a “Material Adverse Effect” shall be deemed to have occurred for purposes of Section 3.06(a) if (x) there shall have occurred any event, change or condition since December 31, 2007 that, individually or in the aggregate, has had, or could reasonably be expected to have, a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise), operating results, projections or prospects of the Target and its subsidiaries, taken as a whole, or (y) there shall have occurred any event, change or condition since December 31, 2007 that, individually or in the

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aggregate, has had, or could reasonably be expected to have, a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise), operating results, projections or prospects of the Borrower and its subsidiaries, taken as a whole. For the avoidance of doubt, neither a Skelaxin Expiration Event nor a Skelaxin Trigger Event shall constitute a Material Adverse Effect.

     “Material Foreign Subsidiary” shall mean any Foreign Subsidiary (a) the consolidated revenues of which for the most recent period of four fiscal quarters of the Borrower for which audited financial statements have been delivered pursuant to Section 5.04 were greater than 2.5% of the Borrower’s total consolidated revenues for such period or (b) the consolidated assets of which as of the end of such period were greater than 2.5% of the Borrower’s total consolidated assets as of such date.

     “Material Indebtedness” shall mean Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower or any Subsidiary in an aggregate principal amount exceeding $35,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the Agreement Value of such Hedging Agreement at such time.

     “Material Leased Property” shall have the meaning assigned to such term in Section 3.20(b).

     “Maturity Date” shall mean the fourth anniversary of the Closing Date or, if such date is not a Business Day, the immediately preceding Business Day; provided that, notwithstanding the foregoing, the Maturity Date shall be October 1, 2011 (or, if such date is not a Business Day, the immediately preceding Business Day) unless (a) the Convertible Notes shall have been refinanced in full on terms reasonably satisfactory to the Administrative Agent on or prior to October 1, 2011 and (b) the Administrative Agent shall have notified the Borrower in writing on or prior to October 1, 2011 of the satisfaction of clause (a).

     “Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

     “Merger” shall have the meaning assigned to such term in the Preliminary Statements.

     “Merger Agreement” shall mean the Agreement and Plan of Merger dated as of November 23, 2008 among the Borrower, Merger Sub and the Target, as amended from time to time in compliance with Section 6.09(b).

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     “Merger Borrowing” shall have the meaning assigned to such term in Section 4.03.

     “Merger Consideration” shall have the meaning assigned to such term in the Preliminary Statements.

     “Merger Date” shall mean the date on which the Merger is consummated.

     “Merger Sub” shall mean Albert Acquisition Corp, a wholly owned Delaware subsidiary of the Borrower.

     “Milestone” shall mean all in process research and development costs and payments due upon achievement of certain clinical, regulatory and sales conditions.

     “Minimum Acceptance Condition” shall have the meaning given such term in Section 4.02(k).

     “Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

     “Mortgaged Properties” shall mean, initially, the owned real properties and leasehold and subleasehold interests of the Loan Parties specified on Schedule 1.01(c), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.13.

     “Mortgages” shall mean the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other security documents delivered pursuant to Section 4.02(i) or pursuant to Section 5.13, each substantially in the form of Exhibit E.

     “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

     “Net Cash Proceeds” shall mean (a) with respect to any Asset Sale, the cash proceeds thereof (including cash proceeds subsequently received (as and when received) in respect of non-cash consideration initially received), net of (i) selling expenses (including actual broker’s fees or commissions, legal fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money (other than Revolving Indebtedness) which is

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secured by the asset sold in such Asset Sale and which is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); provided, however, that, if (x) the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent at the time of receipt thereof setting forth the Borrower’s intent to reinvest such proceeds in productive assets of a kind then used or usable in the business of the Borrower and its Subsidiaries within 180 days of receipt of such proceeds, (y) no Default or Event of Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, and (z) such proceeds are not proceeds of any Required Divestiture, such proceeds shall not constitute Net Cash Proceeds except to the extent that either (A) such proceeds are not so used, and no legally binding commitment to so use such proceeds has been entered into with an entity that is not an Affiliate of the Borrower or its Subsidiaries, on or prior to the end of such 180-day period or (B) a legally binding commitment to so use such proceeds has been entered into on or prior to the end of such 180-day period with an entity that is not an Affiliate of the Borrower or its Subsidiaries, but such proceeds are not so used on or prior to the 90th day following the end of such 180-day period, in either case, at which time such proceeds shall be deemed to be Net Cash Proceeds; provided further that no cash proceeds of an Asset Sale shall constitute Net Cash Proceeds until the aggregate amount of all Net Cash Proceeds from Asset Sales (without giving effect to this proviso) exceeds $5,000,000; (b) with respect to any issuance or incurrence of Indebtedness or any Equity Issuance or with respect to any ARS Liquidation Event, the cash proceeds thereof, net of all taxes and customary fees, commissions, costs and other expenses incurred in connection therewith (and, in the case of any ARS Liquidation Event, net of the principal amount, premium or penalty, if any, interest or other amount on any Permitted ARS Indebtedness which is required to be paid with such proceeds); and (c) with respect to any Extraordinary Receipt, the cash proceeds thereof; provided further that for purposes of this definition, an ARS Liquidation Event shall be governed by clause (b).

     “Obligations” shall mean all obligations defined as “Term Secured Obligations” in the Guarantee and Collateral Agreement and the guarantee thereof set forth in the Guarantee and Collateral Agreement.

     “OFAC” shall have the meaning assigned to such term in Section 3.24.

     “Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

     “Patriot Act” shall have the meaning assigned to such term in Section 9.18.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

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     “Perfection Certificate” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

     “Permitted Acquisition” shall have the meaning assigned to such term in Section 6.04(l).

     “Permitted ARS Indebtedness” shall mean any Indebtedness of the Borrower or any other Loan Party that is secured solely by Liens permitted under Section 6.02(o) and that is otherwise on terms and conditions reasonably satisfactory to the Administrative Agent.

     “Permitted Investments” shall mean:

     (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of issuance thereof;

     (b) investments in commercial paper maturing within 270 days from the date of issuance thereof and having, at the date of acquisition, a rating of at least “Prime 1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P;

     (c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent, the Collateral Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and that issues (or the parent of which issues) commercial paper rated at least “Prime 1” (or the then equivalent grade) by Moody’s or “A-1” (or the then equivalent grade) by S&P;

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (c) above;

     (e) investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above;

     (f) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing; and

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     (g) other investment instruments approved in writing by the Required Lenders.

     For the avoidance of doubt, auction rate securities shall not constitute Permitted Investments.

     “person” shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

     “Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

     “Platform” shall have the meaning assigned to such term in Section 9.01.

     “Prime Rate” shall mean the rate of interest per annum determined from time to time by Credit Suisse as its prime rate in effect at its principal office in New York City and notified to the Borrower. The prime rate is a rate set by Credit Suisse based upon various factors including Credit Suisse’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such rate.

     “Properties” shall have the meaning assigned to such term in Section 3.17(a).

     “Public Lender” shall have the meaning assigned to such term in Section 9.01.

     “Qualified Capital Stock” of any person shall mean any Equity Interest of such person that is not Disqualified Stock.

     “Register” shall have the meaning assigned to such term in Section 9.04(d).

     “Regulation T” shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

     “Regulation U” shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

     “Regulation X” shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

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     “Related Fund” shall mean, with respect to any Lender that is a fund or commingled investment vehicle that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

     “Related Parties” shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, officers, employees, trustees, agents and advisors of such person and such person’s Affiliates.

     “Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the environment.

     “Remedial Action” shall mean (a) “remedial action” as such term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health, welfare or the environment; or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above.

     “Repayment Date” shall have the meaning given such term in Section 2.11(a).

     “Required Divestiture” means any Asset Sale required by the applicable Governmental Authority as a condition to obtaining any approval to, or as a condition to not objecting to, restraining or preventing, the Acquisition under the HSR Act.

     “Required Lenders” shall mean, at any time, Lenders having Loans and Commitments representing more than 50% of the sum of all Loans and Commitments outstanding at such time; provided that the Commitments of any Defaulting Lender shall be disregarded in the determination of the Required Lenders at any time.

     “Responsible Officer” of any person shall mean the chief executive officer, the president or any Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

     “Restricted Indebtedness” shall mean Indebtedness of the Borrower or any Subsidiary, the payment, prepayment, repurchase or defeasance of which is restricted under Section 6.09.

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     “Restricted Payment” shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in the Borrower or any Subsidiary.

     “Revolving Indebtedness” shall mean Indebtedness of the Borrower under the Revolving Loan Credit Agreement and all guarantees thereof by any Subsidiary Guarantor and all refinancings, renewals and extensions thereof that are permitted by Section 6.01(l).

     “Revolving Liens” shall have the meaning assigned to such term in Section 6.02(r).

     “Revolving Loan Credit Agreement” shall mean the Credit Agreement dated as of April 19, 2007 as amended by Amendment No. 1 thereto dated as of December 5, 2008 among the Borrower, the lenders named therein, and Credit Suisse, as administrative agent, collateral agent and swingline lender, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 6.09 and any revolving credit agreement governing any refinancing, renewal or extension of Indebtedness thereunder permitted by Section 6.01(l).

     “Revolving Loan Documents” shall mean the “Loan Documents” under, and as defined in, the Revolving Loan Credit Agreement, and any documents governing refinancings, renewals and extensions of the Indebtedness under the Revolving Loan Credit Agreement that are permitted by Section 6.01(l).

     “Revolving Refinanced Indebtedness” shall have the meaning assigned to such term in Section 6.01(l).

     “Revolving Refinancing Indebtedness” shall have the meaning assigned to such term in Section 6.01(l).

     “S&P” shall mean Standard & Poor’s Ratings Services, or any successor thereto.

     “SEC” shall mean the U.S. Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

     “Secured Parties” shall mean the “Term Secured Parties” as defined in the Guarantee and Collateral Agreement.

     “Security Documents” shall mean the Mortgages, the Guarantee and Collateral Agreement and each of the security agreements, mortgages and other

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instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.13.

     “Senior Managing Agents” means DZ Bank AG, Deutsche Zentral-Genossenschaftsbank New York Branch, Siemans Financial Services, Inc., The Privatebank and Trust Company and Union Bank of California, N.A..

     “Shares” shall mean all of the issued and outstanding shares of Class A Common Stock, par value $0.20 per share, together with the associated preferred stock purchase rights, of the Target.

     “Skelaxin Expiration Event” shall mean that any one or more of the following shall have occurred: (i) U.S. Patent Nos. 6,407,128, 6,683,102 or any other United States Patent listed in the Food and Drug Administration’s Orange Book with reference to Skelaxin (the “Skelaxin Patents”), shall have expired, (ii) any final non-appealable judgment of any court of competent jurisdiction shall have been entered holding that any Skelaxin Patent is non infringed, invalid or unenforceable, or (iii) any authorized sale in the United States of a Food and Drug Administration approved generic product of the same dosage, form and strength as Skelaxin (metaxalone) shall have occurred.

     “Skelaxin Trigger Event” shall mean that, as a result of a Skelaxin Expiration Event, the revenue of the Borrower and the Subsidiaries for any fiscal quarter shall be more than 20% less than the revenue of the Borrower and the Subsidiaries for the corresponding fiscal quarter of the prior fiscal year, in each case as determined on a consolidated basis in accordance with GAAP.

     “SPC” shall have the meaning assigned to such term in Section 9.04(i).

     “Specified Share” shall mean, at any time, a fraction expressed as a percentage, the numerator of which is the aggregate outstanding amount of Loans and Commitments at such time and the denominator of which is the sum of (x) the outstanding Revolving Credit Commitment (as defined in the Revolving Loan Credit Agreement) at such time (whether used or unused) plus (y) the aggregate outstanding amounts of Loans and Commitments at such time.

     “Statutory Reserves” shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the Board) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from

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time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

     “subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, limited liability company, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

     “Subsidiary” shall mean any and all subsidiaries of the Borrower.

     “Subsidiary Guarantor” shall mean each Subsidiary listed on Schedule 1.01(b), and each other Subsidiary that is or becomes a party to the Guarantee and Collateral Agreement.

     “Synthetic Lease” shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

     “Synthetic Lease Obligations” shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

     “Synthetic Purchase Agreement” shall mean any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than the Borrower or any Subsidiary of any Equity Interest or Restricted Indebtedness or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest or Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.

     “Target” shall mean Alpharma Inc., a Delaware corporation.

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     “Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

     “Tender Consideration” shall have the meaning assigned to such term in the Preliminary Statements.

     “Tender Offer” shall mean the offer to purchase for cash all of the Shares by Merger Sub pursuant to the Tender Offer Documentation and in accordance with the Merger Agreement.

     “Tender Offer Documentation” shall have the meaning given such term in Section 4.02(k) and shall in any event include (x) the Offer to Purchase for Cash all outstanding Shares dated as of September 12, 2008 as extended on October 13, 2008 and further extended on November 24, 2008 and as modified to reflect the changes thereto set forth in the Merger Agreement and (y) the related Letter of Transmittal, each as amended from time to time in compliance with Section 6.09(b).

     “Term Facility” shall mean the term loan facility provided for by this Agreement.

     “Total Funded Debt” shall mean, as of any date of determination, without duplication, the aggregate principal amount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date (other than Indebtedness of the type referred to in clauses (i), (j), (k) and (l) of the definition of such term, except, (x) in the case of such clause (j), to the extent of the Agreement Value of any Hedging Agreement that has been terminated and (y) in the case of such clause (l), to the extent of any unreimbursed drawings thereunder).

     “Transaction Fees” means fees or expenses in an aggregate amount not exceeding $70,000,000 for the term of this Agreement incurred or paid by Borrower or any Subsidiary in connection with the Transactions.

     “Transactions” shall mean, collectively, (a) the execution, delivery and performance by the Borrower and Merger Sub of the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby, (b) the consummation of the Tender Offer, (c) the execution, delivery and performance by the Loan Parties of the Loan Documents and the Revolving Loan Documents to which they are a party and the making of the borrowings hereunder or thereunder, and (d) the payment of related fees and expenses.

     “Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall mean the Adjusted LIBO Rate and the Alternate Base Rate.

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     “Uniform Commercial Code” shall mean the Uniform Commercial Code in effect from time to time in the State of New York; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

     “Wholly Owned Subsidiary” of any person shall mean a subsidiary of such person of which securities (except for directors’ qualifying shares) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, Controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.

     “Withdrawal Certificate” shall have the meaning ascribed to such term in Section 5.16.

     “Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

     Section 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time, in each case, in accordance with the express terms of this Agreement, (b) any reference to any statute, regulation or other law shall be construed (i) as referring to such statute, regulation or other law as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor statutes, regulations or other laws) and (ii) to include all official rulings and interpretations thereunder, (c) any reference herein to any person shall be construed to include such person’s successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) the words “assets” or “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and

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contract rights and (f) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

     Section 1.03. Pro Forma Calculations. All computations required to be made hereunder to demonstrate pro forma compliance with any covenant after giving effect to any acquisition, investment, sale, disposition or similar event shall reflect on a pro forma basis such event and, to the extent applicable, the historical earnings and cash flows associated with the assets acquired or disposed of and any related incurrence or reduction of Indebtedness, but shall not take into account any projected synergies or similar benefits expected to be realized as a result of such event; provided that projected synergies or similar benefits may be included to the extent permitted to be recognized in pro forma statements prepared in accordance with Regulation S-X under the Securities Act.

ARTICLE 2
The Credits

     Section 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount not to exceed its Commitment at such time. Amounts paid or prepaid in respect of Loans may not be reborrowed.

     Section 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). The Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $1,000,000 or (ii) equal to the remaining available balance of the Commitment.

     (b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may

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request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than four Eurodollar Borrowings being outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

     (c) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 12:00 (noon), New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account in the name of the Borrower designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

     (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing (which payment shall not constitute a waiver of, or otherwise adversely affect, the Borrower’s rights against the Lender, if any) and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.

     (e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Borrowing or the conversion or

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continuation of any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

     Section 2.03. Borrowing Procedure. In order to request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York City time, one Business Day before a proposed Borrowing; provided that the Borrower shall not be entitled to request Loans on more than three occasions in the aggregate. Each such telephonic Borrowing Request shall be irrevocable, and shall be confirmed promptly by hand delivery or fax to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing (provided that, until the Administrative Agent shall have notified the Borrower that the primary syndication of the Term Facility has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), the Borrower shall not be permitted, without the prior written consent of the Administrative Agent, to request a Eurodollar Borrowing with an Interest Period in excess of one month); (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

     Section 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the principal amount of each Loan of such Lender as provided in Section 2.11.

     (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

     (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal

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or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender’s share thereof.

     (d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with their terms.

     (e) Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive such a promissory note, the interests represented by such note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.

     Section 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December (commencing with March, 2009) in each year and on each date on which any Commitment of such Lender shall expire or be terminated as provided herein, a delayed draw fee (a “Delayed Draw Fee”) equal to 5.00% per annum on the daily amount of the Commitment of such Lender during the preceding quarter (or other period commencing with the Closing Date or ending with the date on which the Commitment of such Lender shall expire or be terminated); provided that any Delayed Draw Fee owing to a Lender which is a Defaulting Lender may be withheld by the Administrative Agent in its sole discretion for so long as such Lender remains a Defaulting Lender. All Delayed Draw Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

     (b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein (the “Administrative Agent Fees”).

     (c) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances.

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     Section 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage.

     (b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage.

     (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate for any day or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

     Section 2.07. Default Interest. If (a) the Borrower shall default in the payment of any principal of or interest on any Loan or any other amount due hereunder or under any other Loan Document, by acceleration or otherwise, (b) if any event described in paragraphs (g) or (h) of Article 7 shall occur or (c) if any Event of Default under Article 7 (other than paragraphs (b), (c), (g) or (h) thereunder) has occurred and is continuing and the Required Lenders so vote, then, in the case of clause (a) above, until such defaulted amount shall have been paid in full, in the case of clause (b) above, which such event is continuing or, in the case of clause (c) above, from the date such vote has been exercised by the Required Lenders and for so long as such Event of Default is continuing, to the extent permitted by law, all amounts outstanding under this Agreement and the other Loan Documents shall bear interest (after as well as before judgment), payable on demand, (i) in the case of principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (ii) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the rate that would be applicable to an ABR Loan plus 2.00% per annum.

     Section 2.08. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that Dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or Lenders whose Loans to be included in such Borrowing aggregate at least 51% thereof advise the Administrative Agent that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining Eurodollar Loans during such Interest Period, or if the

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Administrative Agent shall have determined that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or Section 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.08 shall be conclusive absent manifest error.

     Section 2.09. Termination and Reduction of Commitments. (a) The Commitments shall automatically terminate on the last day of the Availability Period. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on February 15, 2009, if the first Credit Event shall not have occurred by such time in accordance with Section 4.01 and 4.02. The Commitment of each Lender shall automatically be reduced on the date of each Loan by such Lender in an amount equal to the principal amount of such Loan. If on any date that a repayment is required to be made pursuant to Section 2.11 or a mandatory prepayment is required to be made pursuant to Section 2.13 the aggregate principal amount of the required payment or prepayment exceeds the aggregate principal amount of outstanding Loans, then the Commitments (if any) shall be automatically reduced by an amount equal to the lesser of the amount of the Commitments and the amount of such excess.

     (b) Upon at least three Business Days’ prior irrevocable written or fax notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments; provided, however, that each partial reduction of the Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000.

     (c) Except with respect to any reduction pursuant to the penultimate sentence of Section 2.09(a), each reduction in the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of each termination or reduction, the Delayed Draw Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction.

     Section 2.10 . Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing

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as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:

     (i) until the Administrative Agent shall have notified the Borrower that the primary syndication of the Term Facility has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), no ABR Borrowing may be converted into a Eurodollar Borrowing with an Interest Period in excess of one month without the prior written consent of the Administrative Agent;

     (ii) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;

     (iii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;

     (iv) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;

     (v) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;

     (vi) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;

     (vii) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing;

     (viii) no Interest Period may be selected for any Eurodollar Borrowing that would (a) cause there to be more than four different

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Interest Periods applicable to the Eurodollar Borrowings at such time after giving effect to the selection of such Interest Period or (b) end later than a Repayment Date occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of (A) the Eurodollar Borrowings comprised of Loans with Interest Periods ending on or prior to such Repayment Date and (B) the ABR Borrowings would not be at least equal to the principal amount of Borrowings to be paid on such Repayment Date; and

     (ix) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of a Default or Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan.

     Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lender’s portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued as an ABR Borrowing.

     Section 2.11. Repayment of Borrowings. (a) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, on the dates set forth below, or if any such date is not a Business Day, on the next preceding Business Day (each such date being called a “Repayment Date”), a principal amount of the Loans (as adjusted from time to time pursuant to Sections 2.12 and Section 2.13(g)) equal to the amount set forth below for such date, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment:

Repayment Date	Amount
March 31, 2009	$	7,500,000
June 30, 2009	$	7,500,000
September 30, 2009	$	7,500,000
December 31, 2009	$	7,500,000

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Repayment Date	Amount
March 31, 2010	$	10,000,000
June 30, 2010	$	10,000,000
September 30, 2010	$	10,000,000
December 31, 2010	$	10,000,000
March 31, 2011	$	10,000,000
June 30, 2011	$	10,000,000
September 30, 2011	$	10,000,000
December 31, 2011	$	10,000,000
March 31, 2012	$	22,500,000
June 30, 2012	$	22,500,000
September 30, 2012	$	22,500,000
Maturity Date	$	22,500,000

     (b) In the event and on each occasion that the Commitments shall be reduced or shall expire or terminate other than as a result of the making of a Term Loan, the installments payable on each Repayment Date shall be reduced pro rata by an aggregate amount equal to the amount of such reduction, expiration or termination.

     (c) To the extent not previously paid, all Loans shall be due and payable on the Maturity Date, together with accrued and unpaid interest on the principal amount to be paid to but excluding the date of payment.

     (d) All repayments pursuant to this Section 2.11 shall be subject to Section 2.16, but shall otherwise be without premium or penalty.

     Section 2.12. Voluntary Prepayment. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days’ prior written or fax notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000.

     (b) Voluntary prepayments of outstanding Loans under this Agreement shall be applied pro rata against the remaining scheduled installments of principal due in respect of the Loans under Section 2.11(a).

     (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein; provided, however, that if such prepayment is for all of the then outstanding Loans, then the Borrower may revoke such notice and/or extend the prepayment date by not more than five

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Business Days; provided further, however, that the provisions of Section 2.16 shall apply with respect to any such revocation or extension. All prepayments under this Section 2.12 shall be subject to Section 2.16 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

     Section 2.13. Mandatory Prepayments. (a) Substantially simultaneously with (and in any event not later than the third Business Day following) the receipt by the Borrower or any Subsidiary of Net Cash Proceeds from any Asset Sale, the Borrower shall apply an amount equal to (i) the Specified Share multiplied by (ii) the amount of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(g).

     (b) Substantially simultaneously with (and in any event not later than the third Business Day following) the receipt by the Borrower or any Subsidiary of Net Cash Proceeds from any Equity Issuance, the Borrower shall apply an amount equal to 50% of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(g).

     (c) No later than the earlier of (such earlier date, the “Excess Cash Flow Prepayment Date”) (i) 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 2009, and (ii) the date on which the financial statements with respect to such period are delivered pursuant to Section 5.04(a), the Borrower shall prepay outstanding Loans in accordance with Section 2.13(g) in an aggregate principal amount equal to 50% of Excess Cash Flow for the fiscal year then ended; provided that the percentage referred to above shall be reduced to 25% if (1) the Leverage Ratio at the end of such fiscal year is less than 1.75 to 1.0 and (2) no Default or Event of Default shall have occurred and be continuing on the Excess Cash Flow Prepayment Date.

     (d) Substantially simultaneously with (and in any event not later than the third Business Day following) the receipt by the Borrower or any Subsidiary of Net Cash Proceeds from the issuance or incurrence of Indebtedness for money borrowed (other than any cash proceeds from the issuance of Indebtedness for money borrowed permitted pursuant to Section 6.01), the Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(g).

     (e) Substantially simultaneously with (and in any event not later than the third Business Day following) the receipt by the Borrower or any Subsidiary of Net Cash Proceeds from any ARS Liquidation Event, the Borrower shall apply an amount equal to (i) the Specified Share multiplied by (ii) the amount of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(g).

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     (f) Substantially simultaneously with (and in any event not later than the third Business Day following) the receipt by the Borrower or any Subsidiary of Net Cash Proceeds from any Extraordinary Receipt, the Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(g).

     (g) Mandatory prepayments pursuant to paragraphs (a) through (f) of this Section shall be applied as follows:

     (i) first, to the Loans and applied pro rata against the remaining scheduled installments of principal due in respect of the Loans under Section 2.11(a), subject to the proviso to this paragraph below; and

     (ii) second, any remaining amounts may be retained by the Borrower;

provided that, notwithstanding anything herein to the contrary, any Lender may elect, by notice to the Administrative Agent by facsimile or by e-mail within one Business Day of receiving notification from the Administrative Agent of any prepayment of its Loans, to decline (in whole but not in part) such prepayment pursuant to paragraphs (a) through (f) of this Section, in which case the aggregate amount of the prepayment that would have been applied to prepay the Loans of such declining Lender may be retained by the Borrower. Mandatory prepayments in respect of the Loans shall be applied on a pro rata basis to the then outstanding Loans being prepaid irrespective of whether such outstanding Loans are ABR Loans or Eurodollar Loans; provided that if no Lenders exercise the right to waive a given mandatory prepayment of the Loans pursuant to this Section, then, with respect to such mandatory prepayment, the amount of such mandatory prepayment shall be applied first to Loans that are ABR Loans to the full extent thereof before application to Loans that are Eurodollar Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.16.

     (h) The Borrower shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.13, a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment. The Borrower shall provide at least three days prior written notice of such prepayment, specifying the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject to Section 2.16, but shall otherwise be without premium or penalty, and shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.

     Section 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar

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requirement against assets of, deposits with or for the account of or credit extended by any Lender (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount determined in good faith by such Lender to be material, then the Borrower will pay to such Lender upon demand such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

     (b) If any Lender shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made pursuant hereto to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

     (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (a) or (b) above, together with an explanation in reasonable detail, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate delivered by it within 15 days after its receipt of the same.

     (d) Failure or delay on the part of any Lender to demand compensation for any increased costs or reductions in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be under any obligation to compensate any Lender under paragraph (a) or (b) above with respect to increased costs or reductions with respect to any period prior to the date that is 90 days prior to such request if such Lender knew or could reasonably have been expected to know of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would result in a claim for increased compensation by reason of such increased costs or reductions; provided further that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any Change in Law within such 90-day period. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

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     Section 2.15. Change in Legality. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent:

     (i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods) and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans, whereupon any request for a Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing for an additional Interest Period) shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan or to convert a Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration shall be subsequently withdrawn; and

     (ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below.

In the event any Lender shall exercise its rights under clause (i) or (ii) above, all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

     (b) For purposes of this Section 2.15, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

     Section 2.16. Breakage. The Borrower shall indemnify each Lender against any actual loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events

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referred to in this clause (a) being called a “Breakage Event”) or (b) any default in the making of any payment or prepayment of any Eurodollar Loan required to be made hereunder. In the case of any Breakage Event, such actual loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its actual cost (which may be determined by such Lender by any reasonable method) of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.16, together with an explanation in reasonable detail, shall be delivered to the Borrower. In determining any additional amounts owing under this Section 2.16, each Lender will act reasonably and in good faith; provided that such Lender’s determination of compensation owing under this Section 2.16 shall, absent manifest error, unreasonableness or bad faith, be final and conclusive and binding on all parties hereto.

     Section 2.17. Pro Rata Treatment. Subject to the express provisions of this Agreement which require, or permit, differing payments to be made to non-Defaulting Lenders as opposed to Defaulting Lenders, and as required under Section 2.15, and other than with respect to any prepayment rejected by any Lender in accordance with Section 2.13(g), each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Delayed Draw Fees, each reduction of the Commitments (except in accordance with the penultimate sentence of Section 2.09(a)) and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments and Loans. Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole Dollar amount. Notwithstanding the foregoing, the provisions of this Section 2.17 shall not apply to any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant.

     Section 2.18. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker’s lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a result of which the unpaid principal portion of its Loans shall be proportionately less than the unpaid principal portion of the Loans of any other Lender, it shall be

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deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans of such other Lender, so that the aggregate unpaid principal amount of the Loans and participations in Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of banker’s lien, setoff or counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of banker’s lien, setoff or counterclaim or other event; provided, however, that (a) if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest, and (b) the provisions of this Section 2.18 shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant. The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Loan deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.

     Section 2.19. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due in immediately available Dollars, without setoff, defense or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. Each such payment shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010, or as otherwise directed. The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender.

     (b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.

     (c) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and Fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and Fees then due hereunder, ratably among the parties entitled thereto in

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accordance with the amounts of interest and Fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

     Section 2.20. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that, if the Borrower or any other Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent and each Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions, and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) In addition, the Borrower or any other Loan Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) The Borrower or any other Loan Party shall indemnify the Administrative Agent and each Lender within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any other Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or by the Administrative Agent on its own behalf or on behalf of a Lender shall be conclusive absent manifest error. The Administrative Agent or Lender may, at its sole reasonable discretion, take such steps as the Borrower reasonably requests to assist the Borrower, at the Borrower’s own expense, to minimize or, as applicable, recover such Indemnified Taxes or Other Taxes.

     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or any other Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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     (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the United States, or any treaty to which the United States is a party, with respect to payments under this Agreement shall, after having received from the Borrower or any other Loan Party notice of the availability of such exemptions from or reductions of withholding tax, as well as all such appropriate documentation prescribed by applicable law, deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower or any other Loan Party as will permit such payments to be made without withholding or at a reduced rate; provided that such Foreign Lender is lawfully able to do so and that complying with such requirements would not require such Lender Party to disclose any confidential or proprietary information or be otherwise materially disadvantageous to such Lender Party (in form, in procedure or in the substance of information disclosed).

     Section 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender delivers a certificate requesting compensation pursuant to Section 2.14, (ii) any Lender delivers a notice described in Section 2.15, (iii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority on account of any Lender pursuant to Section 2.20, (iv) any Lender refuses to consent to any amendment, waiver or other modification of any Loan Document requested by the Borrower that requires the consent of a greater percentage of the Lenders than the Required Lenders and such amendment, waiver or other modification is consented to by the Required Lenders, or (v) any Lender becomes a Defaulting Lender, then, in each case, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.04(b)), upon notice to such Lender and the Administrative Agent, require such Lender to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such assigned obligations and, with respect to clause (iv) above, shall consent to such requested amendment, waiver or other modification of any Loan Documents (which assignee may be another Lender, if a Lender accepts such assignment); provided that (w) with respect to clause (i) to (iii) above, such assignment will result in a reduction in the claim for compensation under Section 2.14 or in the withdrawal of the notice under Section 2.15 or in the reduction of payments under Section 2.20, as the case may be, (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld or delayed, and (z) the Borrower or such assignee shall have paid to the affected Lender in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans of such Lender plus all Fees and other amounts accrued for the account of such Lender hereunder with

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respect thereto (including any amounts under Sections 2.14 and 2.16); provided further that, if prior to any such transfer and assignment (A) in the case of clauses (i) to (iii) above, the circumstances or event that resulted in such Lender’s claim for compensation under Section 2.14, notice under Section 2.15 or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause such Lender to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.15, or cease to result in amounts being payable under Section 2.20, as the case may be (including as a result of any action taken by such Lender pursuant to paragraph (b) below), or if such Lender shall waive its right to claim further compensation under Section 2.14 in respect of such circumstances or event or shall withdraw its notice under Section 2.15 or shall waive its right to further payments under Section 2.20 in respect of such circumstances or event, (B) in the case of clause (iv) above, such assigning Lender shall consent to the proposed amendment, waiver, consent or other modification, and (C) in the case of clause (v) above, such assigning Lender shall cease to be a Defaulting Lender as the case may be, then such Lender shall not thereafter be required to make any such transfer and assignment hereunder. Each Lender hereby grants to the Administrative Agent an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender, as assignor, any Assignment and Acceptance necessary to effectuate any assignment of such Lender’s interests hereunder in the circumstances contemplated by this Section 2.21(a).

     (b) If (i) any Lender shall request compensation under Section 2.14, (ii) any Lender delivers a notice described in Section 2.15 or (iii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority on account of any Lender, pursuant to Section 2.20, then such Lender shall use reasonable efforts (which shall not require such Lender to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or enable it to withdraw its notice pursuant to Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such filing or assignment, delegation and transfer.

ARTICLE 3
Representations and Warranties

     The Borrower represents and warrants to the Administrative Agent, the Collateral Agent and each of the Lenders that:

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     Section 3.01. Organization; Powers. The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder.

     Section 3.02. Authorization. The Transactions have been duly authorized by all requisite corporate and, if required, stockholder action. The Transactions will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or bylaws of the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents) except, with respect to clauses (i)(C) and (ii), any defaults arising under any Indebtedness of the Target or any subsidiary of the Target as a direct result of (i) the execution, delivery and performance by the Borrower and the Merger Sub of the Merger Agreement and the consummation of the Merger and the other transactions contemplated thereby or (ii) the consummation of the Tender Offer (together the “Acquisition Transactions”), in each case to the extent that such defaults would not reasonably be expected to have a Material Adverse Effect.

     Section 3.03. Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of the Borrower or such Loan Party enforceable against the Borrower or such Loan Party in accordance with its terms.

     Section 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b)

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recordation of the Mortgages, (c) such as have been made or obtained and are in full force and effect and (d) in the case of any such action required to be taken in connection with the Acquisition Transactions, to the extent the failure to take any such action could not reasonably be expected to have a Material Adverse Effect.

     Section 3.05. Financial Statements. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related statements of income, stockholders’ equity and cash flows (i) as of the end of and for each fiscal year in the three-fiscal year period ended December 31, 2007, audited by and accompanied by the opinion of PricewaterhouseCoopers LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2008, certified by its chief financial officer and (iii) as of and for the fiscal months and the portion of the fiscal year ended after the date of the most recently ended fiscal quarter and not less than 30 days prior to the Closing Date, certified by its chief financial officer. Such financial statements present fairly in all material respects the financial condition and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof. Such financial statements (other than such monthly financial statements) were prepared in accordance with GAAP applied on a consistent basis and are in compliance with the requirements of Regulation S-X under the Securities Act of 1933, as amended, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes.

     (b) The Borrower has heretofore furnished to the Lenders the consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Target (i) as of the end of and for each fiscal year in the three-fiscal year period ended December 31, 2007, audited by and accompanied by the opinion of BDO Seidman, LLP, independent public accountants, (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2008 and (iii) as of and for the fiscal months and the portion of the fiscal year ended after the date of the most recently ended fiscal quarter and not less than 30 days prior to the Closing Date. Such financial statements present fairly in all material respects the financial condition and results of operations and cash flows of the Target and its consolidated Subsidiaries as of such dates and for such periods. Such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Target and its consolidated Subsidiaries as of the dates thereof. Such financial statements (other than such monthly financial statements) were prepared in accordance with GAAP applied on a consistent basis and are in compliance with the requirements of Regulation S-X under the Securities Act of 1933, as amended, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes.

     (c) The Borrower has heretofore delivered to the Lenders its unaudited pro forma consolidated balance sheet and related pro forma statements of income,

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stockholder’s equity and cash flows as of September 30, 2008, prepared giving effect to the Transactions as if they had occurred, with respect to such balance sheet, on such date and, with respect to such other financial statements, on the first day of the twelve-month period ending on such date. Such pro forma financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the Closing Date to be reasonable), are based on the best information available to the Borrower as of the date of delivery thereof, accurately reflect all adjustments required to be made to give effect to the Transactions and present fairly in all material respects on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated Subsidiaries as of such date and for such period, assuming that the Transactions had actually occurred at such date or at the beginning of such period, as the case may be.

     Section 3.06. No Material Adverse Change. (a) There has been no Material Adverse Effect since December 31, 2007.

     (b) No Default or Event of Default has occurred and is continuing.

     Section 3.07. Title to Properties; Possession Under Leases. (a) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries has good and marketable title to, or valid leasehold interests in, or easements or other limited property rights in, or is licensed to use, all its material properties and assets (including all Mortgaged Property), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02.

     (b) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries has complied with all material obligations under all material leases to which it is a party and all such leases are in full force and effect. The Borrower and each Subsidiary enjoys peaceful and undisturbed possession under all such material leases.

     (c) As of the Closing Date, the Borrower has not received any notice of, nor has any knowledge of, any pending or contemplated condemnation proceeding affecting the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation.

     (d) Except as disclosed on Schedule 3.20(a) or 3.20(b), as of the Closing Date, none of the Borrower or any of the Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein.

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     Section 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries and the direct or indirect ownership interests of the Borrower therein, and identifies each Subsidiary that is a Material Foreign Subsidiary on the Closing Date. The shares of capital stock or other ownership interests so indicated on Schedule 3.08 are fully paid and non-assessable and, as of the Closing Date, are owned by the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents, the Revolving Liens and statutory nonconsensual Liens expressly permitted by Section 6.02).

     Section 3.09. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.09, there are no actions, suits, proceedings or investigations at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

     (b) Since the Closing Date, there has been no change in the status of the matters disclosed on Schedule 3.09 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

     (c) The Borrower and each of the Domestic Subsidiaries and Material Foreign Subsidiaries is in compliance with all laws, regulations, consent decrees and orders of any Governmental Authority applicable to it (including, without limitation, the Patriot Act, ERISA, employee health and safety, margin regulations, Environmental Laws and Health Care Laws) or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     (d) None of the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries or any of their respective material properties or assets is in violation of, nor will the continued operation of their material properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.

     (e) Certificates of occupancy and permits (in each case, to the extent required by applicable law) are in effect for each Mortgaged Property as currently constructed, and true and complete copies of such certificates of occupancy have been delivered to the Collateral Agent as mortgagee with respect to each Mortgaged Property.

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     Section 3.10. Agreements. (a) Neither the Borrower nor any of the Domestic Subsidiaries or Material Foreign Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (b) Neither the Borrower nor any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect.

     Section 3.11. Federal Reserve Regulations. (a) Neither the Borrower nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

     (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.

     Section 3.12. Investment Company Act. Neither the Borrower nor any of the Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

     Section 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans only for the purposes specified in the Preliminary Statements.

     Section 3.14. Tax Returns. Each of the Borrower and the Subsidiaries has filed or caused to be filed all Federal and all other material state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all Federal and all other material taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP.

     Section 3.15. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto taken as a whole contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that to the extent any such information, report,

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financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions (based upon accounting principles consistent with the historical audited financial statements of the Borrower) and due care in the preparation of such information, report, financial statement, exhibit or schedule (it being understood that any such forecast or projection is not a guarantee of future performance and that actual results during the period covered by such forecast or projection may materially differ from the projected results thereof).

     Section 3.16. Employee Benefit Plans. Each of the Borrower and its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in material liability of the Borrower or any of its ERISA Affiliates. The present value of all benefit liabilities under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the last annual valuation date applicable thereto, exceed the fair market value of the assets of such Plan.

     Section 3.17. Environmental Matters. (a) Except as set forth in Schedule 3.17:

     (i) To the knowledge of the Borrower, the properties and facilities currently or formerly owned, leased or operated by the Borrower and the Subsidiaries (the “Properties”) do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted, a violation of, (ii) require Remedial Action under, or (iii) could reasonably be expected to give rise to liability under, Environmental Laws, which violations, Remedial Actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

     (ii) The Borrower, the Subsidiaries and their respective operations are in compliance, and in the last five years have been in compliance, with all Environmental Laws and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such noncompliance or failure to obtain any necessary permits, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect;

     (iii) To the knowledge of the Borrower, there have been no Releases or threatened Releases at, from, on, to or under the Properties or otherwise in connection with the operations of the Borrower or the Subsidiaries, which Releases or threatened Releases, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

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     (iv) Neither the Borrower nor any of the Subsidiaries has received any Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, nor do the Borrower or the Subsidiaries have any reasonable basis to believe that any such Environmental Claim is being threatened; and

     (v) (A) To the knowledge of the Borrower, Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on or under any of the Properties in a manner that could give rise to any liability under any Environmental Law which in the aggregate could be expected to result in a Material Adverse Effect, nor (B) have the Borrower or the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise with respect to the generation, treatment, storage or disposal of Hazardous Materials, which transportation, generation, treatment, storage or disposal, or retained or assumed liabilities, individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect.

     (b) Since the date of this Agreement, there has been no change in the status of the matters disclosed on Schedule 3.17 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

     Section 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect and all premiums have been duly paid. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice.

     Section 3.19. Security Documents. (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the Collateral Agent, the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent for the ratable benefit of the Secured Parties shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case, pari passu with the Revolving Liens and prior and superior in right to any other person, and (ii) when financing statements in

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appropriate form are filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent for the ratable benefit of the Secured Parties will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral (other than Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case pari passu with the Revolving Liens and prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02.

     (b) Upon the recordation of the Guarantee and Collateral Agreement (or a short-form security agreement in form and substance reasonably satisfactory to the Borrower and the Collateral Agent) with the United States Patent and Trademark Office and the United States Copyright Office, together with the financing statements in appropriate form filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guarantee and Collateral Agreement) in which a security interest may be perfected by filing in the United States and its territories and possessions, in each case pari passu with the Revolving Liens and prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Loan Parties after the Closing Date).

     (c) The Mortgages are effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case pari passu with the Revolving Liens and prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02.

     Section 3.20. Location of Real Property and Leased Premises. (a) Schedule 3.20(a) lists completely and correctly as of the Closing Date all real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries own in fee all the real property set forth on Schedule 3.20(a).

     (b) Schedule 3.20(b) lists completely and correctly as of the Closing Date all Material Leased Property and the addresses thereof. The Borrower and the Subsidiaries have valid leases in all the real property set forth on Schedule

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3.20(b). For the purpose of the foregoing, “Material Leased Property” means real property leased by the Borrower or any Subsidiary with respect to which such property lease (i) has more than twelve (12) months remaining in the lease term and (ii) requires the Borrower or any Subsidiary to make lease payments in excess of $500,000 in any year or $1,000,000 in the aggregate over the remaining term of such lease.

     Section 3.21. Labor Matters. As of the Closing Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters. All payments due from the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries, or for which any claim may be made against the Borrower or any of the Domestic Subsidiaries or Material Foreign Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or the applicable Subsidiary.

     Section 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan, (a) the fair value of the assets of the Borrower and the Subsidiaries on a consolidated basis, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Borrower and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability in respect of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and the Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and the Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.

     Section 3.23. Transaction Documents. (a) The Borrower has delivered to the Administrative Agent a complete and correct copy of the Merger Agreement (including all schedules, exhibits, amendments, supplements and modifications thereto). Neither the Borrower nor any Loan Party or, to the knowledge of the Borrower or each Loan Party, any other person party thereto is in default in the performance or compliance with any material provisions thereof. The Merger Agreement complies in all material respects with all applicable laws. All representations and warranties set forth in the Merger Agreement were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made).

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     (b) The Borrower has delivered to the Administrative Agent a complete and correct copy of the Tender Offer Documentation (including all schedules, exhibits, amendments, supplements and modifications thereto). The Tender Offer complies in all material respects with all applicable laws.

     Section 3.24. Sanctioned Persons. None of the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of the Borrower or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Borrower will not directly or indirectly use the proceeds of the Loans or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

ARTICLE 4
Conditions of Lending

     The obligations of the Lenders to make Loans hereunder are subject to the satisfaction of the following conditions:

     Section 4.01. All Credit Events. On the date of each Borrowing (other than a conversion or a continuation of a Borrowing) (each such event being called a “Credit Event”):

     (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03.

     (b) The representations and warranties set forth in Article 3 and in each other Loan Document (in the case of the Merger Borrowing on the Merger Date, excluding all of the representations and warranties in Article 3 other than those contained in Section 3.01, Section 3.02, Section 3.03, Section 3.11 and Section 3.12) shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date).

     (c) (i) In the case of all Credit Events other than the Merger Borrowing on the Merger Date, the Borrower and each other Loan Party shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing and (ii) in the case of the Merger Borrowing on the Merger Date, at the time of and immediately after such Credit Event, no Event of Default or Default under Article 7(b), Article 7(c), Article 7(g) or Article 7(h) shall have occurred and be continuing.

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     Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the satisfaction of the conditions set forth in paragraphs (b) and (c) of this Section 4.01.

     Section 4.02. First Credit Event. On the Closing Date:

     (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include facsimile transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

     (b) The Administrative Agent shall have received, on behalf of itself and the Lenders, a favorable written opinion of (i) Dewey & LeBoeuf LLP, counsel for the Borrower, substantially to the effect set forth in Exhibit G-1, and (ii) each counsel listed on Schedule 4.02(b), substantially to the effect set forth in Exhibit G-2, in each case (A) dated the Closing Date, (B) addressed to the Administrative Agent and the Lenders, and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions.

     (c) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the bylaws of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Lenders or the Administrative Agent may reasonably request.

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     (d) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance as of the Closing Date with the conditions precedent set forth in Sections 4.01(b), 4.01(c), 4.02(k)(iii), (iv) and (v), 4.02(l), 4.02(m), 4.02(o)(ii), 4.02(p), 4.02(r) and 4.02(s).

     (e) After giving effect to the Transactions occurring on the Closing Date, the Borrower and the Subsidiaries shall have outstanding no Indebtedness for borrowed money or preferred stock other than (i)  Indebtedness under the Loan Documents, (ii) the Convertible Notes, (iii) the Revolving Indebtedness and (iv) other Indebtedness permitted under Section 6.01 (other than clause (m) thereof).

     (f) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all fees and out-of-pocket expenses (including fees, charges and disbursements of outside counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document or under the Fee Letter.

     (g) The Security Documents shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Closing Date. The Collateral Agent on behalf of the Secured Parties shall have a security interest in the Collateral of the type and priority described in each Security Document.

     (h) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the Closing Date and duly executed by a Responsible Officer of the Borrower, and shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Collateral Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.02 or have been or will be contemporaneously released or terminated.

     (i) Except as otherwise agreed by the Collateral Agent pursuant to a letter regarding post-closing matters (i) each of the Security Documents, in form and substance satisfactory to the Lenders, relating to each of the Mortgaged Properties, shall have been duly executed by the parties thereto and delivered to the Collateral Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than those permitted under Section 6.02, (iii) each of such Security Documents shall have been filed

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and recorded in the recording office as specified on Schedule 3.19(c) (or delivered to a nationally recognized title company to be so recorded) and (iv) the Collateral Agent shall have a local opinion of counsel to the Borrower with respect to the enforceability and perfection of the applicable Mortgages and any related fixture filings (or in the event a Subsidiary of the Borrower is the mortgagor, to such Subsidiary, in form and substance reasonably satisfactory to the Collateral Agent.

     (j) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, and an insurance broker’s letter with respect to, the insurance policies required by Section 5.02 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a customary lender’s loss payable endorsement and to name the Collateral Agent as additional insured, in form and substance satisfactory to the Administrative Agent.

     (k) (i) The definitive documents filed with the SEC with respect to the commencement of the Tender Offer shall have been provided to the Administrative Agent prior to the Closing Date (or, in the case of any amendments, supplements or other modifications that were subsequently filed, prior to the filing thereof), and the terms and conditions thereof and documentation relating thereto (the “Tender Offer Documentation”) shall be in form and substance reasonably satisfactory to the Administrative Agent (it being understood that the Tender Offer Documentation provided to the Joint Arrangers dated September 12, 2008, as extended on October 13, 2008 and as further extended on November 24, 2008 and as amended to reflect the changes thereto set forth in the Merger Agreement as in effect on the Closing Date is in form and substance satisfactory to the Administrative Agent) and shall be in full force and effect, (ii) the Tender Offer Documentation shall not have been altered, amended or otherwise changed or supplemented, in each case in any respect that could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders or the ability of the Joint Arrangers to syndicate the Term Facility, and no condition thereto shall have been waived, altered, amended or otherwise changed or supplemented, in each case without the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed), (iii) all material aspects of the Tender Offer shall have been consummated in accordance with applicable laws and the description thereof in the Tender Offer Documentation, (iv) the offer price in the Tender Offer shall not exceed $37.00 per Share, and (v) Merger Sub shall have accepted for payment, pursuant to the Tender Offer, a number of Shares (x) equal to at least a majority of the total number of Shares outstanding and (y) representing at least a majority of the combined voting power of all equity securities of the Target, in each case on a fully diluted basis (the “Minimum Acceptance Condition”).

     (l) The Borrower shall have paid Acquisition Consideration from cash and cash equivalents on hand (and not from the proceeds of the Loans, the loans under the Revolving Loan Credit Agreement or any other Indebtedness) in an

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amount not less than the greater of (i) $1,000,000,000 and (ii) the amount necessary to purchase Shares in an amount sufficient to satisfy the Minimum Acceptance Condition.

     (m) All shareholder rights plans, “poison pill” or any similar plans or charter or bylaw provisions and all anti-takeover or similar statutes, including Section 203 of the Delaware General Corporations Law, are or will be invalid or inapplicable to the acquisition of Shares pursuant to the Transactions and to the Borrower, the Target, Merger Sub and their Affiliates.

     (n) The Administrative Agent shall have received copies of the Merger Agreement and all certificates, opinions and other documents delivered thereunder, certified by a Financial Officer as being complete and correct.

     (o) (i) The Lenders shall have received the financial statements and opinions referred to in Section 3.05, none of which shall demonstrate a material adverse change in the financial condition of the Borrower or the Target, as applicable, from (and shall not otherwise be materially inconsistent with) the financial statements or forecasts previously provided to the Lenders (it being agreed that the financial statements provided to the Joint Arrangers prior to November 23, 2008 are satisfactory) and (ii) there shall have been no material change to the capital stock of the Borrower or the Target since November 23, 2008.

     (p) The Joint Arrangers shall be satisfied, in their reasonable judgment, that the Borrower’s Consolidated EBITDA for the four-fiscal quarter period ended at least 30 days prior to the Closing Date (excluding Consolidated EBITDA of the Target and its subsidiaries) shall not be less than $500,000,000.

     (q) The Administrative Agent shall have received a certificate from the chief financial officer of the Borrower certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Transactions to occur on the Closing Date, are solvent.

     (r) All requisite Governmental Authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required (except to the extent such approvals or consents are not material to the Transactions or the other transactions contemplated hereby), all applicable appeal periods shall have expired and there shall not be any pending or threatened litigation, governmental, administrative or judicial action that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions or the other transactions contemplated hereby. Without limiting the foregoing, the waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act 1976 (as amended, the “HSR Act”) shall have expired or have been terminated.

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     (s) The Administrative Agent shall have received evidence reasonably satisfactory to it that the Borrower shall have received a public corporate credit rating of B+ or higher by S&P and a public corporate family rating of B1 or higher by Moody’s, in each case as of the Closing Date and after giving effect to the Transactions.

     (t) The Lenders shall have received, to the extent requested, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

     (u) The Administrative Agent shall have received a fully executed copy of Amendment No. 1 to the Revolving Loan Credit Agreement, which agreement as so amended shall be in form and substance reasonably satisfactory to the Administrative Agent (it being understood that Amendment No. 1, including the Exhibits thereto, as in effect on December 5, 2008 is acceptable to the Administrative Agent). The Revolving Loan Credit Agreement as amended by Amendment No. 1 thereto shall be in full force and effect on the Closing Date.

     Section 4.03. Conditions to Merger Borrowing Credit Events. The obligation of each Lender to make Loans to the Borrower on the Merger Date to finance the Merger Consideration (the “Merger Borrowing”) is subject to satisfaction of the following conditions precedent:

     (a) After giving effect to the Merger, the Target and its Subsidiaries shall have outstanding no Indebtedness for borrowed money or preferred stock other than (i) Indebtedness under the Loan Documents, and (ii) other Indebtedness permitted under Section 6.01. The Borrower shall have caused the Target and each of its Domestic Subsidiaries to comply with the applicable provisions of Section 5.13 and the Security Documents and to have become Loan Parties. Without limiting the previous sentence, in connection with the foregoing, the Lenders shall have received, in form and substance reasonably satisfactory to the Administrative Agent, with respect to the Target and its Domestic Subsidiaries (x) charter documents and other certifications similar to those delivered pursuant to Section 4.02, (y) additional legal opinions, in form and substance similar to those delivered pursuant to Section 4.02 and (z) customary lien and judgment searches similar to those delivered pursuant to Section 4.02.

     (b) All requisite Governmental Authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required (except to the extent such approvals or consents are not material to the Transactions or the other transactions contemplated hereby), all applicable appeal periods shall have expired and there shall not be any pending or threatened litigation, governmental, administrative or judicial action that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions or the other transactions

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contemplated hereby. Without limiting the foregoing, the waiting periods under the HSR Act shall have expired or have been terminated.

     (c) The terms and conditions of the Merger Agreement and documentation relating thereto shall be in form and substance reasonably satisfactory to the Administrative Agent and shall be in full force and effect (it being understood that the Merger Agreement provided to the Administrative Agent and dated November 23, 2008 is satisfactory to the Administrative Agent). The Merger Agreement shall not have been altered, amended or otherwise changed or supplemented, in each case in any respect that could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders or the ability of the Joint Arrangers to syndicate the Term Facility, and no condition thereto shall have been waived, altered, amended or otherwise changed or supplemented, in each case without the prior written consent of the Joint Arrangers (such consent not to be unreasonably withheld or delayed). The Merger shall be consummated simultaneously with such Credit Event in accordance with applicable laws and on terms described in the Merger Agreement.

     (d) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Merger Date, including, to the extent invoiced, reimbursement or payment of all fees and out-of-pocket expenses (including fees, charges and disbursements of outside counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document or under the Fee Letter.

     (e) The Lenders shall have received, with respect to the Target and its Subsidiaries, to the extent requested, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

ARTICLE 5
Affirmative Covenants

     The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:

     Section 5.01. Existence; Compliance with Laws; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05.

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     (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect its rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names; maintain and operate its business in substantially the manner in which it is presently conducted and operated; comply with all applicable laws, rules, regulations, decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times, in each case to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

     Section 5.02. Insurance. (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers (or, if any insurer no longer qualifies as such, promptly thereafter enter into replacement insurance with a financially sound and reputable insurer); maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law.

     (b) Cause all such policies covering any Collateral to be endorsed or otherwise amended to include a customary lender’s loss payable endorsement, in form and substance satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement”, without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably require from time to time to protect their interests; deliver original or certified copies of all such policies to the Collateral Agent; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent and the

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Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent) together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor.

     (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time require.

     (d) With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including the “broad form CGL endorsement” and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than that which is customary for companies in the same or similar businesses operating in the same or similar locations, naming the Collateral Agent as an additional insured, on forms satisfactory to the Collateral Agent.

     (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by any Loan Party; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies.

     Section 5.03. Obligations and Taxes. Pay its Indebtedness and other obligations promptly when due and in accordance with their terms (it being understood that nothing in this Section shall require the payment of amounts for which the Borrower or any Subsidiary is in good faith disputing its liability so long as the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP) and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good

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faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk of forfeiture of such property.

     Section 5.04. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent, which shall furnish to each Lender:

     (a) no later than the date that is the earlier of (i) the date by which the Annual Report on Form 10-K of the Borrower for each fiscal year is required to be filed under the rules and regulations of the SEC and (ii) 90 days after the end of such fiscal year, its consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all audited by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing reasonably acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified in any material respect (it being agreed that any “going concern” or like qualification or exception or exception as to the scope of such audit shall be deemed to be a material qualification)) to the effect that such consolidated financial statements fairly present in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, together with a customary “management discussion and analysis” provision;

     (b) no later than the date that is the earlier of (i) the date by which the Quarterly Report on Form 10-Q of the Borrower for each of the first three fiscal quarters of each fiscal year is required to be filed under the rules and regulations of the SEC and (ii) 45 days after the end of such fiscal quarter, its consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and, other than with respect to quarterly reports during the remainder of the first fiscal year after the Closing Date, comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments, together with a customary “management discussion and analysis” provision;

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     (c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer in the form of Exhibit H (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 and, in the case of a certificate delivered with the financial statements required by paragraph (a) above, setting forth the Borrower’s calculation of Excess Cash Flow;

     (d) concurrently with any delivery of financial statements under paragraph (a) above, a certificate of the accounting firm that reported on such statements (which certificate may be prepared in accordance with professional accounting standards and may be limited to accounting matters and disclaim responsibility for legal interpretations) stating that in performing the audit necessary therefor, no knowledge was obtained of the existence of any Event of Default or Default with respect to Sections 6.10, 6.11 or 6.12 or, if such knowledge was obtained, specifying the existence thereof in reasonable detail;

     (e) on or prior to each date of delivery of financial statements under paragraph (a) above, the Borrower shall provide to each Lender a business plan for the following two years, in a form satisfactory to the Administrative Agent;

     (f) promptly after the same become publicly available, copies of all reports (excluding, in any event, copies of press releases) which the Borrower sends to its stockholders, and copies of all registration statements, reports on Form 10-K, Form 10-Q or Form 8-K (or, in each case, any successor form) and other material reports which the Borrower or any Subsidiary files with the SEC or any successor or analogous Governmental Authority (other than public offerings of securities under employee benefit plans or dividend reinvestment plans);

     (g) promptly after the receipt thereof by the Borrower or any Subsidiary, a copy of any “management letter” received by any such person from its certified public accountants and the management’s response thereto;

     (h) promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act; and

     (i) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

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     Section 5.05. Litigation and Other Notices. Furnish to the Administrative Agent and each Lender prompt written notice of the following:

     (a) promptly after the Borrower obtains knowledge thereof, any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

     (b) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof, as to which there is a reasonable likelihood of an adverse result and that could reasonably be expected to result in a Material Adverse Effect;

     (c) promptly after the Borrower obtains knowledge thereof, any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; and

     (d) any change in the Borrower’s corporate rating by S&P, in the Borrower’s corporate family rating by Moody’s or in the ratings of the Term Facility by S&P or Moody’s, or any notice from either such agency indicating its intent to effect such a change or to place the Borrower or the Term Facility on a “CreditWatch” or “WatchList” or any similar list, in each case with negative implications, or its cessation of, or its intent to cease, rating the Borrower or the Term Facility.

     Section 5.06. Information Regarding Collateral. (a) Furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s corporate name, (ii) in the jurisdiction of organization or formation of any Loan Party, (iii) in any Loan Party’s identity or corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

     (b) In the case of the Borrower, each year commencing with the year ended December 31, 2009, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.04(a), deliver to the Administrative Agent a certificate of a Financial Officer setting forth the information required pursuant to Section 1 or 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section 5.06.

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     Section 5.07. Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings. (a) Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law are made of all material dealings and transactions in relation to its business and activities. Subject to the provisions of Section 9.16, each Loan Party will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of the Borrower or any of the Subsidiaries upon reasonable prior notice to the Borrower (and, unless a Default or Event of Default shall have occurred and be continuing, on not more than two occasions during any fiscal year) and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrower or any of the Subsidiaries with the officers thereof and independent accountants therefor; provided that whether or not a Default or Event of Default shall have occurred and be continuing, the Borrower shall have the right to participate in all such discussions.

     (b) Use commercially reasonable efforts to cause the Term Facility to be continuously rated by S&P and Moody’s on a public basis, and in the case of the Borrower, use commercially reasonable efforts to maintain a public corporate rating from S&P and a public corporate family rating from Moody’s, in each case in respect of the Borrower.

     Section 5.08. Use of Proceeds. Use the proceeds of the Loans only for the purposes specified in the Preliminary Statements.

     Section 5.09. Employee Benefits. (a) Comply in all material respects with the applicable provisions of ERISA and the Code and (b) furnish to the Administrative Agent as soon as possible after, and in any event within 10 days after any Responsible Officer of the Borrower knows that, any ERISA Event has occurred that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and/or the Subsidiaries in an aggregate amount exceeding $5,000,000, a statement of a Financial Officer of the Borrower setting forth details as to such ERISA Event and the action, if any, that the Borrower proposes to take with respect thereto.

     Section 5.10. Compliance with Environmental Laws. Comply, and use reasonable efforts to cause all lessees and other persons occupying its then current Properties to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and then current Properties; obtain and renew all Environmental Permits necessary for its operations and then current Properties except for such noncompliance as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; and conduct any Remedial Action in accordance with Environmental Laws; provided, however, that neither the Borrower nor any of the Subsidiaries shall be required to undertake any Remedial Action to the extent that its obligation to do so is being

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contested in good faith and by proper proceedings and appropriate reserves are being maintained by the Borrower with respect to such circumstances in accordance with GAAP.

     Section 5.11. Preparation of Environmental Reports. If a Default caused by reason of a breach of Section 3.17 or Section 5.10 shall have occurred and be continuing for more than 20 days without the Borrower or any Subsidiary commencing activities reasonably likely to cure such Default, at the written request of the Required Lenders through the Administrative Agent, provide to the Lenders within 45 days after such request, at the expense of the Loan Parties, an environmental site assessment report regarding the matters which are the subject of such Default prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or remedial action in connection with such Default.

     Section 5.12. Compliance with Laws. Comply with all laws, regulations, consent decrees and orders of any Governmental Authority applicable to it or its property, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     Section 5.13. Further Assurances.

     (a) As soon as practicable and in any event within thirty days of the Closing Date, with respect to each Mortgage delivered pursuant to Section 4.02(i), cause to be delivered to the Collateral Agent (i) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of such Mortgage as a valid Lien (with the priority described therein) on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements and reinsurance as the Administrative Agent or the Collateral Agent may reasonably request and which are available at commercially reasonable rates in the jurisdiction where the applicable Mortgaged Property is located; and (ii) unless the Collateral Agent shall have agreed otherwise in its reasonable discretion, a survey for which all necessary fees (where applicable) have been paid (1) prepared by a surveyor reasonably acceptable to the Collateral Agent, (2) dated not earlier than three months prior to the date of such delivery, (3) certified to the Collateral Agent and the title insurance company issuing the title insurance policy for such Mortgaged Property pursuant to clause (i), which certification shall be reasonably acceptable to the Administrative Agent and the Collateral Agent, and (4) complying with the “Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys”, jointly established and adopted by the American Land Title Association and National Society of Professional Surveyors in 2005 (except for such deviations as are reasonably acceptable to the Collateral Agent).

     (b) Use commercially reasonable efforts to obtain, within 60 days following the Closing Date, landlord consent to a leasehold mortgage in favor of

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the Collateral Agent with respect to the leased premises of Borrower located at 1 Duggar Drive, Willow Island, West Virginia. If such consent is obtained, Borrower shall take, or cause its Subsidiaries to take, all further actions that the Collateral Agent may reasonably request in order to grant, preserve, protect and perfect a valid first priority security interest in such leased premises, including the execution and delivery of a leasehold mortgage in form and substance reasonably satisfactory to the Collateral Agent.

     (c) Execute any and all further documents, financing statements, agreements, amendments, supplements and instruments, and take all further actions (including filing Uniform Commercial Code and other financing or continuation statements, mortgages, deeds of trust and aircraft mortgages) that may be required under applicable law, or that the Required Lenders, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority of the security interests created or intended to be created by the Security Documents in favor of the Collateral Agent for the ratable benefit of the Secured Parties. The Borrower will cause any subsequently acquired or organized Domestic Subsidiary to become a Loan Party (in the case of the Target and each Domestic Subsidiary of the Target, by no later than the Merger Date) by executing the Guarantee and Collateral Agreement and each applicable Security Document in favor of the Collateral Agent. In addition, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of the assets and properties of the Loan Parties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the Obligations shall be secured by substantially all the assets of the Borrower and its Domestic Subsidiaries (in the case of the Target and each Domestic Subsidiary of the Target, such security to be granted by no later than the Merger Date) (including real and other properties acquired subsequent to the Closing Date but subject to limitations and exceptions expressly set forth in the Security Documents)). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance reasonably satisfactory to the Collateral Agent, and the Borrower shall deliver or cause to be delivered to the Lenders all such instruments and documents (including legal opinions, title insurance policies and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section. The Borrower agrees to provide such evidence as the Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, the Borrower will give prompt notice to the Administrative Agent of the acquisition by it or any of the Subsidiaries of any real property (or any interest in real property) having a value in excess of $1,000,000.

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     Section 5.14. Interest Rate Protection. No later than the 90th day after the Closing Date, enter into, and for a minimum of two years thereafter maintain, Hedging Agreements acceptable to the Administrative Agent that result in at least 50% of the aggregate principal amount of its funded long-term Indebtedness being effectively subject to a fixed or maximum interest rate acceptable to the Administrative Agent.

     Section 5.15. Consummation of the Merger. Use commercially reasonable efforts to complete the Merger (which efforts shall include voting, or causing to be voted, all of the Shares then owned by the Borrower or any of its Subsidiaries in favor of the Merger, to the extent any such vote is taken pursuant to the Merger Agreement) in accordance with the terms of the Merger Agreement as promptly as practicable following the consummation of the Tender Offer.

     Section 5.16. Alpharma Escrow Account. If, on the date that is 45 days after the Closing Date, any principal remains outstanding under the Alpharma Convertible Notes, deposit an amount equal to such unpaid principal amount into a Controlled Deposit Account subject to a Deposit Account Control Agreement in form and substance reasonably satisfactory to the Collateral Agent (such account, the “Alpharma Escrow Account”). The Deposit Account Control Agreement governing the Alpharma Escrow Account shall provide that the amounts on deposit in the Alpharma Escrow Account may only be withdrawn by the Borrower (and withdrawals shall be subject to receipt by the Collateral Agent and the applicable depositary bank of a certification from the Borrower (the “Withdrawal Certificate”) that the amounts withdrawn shall be applied) for the following purposes: (i) to make principal payments with respect to the Alpharma Convertible Notes, (ii) to pay Acquisition Consideration (including Merger Consideration) due upon the conversion of the Alpharma Convertible Notes in accordance with their terms or (iii) to voluntarily prepay (x) Loans hereunder or (y) following payment in full of the principal amount of the Loans hereunder, to repay loans outstanding under the Revolving Loan Credit Agreement (which repayment shall be accompanied by a permanent reduction in the commitments under the Revolving Loan Credit Agreement in an amount equal to such repayment). Borrower agrees that any amounts withdrawn from the Alpharma Escrow Account shall be applied for the purpose specified in the Withdrawal Certificate promptly and in any event not later than 3 Business Days following such withdrawal.

ARTICLE 6
Negative Covenants

     The Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full,

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unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not cause or permit any of the Subsidiaries to:

     Section 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except:

     (a) Indebtedness for borrowed money existing on the Closing Date and set forth in Schedule 6.01 and any extensions, renewals or replacements of such Indebtedness to the extent that the principal amount of such Indebtedness is not increased, neither the final maturity nor the weighted average life to maturity of such Indebtedness is decreased, such Indebtedness, if subordinated to the Obligations, remains so subordinated on terms no less favorable to the Lenders, and the original obligors in respect of such Indebtedness remain the only obligors thereon;

     (b) Indebtedness outstanding from time to time hereunder and all guarantees thereof by Subsidiary Guarantors;

     (c) intercompany Indebtedness of the Borrower and the Subsidiaries to the extent permitted by Section 6.04(c) so long as any such Indebtedness owed by any Loan Party to a person that is not a Loan Party is subordinated to the Obligations pursuant to an Affiliate Subordination Agreement;

     (d) Guarantees by any Loan Party of Indebtedness of any other Loan Party;

     (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(e), when combined with the aggregate principal amount of all Capital Lease Obligations incurred pursuant to Section 6.01(f) shall not exceed $25,000,000 at any time outstanding;

     (f) Capital Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.01(e), not in excess of $25,000,000 at any time outstanding;

     (g) Indebtedness under performance bonds or with respect to workers’ compensation claims, in each case incurred in the ordinary course of business;

     (h) Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not exceeding $25,000,000 at any time outstanding;

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     (i) Indebtedness of any person that becomes a Subsidiary after the Closing Date; provided that (i) such Indebtedness exists at the time such person becomes a Subsidiary and is not created in contemplation of or in connection with such person becoming a Subsidiary, (ii) immediately before and after such person becomes a Subsidiary, no Default or Event of Default shall have occurred and be continuing and (iii) the aggregate principal amount of Indebtedness permitted by this Section 6.01(i) shall not exceed $25,000,000 at any time outstanding;

     (j) Indebtedness created under Hedging Agreements that (i) are required by Section 5.14 or (ii) are entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities and not for speculative purposes or entered into to take advantage of reduced interest rates by converting fixed rate obligations into floating rate obligations;

     (k) Permitted ARS Indebtedness; provided that the specified share of the Net Cash Proceeds of such Indebtedness shall be applied as set forth in Section 2.13(e);

     (l) Indebtedness of the Borrower outstanding from time to time under the Revolving Loan Credit Agreement in an aggregate principal amount not to exceed $475,000,000 and all guarantees thereof by any Subsidiary Guarantor and any refinancings, renewals or extensions of all or any part thereof; provided that (i) the terms (other than pricing and yield) of such refinancing, renewing or extending indebtedness (the “Revolving Refinancing Indebtedness”) or of any agreement entered into or of any instrument issued in connection therewith are not less favorable in any material respect to the Loan Parties or the Lenders than the terms of the Indebtedness being refinanced, renewed or extended (“Revolving Refinanced Indebtedness”) or any agreement or instrument governing the terms thereof, (ii) the aggregate amount of loans and unused commitments under the Revolving Refinanced Indebtedness at the time of such refinancing, renewal or extension is not increased by the Revolving Refinancing Indebtedness except by an amount equal to reasonable fees and expenses incurred in connection with such refinancing, renewal or extension, (iii) the obligors of the Revolving Refinancing Indebtedness shall not include any person that is not an obligor on the Revolving Refinanced Indebtedness (unless such obligor is or becomes at such time a Loan Party), and (iv) if the Revolving Refinancing Indebtedness is secured, it is secured on an equal and ratable or junior basis to the Obligations on substantially the same terms as the Revolving Indebtedness is secured on the Closing Date and otherwise on terms reasonably acceptable to the Administrative Agent;

     (m) other Indebtedness of the Borrower or the Subsidiaries in an aggregate principal amount not exceeding $50,000,000 at any time outstanding; provided that the aggregate principal amount of Indebtedness of Subsidiaries that are not Subsidiary Guarantors permitted by this clause shall not exceed $25,000,000 at any time outstanding; and

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     (n) Indebtedness outstanding under the Alpharma Convertible Notes.

     Section 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect thereof, or assign or transfer any such income or revenues or rights in respect thereof, except:

     (a) Liens on property or assets of the Borrower and the Subsidiaries existing on the Closing Date and set forth in Schedule 6.02; provided that such Liens shall extend only to those assets to which they extend on the Closing Date and shall secure only those obligations which they secure on the Closing Date;

     (b) any Lien (i) created under the Loan Documents or (ii) granted in favor of the swingline lender or issuing bank under the Revolving Loan Credit Agreement pursuant to arrangements designed to eliminate such swingline lender’s or issuing banks’ risk with respect to a defaulting lender’s or defaulting lenders’ participation in swingline loans or letters of credit, respectively, as contemplated by Section 2.03(a) or Section 2.04(a), respectively, of the Revolving Loan Credit Agreement;

     (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or assets of any person that becomes a Subsidiary after the Closing Date prior to the time such person becomes a Subsidiary, as the case may be; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such person becoming a Subsidiary, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary, (iii) such Lien secures only those obligations which it secures on the date of such acquisition or the date such person becomes a Subsidiary, as the case may be and (iv) such Lien does not materially interfere with the intended use, occupancy and operation of any asset or property subject thereto;

     (d) Liens for taxes, assessments, charges or levies not yet due or which are being contested in compliance with Section 5.03;

     (e) carriers’, warehousemen’s, mechanics’, landlord’s (or lessor’s under operating leases), materialmen’s, repairmen’s, custom and revenue authorities’, or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable beyond the applicable grace period therefor or that are being contested in compliance with Section 5.03;

     (f) pledges and deposits made in the ordinary course of business in compliance with workmen’s compensation, unemployment insurance and other social security laws or regulations;

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     (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, liability to insurance carriers under insurance or self-insurance arrangements, surety and appeal bonds, performance bonds, statutory bankers’ liens on moneys held in bank accounts and other obligations of a like nature, in each case incurred in the ordinary course of business;

     (h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of the Subsidiaries;

     (i) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 180 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 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 (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;

     (j) Liens deemed to exist in connection with Capital Lease Obligations permitted under Section 6.01;

     (k) attachment or judgment Liens not constituting an Event of Default under Article 7;

     (l) Liens on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets that constitute Collateral or the Equity Interests of any of the Subsidiaries, and (ii) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness incurred by such Foreign Subsidiary pursuant to Section 6.01(h);

     (m) Liens in favor of any Governmental Authority with respect to progress payments under any governmental contract entered into in the ordinary course of business;

     (n) Liens on Margin Stock if and to the extent that the value of all such Margin Stock exceeds 25% of the value of the total assets subject to the restrictions on Liens set forth in this Section 6.02;

     (o) Liens on auction rate securities of the Borrower or any other Loan Party (or on the securities account to which such auction rate securities are credited (so long as no other securities are credited thereto) and the proceeds

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thereof); provided that (i) such Liens secure Permitted ARS Indebtedness and (ii) such Liens do not apply to any other property or assets of the Borrower or any Subsidiary;

     (p) licenses, sublicenses, leases and subleases not relating to any financing, granted to third persons in the ordinary course of business and not interfering in any material respect with the business of the Borrower and the Subsidiaries;

     (q) Liens attaching to assets (other than Collateral) with an aggregate fair market value at the time of attachment not in excess of, and securing liabilities not in excess of, $20,000,000 in the aggregate at any time outstanding; and

     (r) Liens securing obligations under the Revolving Loan Documents or securing Revolving Refinancing Indebtedness permitted by Section 6.01(l) covering Collateral that is also subject to Liens in favor of the Collateral Agent for the benefit of the Secured Parties (“Revolving Liens”); provided that such Liens are pari passu with, or junior to, the Liens securing the Obligations on terms substantially the same as those applicable to the Liens securing the obligations under the Revolving Loan Documents on the Closing Date or otherwise on terms reasonably acceptable to the Administrative Agent.

     Section 6.03. Sale and Leaseback Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred unless (a) the sale or transfer of such property is permitted by Section 6.05 and (b) any Capital Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.01 and 6.02, as the case may be.

     Section 6.04. Investments, Loans and Advances. Purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any similar investment or any other similar interest in, any other person, except:

     (a) (i) investments by the Borrower and the Subsidiaries existing on the Closing Date in the Equity Interests of the Subsidiaries and other investments existing on the Closing Date and set forth on Schedule 6.04(a) and (ii) additional investments by the Borrower and the Subsidiaries in the Equity Interests of the Subsidiaries; provided that (A) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Guarantee and Collateral Agreement (subject to the limitations referred to therein) and (B) the aggregate amount of investments made after the Closing Date by Loan Parties in, and loans and advances made after the Closing Date by Loan Parties to, Subsidiaries that are not Loan Parties

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(determined without regard to any write-downs or write-offs of such investments, loans and advances) shall not exceed $20,000,000 at any time outstanding;

     (b) Permitted Investments;

     (c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement, (ii) such loans and advances made to any Loan Party by any Subsidiary that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to an Affiliate Subordination Agreement and (iii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above;

     (d) repurchases by the Borrower of its common stock to the extent permitted under Section 6.06;

     (e) Guarantees by any Loan Party of the Convertible Notes;

     (f) extensions of trade credit in the ordinary course of business;

     (g) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

     (h) loans and advances to officers and employees of the Borrower or any Subsidiary in the ordinary course of business (including for travel, entertainment, payroll advances and relocation expenses) in an aggregate principal amount outstanding at any time when taken together with the aggregate principal amount outstanding of investments made under clause (i) below (in each case determined without regard to any write-downs or write-offs of such loans and advances) not to exceed $20,000,000 at such time;

     (i) promissory notes or other evidences of Indebtedness received by the Borrower from officers or employees of the Borrower or any Subsidiary (or any loan or advance made to any Plan) in connection with the purchase of Equity Interests in the Borrower in an aggregate principal amount outstanding at any time when taken together with the aggregate principal amount outstanding of investments made under clause (h) above (in each case determined without regard to any write-downs or write-offs of such loans and advances) not to exceed $20,000,000 at such time;

     (j) the Borrower and the Subsidiaries may enter into Hedging Agreements permitted under Section 6.01(j);

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     (k) the Acquisition;

     (l) the Borrower or any Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than 100% of the Equity Interests (other than directors’ qualifying shares) of a person (referred to herein as the “Acquired Entity”); provided that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, the Borrower or any Subsidiary; (ii) the Acquired Entity shall be in a similar line of business as that of the Borrower or any of its Subsidiaries as conducted during the current and most recent calendar year (or business activities reasonably incidental thereto); and (iii) at the time of such transaction (A) both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; (B) the Borrower would be in compliance with the covenants set forth in Sections 6.11 and 6.12 as of the most recently completed period of four consecutive fiscal quarters ending prior to such transaction for which the financial statements and certificates required by Section 5.04(a) or 5.04(b), as the case may be, and 5.04(c) have been delivered or for which comparable financial statements have been filed with the SEC, after giving pro forma effect to such transaction and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any other transaction described in this Section 6.04(l) occurring after such period) as if such transaction had occurred as of the first day of such period (assuming, for purposes of pro forma compliance with Section 6.12, that the maximum Leverage Ratio permitted at the time by such Section was in fact 0.25 to 1.00 less than the ratio actually provided for in such Section at such time); (C) after giving effect to such acquisition, the aggregate amount of unused and available Revolving Credit Commitments (as defined in the Revolving Loan Credit Agreement), cash and Permitted Investments of the Borrower and the Subsidiaries must be at least $50,000,000; (D) the total consideration paid in connection with such acquisition and any other acquisitions pursuant to this Section 6.04(l) (including any Indebtedness of the Acquired Entity that is assumed by the Borrower or any Subsidiary following such acquisition and any payments following such acquisition pursuant to earn-out provisions or similar obligations) shall not in the aggregate exceed $200,000,000 during the term of this Agreement; (E) the Borrower shall have delivered a certificate of a Financial Officer, certifying as to the foregoing and containing reasonably detailed calculations in support thereof, in form and substance satisfactory to the Administrative Agent and (F) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.13 and the Security Documents (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.04(l) being referred to herein as a “Permitted Acquisition”);

     (m) investments, loans or advances made in connection with the license, development, manufacture or distribution of pharmaceutical compounds or products or medical devices, in each case from or through third parties (including

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other pharmaceutical companies) by collaborative efforts or otherwise and in the ordinary course of business;

     (n) investment received as consideration for Asset Sales permitted by Section 6.05(b); and

     (o) additional investments, loans and advances by the Borrower and the Subsidiaries (other than an investment of the type described in clause (h) or (i) above) so long as the aggregate amount invested, loaned or advanced pursuant to this paragraph (o) (determined without regard to any write-downs or write-offs of such investments, loans and advances) does not exceed $50,000,000 in the aggregate.

     Section 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all the assets (whether now owned or hereafter acquired) of the Borrower or less than all the Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or assets that are substantial in relation to the Borrower and the Subsidiaries taken as a whole, except that (i) the Borrower and any Subsidiary may purchase and sell inventory in the ordinary course of business and (ii) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (A) any Wholly Owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (B) any Wholly Owned Subsidiary may merge into or consolidate with any other Wholly Owned Subsidiary in a transaction in which the surviving entity is a Wholly Owned Subsidiary and no person other than the Borrower or a Wholly Owned Subsidiary receives any consideration (provided that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party), (C) the Acquisition shall be permitted and (D) the Borrower and the Subsidiaries may make Permitted Acquisitions.

     (b) Make any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 85% of which is cash; provided that (x) any Asset Sales constituting licenses of intellectual property relating to pharmacological products or medical devices may be for consideration at least 85% of which is cash or royalty payments and (y) any Asset Sale constituting a Required Divestiture may be for consideration at least 85% of which is cash payable within 20 months following the date of consummation of such Asset Sale, (ii) such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of and (iii) the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) (other than auction rate securities and other than Required Divestitures) shall not exceed $200,000,000 in the aggregate during the term of this Agreement.

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     Section 6.06. Restricted Payments; Restrictive Agreements. (a) Declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment (including pursuant to any Synthetic Purchase Agreement), or incur any obligation (contingent or otherwise) to do so; provided, however, that (i) the Borrower may declare and pay dividends or make other distributions on its capital stock to the extent made solely with common stock of the Borrower, (ii) any Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders, (iii) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may repurchase its Equity Interests owned by employees of the Borrower or the Subsidiaries or make payments to employees of the Borrower or the Subsidiaries upon termination of employment in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such employees in an aggregate amount not to exceed $5,000,000 in any fiscal year, (iv) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may make additional Restricted Payments in an aggregate amount not to exceed $5,000,000 in any fiscal year and (v) the Borrower may pay the Acquisition Consideration.

     (b) Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (A) the foregoing shall not apply to restrictions and conditions imposed by law, any Loan Document, the Revolving Loan Credit Agreement or any agreement governing Revolving Refinancing Indebtedness (subject to clause (i) of Section 6.01(l)), (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (C) the foregoing shall not apply to restrictions and conditions imposed on any Foreign Subsidiary by the terms of any Indebtedness of such Foreign Subsidiary permitted to be incurred hereunder, (D) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (E) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

     Section 6.07. Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that (a) this Section shall not apply to transactions solely between or among Loan Parties and (b) the

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Borrower or any Subsidiary may engage in any of the foregoing transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties.

     Section 6.08. Business of Borrower and Subsidiaries. Engage to any material extent at any time in any business or business activity other than the business currently conducted by it and business activities reasonably incidental thereto.

     Section 6.09. Other Indebtedness and Agreements. (a) Permit (i) any waiver, supplement, modification or amendment of the Convertible Notes, the Convertible Note Indenture or any other document relating to the Convertible Notes, (ii) except in connection with a refinancing permitted by Section 6.01(l), any waiver, supplement, modification or amendment of the Revolving Loan Documents or of documents governing Revolving Refinancing Indebtedness, if such waiver, supplement, modification or amendment would (A) increase the aggregate amount of the commitments thereunder except by an amount equal to reasonable fees and expenses incurred in connection with such amendment, (B) result in the terms of such Indebtedness or of any agreement entered into or of any instrument issued in connection therewith to be less favorable in any material respect to the Loan Parties or the Lenders, (C) add any obligor (unless such obligor is or becomes at such time a Loan Party) or (D) cause the Revolving Indebtedness to be secured on a basis other than equally and ratably with, or junior to, the Obligations on substantially the same terms as the Revolving Indebtedness is secured on the Closing Date except as shall be acceptable to the Administrative Agent, (iii) any waiver, supplement, modification, amendment, termination or release of any other indenture, instrument or agreement pursuant to which any other Material Indebtedness of the Borrower or any of the Subsidiaries is outstanding if the effect of such waiver, supplement, modification, amendment, termination or release would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to the Borrower, any of the Subsidiaries or the Lenders or (iv) any waiver, supplement, modification or amendment of (A) its certificate of incorporation, bylaws, operating, management or partnership agreement or other organizational documents or (B) any other agreement that is material to the conduct of its business, to the extent any such waiver, supplement, modification or amendment would be adverse to the Lenders in any material respect.

     (b) (i) Permit any alteration, amendment or other change or supplement to the Tender Offer Documentation or the Merger Agreement that could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders or the ability of the Joint Arrangers to syndicate the Term Facility or (ii) permit any waiver, alteration, amendment or other change or supplement to any condition to the Tender Offer Documentation or the Merger Agreement without the prior written consent of the Joint Arrangers (such consent not to be unreasonably withheld or delayed).

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     (c) (i) Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or pay, or commit to pay, or directly or indirectly (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any Indebtedness except (A) the payment of the Indebtedness created hereunder, (B) the payment of the Revolving Indebtedness, (C) refinancing of Indebtedness permitted by Section 6.01(a), (D) the payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, (E) any payment of Indebtedness owed by Foreign Subsidiaries that is not subordinated in right of payment to the Obligations, (F) so long as no Default or Event of Default shall have occurred and be continuing, any payments with respect to Indebtedness that (x) has an aggregate outstanding principal amount not greater than $25,000,000 and (y) is not subordinated in right of payment to the Obligations and (G) the payment of Indebtedness under the Alpharma Convertible Notes or (ii) pay in cash any amount in respect of any Indebtedness or preferred Equity Interests that may at the obligor’s option be paid in kind or in other securities.

     Section 6.10. Capital Expenditures. Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any fiscal year set forth below to exceed the amount set forth below for such fiscal year:

Period	Amount
Fiscal year ended 12/31/09	$	95,000,000
Fiscal year ended 12/31/10	$	95,000,000
Fiscal year ended 12/31/11	$	100,000,000
Fiscal year ended 12/31/12	$	105,000,000

     The amount of permitted Capital Expenditures set forth above in respect of any fiscal year commencing with the fiscal year ending on December 31, 2010, shall be increased (but not decreased) by (a) an amount equal to 50% of the amount of unused permitted Capital Expenditures for the immediately preceding fiscal year less (b) an amount equal to unused Capital Expenditures carried forward to such preceding fiscal year.

     Section 6.11. Consolidated Interest Expense Coverage Ratio. Permit the Consolidated Interest Expense Coverage Ratio for any period of four consecutive fiscal quarters, in each case taken as one accounting period, ending on a date set forth below (excluding any such date occurring prior to the last day of the first full fiscal quarter following the Closing Date) to be less than:

     (a) for any such date occurring on or prior to the last day of the fiscal quarter in which the Skelaxin Trigger Event occurs, the ratio set forth below opposite such date:

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Date	Ratio
03/31/09	4.00:1
06/30/09	4.00:1
09/30/09	4.00:1
12/31/09	4.00:1
03/31/10	4.00:1
06/30/10	4.00:1
09/30/10	4.00:1
12/31/10	4.00:1
03/31/11	4.00:1
06/30/11	4.00:1
09/30/11	4.00:1
12/31/11	4.00:1
03/31/12	4.00:1
06/30/12	4.00:1
09/30/12	4.00:1

     (b) thereafter, the ratio set forth below opposite such date:

Date	Ratio
03/31/09	3.75:1
06/30/09	3.75:1
09/30/09	3.75:1
12/31/09	3.75:1
03/31/10	3.75:1
06/30/10	3.75:1
09/30/10	4.00:1
12/31/10	4.00:1
03/31/11	4.00:1
06/30/11	4.00:1
09/30/11	4.00:1
12/31/11	4.00:1
03/31/12	4.00:1
06/30/12	4.00:1
09/30/12	4.00:1

     Section 6.12. Maximum Leverage Ratio. Permit the Leverage Ratio on any date during a period set forth below (excluding any such date prior to the last day of the first full fiscal quarter to end following the Closing Date) to be greater than:

     (a) for any date prior to the last day of the fiscal quarter in which the Skelaxin Trigger Event occurs, the ratio set forth below opposite such period:

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Period	Ratio
03/31/09 through 06/29/09	2.25:1
06/30/09 through 09/29/09	2.50:1
09/30/09 through 12/30/09	2.65:1
12/31/09 through 03/30/10	2.30:1
03/31/10 through 06/29/10	2.10:1
06/30/10 through 09/29/10	2.00:1
09/30/10 through 12/30/10	1.75:1
12/31/10 through 03/30/11	1.50:1
03/31/11 through 06/29/11	1.50:1
06/30/11 through 09/29/11	1.50:1
09/30/11 through 12/30/11	1.50:1
12/31/11 through 03/30/12	1.50:1
03/31/12 through 06/29/12	1.50:1
06/30/12 through 09/29/12	1.50:1
09/30/12 through Maturity Date	1.50:1

     (b) for any such period thereafter, the ratio set forth below opposite such period:

Period	Ratio
03/31/09 through 06/29/09	2.25:1
06/30/09 through 09/29/09	2.50:1
09/30/09 through 12/30/09	3.25:1
12/31/09 through 03/30/10	3.25:1
03/31/10 through 06/29/10	3.25:1
06/30/10 through 09/29/10	3.15:1
09/30/10 through 12/30/10	2.70:1
12/31/10 through 03/30/11	2.10:1
03/31/11 through 06/29/11	2.00:1
06/30/11 through 09/29/11	2.00:1
09/30/11 through 12/30/11	2.00:1
12/31/11 through 03/30/12	2.00:1
03/31/12 through 06/29/12	1.50:1
06/30/12 through 09/29/12	1.50:1
09/30/12 through Maturity Date	1.50:1

     Section 6.13. Fiscal Year. Change the end of its fiscal year from December 31 to any other date.

     Section 6.14. Certain Equity Securities. Issue any Equity Interest that is not Qualified Capital Stock.

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ARTICLE 7
Events of Default

     In case of the happening of any of the following events (“Events of Default”):

     (a) any representation or warranty made or deemed made in or in connection with any Loan Document, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

     (b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

     (c) default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

     (d) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a), 5.02, 5.05, 5.08 or 5.16 or in Article 6;

     (e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Administrative Agent or any Lender to the Borrower or (ii) knowledge thereof of the Borrower;

     (f) (i) the Borrower or any Subsidiary shall fail to pay any principal or interest, regardless of amount, due in respect of any Material Indebtedness, when and as the same shall become due and payable, (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness (other than the Revolving Indebtedness) or any trustee or agent on its or their behalf to cause any Material Indebtedness (other than the Revolving Indebtedness) to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness or

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(iii) any “Event of Default” (as defined in the Revolving Loan Credit Agreement) shall occur;

     (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Subsidiary, or of a substantial part of the property or assets of the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or a Subsidiary or (iii) the winding-up or liquidation of the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

     (h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

     (i) one or more judgments shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Subsidiary to enforce any such judgment and such judgment either (i) is for the payment of money in an aggregate amount in excess of $35,000,000 or (ii) is for injunctive relief and could reasonably be expected to result in a Material Adverse Effect;

     (j) an ERISA Event shall have occurred that, when taken together with all other such ERISA Events, could reasonably be expected to result in liability of the Borrower and its ERISA Affiliates in an aggregate amount exceeding $35,000,000;

     (k) any Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with

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its terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);

     (l) any security interest purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to (i) maintain possession of certificates representing securities pledged under the Guarantee and Collateral Agreement or (ii) file or record any financing statement delivered to the Collateral Agent by the Borrower; or

     (m) there shall have occurred a Change in Control;

     then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

ARTICLE 8
The Administrative Agent and the Collateral Agent; Etc.

     Each Lender hereby irrevocably appoints the Administrative Agent and the Collateral Agent (for purposes of this Article 8, the Administrative Agent and the Collateral Agent are referred to collectively as the “Agents”) its agent and authorizes the Agents to take such actions on its behalf and to exercise such

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powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents and (ii) negotiate, enforce or settle any claim, action or proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which negotiation, enforcement or settlement will be binding upon each Lender.

     The institution serving as the Administrative Agent and/or the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

     Neither Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is instructed in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08), and (c) except as expressly set forth in the Loan Documents, neither Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity. Neither Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.08) or in the absence of its own gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by the Borrower or a Lender, and neither Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article 4 or

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elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

     Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. Each Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Term Facility as well as activities as Agent.

     Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor (subject to any restriction on appointing a successor Collateral Agent set forth in the Security Documents). If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has been appointed pursuant to the immediately preceding sentence by the 30^th day after the date such notice of resignation was given by such Agent, such Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent and/or Collateral Agent, as the case may be (subject to any restriction on appointing a successor Collateral Agent set forth in the Security Documents). Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article

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and Section 9.05 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

     Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder.

     Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, each of the Joint Arrangers, the Co-Syndication Agents, the Co-Documentation Agents and the Senior Managing Agents are named as such for recognition purposes only, and in their respective capacities as such shall have no duties, responsibilities or liabilities with respect to this Agreement or any other Loan Document; it being understood and agreed that each of the Joint Arrangers, the Co-Syndication Agents, the Co-Documentation Agents and the Senior Managing Agents shall be entitled to all indemnification and reimbursement rights in favor of the Agents provided herein and in the other Loan Documents. Without limitation of the foregoing, neither the Joint Arrangers, the Co-Syndication Agents, the Co- Documentation Agents nor the Senior Managing Agents in their respective capacities as such shall, by reason of this Agreement or any other Loan Document, have any fiduciary relationship in respect of any Lender, Loan Party or any other person.

     In furtherance of the foregoing, each Lender hereby irrevocably authorizes the Agents, at their option and in their discretion, to:

     (a) release any Lien on any property granted or held by the Agents under the Loan Documents (i) upon termination or expiration of the Commitments and payment in full of all Obligations (other than contingent indemnification and expense reimbursement obligations as to which no claim has been asserted), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document or (iii) if approved, authorized or ratified in writing in accordance with Section 9.08; and

     (b) release any Guarantor from its obligations under its guaranty if such person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

     Upon request by either Agent, the Required Lenders will confirm in writing such Agent’s authority to release its interests in particular types of collateral or to release any Guarantor from its obligations to guarantee pursuant to this Article 8 (it being understood that any Agent’s failure to make such a request

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shall not affect the authority expressly granted to the Agent by the terms hereof or any other Loan Document).

     Each Lender (and each person that becomes a Lender hereunder pursuant to Section 9.04) hereby (i) acknowledges that Credit Suisse (and any successor to Credit Suisse in such capacities) is acting under the Security Documents in multiple capacities as the Administrative Agent, the Collateral Agent and the administrative agent and the collateral agent pursuant to the Revolving Loan Documents and (ii) waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against Credit Suisse (and such successor) any claims, causes of action, damages or liabilities of whatever kind or nature relating thereto. Each Lender (and each person that becomes a Lender hereunder pursuant to Section 9.04) hereby authorizes and directs Credit Suisse (and such successor) to enter into the Security Documents on behalf of such Lender and agrees that Credit Suisse (and such successor), in its various capacities thereunder, may take such actions on its behalf as is contemplated by the terms of the Security Documents.

ARTICLE 9
Miscellaneous

     Section 9.01. Notices; Electronic Communications. Notices and other communications provided for herein and in the other Loan Documents shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

     (a) if to the Borrower, to it at 501 Fifth Street, Bristol, TN 37620, Attention of Randy Sharrow (Fax No.                       ), with a copy to James Elrod at the above address (Fax No.                       );

     (b) if to the Administrative Agent, to Credit Suisse, Agency Manager, One Madison Avenue, New York, NY 10010 (Fax No.                       , e-mail:                       ; and

     (c) if to a Lender, to it at its address (or fax number) set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto.

     All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. As agreed to among the Borrower, the Administrative Agent and the

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applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person.

     The Borrower hereby agrees, unless directed otherwise by the Administrative Agent or unless the electronic mail address referred to below has not been provided by the Administrative Agent to the Borrower, that it will, or will cause its Subsidiaries to, provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan Documents or to the Lenders under Article 5, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) is or relates to a Borrowing Request or a notice pursuant to Section 2.10, (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 Default or Event of Default under this Agreement or any other Loan Document or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium that is properly identified in a format acceptable to the Administrative Agent to an electronic mail address as directed by the Administrative Agent. In addition, the Borrower agrees, and agrees to cause its Subsidiaries, to continue to provide the Communications to the Administrative Agent or the Lenders, as the case may be, in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.

     The Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, the “Borrower Materials”) by posting the Borrower Materials on Intralinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Confidential Information, they shall be treated as set forth in Section 9.16); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Administrative Agent shall be entitled to treat any

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Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the following Borrower Materials shall be marked “PUBLIC”, unless the Borrower notifies the Administrative Agent promptly that any such document contains material non-public information: (1) the Loan Documents and (2) notification of changes in the terms of the Loan Documents.

     Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable law, including United States Federal and state securities laws, to make reference to Communications that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

     THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND EACH EXPRESSLY DISCLAIMS 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 ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL RULING BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSON’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

     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 receipt of notice to it

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(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 that the foregoing notice may be sent to such e-mail address.

     Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

     Section 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions and the other transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender.

     Section 9.03. Binding Effect. This Agreement shall become effective and legally binding on the parties hereto when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

     Section 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, the Administrative Agent, the Collateral Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

     (b) Each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all

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or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent of the Administrative Agent (not to be unreasonably withheld or delayed); provided, however, that (i) the Administrative Agent shall use its commercially reasonable efforts to provide notice of any such assignment to the Borrower (failure to provide or delay in providing such notice shall not invalidate such assignment); (ii) the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of, and not less than, $1,000,000 (or, if less, the entire remaining amount of such Lender’s Commitment or Loans); provided that simultaneous assignments by two or more Related Funds shall be combined for purposes of determining whether the minimum assignment requirement is met; (iii) the parties to each assignment shall (A) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (B) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent an Assignment and Acceptance, and, in each case, shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent); (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire (in which the assignee shall designate one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws) and all applicable tax forms; and (v) no assignment shall be made to the Borrower or any of the Borrower’s Affiliates. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).

     (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitment, and the outstanding balances of its Loans, in each case without

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giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 3.05(a) or delivered pursuant to Section 5.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

     (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive and the Borrower, the Administrative Agent, the Collateral Agent and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register and any Assignments and Acceptances delivered to the Administrative Agent pursuant to this Section 9.04(d) shall be available for inspection by the Borrower, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (e) Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee

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referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent to such assignment and any applicable tax forms, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).

     (f) Each Lender may without the consent of the Borrower or the Administrative Agent sell participations to one or more banks or other persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other persons shall be entitled to the benefit of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders (but, with respect to any particular participant, to no greater extent than the Lender that sold the participation to such participant) and (iv) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable to such participating bank or person hereunder or the amount of principal of or the rate at which interest is payable on the Loans in which such participating bank or person has an interest, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans in which such participating bank or person has an interest, increasing or extending the Commitments in which such participating bank or person has an interest or releasing any Guarantor (other than in connection with the sale of such Guarantor in a transaction permitted by Section 6.05) or all or substantially all of the Collateral). To the extent permitted by law, each participating bank or other person also shall be entitled to the benefits of Section 9.06 as though it were a Lender, provided such participating bank or other person agrees to be subject to Section 2.18 as though it were a Lender.

     (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of Confidential Information, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such Confidential Information on terms no less restrictive than those applicable to the Lenders pursuant to Section 9.16.

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     (h) Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

     (i) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may (A) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.

     (j) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent and each Lender, and any attempted assignment without such consent shall be null and void.

     Section 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Joint Arrangers, the Administrative Agent and the Collateral Agent in connection with the syndication of the Term Facility and the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions

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hereby or thereby contemplated shall be consummated) or incurred by the Joint Arrangers, the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made hereunder, including the reasonable fees, charges and disbursements of Davis Polk & Wardwell, counsel for the Joint Arrangers, the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the fees, charges and disbursements of any other counsel for the Joint Arrangers, the Administrative Agent, the Collateral Agent or any Lender.

     (b) The Borrower agrees to indemnify the Joint Arrangers, the Administrative Agent, the Collateral Agent, each Lender and each Related Party of any of the foregoing persons (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby (including the syndication of the Term Facility), (ii) the use of the proceeds of the Loans, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (and regardless of whether such matter is initiated by a third party or by the Borrower, any other Loan Party or any of their respective shareholders or Affiliates), or (iv) any actual or alleged presence, Release or threatened Release of Hazardous Materials on any property or facility presently or formerly owned, leased or operated by the Borrower or any of the Subsidiaries, or any Environmental Claim related in any way to the Borrower or the Subsidiaries; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee.

     (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Collateral Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Collateral Agent, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Collateral Agent in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its

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share of the sum of the outstanding Loans and Commitments at the time, (in each case, determined as if no Lender were a Defaulting Lender).

     (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof.

     (e) The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor.

     Section 9.06. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, but excluding payroll and related trust fund accounts) at any time held and other indebtedness at any time owing by such Lender (or its Affiliates) to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

     Section 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     Section 9.08. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Collateral Agent or any Lender in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or

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power. The rights and remedies of the Administrative Agent, the Collateral Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice 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.

     (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified other than pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, in the case of any other Loan Document, by the Loan Parties party thereto and the Administrative Agent or the Collateral Agent, as the case may be, with the consent of the Required Lenders. No agreement referred to in the preceding sentence shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan, without the prior written consent of each Lender directly adversely affected thereby, (ii) increase or extend any Commitment or decrease or extend the date for payment of any Fees of any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata requirements of Section 2.17, the provisions of Section 9.04(j) or the provisions of this Section or release any Guarantor (other than in connection with the sale of such Guarantor in a transaction permitted by Section 6.05) or all or substantially all of the Collateral, without the prior written consent of each Lender, (iv) modify the protections afforded to an SPC pursuant to the provisions of Section 9.04(i) without the written consent of such SPC, (v) reduce the percentage contained in the definition of the term “Required Lenders” without the prior written consent of each Lender (it being understood that with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Commitments on the Closing Date), or (vi) amend the definition of “Eligible Assignee” to include the Borrower or any Affiliates of the Borrower without the prior written consent of Lenders having Loans and Commitments representing more than 66 2/3% of the sum of all Loans and Commitments outstanding at such time; provided that it is understood and agreed that any such amendment may impose terms and conditions on any assignment to the Borrower or any Affiliate that are acceptable to the Administrative Agent, the Borrower and the Required Lenders; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent.

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     (c) Notwithstanding anything to the contrary contained in this Section 9.08, if the Administrative Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a technical or immaterial nature, in each case, in any provision of the Loan Documents, then the Administrative Agent and the Borrower shall be permitted to amend such provisions and the resulting amendment shall become effective without any further action of consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within five Business Days following receipt of notice thereof.

     Section 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 9.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

     Section 9.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

     Section 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)

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ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

     Section 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

     Section 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.03. Delivery of an executed signature page to this Agreement by fax transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

     Section 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

     Section 9.15. Jurisdiction; Consent to Service of Process. (a) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or its properties in the courts of any jurisdiction.

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     (b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

     (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

     Section 9.16. Confidentiality. Each of the Administrative Agent, the Collateral Agent and the Lenders agrees to maintain the confidentiality of the Confidential Information (as defined below), except that Confidential Information may be disclosed (a) to its and its Affiliates’ officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential), (b) to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (f) with the consent of the Borrower or (g) to the extent such Confidential Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, “Confidential Information” shall mean all information received from the Borrower and related to the Borrower or its business, other than any such information that was available to the Administrative Agent, the Collateral Agent or any Lender on a nonconfidential basis prior to its disclosure by the Borrower; provided that, in the case of Confidential Information received from the Borrower after the Closing Date, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Confidential Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Confidential Information as such person would accord its own confidential information.

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     Section 9.17. Lender Action. Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, unless expressly provided for herein or in any other Loan Document, without the prior written consent of the Administrative Agent. The provisions of this Section 9.17 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

     Section 9.18. Patriot Act. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower, for itself and the Subsidiaries, that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower and the Subsidiaries, which information includes the name and address of the Borrower and the Subsidiaries and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower and the Subsidiaries in accordance with the Patriot Act.

     Section 9.19. No Fiduciary Duty. The Borrower, on behalf of itself and the Subsidiaries, agrees that in connection with all aspects of the transactions contemplated hereby or by any other Loan Document and any communications in connection therewith, the Borrower, the Subsidiaries and their Affiliates, on the one hand, and the Administrative Agent, the Lenders and their Affiliates, on the other hand, will have a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Administrative Agent, the Lenders or their Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

KING PHARMACEUTICALS, INC.,
By:	/s/ Brian A. Markison
	Name:	Brian A. Markison
	Title:	Chairman, President and Chief Executive Officer

CREDIT SUISSE, CAYMAN ISLANDS BRANCH,      individually and as Administrative Agent       and Collateral Agent,
By:	/s/ John D. Toronto
	Name:	John D. Toronto
	Title:	Director
By:	/s/ Shaheen Malik
	Name:	Shaheen Malik
	Title:	Associate

WACHOVIA BANK, NATIONAL ASSOCIATION,
By:	/s/ David Gillespie
	Name:	David Gillespie
	Title:	Managing Director

BANK OF LINCOLNWOOD
By:	/s/ Richard R. Robbins
	Name:	Richard R. Robbins
	Title:	President & COO

DNB NOR Bank, ASA
By:	/s/ Phil Kurplewski
	Name:	Phil Kurplewski
	Title:	Senior Vice President
By:	/s/ Kristin Riise
	Name:	Kristin Riise
	Title:	Vice President

DZ BANK, DEUTSCHE GENOSSENSCHAFTSBANK
By:	/s/ Oliver Hildenbrand
	Name:	Oliver Hildenbrand
	Title:	SVP
By:	/s/ Cedric Probst
	Name:	Cedric Probst
	Title:	VP

FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, as Lender
By:	/s/ Freddie H. Malone, VP
	Name:	Freddie H. Malone
	Title:	Vice President

Siemens Financial Services, Inc., as Lender
By:	/s/ Todd W. Tucker
	Name:	Todd W. Tucker
	Title:	Vice President — Operations
By:	/s/ Doug Maher
	Name:	Doug Maher
	Title:

The Private Bank and Trust Company, as Lender
By:	/s/ Zennie W. Lynch Jr.
	Name:	Zennie W. Lynch Jr.
	Title:	Associate Managing Director

Union Bank, N.A., as Lender
By:	/s/ Michael Tschida
	Name:	Michael Tschida
	Title:	Vice President

Lender: U.S. Bank, N.A.
By:	/s/ Thomas A. Heckman
	Name:	Thomas A. Heckman
	Title:	Vice President

EX-21.1

Exhibit 21.1

Subsidiaries	Place of Incorporation
Alpharma Inc.	Delaware
Alpharma Pharmaceuticals LLC	Delaware
Monarch Pharmaceuticals, Inc.	Tennessee
King Pharmaceuticals Research and Development, Inc.	Delaware
Meridian Medical Technologies, Inc.	Delaware
Monarch Pharmaceuticals Ireland Limited	Republic of Ireland

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-70203, 333-73053, 333-45276, 333-45284, 333-126939, and 333-128126) and in the Registration Statements on Form S-3 (No. 333-135285) of King Pharmaceuticals, Inc. of our report dated February 27, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

February 27, 2009

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Brian A. Markison, certify that:

1. I have reviewed this annual report on Form 10-K of King Pharmaceuticals, Inc. (“King”);

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 King as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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 the registrant’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 the registrant’s internal control over financial reporting.

/s/  Brian A. Markison

Brian A. Markison

President and Chief Executive Officer

Date: February 27, 2009

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Joseph Squicciarino, certify that:

1. I have reviewed this annual report on Form 10-K of King Pharmaceuticals, Inc. (“King”);

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 King as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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 the registrant’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 the registrant’s internal control over financial reporting.

/s/  Joseph Squicciarino

Joseph Squicciarino

Chief Financial Officer

Date: February 27, 2009

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report on Form 10-K of King Pharmaceuticals, Inc. I, Brian A. Markison, Chief Executive Officer of King Pharmaceuticals, Inc., certify, pursuant to Section 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 this report fairly presents, in all material respects, the financial condition and results of operations of King Pharmaceuticals, Inc.

/s/  Brian A. Markison

Brian A. Markison

President and Chief Executive Officer

Date: February 27, 2009

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report on Form 10-K of King Pharmaceuticals, Inc. I, Joseph Squicciarino, Chief Financial Officer of King Pharmaceuticals, Inc., certify, pursuant to Section 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 this report fairly presents, in all material respects, the financial condition and results of operations of King Pharmaceuticals, Inc.

/s/  Joseph Squicciarino

Joseph Squicciarino

Chief Financial Officer

Date: February 27, 2009