10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File No. 001-15875

King Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Tennessee	54-1684963
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
501 Fifth Street, Bristol, TN (Address of principal executive offices)	37620 (Zip Code)

(423) 989-8000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No 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
	(Do not check if a smaller reporting company)

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

Number of shares outstanding of Registrant’s common stock as of August 4, 2010: 249,662,593

Table of Contents

		Page
PART I — Financial Information
Item 1.	Financial Statements		2
	Condensed Consolidated Balance Sheets		2
	Condensed Consolidated Statements of Operations		3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity and Other Comprehensive Income		4
	Condensed Consolidated Statements of Cash Flows		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		57
Item 4.	Controls and Procedures		57
PART II — Other Information
Item 1.	Legal Proceedings		58
Item 1A.	Risk Factors		58
Item 6.	Exhibits		58
Signatures			59
EX-3.1
EX-3.2
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements

KING PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

	June 30,		December 31,
	2010		2009
ASSETS
Current assets:
Cash and cash equivalents	$	573,062	$	545,312
Investments in debt securities		16,346		29,258
Marketable securities		1,022		2,100
Accounts receivable, net of allowance of $3,338 and $3,401		209,585		210,256
Inventories		195,614		182,291
Deferred income tax assets		72,494		83,675
Income taxes receivable		13,341		16,091
Prepaid expenses and other current assets		29,323		60,860
Total current assets		1,110,787		1,129,843
Property, plant and equipment, net		377,298		391,839
Intangible assets, net		719,862		794,139
Goodwill		466,283		467,613
Deferred income tax assets		259,579		264,162
Investments in debt securities		169,777		218,608
Other assets (includes restricted cash of $15,905 and $15,900)		58,748		56,496
Assets held for sale		5,890		5,890
Total assets	$	3,168,224	$	3,328,590
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	74,176	$	86,692
Accrued expenses		228,747		320,992
Short-term debt		3,506		3,662
Current portion of long-term debt		—		85,550
Total current liabilities		306,429		496,896
Long-term debt		341,735		339,016
Other liabilities		126,604		123,371
Total liabilities		774,768		959,283
Commitments and contingencies (Note 9)
Shareholders’ equity		2,393,456		2,369,307
Total liabilities and shareholders’ equity	$	3,168,224	$	3,328,590

See accompanying notes.

2

KING PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Revenues:
Net sales	$	332,853		$	430,299		$	705,931		$	844,631
Royalties		38,050			14,689			45,827			29,414
Total revenues		370,903			444,988			751,758			874,045
Operating costs and expenses:
Cost of revenues, exclusive of depreciation and amortization shown below		119,027			156,093			246,081			307,032
Selling, general and administrative		131,829			120,631			272,304			259,165
Acquisition related costs		—			2,944			—			6,733
Total selling, general and administrative expense		131,829			123,575			272,304			265,898
Research and development		33,174			21,202			61,498			48,458
Depreciation and amortization		53,903			52,862			111,178			106,211
Restructuring charges (Note 13)		4,852			1,475			5,114			49,525
Total operating costs and expenses		342,785			355,207			696,175			777,124
Operating income		28,118			89,781			55,583			96,921
Other income (expense):
Interest income		487			1,506			896			4,294
Interest expense		(7,479	)		(27,592	)		(16,215	)		(50,695	)
Gain on Kadian® (Note 6)		12,500			—			12,500			—
Gain (loss) on investments		249			(524	)		(623	)		(1,347	)
Loss on early extinguishment of debt		(2,252	)		—			(2,252	)		—
Other, net		(1,753	)		4,112			(1,956	)		1,333
Total other income (expense)		1,752			(22,498	)		(7,650	)		(46,415	)
Income before income taxes		29,870			67,283			47,933			50,506
Income tax expense		11,882			29,348			25,476			23,293
Net income	$	17,988		$	37,935		$	22,457		$	27,213
Net income per common share:
Basic net income per common share	$	0.07		$	0.16		$	0.09		$	0.11
Diluted net income per common share	$	0.07		$	0.15		$	0.09		$	0.11

See accompanying notes.

3

KING PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
AND OTHER COMPREHENSIVE INCOME
(In thousands, except share data)
(Unaudited)

							Accumulated
							Other
	Common Stock				Retained		Comprehensive
	Shares		Amount		Earnings		Income (Loss)			Total
Balance at December 31, 2008		246,487,232	$	1,391,065	$	871,021	$	(28,287	)	$	2,233,799
Adoption of new accounting standard, net of taxes of $396 (Note 3)		—		—		646		(646	)		—
Comprehensive income:
Net income		—		—		27,213		—			27,213
Reclassification of unrealized losses on investments in debt securities, net of taxes of $542		—		—		—		885			885
Net unrealized gain on marketable securities, net of taxes of $345		—		—		—		563			563
Net unrealized loss on interest rate swap, net of taxes of $88		—		—		—		(144	)		(144	)
Net unrealized gain on investments in debt securities, net of taxes of $2,518		—		—		—		4,108			4,108
Foreign currency translation		—		—		—		(235	)		(235	)
Total comprehensive income											32,390
Stock-based award activity		1,642,536		13,641		—		—			13,641
Balance at June 30, 2009		248,129,768	$	1,404,706	$	898,880	$	(23,756	)	$	2,279,830
Balance at December 31, 2009		248,444,711	$	1,421,489	$	963,620	$	(15,802	)	$	2,369,307
Comprehensive income:
Net income		—		—		22,457		—			22,457
Reclassification of unrealized losses on investments in debt securities, net of taxes of $268		—		—		—		428			428
Net unrealized loss on marketable securities, net of taxes of $305		—		—		—		(773	)		(773	)
Net unrealized gain on investments in debt securities, net of taxes of $1,798		—		—		—		2,875			2,875
Foreign currency translation		—		—		—		(12,882	)		(12,882	)
Total comprehensive income											12,105
Stock-based award activity		1,219,802		12,044		—		—			12,044
Balance at June 30, 2010		249,664,513	$	1,433,533	$	986,077	$	(26,154	)	$	2,393,456

See accompanying notes.

4

KING PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended June 30,
	2010			2009
Cash flows provided by operating activities	$	48,875		$	117,566
Cash flows from investing activities:
Transfers to restricted cash		(5	)		(55	)
Proceeds from maturities and sales of investments in debt securities		67,860			32,223
Purchases of property, plant and equipment		(17,299	)		(18,832	)
Proceeds from sale of property and equipment		235			—
Proceeds from sale of Kadian®		40,000			34,800
Acquisition of Alpharma		—			(70,374	)
Forward foreign exchange contracts		—			(3,117	)
Purchases of intellectual property and product rights		(1,280	)		(1,207	)
Net cash provided by (used in) investing activities		89,511			(26,562	)
Cash flows from financing activities:
Proceeds from exercise of stock options		963			1,286
Net payments related to stock-based award activity		(4,979	)		(3,123	)
Payments on debt		(92,417	)		(585,227	)
Debt issuance costs		(4,315	)		(1,313	)
Net cash used in financing activities		(100,748	)		(588,377	)
Effect of exchange rate changes on cash		(9,888	)		(647	)
Increase (decrease) in cash and cash equivalents		27,750			(498,020	)
Cash and cash equivalents, beginning of period		545,312			940,212
Cash and cash equivalents, end of period	$	573,062		$	442,192

See accompanying notes.

5

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010 and 2009

(In thousands, except share and per share data)

(Unaudited)

1.   General

The accompanying unaudited Condensed Consolidated Financial Statements of King Pharmaceuticals, Inc. (“King” or the “Company”) were prepared by the Company in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of items of a normal recurring nature) considered necessary for a fair presentation are included. Operating results for the six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The year-end Condensed Consolidated Balance Sheet included in this Form 10-Q was derived from the audited Consolidated Financial Statements, but does not include all disclosures required by generally accepted accounting principles.

These unaudited Condensed Consolidated Financial Statements include the accounts of King and all of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Certain amounts from the prior Condensed Consolidated Financial Statements have been reclassified to conform to the presentation adopted in 2010.

2.   Earnings Per Share

Basic and diluted income per common share were determined using the following share data:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Basic net income per common share:
Weighted average common shares		245,786,855		244,693,041		245,496,207		244,290,940
Diluted net income per common share:
Weighted average common shares		245,786,855		244,693,041		245,496,207		244,290,940
Effect of stock options		263,519		20,242		463,708		12,709
Effect of dilutive share awards		3,324,536		2,493,266		3,660,933		2,618,332
Weighted average common shares		249,374,910		247,206,549		249,620,848		246,921,981

For the three months ended June 30, 2010, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per common share, included options to purchase 5,525,900 shares of common stock, 795,260 restricted stock awards (“RSAs”) and 878,690 long-term performance units (“LPUs”). For the six months ended June 30, 2010, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per common share, included options to purchase 4,359,163 shares of common stock, 448,807 RSAs and 492,449 LPUs. For the three months ended June 30, 2009, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per common share, included options to purchase 7,902,942 shares of common stock, 286,368 RSAs and 371,840 LPUs. For the six months ended June 30, 2009, the weighted average shares that were anti-dilutive, and therefore excluded from the calculation of diluted income per common share included options to purchase 7,029,986 shares of common stock, 303,948 RSAs and 262,723 LPUs. The 11/4% Convertible Senior Notes due April 1, 2026, the “Convertible Senior Notes”, could be converted into the Company’s common stock in the future, subject to certain contingencies. Shares of the Company’s common stock associated with this right of conversion were excluded from the calculations of

6

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

diluted income per common share because the conversion price of the notes was greater than the average market price of the Company’s common stock during the three and six months ended June 30, 2009 and 2010.

3.   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 consisted of institutional money market funds. There were no cumulative unrealized holding gains or losses associated with these money market funds as of June 30, 2010 and December 31, 2009.

Derivatives.  During 2009, the Company had forward foreign exchange contracts outstanding on certain non-U.S. cash balances. The forward exchange contracts were not designated as hedges. The Company recorded these contracts at fair value and changes in fair value were recognized in current earnings. All foreign exchange contracts expired during 2009.

The terms of certain credit agreements required the Company to maintain hedging agreements that fix the interest rates on 50% of the Company’s total outstanding long-term debt. Accordingly, in March 2009 the Company entered into an interest rate swap agreement with an aggregate notional amount of $112,500, which was scheduled to expire in March 2011. The interest rate swap was designated as a cash flow hedge and was being used to offset the overall variability of cash flows. For a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the period during which the hedged transaction affects earnings. As a result of the reduction of its variable rate long-term debt beginning in the third quarter of 2009, more than 50% of the Company’s outstanding long-term debt was at fixed rates and therefore an interest rate swap was no longer required. The Company terminated the interest rate swap in the third quarter of 2009.

The following tables summarize the effect of derivative instruments on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2009:

Three Months Ended June 30, 2009

Six Months Ended June 30, 2009

Gain or (Loss)

Gain or (Loss)

Gain or (Loss)

Reclassified from

Reclassified from

in Other

Accumulated

Gain or (Loss)

Accumulated

Comprehensive

Other

in Other

Other

Income

Comprehensive

Gain or (Loss)

Comprehensive

Comprehensive

Gain or (Loss)

on

Income into

Recorded

Income on

Income into

Recorded

Derivative

Income

in Income

Derivative

Income

in Income

Derivatives in Cash Flow

(Effective

(Effective

(Ineffective

(Effective

(Effective

(Ineffective

Hedging Relationships

Portion)

Portion)

Portion)

Portion)

Portion)

Portion)

Interest rate swap

$

299

$

—

$

—

$

(232

)

$

—

$

—

		Three Months Ended June 30, 2009			Six Months Ended June 30, 2009
Derivatives not Designated as		Gain or (Loss) Recognized			Gain or (Loss) Recognized
Hedging Instruments		in Income on Derivative			in Income on Derivative
Foreign currency contracts	Other Income	$	(8,523	)	$	429

Marketable Securities.  As of June 30, 2010 and December 31, 2009, the Company’s investment in marketable securities consisted solely of Palatin Technologies, Inc. common stock with a cost basis of $511. The cumulative unrealized holding gain in this investment was $511 and $1,589, respectively, as of June 30, 2010 and December 31, 2009.

Investments in Debt Securities.  The Company undertook investments in auction rate securities prior to the end of the first quarter of 2008. 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 7, 28 or 35 days. 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 Company will not be able to liquidate these securities until a successful

7

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or it is purchased by a buyer outside the auction process.

The Company classified auction rate securities as available-for-sale at the time of purchase. Temporary gains or losses are included in accumulated other comprehensive income (loss). Other-than-temporary credit losses are included in Gain (loss) on investments in the Condensed Consolidated Statements of Operations. Non-credit related other-than-temporary losses are recorded in accumulated other comprehensive income (loss), as the Company has no intent to sell the securities and believes that it is more likely than not that it will not be required to sell the securities prior to recovery.

As of June 30, 2010 and December 31, 2009, the par value of the Company’s investments in debt securities was $213,025 and $281,525, 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.

Excluding the municipal bond discussed below, as of June 30, 2010, there were cumulative unrealized holding losses of $21,195 recorded in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheet associated with investments in debt securities with a par value of $179,825, which were classified as available for sale. All of these investments in debt securities have been in continuous unrealized loss positions for greater than 12 months. As of June 30, 2010, the Company believed the decline associated with the underlying securities was temporary and it was probable that the par amount of these auction rate securities would be collectible under their contractual terms.

As of April 1, 2009, the Company adopted a new statement of the Financial Accounting Standards Board (“FASB”) that provides guidance in determining whether impairments in debt securities are other-than-temporary, and modifies the presentation and disclosures surrounding such instruments. During the fourth quarter of 2008, the Company recognized unrealized losses of $6,832 in other (expense) income for a municipal bond with a par value of $15,000 for which the holding losses were determined to be other-than-temporary. The Company determined that $1,042 (or $646 net-of-tax) of this previously recognized loss was non-credit related. Upon the adoption of this statement, the Company was required to reclassify this non-credit related loss from retained earnings to accumulated other comprehensive income (loss). As of June 30, 2010, there were cumulative unrealized holding gains of $1,936 associated with this security recorded in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheet. For the three and six months ended June 30, 2010, no other-than-temporary impairment losses associated with available for sale investments in debt securities were recognized.

During the first quarter of 2010, the Company sold certain auction rate securities associated with student loans with a par value of $8,000 for $7,360 to the issuer and realized a loss of $640 in the Condensed Consolidated Statements of Operations. During the second quarter of 2009, the Company sold certain auction rate securities associated with student loans with a par value of $20,350 for $18,923 to the issuer and realized a loss of $1,427 in the Condensed Consolidated Statements of Operations. The Company has not sold any other investments in debt securities below par value during the periods presented in the accompanying Condensed Consolidated Statements of Operations.

During the fourth quarter of 2008, the Company accepted an offer from UBS Financial Services, Inc. (“UBS”) providing the Company the right to sell to UBS at par value certain auction rate securities during the period from June 30, 2010 to July 2, 2012 (the “right”). During the second quarter of 2010, the Company notified UBS of its intent to sell the auction rate securities related to this offer. At June 30, 2010 and December 31, 2009, the Company held auction rate securities related to this offer with a par value of $18,200 and $32,500, respectively. The Company has elected the fair value option to account for this right. As a result, gains and losses associated with this right are recorded in Other income (expense) in the Condensed Consolidated Statements of Operations. The value of the right to sell certain auction rate securities to UBS was estimated considering the present value of future cash flows, the

8

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fair value of the auction rate security and counterparty risk. As of June 30, 2010 and December 31, 2009, the fair value of the right to sell the auction rate securities to UBS at par was $1,854 and $3,226, respectively. With respect to this right, the Company recognized unrealized losses of $571 and $1,372 during the second quarter and first six months of 2010, respectively, and an unrealized gain of $108 and an unrealized loss of $457 during the second quarter and first six months of 2009, respectively, in Other income (expense) in the accompanying Condensed Consolidated Statements of Operations.

In addition, during the fourth quarter of 2008, the Company reclassified the auction rate securities that are included in this right from available-for-sale securities to trading securities. As of June 30, 2010 and December 31, 2009, the fair value of the investments in debt securities classified as trading was $16,346 and $29,258, respectively. The Company recognized unrealized gains related to these securities of $819 and $1,388 during the second quarter and first six months of 2010, respectively, and $795 and $537 during the second quarter and first six months of 2009, respectively, in Other income (expense) in the accompanying Condensed Consolidated Statements of Operations.

During July 2010, the Company sold the auction rate securities that were included in the UBS right for par value of $18,200, recognizing no gain or loss on the exercise of the right and the sale of the securities.

As of June 30, 2010, the Company had classified $16,346 of its auction rate securities as current assets and $169,777 as long-term assets.

The following tables summarize the Company’s assets that are measured at fair value on a recurring basis:

			Fair Value Measurements at June 30, 2010 Using
			Quoted Prices in		Significant Other		Significant
	Total		Active Markets for		Observable		Unobservable
	Fair Value at		Identical Assets		Inputs		Inputs
Description	06/30/2010		(Level 1)		(Level 2)		(Level 3)
Assets:
Money Market Funds	$	561,347	$	561,347	$	—	$	—
U.S. Government Securities		4,136		4,136		—		—
Marketable Securities		1,022		1,022		—		—
Investments in Debt Securities		186,123		—		—		186,123
Right to Sell Debt Securities		1,854		—		—		1,854
Total Assets	$	754,482	$	566,505	$	—	$	187,977

			Fair Value Measurements at December 31, 2009 Using
			Quoted Prices in		Significant Other		Significant
	Total		Active Markets for		Observable		Unobservable
	Fair Value at		Identical Assets		Inputs		Inputs
Description	12/31/2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Money Market Funds	$	518,950	$	518,950	$	—	$	—
U.S. Government Securities		4,138		4,138		—		—
Marketable Securities		2,100		2,100		—		—
Investments in Debt Securities		247,866		—		—		247,866
Right to Sell Debt Securities		3,226		—		—		3,226
Total Assets	$	776,280	$	525,188	$	—	$	251,092

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 the valuation date.

9

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 at the valuation date 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 June 30, 2010, the Company assumed a weighted average discount rate of 4.7% and expected terms which are generally less than five 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 as of June 30, 2010. 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.

The following table provides a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	2010			2009
Beginning balance, January 1	$	251,092		$	361,913
Total gains (losses) (realized/unrealized)
Included in earnings		(872	)		(823	)
Included in other comprehensive income (loss)		927			(4,300	)
Settlements		(16,810	)		(8,000	)
Transfers into (out of) Level 3		(3,750	)		1,700
Ending balance, March 31	$	230,587		$	350,490
Total gains (losses) (realized/unrealized)
Included in earnings		249			(524	)
Included in other comprehensive income (loss)		4,441			13,781
Settlements		(51,050	)		(25,650	)
Transfers into (out of) Level 3		3,750			700
Ending balance, June 30	$	187,977		$	338,797

4.   Inventories

Inventories consist of the following:

	June 30,			December 31,
	2010			2009
Raw materials	$	65,193		$	62,054
Work-in-process		37,147			29,979
Finished goods (including $1,920 and $3,908 of sample inventory, respectively)		136,538			126,705
		238,878			218,738
Inventory valuation allowance		(43,264	)		(36,447	)
Total inventories	$	195,614		$	182,291

10

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.   Property, Plant and Equipment

During the first quarter of 2009, the Company classified as held for sale a pharmaceutical facility which was acquired as a result of the acquisition of Alpharma Inc., now Alpharma LLC (“Alpharma”). The facility is recorded at estimated fair value less cost to sell. The Company finalized its determination of fair value of this asset in the first quarter of 2009, reduced the value by $3,600 and adjusted goodwill accordingly. During the fourth quarter of 2009, the Company further reduced the fair value of this asset based on management’s estimate of current market conditions and incurred an asset impairment charge of $2,010.

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.

6.   Acquisitions, Dispositions, Co-Promotions and Alliances

Kadian^®

On December 29, 2008, the Company completed its acquisition of Alpharma. 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 (“FTC”). The Consent Order required the Company to divest the assets related to Alpharma’s branded oral long-acting opioid analgesic drug Kadian^® to Actavis Elizabeth, L.L.C. (“Actavis LLC”). In accordance with the Consent Order, effective upon the acquisition of Alpharma on December 29, 2008, the Company divested the Kadian^® product to Actavis LLC. Actavis LLC is entitled to sell Kadian^® as a branded or generic product. Prior to the divestiture, Actavis LLC supplied Kadian^® to Alpharma.

Actavis LLC paid a purchase price 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 purchase price payment associated with each calendar quarter is as follows:

	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

The Company recorded a receivable of $115,000 at the time of the divestiture, reflecting the present value of the estimated future purchase price payments from Actavis LLC. The Company recorded a gain of $12,500 in the second quarter of 2010 as a result of the divestiture. In accordance with the agreement, quarterly payments are received one quarter in arrears. During the second quarter and first six months of 2010, the Company received $20,000 and $40,000, respectively, from Actavis LLC related to gross profit from sales during the fourth quarter of 2009 and the first quarter of 2010. In July 2010, the Company received the final payment of $7,500.

Skelaxin^® Authorized Generic

In January 2008, the Company entered into an agreement with CorePharma, LLC (“CorePharma”) granting CorePharma a license to launch an authorized generic version of Skelaxin^® under certain conditions. In accordance with this agreement, the Company receives a fee based on CorePharma’s gross profit, as defined by the agreement, of the authorized generic product. During the second quarter of 2010, the Company recognized revenue of $25,624

11

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

related to the gross profit of the CorePharma Skelaxin^® authorized generic which is recorded in royalties. In addition, the Company sells the related active pharmaceutical ingredient to CorePharma for their manufacture of the authorized generic.

7.   Intangible Assets and Goodwill

Intangible assets consist primarily of patents, licenses, trademarks and product rights. A summary of the gross carrying amount and accumulated amortization is as follows:

	June 30, 2010				December 31, 2009
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Branded prescription pharmaceuticals	$	1,266,163	$	834,766	$	1,264,250	$	764,327
Alpharma Animal Health		169,945		14,446		170,000		9,633
Meridian Auto-Injector		186,764		53,997		183,249		49,621
Royalties and other		3,731		3,532		3,731		3,510
Total intangible assets	$	1,626,603	$	906,741	$	1,621,230	$	827,091

Amortization expense for the three months ended June 30, 2010 and 2009 was $38,213 and $38,149, respectively. Amortization expense for the six months ended June 30, 2010 and 2009 was $79,650 and $76,327, respectively.

In January 2009, the U.S. District Court for the Eastern District of New York issued an order ruling invalid two Skelaxin^® patents. In June 2009, the Court entered judgment against the Company. In August 2010, the Court of Appeals for the Federal Circuit affirmed the actions of the District Court. Generic versions of Skelaxin^® entered the market early in the second quarter of 2010. The Company’s sales of Skelaxin^® have declined significantly and will continue to decline as a result of generic competition. Net sales of Skelaxin^® were $400,998 in 2009 and $5,319 and $96,236, respectively, in the three and six months ended June 30, 2010. According to IMS America, Ltd. weekly prescription data, for the week ending July 23, 2010, generic competitors have garnered approximately 90% of the prescriptions in the metaxalone market. The intangible assets associated with Skelaxin^® were fully amortized in the second quarter of 2010. The amortization expense associated with Skelaxin^® in the second quarter and first six months of 2010 was $19,979 and $43,226, respectively.

For additional information regarding Skelaxin^® litigation, please see Note 9.

Goodwill at June 30, 2010 and December 31, 2009 is as follows:

	Branded		Animal Health			Meridian
	Segment		Segment			Segment		Total
Goodwill at December 31, 2009	$	267,024	$	92,179		$	108,410	$	467,613
Adjustment to Alpharma acquisition		—		(1,330	)		—		(1,330	)
Goodwill at June 30, 2010	$	267,024	$	90,849		$	108,410	$	466,283

12

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Long-Term Debt

Long-term debt consists of the following:

	June 30,		December 31,
	2010		2009
Convertible senior notes	$	341,735	$	332,305
Senior secured revolving credit facility		—		92,261
Total long-term debt		341,735		424,566
Less current portion		—		85,550
Long-term portion	$	341,735	$	339,016

Convertible Senior Notes

At June 30, 2010, the Company has $400,000 of Convertible Senior Notes outstanding. The liability and equity components of the Convertible Senior Notes have been separately accounted for in a manner that reflects the Company’s nonconvertible debt borrowing rate at the date of issuance. The debt component is being amortized through March 31, 2013.

A summary of the gross carrying amount, unamortized debt cost and the net carrying amount of the liability component is as follows:

	June 30,		December 31,
	2010		2009
Gross carrying amount	$	400,000	$	400,000
Unamortized debt discount		58,265		67,695
Net carrying amount	$	341,735	$	332,305

Senior Secured Revolving Credit Facility

On May 11, 2010, the Company entered into a new $500,000 five-year Senior Secured Revolving Credit Facility (“2010 Revolving Credit Facility”) with Credit Suisse AG, as Administrative Agent (the “Administrative Agent”) and terminated the existing $475,000 Senior Secured Revolving Credit Facility (“2008 Revolving Credit Facility”) entered into April 19, 2007 and amended December 5, 2008, which was scheduled to mature in April 2012. The 2010 Revolving Credit Facility provides the Company with aggregate revolving credit commitments of $500,000, with a $50,000 sublimit for the issuance of letters of credit. The 2010 Revolving Credit Agreement also provides for an incremental term loan facility in an aggregate amount of up to $500,000. The 2010 Revolving Credit Facility matures on May 11, 2015.

The undrawn commitment amount under the 2010 Revolving Credit Facility on June 30, 2010 totals $496,291 after giving effect to letters of credit totaling $3,709.

Prior to the termination of the 2008 Revolving Credit Facility, the Company made payments of $92,261 on this facility in the first quarter of 2010, which represented full payment on all outstanding borrowings under the facility. During the three and six months ended June 30, 2009, the Company made payments of $102,092 and $134,185, respectively, on the 2008 Revolving Credit Facility.

In connection with the establishment of the 2010 Revolving Credit Facility, the Company incurred approximately $4,615 of new deferred financing costs. During the second quarter of 2010, the Company expensed $2,252 of the $4,287 of deferred financing costs that remained outstanding at the time of the termination of the 2008 Revolving Credit Facility. Therefore, deferred financing costs associated with the 2010 Revolving Credit Facility total $6,651 and are being amortized over five years.

13

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s borrowings under the 2010 Revolving Credit Facility will 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 greatest of (a) the prime rate of the Administrative Agent, (b) the federal funds effective rate plus 0.5% and (c) the one-month adjusted LIBO rate (by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars) plus 1.0% and (ii) an applicable percentage of 1.50%, 1.75% or 2.00%, depending on the Company’s corporate credit rating; or

•  an adjusted LIBO rate generally defined as the sum of (i) the product of (a) the LIBO rate (by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars) in effect for the relevant interest period and (b) a fraction, the numerator of which is one and the denominator of which is one minus certain maximum statutory reserves for eurocurrency liabilities and (ii) an applicable percentage of 2.50%, 2.75% or 3.00%, depending on the Company’s corporate credit rating.

If the Company makes any borrowings under the incremental term loan facility, those borrowings will bear interest at annual rates established at the time of the borrowings.

The Company is required to pay an unused commitment fee on the difference between committed amounts and amounts actually borrowed under the 2010 Revolving Credit Facility equal to an applicable percentage of 0.375% or 0.5% per annum, depending on the Company’s corporate credit rating. 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 an applicable percentage of 2.5%, 2.75% or 3.0% per annum, depending on the Company’s corporate credit rating.

The 2010 Revolving Credit Facility contains customary representations and warranties and affirmative covenants. The 2010 Revolving Credit Facility also contains certain covenants that restrict, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, permit certain liens to exist on its respective assets, enter into sale and leaseback transactions, make investments, loans and advances, undertake acquisitions, mergers and consolidations, sell assets, make dividend and other restricted payments, enter into transactions with affiliates, prepay, redeem or repurchase other indebtedness and make capital expenditures, in each case, subject to certain exceptions.

The 2010 Revolving Credit Facility also requires the Company to meet the following financial tests:

•  maintenance of a minimum consolidated EBITDA to consolidated interest expense ratio for periods of four consecutive fiscal quarters of 3.50 to 1; and

•  maintenance of a maximum total funded debt to consolidated EBITDA ratio of 3.0 to 1.

The 2010 Revolving Credit Facility also contains customary events of default, including events of default based on failures to make payments as and when required under the 2010 Revolving Credit Facility, breaches of representations, warranties and covenants, defaults under certain other material indebtedness, the occurrence of certain bankruptcy and insolvency events related to the Company and certain of its subsidiaries, the levy of judgments in excess of specified amounts, the occurrence of certain ERISA events, certain impairments to the guarantees of the Company’s obligations under the credit facility, certain impairments of the security interests granted by the Company and the subsidiary guarantors in connection with the 2010 Revolving Credit Facility and a change in control.

The Company’s obligations under the 2010 Revolving Credit Facility are guaranteed by each of the Company’s domestic subsidiaries and secured by pledges by the Company of certain of its assets, including equity interests in certain of the Company’s subsidiaries and intellectual property.

Senior Secured Term Facility

In connection with the acquisition of Alpharma on December 29, 2008, the Company entered into a $200,000 Senior Secured Term Facility with a maturity date of December 28, 2012. The Company borrowed $200,000 under

14

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Senior Secured Term Facility and received proceeds of $192,000, net of the discount at issuance. During the three and six months ended June 30, 2009, the Company made payments of $49,886 and $65,815, respectively, on its Senior Secured Term Facility. During the fourth quarter of 2009, the Company completed its repayment obligations under the facility.

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 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. During the first quarter of 2009, the Company paid $385,227 to redeem the Alpharma Convertible Senior Notes.

9.   Commitments and Contingencies

Intellectual Property Matters

Skelaxin^®

Eon Labs, Inc. (“Eon Labs”), CorePharma and Mutual Pharmaceutical Company, Inc. (“Mutual”) each filed an Abbreviated New Drug Application (“ANDA”) with the U.S. Food and Drug Administration (“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 CorePharma each filed Paragraph IV certifications against the ‘128 and ‘102 patents alleging non-infringement, invalidity and unenforceability of those patents. Mutual has filed a Paragraph IV certification against the ‘102 patent alleging non-infringement 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 CorePharma 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 CorePharma case. In January 2008, the Company entered into an agreement with CorePharma providing it with, among other things, 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 CorePharma submitted a joint stipulation of dismissal without prejudice. On January 15, 2008, the Court entered an order dismissing the case without prejudice.

The Company believes that CorePharma began shipping a generic form of Skelaxin^® in early April 2010. On April 13, 2010, the Company brought suit against CorePharma in the U.S. District Court for New Jersey asserting

15

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

certain of the Company’s rights under the January 2008 agreement. The parties appeared at a District Court hearing on April 14, 2010, at which the Company sought, and was denied, a temporary restraining order (“TRO”) against CorePharma to prevent further sales of generic product. On May 6, 2010, the Court granted a preliminary injunction against CorePharma. On May 19, 2010, the Court entered a consent order from the parties vacating the preliminary injunction, and CorePharma resumed selling the authorized generic form of Skelaxin^®.

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 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 from January 10, 2005 to April 30, 2007, and the stay expired in early August 2009. 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 May 8, 2008, Eon Labs filed amended pleadings. On May 22, 2008, the Company moved to dismiss certain defenses and counterclaims. On June 6, 2008, the Company responded to Eon Labs’ motion for summary judgment on the issue of validity. 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 order also allowed Eon Labs to pursue its claim for exceptional case, and on March 31, 2009, Eon Labs filed its motion for this purpose, which was opposed by the Company and Elan Pharmaceuticals, Inc. (“Elan”). Eon Labs has replied and the motion remains pending before the Court. On May 20, 2009, Eon Labs asked for entry of final judgment, and on June 4, 2009, the Court granted this request. On July 1, 2009, the Company filed a notice of appeal to the Court of Appeals for the Federal Circuit of the Court’s entry of judgment. On July 2, 2009, Elan did the same. The appeals were docketed by the Federal Circuit on July 10, 2009. In late July 2009, the companies moved to dismiss the appeals for lack of jurisdiction. On September 30, 2009, the Federal Circuit denied the motions to dismiss. The Company and Elan filed opening briefs on November 23, 2009. Eon filed its opposition brief on January 19, 2010. The Company and Elan filed reply briefs on February 19, 2010. Oral argument of the appeal was heard by the Federal Circuit on May 7, 2010. On August 2, 2010, the Federal Circuit affirmed the district court’s grant of summary judgment and vacated the order against Elan for lack of subject matter jurisdiction. Any petition for a rehearing is due September 1, 2010. The Company 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^® that is 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, which 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 31, 2010, Sandoz received approval from the FDA to commercialize a generic product containing metaxalone. On April 1, 2010, the Company sought, and the United States District Court of New Jersey granted, a TRO enjoining Sandoz from using, offering to sell, or selling within the United States its generic metaxalone

16

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

product. On April 9, 2010, the TRO was vacated. On April 14 and May 5, 2010, the District Court heard the Company’s arguments in support of a preliminary injunction against Sandoz. The preliminary injunction motion was denied on May 17, 2010. On June 1, 2010, the Company filed an amended complaint to include claims for monetary damages. On June 15, 2010, Sandoz answered the amended complaint and filed amended counterclaims. The Company’s request for a jury trial was also granted and the trial date for the patent litigation against Sandoz is set for September 7, 2010.

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 filed responses and 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.

Avinza^®

Actavis, Inc. (“Actavis”) filed an ANDA with the FDA seeking permission to market generic versions of Avinza^® at the 30 mg, 45 mg, 60 mg and 120 mg dosages. 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 U.S. 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.

In November 2009, Actavis sent the Company and EPI a second Paragraph IV certification adding the 75 mg and 90 mg dosages. The Company and EPI initiated another suit against Actavis in New Jersey on December 15, 2009. On January 12, 2010, Actavis answered the complaint and filed counterclaims of non-infringement and invalidity. On February 23, 2010, this case was consolidated with the earlier-initiated suit.

17

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Court held a claim construction hearing on March 19, 2010 and issued a ruling. No trial date has been set. The close of all discovery is currently set for December 17, 2010.

Sandoz filed an ANDA with the FDA seeking permission to market generic versions of Avinza^® at the 30 mg and 120 mg dosages and provided the Company with a Paragraph IV certification challenging the validity and alleging non-infringement of the ‘339 patent. The Company and EPI filed suit on July 21, 2009 in the U.S. 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 Sandoz provided the Company with an automatic stay of FDA approval of Sandoz’s ANDA for up to 30 months (unless the patent is held invalid, unenforceable or not infringed) from no earlier than June 11, 2009. Sandoz subsequently sent the Company and EPI a second Paragraph IV certification adding the 45 mg, 60 mg, 75 mg and 90 mg dosages. The Company and EPI initiated another suit against Sandoz in New Jersey on September 1, 2009. On October 2, 2009, Sandoz answered the complaints and filed counterclaims of non-infringement and invalidity. The Company and EPI filed a reply on October 22, 2009. The two cases were consolidated on January 4, 2010. The parties are in the midst of fact discovery. A claim construction hearing is set for September 27, 2010 and trial is currently set for May 9, 2011.

The Company intends to vigorously defend its rights under the ‘339 patent. Net sales of Avinza^® were $131,148 in 2009 and $24,740 and $47,936, respectively, in the three and six months ended June 30, 2010. As of June 30, 2010, the Company had net intangible assets related to Avinza^® of $201,213. If a generic form of Avinza^® enters the market or if the Company’s current estimates regarding future cash flows adversely change, 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.

EpiPen^®

On November 11, 2008, the Company was granted U.S. Patent 7,449,012 (the ‘‘ ‘012 patent”) covering the next generation autoinjector (“NGA”) for use with epinephrine to be sold under the EpiPen^® brand name. The ‘012 patent expires September 11, 2025. The ‘012 patent was listed in FDA’s Orange Book on July 17, 2009 under the EpiPen^® NDA. On July 21, 2009, the Company received a Paragraph IV certification from Teva Pharmaceutical Industries Ltd. (“Teva”) giving notice that it had filed an ANDA to commercialize an epinephrine injectable product and challenging the validity and alleging non-infringement of the ’012 patent. On August 28, 2009, the Company filed suit against Teva in the U.S. District Court for the District of Delaware to defend its rights under the ‘012 patent. On October 21, 2009, Teva filed its answer asserting non-infringement and invalidity of the ‘012 patent.

On June 4, 2010, the Company received a Paragraph IV certification from Sandoz giving notice that it had filed an ANDA to commercialize an epinephrine injectable product and challenging the validity and alleging non-infringement of the ‘012 patent. On July 14, 2010, the Company filed suit against Sandoz in the U.S. District Court for District of New Jersey to defend its rights under the ‘012 patent.

Embeda^®

On November 17, 2008, Alpharma filed a declaratory judgment action against Purdue Pharma L.P. (“Purdue”) in the U.S. District Court for the Western District of Virginia, seeking an order declaring that nine of Purdue’s patents are invalid and/or would not be infringed by the commercialization of Embeda^®. The complaint was served on March 12, 2009, and on April 22, 2009, Purdue filed a motion requesting that the court dismiss the action for lack of subject matter jurisdiction or, alternatively, to transfer the action to the District of Connecticut. On July 9, 2009, the court denied Purdue’s motion to dismiss or transfer. On August 6, 2009, Purdue filed its answer and counterclaims, and filed a motion for an order certifying the court’s July 9 order for immediate appeal. On August 26, 2009, the court denied Purdue’s motion to certify for immediate appeal and issued an order scheduling certain discovery and hearing dates. On December 4, 2009, the Company was added as a plaintiff to the lawsuit. On December 23, 2009, Purdue delivered an unconditional and irrevocable covenant not to sue the Company (or any of its affiliates, subsidiaries, parents, divisions, successors and assigns) for infringement of eight of the nine patents in

18

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the suit. On that day, the parties also filed a Stipulation with the Court to dismiss the lawsuit with prejudice with respect to these eight patents. The only patent remaining in the case was U.S. Patent No. 6,696,088 (the ‘‘ ‘088 patent”). On February 4, 2010, after extensive briefing, the Court held a claim construction hearing.

On February 9, 2010, the United States Patent & Trademark Office issued U.S. Patent No. 7,658,939 (“the ‘939 patent”) to Purdue. The ‘939 patent is a continuation of the ‘088 patent. On the same day, Purdue filed a patent infringement action against the Company in the U.S. District Court for the District of New Jersey, alleging infringement of the ‘939 patent by the commercialization of Embeda^®. On February 10, 2010, the Company filed a motion in the U.S. District Court for the Western District of Virginia seeking leave to amend its complaint to add declaratory judgment counts of non-infringement and invalidity against the ‘939 patent.

On March 19, 2010, the Court in the Western District of Virginia granted the Company’s motion for leave to amend its complaint adding the ‘939 patent to the existing litigation. A trial date was set for August 18, 2010, for both the ’088 and the ‘939 patents. On April 2, 2010, Purdue’s action brought in the U.S. District Court for the District of New Jersey was dismissed. On June 22, 2010, the Court issued its opinion and order regarding claim construction.

On July 23, 2010, the Company and Alpharma (collectively “the King Parties”) entered into a settlement agreement with Purdue. Pursuant to the terms of the agreement, Purdue agreed not to sue the King Parties or their affiliates in the United States with regard to the manufacture, use or sale of Embeda^®. The King Parties are obligated to pay to Purdue an up-front payment, which is accrued as of June 30, 2010, and a quarterly royalty on net sales of Embeda^® for the duration of any valid claims in the ’088 and ‘939 patents, or other patents in the same family that cover the Embeda^® product beginning on August 1, 2010. In addition, the King Parties agreed not to challenge certain of Purdue’s patents, including the ’088 and ‘939 patents, as they may relate to Embeda^®. The agreement also obligates the parties to dismiss the civil action pending in the District Court for the Western District of Virginia.

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 U.S. 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, except for the Erie, Oswego and Schenectady County cases, which were removed in October 2006 and remanded to the state of New York Supreme Court in Erie County, New York state court in September 2007. Motions to dismiss were granted in part and denied in part for all defendants in all NYC and county cases pending in the MDL Court. 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. A hearing on these motions to dismiss occurred on March 15, 2010, and the Court has taken the motions under advisement. It is not anticipated that any trials involving the Company will be set in any of these cases in 2010. On January 27, 2010, the MDL Court granted partial summary judgment for the plaintiffs in a case involving other pharmaceutical company defendants.

In January 2005, the State of Alabama filed a lawsuit in the Circuit Court for Montgomery County, Alabama against 79 defendants, including the Company and Monarch. The four causes of action center on the allegation that

19

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

all defendants fraudulently inflated the AWPs of their products. A motion to dismiss was filed and denied by the Court, but the Court required 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. These defendants appealed their verdicts. On October 16, 2009, the Alabama Supreme Court reversed all of the verdicts against AstraZeneca, Novartis and SmithKline Beecham and rendered judgment in favor of these companies. Alabama filed a petition to rehear in the Alabama Supreme Court, which was denied in January 2010. Trials scheduled to begin in 2010 have been stayed or continued pending a ruling on the Sandoz appeal. A trial against Watson Pharmaceuticals, Inc. in June 2009 resulted in a deadlocked jury. In April 2009, the Court established various trial dates for all defendants. The Company is scheduled for trial in January 2011 but other scheduled cases have been continued or reset for later dates following the Alabama Supreme Court decision.

In October 2005, the State of Mississippi filed a lawsuit in the Chancery Court of Rankin County, Mississippi 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, which was instituted in October 2007. The Company filed a motion to dismiss the Iowa complaint. On February 20, 2008, the Iowa case was transferred to the MDL Court. The relief sought in all of these cases is similar to the relief sought in the NYC lawsuit. The MDL Court 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.

See also “AWP Litigation” under the section “Alpharma Matters” below.

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 the U.S. District Court for the Eastern District of 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, was originally a defendant in numerous cases. These lawsuits were 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”), was 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

20

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. All of the cases involving King Research and Development have been dismissed, except for two. The Company expects these cases to be dismissed as well.

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 nearly all 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 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.

Hormone Replacement Therapy

Currently, the Company is named as a defendant by 22 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 for lack of product identification. The remaining 22 lawsuits were filed in Alabama, Arkansas, California, Missouri, Pennsylvania, Ohio, Florida, Maryland, Mississippi and Minnesota. A federal multidistrict litigation court has been established in the U.S. District Court for the Eastern District of Arkansas, Western Division, 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/Pfizer/Upjohn. The trials against Pfizer/Wyeth have resulted in verdicts for and against Pfizer/Wyeth, with several verdicts against Wyeth reversed on post-trial motions. Pfizer/Wyeth lost appeals in the Eighth Circuit from an adverse jury verdict in the federal multidistrict litigation court and in the Pennsylvania Court of Appeals. Pfizer/Upjohn has lost several jury verdicts. One of these verdicts was later reversed, and one other was partially reversed. 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 Matters

The following matters relate to our Alpharma subsidiary and/or certain of its subsidiaries.

21

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Department of Justice Investigation

As previously disclosed, Alpharma, acquired by the Company in December 2008, received a subpoena from the U.S. Department of Justice (“DOJ”) in February 2007 in connection with its investigation of alleged improper sales and marketing practices related to the sale of the pain medicine Kadian^®. The Company divested Alpharma’s Kadian^® assets to Actavis LLC simultaneously with the closing of the acquisition of Alpharma.

In September 2009, the Company reached an agreement in principle with the U.S. Attorney’s Office and DOJ which would resolve this investigation. The Company recorded a reserve of $42,500 in connection with this development in the third quarter of 2009 as an adjustment to the goodwill associated with the purchase of Alpharma. Under the terms of the agreement in principle, the Company began accruing interest on October 1, 2009 at a rate of 3.125% per annum. During the first quarter of 2010, Alpharma entered into a definitive settlement agreement and paid $42,500 plus interest of $648 to the DOJ, of which $8,876 plus interest of $161 is related to certain states.

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). These lawsuits were filed beginning on December 16, 2003. Alpharma provided notice to its insurance carriers and its primary insurance carriers have 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. 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. Further, 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. 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 case was tried against the poultry company co-defendants in April and May 2009, resulting in a verdict for the defendants. In July 2009, the plaintiffs filed a notice of appeal of that verdict. It is expected that the appeal of the case will be heard in 2010. No additional cases have been set for trial. Subsequent cases may 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 $23,606 in 2009 and approximately $7,059 and $14,235, respectively, in the three and six months ended June 30, 2010.

22

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 courts:

•  Superior Court for the State of Alaska, Third Judicial District of Anchorage;

•  Second Judicial Court in and for Leon County, Florida;

•  Circuit Court of Cook County, Illinois, County Department, Chancery Division; and

•  Court of Common Pleas, for the Fifth Judicial District, State of South Carolina, County of Richland.

In addition, Alpharma’s New York and Iowa cases are pending in the MDL Court discussed above. Mississippi and Texas cases against Alpharma were dismissed without prejudice. The Company expects the Florida case will be dismissed voluntarily.

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, declaratory and injunctive relief, and punitive damages, 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.

Environmental Matters

In 2006, the Company contacted the U.S. Environmental Protection Agency (“EPA”) to report past deviations from the requirements of the state conditional major air emissions operating permit relating to the Company’s operation of certain pollution control equipment at its Bristol, Tennessee facility. In May 2009, the Company received an information request from EPA pursuant to section 114 of the Clean Air Act regarding the Company’s historic air emissions and its operation of certain pollution control equipment (“Information Request”). In June 2009, the Company provided EPA with its initial response to the Information Request. The Company has subsequently provided additional information to, and met with, EPA and the Tennessee Department of Environment and Conservation. 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.

10.   Accounting Developments

In April 2010, the FASB issued a standard that provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for certain research and development transactions. Under this new standard, a company can recognize as revenue consideration that is contingent upon achievement of a milestone in the period in which it is achieved, if the milestone meets all criteria to be considered substantive. This standard will be effective for us on a prospective basis for periods beginning after January 1, 2011. The Company does not anticipate the standard will have a material effect on its financial statements.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of financial assets. This amendment requires greater transparency and additional disclosures for transfers of financial assets and the entity’s continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, this amendment eliminates the concept of a qualifying special-purpose entity (“QSPE”). This amendment is effective for financial statements issued for fiscal years beginning after November 15, 2009. The Company’s adoption of this amendment did not have a material effect on its financial statements.

In June 2009, the FASB also issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”). The elimination of the concept of a QSPE, as discussed above,

23

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

removes the exception from applying the consolidation guidance within this amendment. This amendment requires an enterprise to perform a qualitative analysis when determining whether or not it must consolidate a VIE. The amendment also requires an enterprise to continuously reassess whether it must consolidate a VIE. Additionally, the amendment requires enhanced disclosures about an enterprise’s involvement with VIEs and any significant change in risk exposure due to that involvement, as well as how its involvement with VIEs impacts the enterprise’s financial statements. Finally, an enterprise will be required to disclose significant judgments and assumptions used to determine whether or not to consolidate a VIE. This amendment is effective for financial statements issued for fiscal years beginning after November 15, 2009. The Company’s adoption of this amendment did not have a material effect on its financial statements.

11.   Income Taxes

During the three months and six months ended June 30, 2010, the Company’s effective income tax rate was 39.8% and 53.1%, respectively. During the three months and six months ended June 30, 2009, the Company’s effective income tax was 43.6% and 46.1%, respectively. These rates are higher than the statutory rate of 35% primarily due to losses from foreign subsidiaries with no tax benefit, taxes related to stock compensation and state taxes.

12.   Segment Information

The Company’s business is classified into four reportable segments: branded prescription pharmaceuticals, Alpharma animal health, Meridian Auto-Injector, and royalties and 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 Alpharma 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 in the Meridian Auto-Injector segment 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. Royalties and other primarily includes 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 and segment profit. Segment profit is defined as operating income (loss) before other expenses such as depreciation, amortization, restructuring charges and expenses associated with the acquisition of Alpharma. Additionally, segment profit does not include general corporate expenses, which are included in “Corporate costs” in the table below. Prior year results have been conformed to the current presentation.

24

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents selected information for the Company’s reportable segments for the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Total revenues:
Branded prescription pharmaceuticals(1)	$	162,243		$	275,110		$	403,784		$	552,814
Alpharma Animal Health		84,673			82,824			165,987			162,659
Meridian Auto-Injector		82,702			72,091			132,529			128,698
Royalties and other		42,415			15,739			51,059			31,886
Eliminations		(1,130	)		(776	)		(1,601	)		(2,012	)
Total revenues	$	370,903		$	444,988		$	751,758		$	874,045
Segment profit:
Branded prescription pharmaceuticals(1)(2)	$	8,598		$	117,656		$	71,775		$	222,973
Alpharma Animal Health(2)		21,816			5,126			39,279			5,159
Meridian Auto-Injector		51,096			38,224			74,937			65,109
Royalties and other		28,346			13,640			35,715			26,858
Corporate costs		(22,983	)		(27,584	)		(49,831	)		(60,709	)
Acquisition related costs		—			(2,944	)		—			(6,733	)
Depreciation and amortization		(53,903	)		(52,862	)		(111,178	)		(106,211	)
Restructuring charges		(4,852	)		(1,475	)		(5,114	)		(49,525	)
Other income (expense)		1,752			(22,498	)		(7,650	)		(46,415	)
Income before income taxes	$	29,870		$	67,283		$	47,933		$	50,506

(1)

Branded prescription pharmaceuticals revenues and segment profit does not include the revenue recognized related to the Company’s agreement with CorePharma providing it with a license to launch an authorized generic version of Skelaxin®. In accordance with the agreement, the Company receives a fee based on CorePharma’s gross profit, as defined in the agreement, of the authorized generic product. This revenue is recorded in royalties and other.

(2)

The segment profit for branded prescription pharmaceuticals and Alpharma animal health for the three months ended June 30, 2009 includes charges of $2,440 and $13,618, respectively, related to the mark up of inventory upon acquisition of Alpharma, which the Company recognized as the related inventory was sold. The segment profit for branded prescription pharmaceuticals and Alpharma animal health for the six months ended June 30, 2009 includes charges of $3,455 and $34,128, respectively.

25

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents branded prescription pharmaceutical revenues by the Company’s target markets:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Total revenues:
Neuroscience	$	77,906	$	170,853	$	233,603	$	327,954
Hospital		40,005		52,698		79,960		104,657
Legacy:
Cardiovascular/metabolic		27,626		32,818		55,776		77,786
Other		16,706		18,741		34,445		42,417
Branded prescription pharmaceutical revenues	$	162,243	$	275,110	$	403,784	$	552,814

13.   Restructuring Activities

Second Quarter of 2010 Action

During the second quarter of 2010, management completed an evaluation of the commercial operations organization within the branded prescription pharmaceuticals segment. As a result of this evaluation, the Company made changes in the management of its commercial operations organization, and a number of employees departed the Company, including the Chief Commercial Officer. The Company also eliminated certain sales territories to better focus on higher potential territories.

The Company has estimated that the total costs associated with this restructuring plan will be approximately $4,946 for severance pay and other employee related costs, which include approximately $1,119 of cash expenditures paid in the second quarter of 2010. The remaining severance pay is expected to be fully paid in the third quarter of 2010.

The restructuring charges include employee termination costs associated with a workforce reduction of approximately 30 employees, all of which were members of the commercial operations organization.

First Quarter of 2009 Action

On January 20, 2009, the U.S. District Court for the Eastern District of New York issued an order ruling invalid two patents relating to the Company’s product Skelaxin^®. In June 2009, the Court entered judgment against the Company. In August 2010, the Court of Appeals for the Federal Circuit affirmed the actions of the District Court. Generic versions of Skelaxin^® entered the market early in the second quarter of 2010. The Company’s sales of Skelaxin^® have declined significantly and are expected to continue to decline as a result of generic competition. For additional information regarding Skelaxin^® litigation, please see Note 9.

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. Based on an analysis of the Company’s strategic needs, this initiative included 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 incurred restructuring charges of approximately $50,000 associated with this restructuring plan related to severance pay and other employee termination expenses. Almost all of the restructuring charges were cash expenditures and were substantially paid in the second quarter of 2009. The remaining severance pay and other employee termination costs are expected to be fully paid by the third quarter of 2010.

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

26

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 $70,928 associated with this restructuring plan, $64,516 of which was included in the liabilities assumed in the purchase price of Alpharma. The restructuring plan includes employee termination costs associated with a workforce reduction of 250 employees. The restructuring plan also includes contract termination costs of $16,458 as a result of the acquisition. All employee termination costs are expected to be paid by the end of 2012. All contract termination costs are expected to be paid by the end of 2018.

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 2011. As a result of these steps, the Company incurred restructuring charges totaling approximately $16,500, of which approximately $12,000 are associated with accelerated depreciation and approximately $4,500 are associated with employee termination costs. The employee termination costs are expected to be fully paid in the first quarter of 2011.

A summary of the types of costs accrued and incurred are summarized below:

	Accrued										Accrued
	Balance at		Income								Balance at
	December 31,		Statement			Cash		Non-Cash			June 30,
	2009		Impact			Payments		Costs			2010
Second quarter of 2010 Action
Employee separation payments	$	—	$	4,900		$	1,119	$	1,640		$	2,141
Contract termination		—		46			—		—			46
Third quarter of 2009 action
Employee separation payments		1,080		59			1,129		—			10
First quarter of 2009 action
Employee separation payments		314		23			303		—			34
Accelerated depreciation(1)		—		(45	)		—		(45	)		—
Fourth quarter of 2008 action
Employee separation payments		16,177		(79	)		8,399		(576	)		8,275
Contract termination		9,193		265			2,700		(463	)		7,221
Other		182		(182	)		—		—			—
Third quarter of 2006 action
Employee separation payments		1,185		82			22		12			1,233
	$	28,131	$	5,069		$	13,672	$	568		$	18,960

(1) Included in depreciation and amortization on the Condensed Consolidated Statements of Operations.

The restructuring charges in 2010 relate primarily to the branded prescription pharmaceutical segment.

14.   Stock-Based Compensation

During the second quarter of 2010, the Company granted 9,500 RSAs to certain employees, pursuant to its Incentive Plan, and 145,809 restricted stock units (“RSUs”) were granted to non-employee directors.

27

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the first quarter of 2010, the Company granted to certain employees, pursuant to its Incentive Plan, 650,370 RSAs, 452,530 LPUs with a one-year performance cycle, 193,930 LPUs with a three-year performance cycle, 16,550 RSUs and 1,770,260 nonqualified stock options.

The RSAs are grants of shares of common stock restricted from sale or transfer for three years from grant date.

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 for 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 the date of the grant, unless a deferral election is made in advance.

The 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. LPUs with a one-year performance cycle, followed by a two-year restriction period, will be earned based on 2010 operating targets. LPUs with a three-year performance cycle will be earned based on market-related performance targets over the years 2010 through 2012. At the end of the applicable performance period, the number of shares of common stock awarded is either 0% or between 50% and 200% of a target number. The final performance percentage on which the number of shares of common stock issued is based, considering performance metrics established for the performance period, will be determined by the Company’s Board of Directors or a committee of the Board at its sole discretion.

The nonqualified stock options were granted at option prices equal to the fair market value of the common stock at the date of grant and vest approximately in one-third increments on each of the first three anniversaries of the grant date.

15.   Guarantor Financial Statements

Each of the Company’s U.S. subsidiaries (the “Guarantor Subsidiaries”) guarantees on a full, unconditional and joint and several basis the Company’s performance under the $400,000 aggregate principal amount of the Convertible Senior Notes.

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 Convertible Senior 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.

28

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
(Unaudited)

	June 30, 2010														December 31, 2009
							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	$	303,425		$	40,637		$	229,000		$	—		$	573,062	$	277,603		$	30,779		$	236,930		$	—		$	545,312
Investments in debt securities		16,346			—			—			—			16,346		29,258			—			—			—			29,258
Marketable securities		1,022			—			—			—			1,022		2,100			—			—			—			2,100
Accounts receivable, net		29,174			143,753			36,658			—			209,585		2,467			174,713			33,076			—			210,256
Inventories		44,533			120,651			32,600			(2,170	)		195,614		43,834			111,242			28,642			(1,427	)		182,291
Deferred income tax assets		31,296			40,739			459			—			72,494		30,828			52,597			250			—			83,675
Income taxes receivable		13,147			472			(278	)		—			13,341		17,983			(1,865	)		(27	)		—			16,091
Prepaid expenses and other current assets		11,565			16,637			1,121			—			29,323		14,972			44,384			1,504			—			60,860
Total current assets		450,508			362,889			299,560			(2,170	)		1,110,787		419,045			411,850			300,375			(1,427	)		1,129,843
Property, plant and equipment, net		143,290			225,840			8,168			—			377,298		148,399			234,233			9,207			—			391,839
Intangible assets, net		—			686,452			33,410			—			719,862		—			759,583			34,556			—			794,139
Goodwill		—			466,283			—			—			466,283		—			467,613			—			—			467,613
Deferred income tax assets		(29,626	)		288,633			572			—			259,579		(26,551	)		290,104			609			—			264,162
Investments in debt securities		169,777			—			—			—			169,777		218,608			—			—			—			218,608
Other assets		37,232			21,206			310			—			58,748		32,368			23,795			333			—			56,496
Assets held for sale		—			5,890			—			—			5,890		—			5,890			—			—			5,890
Investments in subsidiaries		3,038,414			873,349			(115	)		(3,911,648	)		—		3,027,491			938,020			(88	)		(3,965,423	)		—
Total assets	$	3,809,595		$	2,930,542		$	341,905		$	(3,913,818	)	$	3,168,224	$	3,819,360		$	3,131,088		$	344,992		$	(3,966,850	)	$	3,328,590
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,772		$	41,836		$	6,568		$	—		$	74,176	$	27,377		$	53,966		$	5,349		$	—		$	86,692
Accrued expenses		24,281			196,218			8,248			—			228,747		31,541			279,662			9,789			—			320,992
Short-term debt		—			—			3,506			—			3,506		—			—			3,662			—			3,662
Current portion of long-term debt		—			—			—			—			—		85,550			—			—			—			85,550
Total current liabilities		50,053			238,054			18,322			—			306,429		144,468			333,628			18,800			—			496,896
Long-term debt		341,735			—			—			—			341,735		339,016			—			—			—			339,016
Other liabilities		67,508			45,764			13,332			—			126,604		59,884			48,579			14,908			—			123,371
Intercompany (receivable) payable		956,843			(998,019	)		41,176			—			—		906,685			(932,193	)		25,508			—			—
Total liabilities		1,416,139			(714,201	)		72,830			—			774,768		1,450,053			(549,986	)		59,216			—			959,283
Shareholders’ equity		2,393,456			3,644,743			269,075			(3,913,818	)		2,393,456		2,369,307			3,681,074			285,776			(3,966,850	)		2,369,307
Total liabilities and shareholders’ equity	$	3,809,595		$	2,930,542		$	341,905		$	(3,913,818	)	$	3,168,224	$	3,819,360		$	3,131,088		$	344,992		$	(3,966,850	)	$	3,328,590

29

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

	Three Months Ended June 30, 2010															Three Months Ended June 30, 2009
							Non-															Non-
				Guarantor			Guarantor						King						Guarantor			Guarantor						King
	King			Subsidiaries			Subsidiaries			Eliminations			Consolidated			King			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Net sales	$	75,045		$	302,432		$	46,257		$	(90,881	)	$	332,853		$	83,593		$	528,701		$	39,362		$	(221,357	)	$	430,299
Royalties		25,630			12,420			—			—			38,050			(20	)		14,709			—			—			14,689
Total revenues		100,675			314,852			46,257			(90,881	)		370,903			83,573			543,410			39,362			(221,357	)		444,988
Operating costs and expenses:
Cost of revenues		32,293			151,225			26,142			(90,633	)		119,027			31,163			320,858			26,465			(222,393	)		156,093
Selling, general and administrative		49,360			74,253			8,216			—			131,829			46,453			70,101			7,021			—			123,575
Research and development		2,720			29,493			961			—			33,174			985			17,835			2,382			—			21,202
Depreciation and amortization		5,527			47,484			892			—			53,903			4,793			46,763			1,306			—			52,862
Restructuring charges		2,754			2,098			—			—			4,852			803			672			—			—			1,475
Total operating costs and expenses		92,654			304,553			36,211			(90,633	)		342,785			84,197			456,229			37,174			(222,393	)		355,207
Operating income (loss)		8,021			10,299			10,046			(248	)		28,118			(624	)		87,181			2,188			1,036			89,781
Other income (expense):
Interest income		361			16			110			—			487			979			10			517			—			1,506
Interest expense		(6,818	)		(612	)		(49	)		—			(7,479	)		(26,402	)		(1,116	)		(74	)		—			(27,592	)
Gain on Kadian®		—			12,500			—			—			12,500			—			—			—			—			—
Gain (loss) on investments		249			—			—			—			249			(524	)		—			—			—			(524	)
Loss on early extinguishment of debt		(2,252	)		—			—			—			(2,252	)		—			—			—			—			—
Other, net		(145	)		(334	)		(1,274	)		—			(1,753	)		482			2,046			1,584			—			4,112
Equity in earnings (loss) of subsidiaries		19,343			2,641			(7	)		(21,977	)		—			58,932			4,238			60			(63,230	)		—
Intercompany interest income (expense)		(2,309	)		11,139			(8,830	)		—			—			(1,296	)		5,725			(4,429	)		—			—
Total other income (expense)		8,429			25,350			(10,050	)		(21,977	)		1,752			32,171			10,903			(2,342	)		(63,230	)		(22,498	)
Income (loss) before income taxes		16,450			35,649			(4	)		(22,225	)		29,870			31,547			98,084			(154	)		(62,194	)		67,283
Income tax expense (benefit)		(1,538	)		12,564			856			—			11,882			(6,388	)		35,852			(116	)		—			29,348
Net income (loss)	$	17,988		$	23,085		$	(860	)	$	(22,225	)	$	17,988		$	37,935		$	62,232		$	(38	)	$	(62,194	)	$	37,935

30

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS — (Continued)
(In thousands)
(Unaudited)

	Six Months Ended June 30, 2010															Six Months Ended June 30, 2009
							Non-															Non-
				Guarantor			Guarantor						King						Guarantor			Guarantor						King
	King			Subsidiaries			Subsidiaries			Eliminations			Consolidated			King			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues:
Net sales	$	167,996		$	659,226		$	83,699		$	(204,990	)	$	705,931		$	178,775		$	926,057		$	69,839		$	(330,040	)	$	844,631
Royalties		25,617			20,210			—			—			45,827			(53	)		29,467			—			—			29,414
Total revenues		193,613			679,436			83,699			(204,990	)		751,758			178,722			955,524			69,839			(330,040	)		874,045
Operating costs and expenses:
Cost of revenues		52,030			348,800			48,186			(202,935	)		246,081			58,093			530,253			49,566			(330,880	)		307,032
Selling, general and administrative		99,124			157,091			16,089			—			272,304			105,872			146,320			13,706			—			265,898
Research and development		4,904			54,207			2,387			—			61,498			2,594			42,162			3,702			—			48,458
Depreciation and amortization		11,701			97,684			1,793			—			111,178			9,650			94,709			1,852			—			106,211
Restructuring charges		2,756			2,358			—			—			5,114			14,307			35,218			—			—			49,525
Total operating costs and expenses		170,515			660,140			68,455			(202,935	)		696,175			190,516			848,662			68,826			(330,880	)		777,124
Operating income (loss)		23,098			19,296			15,244			(2,055	)		55,583			(11,794	)		106,862			1,013			840			96,921
Other income (expense):
Interest income		640			66			190			—			896			2,428			277			1,589			—			4,294
Interest expense		(14,519	)		(1,600	)		(96	)		—			(16,215	)		(48,468	)		(2,077	)		(150	)		—			(50,695	)
Gain on Kadian®		—			12,500			—			—			12,500			—			—			—			—			—
Gain (loss) on investments		(623	)		—			—			—			(623	)		(1,347	)		—			—			—			(1,347	)
Loss on early extinguishment of debt		(2,252	)		—			—			—			(2,252	)		—			—			—			—			—
Other, net		(52	)		(197	)		(1,707	)		—			(1,956	)		41			1,947			(655	)		—			1,333
Equity in earnings (loss) of subsidiaries		23,804			5,401			(27	)		(29,178	)		—			71,550			12,048			40			(83,638	)		—
Intercompany interest income (expense)		(4,402	)		18,696			(14,294	)		—			—			(2,687	)		9,473			(6,786	)		—			—
Total other income (expenses)		2,596			34,866			(15,934	)		(29,178	)		(7,650	)		21,517			21,668			(5,962	)		(83,638	)		(46,415	)
Income (loss) before income taxes		25,694			54,162			(690	)		(31,233	)		47,933			9,723			128,530			(4,949	)		(82,798	)		50,506
Income tax expense (benefit)		3,237			20,435			1,804			—			25,476			(17,490	)		41,836			(1,053	)		—			23,293
Net income (loss)	$	22,457		$	33,727		$	(2,494	)	$	(31,233	)	$	22,457		$	27,213		$	86,694		$	(3,896	)	$	(82,798	)	$	27,213

31

KING PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended June 30, 2010												Six Months Ended June 30, 2009
							Non-												Non-
				Guarantor			Guarantor			King						Guarantor			Guarantor			King
	King			Subsidiaries			Subsidiaries			Consolidated			King			Subsidiaries			Subsidiaries			Consolidated
Cash flows provided by operating activities	$	12,798		$	49,270		$	(13,193	)	$	48,875		$	(74,351	)	$	190,727		$	1,190		$	117,566
Cash flows from investing activities:
Transfers to restricted cash		(5	)		—			—			(5	)		(28	)		(27	)		—			(55	)
Proceeds from maturities and sales of investments in debt securities		67,860			—			—			67,860			32,223			—			—			32,223
Purchases of property, plant and equipment		(8,925	)		(8,058	)		(316	)		(17,299	)		(13,492	)		(5,168	)		(172	)		(18,832	)
Proceeds from sale of property and equipment		162			73			—			235			—			—			—			—
Proceeds from sale of Kadian®		—			40,000			—			40,000			—			34,800			—			34,800
Acquisition of Alpharma		—			—			—			—			(13,677	)		(56,697	)		—			(70,374	)
Forward foreign exchange contracts		—			—			—			—			—			—			(3,117	)		(3,117	)
Purchases of intellectual property and product rights		—			(1,280	)		—			(1,280	)		(1	)		(1,206	)		—			(1,207	)
Net cash provided by (used in) investing activities		59,092			30,735			(316	)		89,511			5,025			(28,298	)		(3,289	)		(26,562	)
Cash flows from financing activities:
Proceeds from exercise of stock options		963			—			—			963			1,286			—			—			1,286
Net payments related to stock-based award activity		(4,979	)		—			—			(4,979	)		(3,123	)		—			—			(3,123	)
Payments on debt		(92,261	)		—			(156	)		(92,417	)		(200,000	)		(385,227	)		—			(585,227	)
Debt issuance costs		(4,315	)		—			—			(4,315	)		(1,313	)		—			—			(1,313	)
Intercompany		54,524			(70,147	)		15,623			—			56,517			(49,179	)		(7,338	)		—
Net cash (used in) provided by financing activities		(46,068	)		(70,147	)		15,467			(100,748	)		(146,633	)		(434,406	)		(7,338	)		(588,377	)
Effect of exchange rate changes on cash		—			—			(9,888	)		(9,888	)		—			—			(647	)		(647	)
Increase (decrease) in cash and cash equivalents		25,822			9,858			(7,930	)		27,750			(215,959	)		(271,977	)		(10,084	)		(498,020	)
Cash and cash equivalents, beginning of period		277,603			30,779			236,930			545,312			401,657			289,996			248,559			940,212
Cash and cash equivalents, end of period	$	303,425		$	40,637		$	229,000		$	573,062		$	185,698		$	18,019		$	238,475		$	442,192

32

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains certain forward-looking statements that reflect management’s current views of future events and our business, financial condition and results of operations. This discussion should be read in conjunction with the following: (a) our audited consolidated financial statements and related notes which are included in our Annual Report on Form 10-K for the year ended December 31, 2009; and (b) our unaudited condensed consolidated financial statements and related notes which are included in this Quarterly Report on Form 10-Q. Please see the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, and “Risk Factors” and “A Warning About Forward-Looking Statements” in this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements.

I.   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

•  manufacturing

•  packaging

•  quality control and assurance

•  distribution

•  sales and marketing

•  business development

•  regulatory management

Branded prescription pharmaceutical products are innovative products sold under a brand name that have, or previously had, some degree of market exclusivity. Our branded prescription pharmaceuticals include neuroscience products (primarily pain medicines), hospital products, and legacy brands, all of which are for use in humans. Our auto-injector business manufactures acute care medicines for use in humans that are delivered using an auto-injector. Our Alpharma 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 to focus on these markets. Our growth in specialty markets is achieved through both acquisitions and organic growth. Our strategy focuses on growth through the acquisition of novel branded prescription pharmaceutical products and technologies that we believe complement the commercial footprint we have established in the neuroscience and hospital markets. 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 commercialized products or products in development, technologies or sales and marketing capabilities to our existing platforms or that otherwise complement our operations. We also have a commitment to research and development and advancing the products and technologies in our development pipeline.

We work to achieve organic growth by maximizing the potential of our currently marketed products through sales and marketing and product life-cycle management. By “product life-cycle management,” we mean the extension of the economic life of products, including seeking and obtaining necessary governmental approvals, by securing from the U.S. Food and Drug Administration (“FDA”) additional approved uses for our products, developing and producing different strengths, producing different package sizes, developing new dosage forms, and developing new product formulations.

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.

Through a team of internal sales professionals, our auto-injector business 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 services, emergency medical personnel and first responders and approved foreign governments.

33

The animal health products of our wholly-owned subsidiary Alpharma, LLC (“Alpharma”) are marketed through a staff of trained sales and technical service and marketing employees, many of whom are veterinarians and nutritionists. Sales offices are located in the U.S., Europe, Canada, Mexico, South America and Asia. Elsewhere, our Alpharma animal health products are sold primarily through distributors and other third-party sales companies.

Recent Developments

Acurox^® Tablets (with niacin)

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 Acura Pharmaceuticals Inc.’s (“Acura”) patented Aversion^® Technology, 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 result in the formation of a viscous gel which is intended to limit the ability to inject the drug intravenously. 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.

On June 30, 2009, the FDA issued a Complete Response Letter regarding the New Drug Application (“NDA”) for Acurox^® Tablets. The Complete Response Letter raises issues regarding the potential abuse deterrent benefits of Acurox^®. In early September 2009, we and Acura met with the FDA to discuss the Complete Response Letter. The FDA, Acura and we agreed to submit the NDA to an FDA advisory committee. On April 22, 2010, the FDA held an advisory committee meeting to review the NDA related to Acurox^®. The advisory committee voted that they did not have sufficient evidence to support the approval of the NDA for Acurox^® Tablets for the treatment of moderate to severe pain. The presence of niacin in Acurox^® was central to the deliberations. The advisory committee did not believe that the benefits of niacin outweighed the potential risks for a broad treatment population. The FDA is not bound by the advisory committee’s recommendation, but may take its advice into consideration when evaluating the NDA for Acurox^® Tablets. We continue to evaluate our plans regarding the NDA.

Acurox^® Tablets (without niacin)

Acura and King plan to develop and submit an NDA for Acurox^® (oxycodone HCl) Tablets (without niacin) intended to relieve moderate to severe pain and introduce limits and impediments to potential abuse via nasal snorting of crushed tablets and intravenous injection of dissolved tablets. At the April 22, 2010 advisory committee meeting, the FDA cited no concerns with the snorting and intravenous abuse limiting features of the original Acurox^® Tablets formulation. The Companies expect to submit an NDA for Acurox^® Tablets (without niacin) in early 2011.

Acura and King also plan to develop and submit NDAs for two additional immediate release opioid analgesic products utilizing Acura’s proprietary Aversion^® Technology: Vycavert^® (hydrocodone bitartrate/acetaminophen) Tablets and Acuracet^® (oxycodone HCl/acetaminophen) Tablets. Like Acurox^® Tablets (without niacin), these additional product candidates are patent protected compositions comprising a mixture of active and inactive ingredients intended to relieve pain and introduce limits and impediments to nasal and intravenous abuse.

Skelaxin^®

On January 20, 2009, the U.S. District Court for the Eastern District of New York issued an order ruling invalid two patents related to Skelaxin^®. In June 2009, the Court entered judgment against King. In August 2010, the Court of Appeals for the Federal Circuit affirmed the actions of the District Court. Generic versions of Skelaxin^® entered the market early in the second quarter of 2010, one of which is an authorized generic product sold by CorePharma, LLC (“CorePharma”) under a license from us. Net sales of Skelaxin^® have declined significantly and will continue to decline as a result of generic competition. According to IMS America, Ltd. (“IMS”) weekly prescription data, for the week ending July 23, 2010, generic competitors have garnered approximately 90% of the prescriptions in the metaxalone market.

34

For additional information on the Skelaxin^® litigation, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

II.   RESULTS OF OPERATIONS

Three and Six Months Ended June 30, 2010 and 2009

Revenues

The following table summarizes total revenue by operating segment:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2010		2009		2010		2009
			(In thousands)
Total Revenues
Branded prescription pharmaceuticals	$	162,243	$	275,110	$	403,784	$	552,814
Alpharma Animal Health		84,673		82,824		165,987		162,659
Meridian Auto-Injector		82,702		72,091		132,529		128,698
Royalties and other		41,285		14,963		49,458		29,874
Total revenues	$	370,903	$	444,988	$	751,758	$	874,045

The following table summarizes our deductions from gross revenues:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2010		2009		2010		2009
			(In thousands)
Gross Revenues	$	451,547	$	522,833	$	921,692	$	1,029,877
Commercial Rebates		13,290		14,386		29,219		29,845
Medicare Part D Rebates		2,364		3,099		6,129		5,638
Medicaid Rebates		6,864		11,400		17,804		23,023
Chargebacks		29,406		26,704		57,628		54,880
Returns		9,730		5,345		20,487		8,228
Trade Discounts/Other		18,990		16,911		38,667		34,218
Total revenues	$	370,903	$	444,988	$	751,758	$	874,045

Gross revenues decreased in the second quarter of 2010 compared to the second quarter of 2009, and in the first six months of 2010 compared to the first six months of 2009, primarily due to Skelaxin^® and market competition with several other key products in the branded prescription pharmaceuticals segment, partially offset by increased revenues in our Meridian Auto-Injector and Royalties and other segments discussed below.

Based on inventory data provided to us by our customers, we believe that wholesale inventory levels of Thrombin-JMI^®, Flector^® Patch, Avinza^®, Embeda^®, Levoxyl^®, and Skelaxin^® are at or below normalized levels as of June 30, 2010. As of June 30, 2010, we estimate that wholesale and retail inventories of our products represent gross sales of approximately $90.0 million to $100.0 million.

35

Accrual for Rebates, including Administrative Fees (in thousands):

	2010			2009
Balance at January 1, net of prepaid amounts	$	44,439		$	58,129
Current provision related to sales made in current period		30,431			28,512
Current provision related to sales made in prior periods		203			1,109
Alpharma acquisition		(124	)		1,772
Rebates paid		(29,580	)		(34,482	)
Balance at March 31, net of prepaid amounts	$	45,369		$	55,040
Current provision related to sales made in current period		21,027			31,219
Current provision related to sales made in prior periods		1,491			(2,334	)
Alpharma acquisition		99			885
Rebates paid		(30,575	)		(35,474	)
Balance at June 30, net of prepaid amounts	$	37,411		$	49,336

Rebates include commercial, Medicaid and Medicare rebates.

Accrual for Returns (in thousands):

	2010			2009
Balance at January 1	$	30,345		$	33,471
Current provision		10,757			2,883
Actual returns		(9,729	)		(4,646	)
Ending balance at March 31	$	31,373		$	31,708
Current provision		9,730			5,345
Actual returns		(9,073	)		(6,062	)
Ending balance at June 30	$	32,030		$	30,991

Accrual for Chargebacks (in thousands):

	2010			2009
Balance at January 1	$	10,593		$	9,965
Current provision		28,222			28,176
Actual chargebacks		(28,589	)		(27,244	)
Ending balance at March 31	$	10,226		$	10,897
Current provision		29,406			26,704
Actual chargebacks		(29,178	)		(27,958	)
Ending balance at June 30	$	10,454		$	9,643

36

Branded Prescription Pharmaceuticals Segment

	For the Three Months				Change						For the Six Months				Change
	Ended June 30,				2010 vs. 2009						Ended June 30,				2010 vs. 2009
	2010		2009		$			%			2010		2009		$			%
	(In thousands)				(In thousands)
Branded Prescription Pharmaceutical revenue:
Skelaxin®	$	5,319	$	102,178	$	(96,859	)		(94.8	)%	$	96,236	$	202,777	$	(106,541	)		(52.5	)%
Thrombin-JMI®		36,955		48,562		(11,607	)		(23.9	)		73,887		95,901		(22,014	)		(23.0	)
Flector® Patch		35,261		38,621		(3,360	)		(8.7	)		68,793		55,397		13,396			24.2
Avinza®		24,740		28,892		(4,152	)		(14.4	)		47,936		67,872		(19,936	)		(29.4	)
Embeda®		14,641		—		14,641			—			23,716		—		23,716			—
Levoxyl®		16,103		15,280		823			5.4			31,458		34,852		(3,394	)		(9.7	)
Other		29,224		41,577		(12,353	)		(29.7	)		61,758		96,015		(34,257	)		(35.7	)
Total revenue	$	162,243	$	275,110	$	(112,867	)		(41.0	)%	$	403,784	$	552,814	$	(149,030	)		(27.0	)%

Skelaxin^®

Net sales of Skelaxin^® decreased significantly in the second quarter and first six months of 2010 from the second quarter and first six months of 2009 primarily due to the entry of two competitors in the market early in the second quarter of 2010 with generic substitutes for Skelaxin^®. Total prescriptions for Skelaxin^® decreased approximately 83.9% and 53.6% in the second quarter and first six months of 2010, respectively, from the second quarter and first six months of 2009, respectively, according to IMS monthly prescription data. As a result of generic competition, net sales of Skelaxin^® will continue to decrease significantly in 2010 compared to 2009.

For additional information on Skelaxin^® generic competition, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

Thrombin-JMI^®

Net sales of Thrombin-JMI^® decreased in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009 primarily due to market competition. The first competing product entered the market in the fourth quarter of 2007 and another entered the market in the first quarter of 2008. We expect net sales of our Thrombin-JMI^® product to decrease in 2010 compared to 2009, as a result of competition.

Flector^® Patch

Net sales of Flector^® Patch decreased in the second quarter of 2010 from the second quarter of 2009 primarily due to a decrease in prescriptions, partially offset by a price increase taken in the first quarter of 2010. Net sales of Flector^® Patch increased in the first six months of 2010 from the first six months of 2009 primarily due to a significant reduction in wholesale inventory levels in the first quarter of 2009, and price increases taken in the second quarter of 2009 and the first quarter of 2010, partially offset by a decrease in prescriptions. Flector^® Patch was part of the acquisition of Alpharma at the end of December 2008. At the time of acquisition, the wholesale inventory level of Flector^® Patch exceeded our normal levels. During the first quarter of 2009, we reduced these inventories to a level consistent with our other promoted products. As a result, net sales of Flector^® Patch were lower than prescription demand in the first quarter of 2009. Alpharma began selling the Flector^® Patch in January 2008. Total prescriptions for Flector^® Patch decreased approximately 8.9% and 6.2% in the second quarter and first six months of 2010, respectively, compared to the second quarter and first six months of 2009, respectively, according to IMS monthly prescription data. While we expect net sales of Flector^® Patch to increase in the second half of 2010 compared to the first half of 2010, we anticipate lower net sales of Flector^® Patch during both the third and fourth quarters of 2010 compared to the third and fourth quarters of 2009.

Avinza^®

Net sales of Avinza^® decreased in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a decrease in prescriptions, partially offset by a price increase taken in the fourth quarter of 2009 and a decrease in wholesale inventory levels in the second quarter of 2009. Net sales of Avinza^® decreased in the first six months of 2010

37

compared to the first six months of 2009 primarily due to a decrease in prescriptions, partially offset by a price increase taken in the fourth quarter of 2009. Total prescriptions for Avinza^® decreased approximately 29.9% and 28.3% in the second quarter and first six months of 2010, respectively, compared to the second quarter and first six months of 2009, respectively, according to IMS monthly prescription data. We expect net sales of Avinza^® to decrease in 2010 compared to 2009.

For a discussion regarding the risk of potential generic competition for Avinza^®, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

Embeda^®

In August 2009, the FDA approved Embeda^® (morphine sulfate and naltrexone hydrochloride) Extended Release Capsules, a long-acting Schedule II opioid analgesic for the management of moderate to severe pain when a continuous, around-the-clock opioid analgesic is needed for an extended period of time. We began selling Embeda^® in late September 2009, and we anticipate net sales of Embeda^® will increase significantly in 2010 compared to 2009. During the first quarter of 2010, we received approval of two patents on the product and listed these in the FDA’s Orange Book. These patents expire in June 2027.

On October 8, 2009, we received a warning letter from the FDA, Division of Drug Marketing, Advertising, and Communications (“DDMAC”) regarding certain materials used to announce the commercial launch of Embeda^®. The letter indicated these materials were false or misleading because they omitted and minimized the risks associated with the use of Embeda^®, failed to present the limitations to its approved indication, and presented misleading claims. We ceased the dissemination of these materials and took steps to conform other materials we currently utilize with Embeda^® to the guidance set forth in the warning letter. On October 16, 2009, we responded to the warning letter, providing DDMAC with a list of materials that were discontinued and a comprehensive plan of action to appropriately disseminate corrective messages to those that received the original materials. We met with members of the FDA on December 22, 2009 to discuss the warning letter. On March 26, 2010, we issued a corrective press release to address the issues raised in the warning letter and DDMAC closed the case.

During January 2010, we submitted to DDMAC for pre-approval proposed revised marketing materials for Embeda^®. In late March 2010, we received DDMAC’s reply to our submission and, during the third quarter of 2010, we expect to begin using modified materials which are responsive to its comments.

On March 23, 2010 and April 30, 2010, we voluntarily recalled certain lots of Embeda^® as a result of issues noted in standard post-manufacturing testing that were not related to patient safety. We believe the recalls caused some disruption in the market that could have negatively affected the prescriptions of Embeda^®. The recalls did not have a significant effect on the results of operations during the first or second quarters of 2010.

Levoxyl^®

Net sales of Levoxyl^® increased in the second quarter of 2010 compared to the second quarter of 2009 primarily due to greater decreases in wholesale inventory levels in the second quarter of 2009 than in the second quarter of 2010, partially offset by a decrease in prescriptions. Net sales of Levoxyl^® decreased in the first six months of 2010 compared to the first six months of 2009 primarily due to decreases in wholesale inventory levels in 2010 and a decrease in prescriptions. Total prescriptions for Levoxyl^® decreased approximately 13.1% and 11.4% in the second quarter and first six months of 2010, respectively, compared to the second quarter and first six months of 2009, according to IMS monthly prescription data. We anticipate net sales for this product will decline in 2010 due to decreasing prescriptions.

Other

Our 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 pharmaceutical products were lower in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009 primarily due to lower net sales of Cytomel^®, increases in returns of certain products, and a decrease in prescriptions.

38

In April 2009, a third party entered the market with a generic substitute for Cytomel^®. As a result of the entry of generic competition, net sales of Cytomel^® declined in the second quarter of 2010 and we expect net sales of Cytomel^® to continue to decline in the future. Net sales of Cytomel^® decreased from $7.4 million and $21.3 million in the second quarter and first six months of 2009, respectively, to $4.5 million and $9.8 million in the second quarter and first six months of 2010, respectively.

As a result of generic competition for Cytomel^® 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 2010.

Alpharma Animal Health

Revenues of the Alpharma animal health segment were consistent in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009.

Meridian Auto-Injector

Revenues from our Meridian Auto-Injector segment increased in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009, primarily due to price increases and higher unit sales of EpiPen^®, partially offset by lower sales to government entities.

Revenues from the Meridian Auto-Injector segment fluctuate based on the buying patterns of Dey, L.P. and government customers. With respect to auto-injector products sold to government entities, demand for these products is affected by the cyclical nature of procurements as well as response to domestic and international events. Demand for EpiPen^® is seasonal as a result of its use in the 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. 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. Total prescriptions for EpiPen^® in the United States increased approximately 9.7% and 8.4% in the second quarter and first six months of 2010, respectively, compared to the second quarter and first six months of 2009, according to IMS monthly prescription data.

During the second quarter of 2010, we entered into a new supply agreement with Dey, L.P. which extends the term through December 31, 2020.

Royalties and other

Skelaxin^® Authorized Generic

During the second quarter of 2010, we recognized revenue of $25.6 million related to our agreement with CorePharma providing it with a license to launch an authorized generic version of Skelaxin^® under certain conditions. In accordance with this agreement, we receive a fee based on gross profit, as defined in the agreement, of the authorized generic product.

Adenoscan^®

We receive royalty revenue based on sales of Adenoscan^®. We are not responsible for the marketing of this product. On April 10, 2008, CV Therapeutics, Inc. and Astellas Pharma US, Inc. (“Astellas US”) announced that the FDA approved regadenoson injection, an A2A adenosine receptor agonist product that competes with Adenoscan^®. Regadenoson has been commercialized by Astellas US. Astellas US is also responsible for the marketing and sale of Adenoscan^® pursuant to agreements we have with Astellas US. With the commercial launch of regadenoson, sales of Adenoscan and our royalty revenue have declined and may continue to decline. However, our agreements with Astellas US provide for minimum royalty revenue payments to us of $40.0 million per year for three years (beginning June 1, 2008 and ending May 31, 2011). Therefore, we will continue to receive royalties on the sale of Adenoscan^® through expiration of the patents covering the product, although the minimum guaranteed portion of the royalty payments would terminate upon certain events, including a finding of invalidity or unenforceability of the patents related to Adenoscan^®. During the second quarter of 2010, we recorded royalty revenue related to Adenoscan of

39

$10.1 million, of which $2.8 million is as a result of the minimum royalty agreement we have with Astellas US for the contract year ended May 30, 2010.

In October 2007, we entered into an agreement with Astellas US 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.

Operating Costs and Expenses

	For the Three										For the Six
	Months Ended				Change						Months Ended				Change
	June 30,				2010 vs. 2009						June 30,				2010 vs. 2009
	2010		2009		$			%			2010		2009		$			%
	(In thousands)				(In thousands)
Cost of revenues, exclusive of depreciation and amortization shown below	$	119,027	$	156,093	$	(37,066	)		(23.7	)%	$	246,081	$	307,032	$	(60,951	)		(19.9	)%
Selling, general and administrative		131,829		123,575		8,254			6.7			272,304		265,898		6,406			2.4
Research and development		33,174		21,202		11,972			56.5			61,498		48,458		13,040			26.9
Depreciation and amortization		53,903		52,862		1,041			2.0			111,178		106,211		4,967			4.7
Restructuring charges		4,852		1,475		3,377			>100			5,114		49,525		(44,411	)		(89.7	)
Total operating costs and expenses	$	342,785	$	355,207	$	(12,422	)		(3.5	)%	$	696,175	$	777,124	$	(80,949	)		(10.4	)%

Cost of Revenues

Cost of revenues decreased in the second quarter and first six months of 2010 versus the second quarter and first six months of 2009 primarily due to the decrease of a special item related to the acquisition of Alpharma, as described below, and a decrease in Skelaxin^® revenues, partially offset by costs associated with the addition of Embeda^®, which we began selling in late September 2009, and an increase in the Skelaxin^® royalty rate.

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, merger and 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; 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.

At the time of the acquisition of Alpharma, we valued the inventory that was acquired based on the accounting requirements for business combinations. As a result, we increased the carrying value of the Flector^® Patch and Alpharma animal health inventory by approximately $42.1 million. During the second quarter and first six months of 2009, the cost of revenues reflects a charge of $16.1 million and $37.6 million, respectively, related to the sale of this marked up inventory.

The royalty rate on Skelaxin^® increased in the second quarter of 2009 due to the achievement of certain regulatory milestones under our agreement with Mutual Pharmaceutical Company, Inc. (“Mutual”). For additional information on the Mutual agreement, please see “Other” within the “Liquidity and Capital Resources” section below.

40

Selling, General and Administrative Expenses

	For the Three										For the Six
	Months Ended				Change						Months Ended				Change
	June 30,				2010 vs. 2009						June 30,				2010 vs. 2009
	2010		2009		$			%			2010		2009		$			%
	(In thousands)				(In thousands)
Selling, general and administrative	$	131,829	$	120,631	$	11,198			9.3	%	$	272,304	$	259,165	$	13,139			5.1	%
Acquisition related costs		—		2,944		(2,944	)		(100	)		—		6,733		(6,733	)		(100	)
Total selling, general and administrative	$	131,829	$	123,575	$	8,254			6.7	%	$	272,304	$	265,898	$	6,406			2.4	%

As a percentage of total revenues, total selling, general, and administrative expenses were 35.5% and 36.2% in the second quarter and first six months of 2010, respectively. As a percentage of total revenues, total selling, general and administrative expenses were 27.8% and 30.4% in the second quarter and first six months of 2009, respectively.

Total selling, general and administrative expenses increased in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009 primarily due to an increase in marketing due to the launch of Embeda^®. The increase in the first six months of 2010 compared to the first six months of 2009 was partially offset by a decrease in expenses resulting from the integration of Alpharma and a restructuring initiative related to Skelaxin^®.

Alpharma was purchased on December 29, 2008. The integration of Alpharma was substantially completed by the end of the first quarter of 2009. During the first quarter of 2009, therefore, selling, general and administrative costs included costs associated with Alpharma corporate and pharmaceutical management division employees and related activities.

Following the January 2009 court order ruling invalid two patents relating to Skelaxin^®, our senior management team conducted an extensive examination of our company and implemented a restructuring initiative. The initiative included, 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 incurred special charges of $2.9 million and $6.7 million in the second quarter and first six months of 2009, respectfully, for costs related to the acquisition and integration of Alpharma. In addition, we incurred net special charges in the second quarter and first six months of 2010 of $1.9 million and $3.5 million, respectively, related to litigation settlements.

Research and Development Expense

	For the Three									For the Six
	Months Ended				Change					Months Ended				Change
	June 30,				2010 vs. 2009					June 30,				2010 vs. 2009
	2010		2009		$		%			2010		2009		$		%
	(In thousands)				(In thousands)
Research and development	$	33,174	$	21,202	$	11,972		56.5	%	$	61,498	$	48,458	$	13,040		26.9	%

Research and development represents expense associated with the ongoing development of investigational drugs and product life-cycle management projects in our research and development pipeline. These expenses increased in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009 due to the timing of costs incurred on our current research and development projects. During the second quarter of 2010, we incurred a $5.0 million expense associated with the modification of our strategic alliance with Pain Therapeutics, Inc. (“Pain Therapeutics”) for Remoxy^® and other opioid products. During the second quarter of 2010, we modified the strategic alliance with Pain Therapeutics to provide a royalty rate of 10% on net sales outside the U.S. The original agreement called for a royalty rate of 15% of net sales and included a provision to increase the royalty rate to 20% should certain net sales benchmarks be met. We also gained certain rights to the development of other opioid products covered by the collaboration agreement. The U.S. royalty rate and potential milestone payments under the strategic alliance with Pain Therapeutics remain unchanged.

41

For a discussion regarding recent research and development activities, please see “Recent Developments” above.

Depreciation and Amortization Expense

Amortization expense associated with Skelaxin^® was completed during the second quarter of 2010. As a result, we anticipate a significant decrease in amortization expense in the second half of 2010. The amortization expense associated with Skelaxin^® in the second quarter and first six months of 2010 was $20.0 million and $43.2 million, respectively.

Depreciation and amortization expense in the second quarter and first six months of 2009 includes special items of $0.3 million and $1.3 million, respectively, due to accelerated depreciation on certain assets.

In addition, certain manufacturers of generic pharmaceutical products have challenged the patents covering Avinza^® and EpiPen^®. For additional information, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.” If a generic version of Avinza^® or EpiPen^® enters the market or if our current estimates regarding future cash flows adversely change, we may have to write off a portion or all of the intangible assets associated with these products.

Other Operating Expenses

We incurred restructuring charges of $4.9 million and $5.1 million in the second quarter and first six months of 2010, respectively, primarily due to a restructuring of our commercial operations organization in the second quarter of 2010.

We incurred restructuring charges of $1.5 million and $49.5 million in the second quarter and first six months of 2009, respectively, primarily due to our restructuring initiative related to Skelaxin^®.

For additional information on restructuring events, please see Note 13, “Restructuring Activities”, in Part I, Item 1, “Financial Statements.”

Non-Operating Items

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2010			2009			2010			2009
	(In thousands)						(In thousands)
Interest income	$	487		$	1,506		$	896		$	4,294
Interest expense		(7,479	)		(27,592	)		(16,215	)		(50,695	)
Gain on Kadian®		12,500			—			12,500			—
Gain (loss) on investments		249			(524	)		(623	)		(1,347	)
Loss on early extinguishment of debt		(2,252	)		—			(2,252	)		—
Other, net		(1,753	)		4,112			(1,956	)		1,333
Total other income (expense)	$	1,752		$	(22,498	)	$	(7,650	)	$	(46,415	)
Income tax expense		11,882			29,348			25,476			23,293

Interest Income

Interest income decreased during the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009, primarily due to a lower average balance of investments in debt securities and a decrease in interest rates. Cash and cash equivalents decreased in the first quarter of 2009 due to the payment of the Alpharma Convertible Senior Notes. In addition, cash received through redemptions of our auction rate securities of approximately $145.9 million during 2009 and the first quarter of 2010 was used to reduce long-term debt.

Interest Expense

Interest expense decreased in the second quarter and first six months of 2010 compared to the second quarter and first six months of 2009 primarily due to a decrease in borrowings. Our December 29, 2008 acquisition of

42

Alpharma was funded with available cash on hand, borrowings of $425.0 million under our Senior Secured Revolving Credit Facility (the “2008 Revolving Credit Facility”) entered into April 19, 2007 and amended December 5, 2008, and borrowings of $200.0 million under a Senior Secured Term Facility. We made payments of $918.0 million related to long-term debt during 2009, which consisted of $200.0 million related to the Senior Secured Term Facility, $332.7 million related to the 2008 Revolving Credit Facility, and $385.2 million related to the Alpharma Convertible Senior Notes. In addition, during the first quarter of 2010, the remaining outstanding borrowings of $92.3 million under the 2008 Revolving Credit Facility were paid in full.

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

•  The liability and equity components of the $400,000 11/4% Convertible Senior Notes due April 1, 2026 (the “Convertible Senior Notes”) have been separately accounted for in a manner that reflects our nonconvertible debt borrowing rate at the date of issuance. The debt component is being amortized through March 31, 2013, which is reflected as an increase in interest expense. Interest expense in the second quarter of 2010 and 2009 reflects non-cash interest of $4.8 million and $4.4 million, respectively, and $9.4 million and $8.8 million in the first six months of 2010 and 2009, respectively, due to the accretion of the debt component of the Convertible Senior Notes.

•  During the second quarter of 2010, we recorded a gain of $12.5 million as a result of the divestiture of Kadian^®. For additional information regarding the Kadian^® divestiture, please see “Kadian^®” within the “Liquidity and Capital Resources” section below.

•  A gain of $0.2 million and a loss of $0.5 million in the second quarter of 2010 and 2009, respectively, and a loss of $0.6 million and $1.3 million in the first six months of 2010 and 2009, respectively, related to our investments in debt securities.

•  A loss of $2.3 million in the second quarter of 2010 resulting from the early extinguishment of our 2008 Revolving Credit Facility. On May 11, 2010, we entered into a new $500.0 million five-year Senior Secured Revolving Credit Facility (“2010 Revolving Credit Facility”) with Credit Suisse AG, as Administrative Agent (the “Administrative Agent”) and terminated the 2008 Revolving Credit Facility that was scheduled to mature April 2012. As a result, we wrote off a portion of the deferred financing costs associated with the 2008 Revolving Credit Facility.

Income Tax Expense

During the second quarter and first six months of 2010, our effective income tax rate was 39.8% and 53.1%, respectively. During the second quarter and first six months of 2009, our effective income tax rate was 43.6% and 46.1%, respectively. These rates are greater than the statutory rate of 35% primarily due to losses from foreign subsidiaries with no tax benefit, taxes related to stock compensation and state taxes.

Liquidity and Capital Resources

General

We believe that existing balances of cash, cash equivalents, 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 June 30, 2010, 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 7, 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 were limited to issues which were rated AA or higher at the time of purchase.

43

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 June 30, 2010, all our investments in auction rate securities, with a total par value of $213.0 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 August 3, 2010, we have received all scheduled interest payments associated with these securities.

We will be unable to liquidate these securities until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or is purchased by a buyer outside the auction process. 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 $213.0 million in par value of our investments in debt securities and the UBS put right discussed below, or 27.5% of the assets that we have measured at fair value, using unobservable inputs, which are classified as Level 3 measurements. For additional information regarding this, please see Note 3, “Fair Value Measurements”, in Part I, Item 1, “Financial Statements.”

As of June 30, 2010, there were cumulative unrealized holding losses of $21.2 million recorded in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheet associated with investments in debt securities with a par value of $179.8 million classified as available for sale. All of these investments in debt securities have been in continuous unrealized loss positions for greater than twelve months. As of June 30, 2010, we believed the decline was temporary and it was probable that the par amount of these auction rate securities would be collectible under their contractual terms.

During the first quarter of 2010, we sold certain auction rate securities associated with student loans with a par value of $8.0 million for $7.4 million to the issuer and realized a loss of $0.6 million in the Condensed Consolidated Statements of Operations. During the second quarter of 2009, we sold certain auction rate securities associated with student loans with a par value of $20.4 million for $18.9 million to the issuer and realized a loss of $1.4 million in the Condensed Consolidated Statements of Operations. We have not sold any other investments in debt securities below par value during the periods presented in the accompanying Condensed Consolidated Statements of Operations.

During the fourth quarter of 2008, we accepted an offer from UBS Financial Services, Inc. (“UBS”) providing us the right to sell to UBS at par value certain auction rate securities during the period from June 30, 2010 to July 2, 2012 (the “right”). During the second quarter of 2010, we notified UBS of our intent to sell the auction rate securities related to this offer. At June 30, 2010 and December 31, 2009, we held auction rate securities related to this offer with a par value of $18.2 million and $32.5 million, respectively. We have elected the fair value option to account for this right. As a result, gains and losses associated with this right are recorded in other income (expense) in the Condensed Consolidated Statements of Operations. 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. As of June 30, 2010 and December 31, 2009, the fair value of the right to sell the auction rate securities to UBS at par was $1.9 million and $3.2 million, respectively. With respect to this right, we recognized unrealized losses of $0.6 million and $1.4 million during the second quarter and first six months of 2010, respectively, and an unrealized gain of $0.1 million and an unrealized loss of $0.5 million during the second quarter and first six months of 2009, respectively, in Other income (expense) in the Condensed Consolidated Statements of Operations.

In addition, during the fourth quarter of 2008, we reclassified the auction rate securities that are included in this right from available-for-sale securities to trading securities. As of June 30, 2010 and December 31, 2009, the fair value of the investments in debt securities classified as trading was $16.3 million and $29.3 million, respectively. We recognized unrealized gains related to these securities of $0.8 million and $1.4 million during the second quarter and first six months of 2010, respectively, and $0.8 million and $0.5 million during the second quarter and first six months of 2009, respectively, in Other income (expense) in the accompanying Condensed Consolidated Statements of Operations.

During July 2010, we sold the auction rate securities that were included in the UBS right for par value of $18.2 million, recognizing no gain or loss on the exercise of the right and the sale of the securities.

44

As of June 30, 2010, we had unrealized holding gains of $1.9 million associated with a security that was previously impaired, as it was determined that the losses in previous periods were other-than-temporary.

As of June 30, 2010, we had approximately $213.0 million, in par value, invested in tax-exempt auction rate securities which consisted of $107.2 million associated with student loans backed by the Federal Family Education Loan Program (FFELP), $87.6 million associated with municipal bonds in which performance is supported by bond insurers and $18.2 million associated with student loans collateralized by loan pools that equal at least 200% of the bond issue.

As of June 30, 2010, we classified $16.3 million of auction rate securities as current assets and $169.8 million as long-term assets.

Skelaxin^®

As previously disclosed, we are involved in multiple legal proceedings over patents relating to our product Skelaxin^®. In January 2009, the U.S. District Court for the Eastern District of New York issued an order ruling invalid two of these patents. In June 2009, the Court entered judgment against us. In August 2010, the Court of Appeals for the Federal Circuit affirmed the actions of the District Court. Generic versions of Skelaxin^® entered the market early in the second quarter of 2010. Net sales of Skelaxin^® have declined significantly and will continue to decline as a result of generic competition. For additional information regarding Skelaxin^® litigation, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

Following the decision of the District Court in January 2009, we conducted an extensive examination of the company and developed a restructuring initiative. Based on an analysis of our strategic needs, this initiative included: a reduction in branded prescription pharmaceutical sales, marketing and other personnel; leveraging of staff; expense reductions and additional controls over spending; and reorganization of sales teams.

We incurred total restructuring costs of approximately $50.0 million, almost all of which was paid during the second quarter of 2009. These costs relate to severance pay and other employee termination expenses. For additional information, please see Note 13, “Restructuring Activities”, in Part I, Item 1, “Financial Statements.”

Kadian^®

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

Actavis LLC paid a purchase price 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 purchase price payment associated with each calendar quarter is as follows:

	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

At the time of the divestiture, we recorded a receivable of $115.0 million reflecting the present value of the estimated future purchase price payments from Actavis LLC. We recorded a gain of $12.5 million in the second quarter of 2010 as a result of the divestiture. In accordance with the agreement, quarterly payments are received one quarter in arrears. During the second quarter and first six months of 2010, we received $20.0 million and

45

$40.0 million, respectively, from Actavis LLC related to gross profit from sales during the fourth quarter of 2009 and the first quarter of 2010. In July 2010, we received the final payment of $7.5 million for the sale of Kadian^® from Actavis LLC.

Alpharma

As part of the integration of Alpharma, management developed a restructuring initiative to eliminate redundancies in operations created by the acquisition. This initiative included, 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 approximately $70.9 million associated with this restructuring plan, almost all of which are cash-related costs. All employee termination costs are expected to be paid by the end of 2012. All contract termination costs are expected to be paid by the end of 2018. For additional information, please see Note 13, “Restructuring Activities”, in Part I, Item 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 Note 8, “Long-Term Debt”, in Part I, Item 1, “Financial Statements.”

Senior Secured Revolving Credit Facility

On May 11, 2010, we entered into the $500.0 million 2010 Revolving Credit Facility and terminated the existing $475.0 million 2008 Revolving Credit Facility, which was scheduled to mature in April 2012. The 2010 Revolving Credit Facility matures on May 11, 2015.

In connection with the acquisition of Alpharma on December 29, 2008, we borrowed $425.0 million in principal amount under the 2008 Revolving Credit Facility. During 2009 and the first quarter of 2010, we made payments of $332.7 million and $92.3 million, respectively, on the 2008 Revolving Credit Facility, $203.2 million in excess of the required amounts, which represented full payment of all borrowings under the 2008 Revolving Credit Facility.

As of June 30, 2010, the remaining undrawn commitment amount under the 2010 Revolving Credit Facility totals approximately $496.3 million after giving effect to outstanding letters of credit totaling approximately $3.7 million.

For additional discussion regarding the 2010 Revolving Credit Facility, please see “Senior Secured Revolving Credit Facility” within the “Certain Indebtedness and Other Matters” section below.

CorePharma, LLC

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 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 Pharmaceuticals, Inc.

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

46

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. 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.

Avinza^®

In September 2006, we entered into a definitive asset purchase agreement and related agreements with 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.

As part of the transaction, we agreed to pay Ligand an ongoing royalty through November 2017 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 are 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.

Patient Protection and Affordable Care Act

On March 23, 2010, the Patient Protection and Affordable Care Act (“PPACA”) was signed into law. We expect that the new legislation will increase Medicaid rebates paid by us in the future, primarily due to an increase in Medicaid rebate rates, changes to the calculation of Medicaid rebates for new formulations of existing products, and an expansion of Medicaid rebates to products supplied to enrollees of Medicaid managed care organizations. For the full year of 2010, we expect rebates to increase by approximately $10.0 million as a result of the PPACA.

In addition, the PPACA will impose an annual fee on pharmaceutical manufacturers beginning in 2011. The fee will be payable no later than September 30 of each applicable year and will be allocated to pharmaceutical manufacturers based on relative market share.

Other

In March 2006, we acquired the exclusive right to market, distribute and sell EpiPen^® throughout Canada and certain other 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 increase intangible assets by the amount of the accrual. As of June 30, 2010, we have incurred a total of $13.5 million for these earn-out payments. The aggregate amount of these payments will be approximately $14.2 million and are expected to be incurred by the end of third quarter of 2010.

47

In December 2005, we entered into a cross-license agreement with Mutual related to Skelaxin^®. 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 to Mutual on net sales of products containing metaxalone. This royalty increased in the fourth quarter of 2006 and the second quarter of 2009 due to the achievement of certain milestones. The royalty percentage we pay to Mutual is currently in the low-double-digit and could potentially increase by an additional 10% depending on the achievement of certain regulatory and commercial milestones in the future. In the event certain specified net sales levels are not achieved, the royalty could be reduced to a lower double-digit or single-digit rate. No increases in the royalty rate are presently anticipated. The royalty we pay to Mutual is in addition to the royalty we pay to Elan Corporation, plc on our current formulation of metaxalone, Skelaxin^®.

During the fourth quarter of 2005, we entered into a strategic alliance with Pain Therapeutics to develop and commercialize Remoxy^® and other opioid painkillers. 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^®. In March 2009, we exercised rights under our Collaboration Agreement with Pain Therapeutics and assumed sole control and responsibility for the development of Remoxy^®. This includes all communications with the FDA regarding Remoxy^® and ownership of the Remoxy^® NDA. During the second quarter of 2010, we incurred a $5.0 million expense associated with the modification of our strategic alliance with Pain Therapeutics for Remoxy^® and other opioid painkillers which was paid in the third quarter of 2010. The modification reduced the royalty rate on net sales of Remoxy^® and other products developed through this alliance for net sales outside the U.S to 10%. We also gained certain rights to the development of other opioid products covered by the collaboration 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 in the U.S. up to $1.0 billion and 20% of the cumulative net sales in the U.S. over $1.0 billion. We are responsible for research and development expenses related to this alliance, subject to certain limitations set forth in the agreement.

Patent Challenges

Certain generic companies have challenged patents on Skelaxin^®, Avinza^® and EpiPen^®. For additional information, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.” Generic versions of Skelaxin^® entered the market early in the second quarter of 2010. Net sales of Skelaxin^® have declined significantly and will continue to decline as a result of generic competition. If a generic version of Avinza^® or EpiPen^® enters the market, our business, financial condition, results of operations and cash flows could be materially adversely affected.

Cash Flows

Operating Activities

	For the Six Months
	Ended June 30,
	2010		2009
	(In thousands)
Net cash provided by operating activities	$	48,875	$	117,566

Our net cash from operations was lower in the first six months of 2010 than in the first six months of 2009 primarily due to a decrease in net sales of several key branded prescription pharmaceutical products and payment of $42.5 million to the DOJ. Please see the section above entitled “Results of Operations” for a discussion of net sales.

In March 2010, we made a payment of $42.5 million, plus interest of $0.6 million, to the DOJ. For additional information related to the DOJ settlement, please see Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

48

In addition, we made cash payments related to the Skelaxin^® and Alpharma restructuring actions during the first six months of 2009 and 2010 which reduced operating cash flows. For information regarding the restructuring actions, please see Note 13, “Restructuring Activities”, in Part I, Item 1, “Financial Statements.”

The following table summarizes the changes in operating assets and liabilities and deferred taxes for the six months ended June 30, 2010 and 2009:

	For the Six Months
	Ended June 30,
	2010			2009
	(In thousands)
Accounts receivable, net of allowance	$	(2,384	)	$	35,832
Inventories		(16,447	)		(3,026	)
Prepaid expenses and other current assets		2,604			(9,563	)
Accounts payable		(10,253	)		(79,475	)
Accrued expenses and other liabilities		(89,381	)		(48,422	)
Income taxes payable		5,553			(17,047	)
Deferred revenue		(2,340	)		(2,340	)
Other assets		(2,142	)		734
Deferred taxes		13,102			17,663
Total changes in operating assets and liabilities and deferred taxes	$	(101,688	)	$	(105,644	)

Investing Activities

	For the Six Months Ended June 30,
	2010		2009
	(In thousands)
Net cash provided by (used in) investing activities	$	89,511	$	(26,562	)

Our cash flows from investing activities for the first six months of 2010 were primarily due to net sales of our investments in debt securities of $67.9 million and proceeds related to the sale of Kadian^® of $40.0 million, partially offset by capital expenditures of $17.3 million. Our cash flows from investing activities for the first six months of 2009 were primarily due to payments made in connection with our acquisition of Alpharma of $70.4 million and capital expenditures of $18.8 million, partially offset by proceeds related to the sale of Kadian^® of $34.8 million and proceeds from the sale of debt securities of $32.2 million.

We anticipate capital expenditures, including capital lease obligations, for the year ending December 31, 2010 of approximately $35.0 million to $45.0 million, which will be funded 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

	For the Six Months Ended June 30,
	2010			2009
	(In thousands)
Net cash used in financing activities	$	(100,748	)	$	(588,377	)

Our cash flows from financing activities for the first six months of 2010 are primarily related to payments on long-term debt. During the first quarter of 2010, we made payments of $92.3 million on the 2008 Revolving Credit Facility, which represented full payment of all outstanding borrowings. During the first six months of 2009, we made payments on debt of $585.2 million, which included $385.2 million to redeem the Alpharma Convertible Senior Notes, $134.2 million on the 2008 Revolving Credit Facility and $65.8 million on the Senior Secured Term Facility.

49

Certain Indebtedness and Other Matters

Convertible Senior Notes

The Convertible Senior Notes, issued in 2006, are unsecured obligations and are guaranteed by each of our domestic subsidiaries on a joint and several basis. The Convertible Senior 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 Convertible Senior 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 Convertible Senior Notes. Interest is payable on April 1 and October 1 of each year.

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

Senior Secured Revolving Credit Facility

The 2010 Revolving Credit Facility provides us with aggregate revolving credit commitments of $500.0 million, with a $50.0 million sublimit for the issuance of letters of credit. The 2010 Revolving Credit Agreement also provides for an incremental term loan facility in an aggregate amount of up to $500.0 million. The 2010 Revolving Credit Facility matures on May 11, 2015.

As of June 30, 2010, there were no outstanding borrowings under the 2010 Revolving Credit Facility and letters of credit totaled $3.7 million. The undrawn commitment amount under the 2010 Revolving Credit Facility on June 30, 2010 totals $496.3 million after giving effect to letters of credit.

In connection with our acquisition of Alpharma on December 29, 2008, we borrowed $425.0 million in principal under the 2008 Revolving Credit Facility. Prior to the termination of the 2008 Revolving Credit Facility, we made payments of $92.3 million on this facility in the first quarter of 2010, which represented full payment on all outstanding borrowings under the facility. During the three and six months ended June 30, 2009, we made payments of $102.1 million and $134.2 million, respectively, on the 2008 Revolving Credit Facility.

In connection with the establishment of the 2010 Revolving Credit Facility, we incurred approximately $4.6 million of new deferred financing costs. During the second quarter of 2010, we expensed $2.3 million of the $4.3 million of deferred financing costs that remained outstanding at the time of the termination of the 2008 Revolving Credit Facility. Therefore, deferred financing costs associated with the 2010 Revolving Credit Facility total $6.7 million and are being amortized over five years.

Our borrowings under the 2010 Revolving Credit Facility will bear interest at annual rates that, at our option, will be either:

•  a base rate generally defined as the sum of (i) the greatest of (a) the prime rate of the Administrative Agent, (b) the federal funds effective rate plus 0.5% and (c) the one-month adjusted LIBO rate (by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars) plus 1.0% and (ii) an applicable percentage of 1.50%, 1.75% or 2.00%, depending on our corporate credit rating; or

•  an adjusted LIBO rate generally defined as the sum of (i) the product of (a) the LIBO rate (by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars) in effect for the relevant interest period and (b) a fraction, the numerator of which is one and the denominator of which is one minus certain maximum statutory reserves for eurocurrency liabilities and (ii) an applicable percentage of 2.50%, 2.75% or 3.00%, depending on the our corporate credit rating.

50

If we make any borrowings under the incremental term loan facility, those borrowings will bear interest at annual rates established at the time of such borrowings.

We are required to pay an unused commitment fee on the difference between committed amounts and amounts actually borrowed under the 2010 Revolving Credit Facility equal to an applicable percentage of 0.375% or 0.5% per annum, depending on our corporate credit rating. We are required to pay a letter of credit participation fee based upon the aggregate face amount of outstanding letters of credit equal to an applicable percentage of 2.5%, 2.75% or 3.0% per annum, depending on our corporate credit rating.

The 2010 Revolving Credit Facility contains customary representations and warranties and affirmative covenants. The 2010 Revolving Credit Facility also contains certain covenants that restrict, among other things, our and our subsidiaries’ ability to incur additional indebtedness, permit certain liens to exist on assets, enter into sale and leaseback transactions, make investments, loans and advances, undertake acquisitions, mergers and consolidations, sell assets, make dividend and other restricted payments, enter into transactions with affiliates, prepay, redeem or repurchase other indebtedness and make capital expenditures, in each case, subject to certain exceptions.

The 2010 Revolving Credit Facility also requires us to meet the following financial tests:

•  maintenance of a minimum consolidated EBITDA to consolidated interest expense ratio for periods of four consecutive fiscal quarters of 3.50 to 1; and

•  maintenance of a maximum total funded debt to consolidated EBITDA ratio of 3.0 to 1.

As of June 30, 2010, we were in compliance with these covenants.

The 2010 Revolving Credit Facility also contains customary events of default, including events of default based on failures to make payments as and when required under the 2010 Revolving Credit Facility, breaches of representations, warranties and covenants, defaults under certain other material indebtedness, the occurrence of certain bankruptcy and insolvency events related to us and certain of our subsidiaries, the levy of judgments in excess of specified amounts, the occurrence of certain ERISA events, certain impairments to the guarantees of our obligations under the credit facility, certain impairments of the security interests granted by us and the subsidiary guarantors in connection with the 2010 Revolving Credit Facility and a change in control.

Our obligations under the 2010 Revolving Credit Facility are guaranteed by each of our domestic subsidiaries and secured by pledges by us of certain of our assets, including equity interests in certain of our subsidiaries and intellectual property.

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.

Recently Issued Accounting Standards

For information regarding recently issued accounting standards, please see Note 10, “Accounting Developments”, in Part I, Item 1, “Financial Statements.”

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 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.

51

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, Medicare, and other rebates, returns and chargebacks, allowances for doubtful accounts, the fair value of our investments in debt securities, 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 products, 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. 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, during the first quarter, 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. We review our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. 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.

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.

52

The gross carrying amount and accumulated amortization as of June 30, 2010 are as follows:

	Gross
	Carrying		Accumulated		Net Book
	Amount		Amortization		Value
	(In thousands)
Branded Prescription Pharmaceuticals
Avinza®	$	290,367	$	89,154	$	201,213
Skelaxin®		288,049		288,049		—
Sonata®		61,961		61,961		—
Flector® Patch		130,000		17,727		112,273
Neuroscience		770,377		456,891		313,486
Synercid®		70,959		50,773		20,186
Other hospital		8,442		6,883		1,559
Hospital		79,401		57,656		21,745
Bicillin®		92,350		36,823		55,527
Other legacy products		324,035		283,396		40,639
Legacy products		416,385		320,219		96,166
Total Branded		1,266,163		834,766		431,397
Alpharma Animal Health		169,945		14,446		155,499
Meridian Auto-Injector		186,764		53,997		132,767
Royalties and other		3,731		3,532		199
Total intangible assets	$	1,626,603	$	906,741	$	719,862

The amounts of impairments and amortization expense for the three months ended June 30, 2010 and 2009 are as follows:

	Three Months Ended				Three Months Ended
	June 30, 2010				June 30, 2009
			Amortization				Amortization
	Impairments		Expense		Impairments		Expense
	(In thousands)				(In thousands)
Branded Prescription Pharmaceuticals
Avinza®	$	—	$	6,782	$	—	$	6,638
Skelaxin®		—		19,979		—		20,041
Flector® Patch		—		2,954		—		2,955
Neuroscience		—		29,715		—		29,634
Synercid®		—		1,443		—		1,484
Other hospital		—		75		—		76
Hospital		—		1,518		—		1,560
Bicillin®		—		926		—		925
Other legacy products		—		1,430		—		1,430
Legacy products		—		2,356		—		2,355
Total Branded		—		33,589		—		33,549
Alpharma Animal Health		—		2,405		—		2,411
Meridian Auto-Injector		—		2,208		—		2,062
Royalties and other		—		11		—		127
Total	$	—	$	38,213	$	—	$	38,149

53

The amounts of impairments and amortization expense for the six months ended June 30, 2010 and 2009 are as follows:

	Six Months Ended				Six Months Ended
	June 30, 2010				June 30, 2009
			Amortization				Amortization
	Impairments		Expense		Impairments		Expense
	(In thousands)				(In thousands)
Branded Prescription Pharmaceuticals
Avinza®	$	—	$	13,557	$	—	$	13,276
Skelaxin®		—		43,226		—		40,082
Flector® Patch		—		5,909		—		5,910
Neuroscience		—		62,692		—		59,268
Synercid®				2,885		—		2,968
Other hospital		—		151		—		152
Hospital		—		3,036		—		3,120
Bicillin®				1,851		—		1,850
Other legacy products		—		2,860		—		2,860
Legacy products		—		4,711		—		4,710
Total Branded		—		70,439		—		67,098
Alpharma Animal Health		—		4,813		—		4,819
Meridian Auto-Injector		—		4,376		—		4,097
Royalties and other		—		22		—		313
Total	$	—	$	79,650	$	—	$	76,327

	Remaining Life at
	June 30, 2010
Skelaxin®	—
Avinza®	7 years 5 months
Synercid®	3 years 6 months
Bicillin®	15 years
Flector® Patch	9 years 6 months

•  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 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,

54

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.

•  Investments in debt securities.  Prior to the end of the first quarter of 2008, we undertook 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 7, 28 or 35 days. On February 11, 2008, we began to experience auction failures with respect to our investments in auction rate securities. All of our investments in auction rate securities have experienced multiple failed auctions. We will not be able to liquidate these securities until a successful auction occurs, the issuer calls or restructures the underlying security, the underlying security matures or it is purchased by a buyer outside the auction process. 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 measure these investments using unobservable inputs.

The fair value of investments in debt securities is based on a trinomial discount model. This model considers the probability at the valuation date 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. The discount rate is determined as the loss-adjusted required rate of return using public information such as spreads or near risk-free to risk-free assets. The expected term is based on our estimate of future liquidity as of the balance sheet date.

•  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. We launched Embeda^® in late September 2009. We have recognized revenue on Embeda^® in a manner consistent with our other products, as described above, which is generally at the time the product is received by the customer. We believe Embeda^® has similar characteristics of certain of our other pharmaceutical products such that we can reliably estimate expected returns of the product. Royalty revenue is recognized based on a percentage of sales (namely, contractually agreed-upon royalty rates) reported by third parties.

55

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 “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections, as well as other sections of this report. You should not unduly rely on our forward-looking statements.

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

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

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

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

•  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 and our ability to enter into borrowing arrangements in the future;

•  anticipated capital expenditures;

•  the development, approval and successful commercialization of Remoxy^®, 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 timing or outcomes of regulatory processes or 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 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.

56

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 3.   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”). At June 30, 2010, we held derivative financial instruments associated with the Convertible Senior Notes. There have been no material changes in our exposure to these items since our disclosure under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2009, except that (i) we fully repaid all borrowings under the 2008 Revolving Credit Facility in the first quarter of 2010, which carried a variable rate of interest, and (ii) we terminated the 2008 Revolving Credit Facility and entered into the 2010 Revolving Credit Facility in the second quarter of 2010. For additional information, please see “Senior Secured Revolving Credit Facility” within “Certain Indebtedness and Other Matters”, in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4.   Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to reasonably ensure that information required to be disclosed and filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that management will be timely alerted to material information required to be included in our periodic reports filed with the SEC.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

57

PART II — OTHER INFORMATION

Item 1.   Legal Proceedings

The information required by this Item is incorporated by reference to Note 9, “Commitments and Contingencies”, in Part I, Item 1, “Financial Statements.”

Item 1A.   Risk Factors

We have disclosed a number of material risks under Item 1A of our annual report on Form 10-K for the year ended December 31, 2009, which we filed with the Securities and Exchange Commission on February 26, 2010. Please also see the additional risk factor below.

Net sales of Skelaxin^® will decline significantly as the result of competition from generic products.

In January 2009, the U.S. District Court for the Eastern District of New York issued an order ruling invalid two Skelaxin^® patents, and the Court entered judgment against the Company in June 2009. In August 2010, the Court of Appeals for the Federal Circuit affirmed the actions of the District Court. Generic versions of Skelaxin^® entered the market early in the second quarter of 2010, including an authorized generic sold by CorePharma. The Company’s net sales of Skelaxin^® have declined significantly and will continue to decline as a result of this competition from generic products.

Item 6.   Exhibits

Exhibit
Number			Description
	3	.1	Third Amended and Restated Charter of King Pharmaceuticals, Inc., as amended June 2, 2010
	3	.2	Second Amended and Restated Bylaws of King Pharmaceuticals, Inc., as amended June 29, 2010
	10	.1	Credit Agreement, dated as of May 11, 2010, among King Pharmaceuticals, Inc., the Lenders Named Therein, Credit Suisse AG, as Administrative Agent, as Collateral Agent and as Swingline Lender, Credit Suisse Securities (USA) LLC, Bank of America, N.A., DnBNOR Bank ASA, SunTrust Bank and U.S. Bank National Association, as Co-Syndication Agents, Credit Suisse Securities (USA) LLC, as Sole Arranger and Sole Bookrunner
	10	.2*	Letter Amendment to License and Collaboration Agreements, dated June 25, 2010, between Pain Therapeutics, Inc. and King Pharmaceuticals, Inc.
	10	.3	King Pharmaceuticals, Inc. Form of Indemnification Agreement for Directors
	10	.4	King Pharmaceuticals, Inc. Form of Indemnification Agreement for Officers
	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
	101	.INS**	XBRL Instance Document
	101	.SCH**	XBRL Taxonomy Extension Schema Document
	101	.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
	101	.DEF**	XBRL Taxonomy Definition Linkbase Document
	101	.LAB**	XBRL Taxonomy Extension Label Linkbase Document
	101	.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

*	Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
**	XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 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

President and Chief Executive Officer

Date: August 9, 2010

By:  /s/  Joseph Squicciarino

Joseph Squicciarino

Chief Financial Officer

Date: August 9, 2010

59

EX-3.1

Exhibit 3.1

THIRD AMENDED AND RESTATED CHARTER
OF KING PHARMACEUTICALS, INC.,
AS AMENDED

     Pursuant to the provisions of Section 48-20-107 of the Tennessee Business Corporation Act, Tennessee Code Annotated, the undersigned Corporation hereby adopts the following Third Amended and Restated Charter, as amended:

1.	Name. The name of the Corporation is King Pharmaceuticals, Inc.
2.	Authorized Shares.

(a)	The total number of shares of common stock that the Corporation shall have authority to issue is 600,000,000, no par value (the “Common Stock”). The total number of shares of preferred stock that the Corporation shall have authority to issue is 15,000,000, no par value per share (the “Preferred Stock”).
(b)	The Common Stock shall rank junior to the Preferred Stock in right of payment of dividends and upon liquidation and is subject to all the powers, rights, privileges, preferences and priorities of the Preferred Stock as provided herein or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of subparagraph (c) of this Paragraph 2.
(c)	Authority is hereby expressly vested in the Board of Directors of the Corporation, subject to the provisions of this Paragraph 2 and to the limitations prescribed by law, to authorize the issuance from time to time of one or more series of Preferred Stock. The authority of the Board of Directors with respect to each series shall include, but not be limited to, the determination or fixing of the following by resolution or resolutions adopted by the affirmative vote of a majority of the total number of the directors then in office:

(i)	The designation of such series;
(ii)	The dividend rate of such series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes or series of the Corporation’s capital stock, and whether such dividends shall be cumulative or noncumulative;
(iii)	Whether the shares of such series shall be subject to redemption for cash, property or rights, including securities of any other corporation, by the Corporation, or upon the happening of a specified event, and, if made subject to any such redemption, the times or events, prices, rates, adjustments and other terms and conditions of such redemptions;
(iv)	The terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series;

(v)	Whether or not the shares of such series shall be convertible into, or exchangeable for, at the option of either the holder or the Corporation or upon the happening of a specified event, shares of any other class or classes or of any other series of the same or any other class or classes of the Corporation’s capital stock, and, if provision be made for conversion or exchange, the times or events, prices, rates, adjustments and other terms and conditions of such conversions or exchanges;
(vi)	The restrictions, if any, on the issue or reissue of any additional series of Preferred Stock;
(vii)	The rights of the holders of the shares of such series upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and
(viii)	The provisions as to voting, optional and/or other special rights and preferences, if any, including, without limitation, the right to elect one or more directors.

3.	Registered Office. The address of the Corporation’s registered office in the State of Tennessee shall be 501 Fifth Street, Bristol, Tennessee 37620, Sullivan County.
4.	Registered Agent. The name of the registered agent at that office is William L. Phillips III.
5.	Principal Office. The address of the principal office of the Corporation is 501 Fifth Street, Bristol, Tennessee 37620, Sullivan County.
6.	Board of Directors.

(a)

The number of directors shall be as specified in the Amended and Restated Bylaws of the Corporation. All directors shall be elected at each annual meeting of shareholders for terms expiring at the next annual meeting of shareholders. Each director shall hold office for the term for which the director is elected or appointed and until the director’s successor shall be elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office with or without cause. In no case shall a decrease in the number of directors shorten the term of any incumbent director.

(b)

Except in the case of a contested election, a nominee for director shall be elected by affirmative vote of a majority of the votes cast in favor of or against the election of such nominee by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. For purposes of this paragraph, “affirmative vote of a majority of the votes cast” shall mean that the number of votes cast in favor of the election of such nominee exceeds the number of votes cast against the election of such nominee; abstentions and broker non-votes shall not be deemed to be votes cast for purposes of tabulating the vote. In any uncontested election of directors, any nominee who is an incumbent director and who receives a greater number of votes cast against his or her election than in favor of his or her election promptly shall tender his or her resignation to the Board of Directors. The Board of Directors (excluding the director who tendered his or her

resignation) shall decide, taking into account the recommendation of the Nominating and Corporate Governance Committee, whether to accept or reject the tendered resignation, or whether other action should be taken, and shall publicly disclose its decision and the rationale therefor within 90 days from the date of the certification of the election results. In a contested election, a nominee for director shall be elected by a plurality of the votes cast by holders of shares entitled to vote in the election at a meeting for the election of directors at which a quorum is present. An election shall be considered “contested” if there are more nominees for election than positions on the Board of Directors to be filled by election at the meeting. The determination of the number of nominees for purposes of this subsection shall be made as of (i) the expiration of the time fixed by this Third Amended and Restated Charter or the Amended and Restated Bylaws of the Corporation for advance notice by a shareholder of an intention to nominate directors, or (ii) absent such a provision, at a time publicly announced by the Board of Directors which is not more than 14 days before notice is given of the meeting at which the election is to occur.

7. For Profit: Duration. The Corporation is for profit and its duration shall be perpetual.

8. Director Liability. No director of the Corporation shall have or owe any personal liability to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director; provided, that such provision shall not eliminate or limit the liability of a director:

(a)	For any breach of the director’s duty of loyalty to the Corporation or its shareholders;
(b)	For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or
(c)	Under Tennessee Code Annotated §48-18-304, as such provision may be amended from time to time.

9.	Indemnification. Each director, officer and employee of the Corporation shall be entitled to all indemnification rights and protections now or hereafter available under applicable Tennessee law.
10.	Section 6 and this Section 10 of this Third Amended and Restated Charter and Sections 2 and 6 of Article I and Section 3 of Article II of the Amended and Restated Bylaws of the Corporation shall not be altered, amended or repealed by, and no provision inconsistent therewith shall be adopted by, the shareholders without the affirmative vote of the holders of at least eighty percent (80%) of the Common Stock, voting together as a single class.
11.	These amendments shall be effective as of the filing of this Third Amended and Restated Charter.
12.	This restatement contains amendments requiring shareholder approval and these amendments were duly adopted by the shareholders at a meeting duly called on the 16th day of May, 2007.

     This Third Amended and Restated Charter of King Pharmaceuticals, Inc., as amended, was duly approved by the shareholders, upon the recommendation of the Board of Directors, on May 26, 2010.

     Date: June 2, 2010

/s/ William L. Phillips III  

William L. Phillips III 

Corporate Secretary 

EX-3.2

Exhibit 3.2

SECOND AMENDED AND RESTATED BYLAWS,
AS AMENDED,
OF
KING PHARMACEUTICALS, INC.

ARTICLE I

MEETING OF SHAREHOLDERS

     Section 1. Annual Meeting. The annual meeting of the shareholders shall be held at such time and place, either within or outside the State of Tennessee, as may be designated from time to time by the Board of Directors.

     Section 2. Special Meeting. Special meetings of the shareholders may be called by the Chairman of the Board and Chief Executive Officer, the President or a majority of the Board of Directors. The place of said meeting shall be designated by the directors.

     Section 3. Notice of Shareholder Meetings. Written notice stating the date, time, and place of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered either personally, or by mail, by or at the direction of Chairman of the Board and Chief Executive Officer, the President, Secretary, officer, or person calling the meeting to each shareholder entitled to vote at the meeting. Such notice shall be delivered not less than ten (10) days nor more than two (2) months before the date of the meeting, and shall be deemed to be delivered when deposited in the United States mail postpaid and correctly addressed (if mailed), or upon actual receipt (if hand delivered). The person giving such notice shall certify that the notice required by this paragraph has been given.

     Section 4. Quorum Requirements. A majority of the shares entitled to vote shall constitute a quorum for the transaction of business. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

     Section 5. Voting and Proxies. If a quorum exists, action on a matter (other than the election of directors) shall be approved if the votes favoring the action exceed the votes opposing the action. A shareholder may vote his or her shares either in person or by written proxy, which proxy is effective when received by the Secretary or other person authorized to tabulate votes. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless otherwise provided in the proxy.

     Section 6. Business Brought Before a Meeting. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) brought before the meeting by or at the direction of a majority of the total number of directors which the Corporation would have if there

were no vacancies, or (c) otherwise properly requested to be brought before the meeting by a shareholder of record of the Corporation who was a shareholder of record at the time of the giving of the notice by such shareholder as provided for in Article I, Section 3, who is entitled to vote at the meeting and who has complied with the notice procedures of Article I, Section 8. Article I, Section 6(c) shall be the exclusive means for a shareholder to propose any business to be brought before an annual meeting of shareholders (other than with respect to the nomination and election of directors, which is governed by Article II, Section 3).

     Section 7. Determination of Propriety of Business. The presiding officer of an annual meeting shall, if he determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, declare to the meeting that the business was not properly brought before the meeting in accordance with the provisions of this Article I, and if he should so determine, he shall so declare to the meeting any such business not properly brought before the meeting shall not be transacted, and such business shall be disregarded.

     Section 8. Shareholder Proposals. Without qualification, for business (other than with respect to the nomination and election of directors, which is governed by Article II, Section 3) to be properly requested to be brought before any annual meeting by a shareholder, whether pursuant to the Corporation’s notice of meeting or otherwise, the shareholder must have given timely notice thereof in writing in proper form to the Secretary and such business must be a proper matter for shareholder action under the Tennessee Business Corporation Act (“TBCA”). To be timely, a shareholder’s notice must be delivered to, or mailed to and received by, the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the one-year anniversary of the date of the prior year’s annual meeting of the shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, in order to be timely, a shareholder’s notice must be delivered to, or mailed to and received by, the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public announcement of the date of the annual meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of an annual meeting of shareholders, or such adjournment or postponement, commence a new time period (or otherwise extend any time period) for the giving of a shareholder’s notice as described above.

     Section 9. Form of Shareholder Proposal.

     (a) As to each matter the shareholder proposes to bring before the annual meeting, to be in proper form, the shareholder’s notice shall set forth and include the following:

     (i) a brief description of the business desired to be brought before the annual meeting, including the text of any proposal regarding such business, and the reasons for conducting such business at the annual meeting, which shall not exceed 500 words;

     (ii) any interest of such shareholder and/or any Shareholder Associated Person in such business;

2

     (iii) a detailed description of whether such shareholder and/or any Shareholder Associated Person has communicated with any other shareholder or beneficial owner of any securities of the Corporation regarding such business and a detailed description of every agreement, arrangement and understanding between such shareholder and/or Shareholder Associated Person, and any other person (including such person’s name) in connection with the proposal of such business by such shareholder; and

     (iv) a list of each company to which such shareholder and/or any Shareholder Associated Person has proposed at any time during the past five years, or is currently proposing, business that is substantially similar to the business desired to be brought before the annual meeting, together with the date such proposal was made.

     (b) As to the shareholder giving such notice and each Shareholder Associated Person, to be in proper form, the shareholder’s notice shall set forth and include the following:

     (i) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business and the name and address of each Shareholder Associated Person, if any, and a detailed description of the relationship between such shareholder and any such Shareholder Associated Person and every agreement, arrangement and understanding between such shareholder and Shareholder Associated Person in connection with the proposal of such business by such shareholder;

     (ii) the class or series and number of shares of securities of the Corporation which are, directly or indirectly, owned beneficially and of record by such shareholder and/or Shareholder Associated Person, if any;

     (iii) a detailed description of all purchases and sales of securities of the Corporation by such shareholder and/or Shareholder Associated Person, if any, during the previous 24-month period, including the date of such transactions, the class and number of securities involved in such transactions, the consideration involved in such transactions and the investment intent in respect thereof;

     (iv) a detailed description of all Derivative Transactions by, directly or indirectly, such shareholder and/or Shareholder Associated Person, if any, during the previous 24-month period, including the date of such transactions and the class and number of securities involved in, and the material terms of such transactions (such description to include all information that such shareholder and/or Shareholder Associated Person, if any, would have been required to report on an Insider Report (as defined below) if such shareholder and/or Shareholder Associated Person, if any, had been directly or indirectly the beneficial owner of more than 10% of any class of any equity security of the Corporation or a director or an officer of the Corporation at the time of such transactions and the effect of such Derivative Transactions on any voting or economic rights relating to the securities of the Corporation as of the date of the notice and any change in such voting or economic rights which may arise pursuant to the terms of the Derivative Transactions under any circumstances, whether or not then contingent or subject to conditions precedent or subsequent);

     (v) to the extent actually known by the shareholder giving the notice, the name and

3

address of any other person who owns, of record or beneficially, any securities of the Corporation and who supports the proposal of such business that such shareholder proposes to bring before the meeting on the date of such shareholder’s notice;

     (vi) a detailed description of each proxy, contract, arrangement, understanding, or relationship pursuant to which such shareholder and/or Shareholder Associated Person, if any, has a right to vote, or cause or direct the vote of, any securities of the Corporation;

     (vii) a detailed description of any proportionate interest in shares of the Corporation or any Derivative Transaction held or engaged in, as the case may be, directly or indirectly, by a general or limited partnership or limited liability company or similar entity in which such shareholder and/or Shareholder Associated Person, if any, is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, or is the manager, managing member, or directly or indirectly, owns an interest in the manager or managing member of a limited liability company or similar entity; and

     (viii) any other information relating to such shareholder and Shareholder Associated Person, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (such Act, together with the rules and regulations promulgated thereunder, the “Exchange Act”).

     Section 10. General. Notwithstanding anything in these Bylaws to the contrary, only such business shall be conducted at an annual meeting of shareholders as shall have been brought before the annual meeting in accordance with the procedures set forth in this Article I. The requirements of this Article I shall apply to any business to be brought before an annual meeting of shareholders by a shareholder (other than with respect to the nomination and election of directors, which is governed by Article II, Section 3) without regard to whether such business also is intended to be included in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act or whether such business is presented to shareholders by means of a proxy solicitation by any person other than by or on behalf of the Board of Directors. Notwithstanding the foregoing provisions of this Article I, a shareholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this Article I. Any references to the Exchange Act are not intended to and shall not limit the requirements applicable to shareholder-proposed business to be considered pursuant to this Article I.

     Section 11. Definitions. For purposes of Article I and Article II, Section 3, the following terms shall have the following meanings:

     (a) “Derivative Transaction” by a person shall mean any direct or indirect (i) transaction or series of transactions in, or agreement, arrangement, understanding or relationship with respect to, any option, warrant, convertible or exchangeable security, stock appreciation right or right similar to any of the foregoing with an exercise, conversion or exchange privilege, or settlement payment or mechanism related to, any security of the Corporation, or similar instrument with a value derived in whole or in part from the value of a security of the Corporation, in any such case whether or not it is subject to settlement in a security of the Corporation or otherwise, (ii) transaction or series of transactions, agreement, arrangement,

4

proxy, understanding or relationship which included or includes an opportunity for such person, directly or indirectly, to profit or share in any profit derived from any increase or decrease in the value of any security of the Corporation, to receive or share in the receipt of dividends payable on any securities of the Corporation separate or separable from the underlying shares, to mitigate any loss or manage any risk associated with any increase or decrease in the value of any security of the Corporation or to increase or decrease the number of securities of the Corporation which such person was, is or will be entitled to vote, in any case whether or not it is subject to settlement in a security of the Corporation or otherwise, in each case under clauses (i) and (ii) including, without limitation, any put or call arrangement, short position, borrowed shares or swap or similar arrangement and (iii) transaction or series of transactions, or agreement, arrangement, understanding or relationship with respect to the borrowing or lending of securities of the Corporation or any interest therein.

     (b) “Insider Report” shall mean a statement required to be filed pursuant to Section 16 of the Exchange Act by a person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of any equity security of the Corporation or who is a director or an officer of the Corporation.

     (c) “Proposed Nominee Associated Person” of any Proposed Nominee shall mean (i) any person acting in concert (pursuant to any agreement, arrangement, understanding or otherwise, whether written or oral) with such Proposed Nominee, (ii) any beneficial owner of any securities of the Corporation owned of record or beneficially by such Proposed Nominee, (iii) any person directly or indirectly controlling, controlled by or under common control with such Proposed Nominee or a Proposed Nominee Associated Person, (iv) any such Proposed Nominee’s spouse or descendant, (v) any trust or family partnership or other entity whose beneficiaries or owners shall solely be such Proposed Nominee and/or such Proposed Nominee’s spouse and/or any person related by blood or adoption to such Proposed Nominee or such Proposed Nominee’s spouse and (vi) the estate of such Proposed Nominee.

     (d) “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

     (e) “Shareholder Associated Person” of any shareholder shall mean (i) any person acting in concert (pursuant to any agreement, arrangement, understanding or otherwise, whether written or oral) with such shareholder, (ii) any beneficial owner of any securities of the Corporation owned of record or beneficially by such shareholder, (iii) any person directly or indirectly controlling, controlled by or under common control with such shareholder or a Shareholder Associated Person, (iv) with respect to any shareholder who is a natural person, any such shareholder’s spouse or descendant, (v) any trust or family partnership or other entity whose beneficiaries or owners shall solely be such individual and/or such individual’s spouse and/or any person related by blood or adoption to such individual or such individual’s spouse and (vi) the estate of such person.

     Section 12. Updating of Notices. A shareholder providing notice of any proposal as required under Article I or Article II shall further update and supplement such notice so that the

5

information provided or required to be provided in such notice shall be true and correct as of the record date for the applicable meeting and as of the date that is ten business days prior to such meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for such meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight business days prior to the date for such meeting or any adjournment any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten business days prior to such meeting or any adjournment or postponement thereof).

ARTICLE II

BOARD OF DIRECTORS

     Section 1. Qualification and Election. Directors need not be shareholders or residents of this State. Each director shall be elected as provided for in the Charter of the Corporation, as amended from time to time, or, if not so specified, as allowed by applicable laws of Tennessee. Each director shall hold office until the expiration of the term for which the director is elected, and thereafter until a successor has been elected and qualified.

     Section 2. Number. The number of directors shall be eight (8) unless another number is fixed by the Board of Directors.

     Section 3. Nominations of Directors; Advance Notice of Shareholder Nominations. Only persons who are nominated in accordance with the procedures set forth in this Article II, Section 3 shall be eligible for election as directors.

     (a) Annual Meetings of Shareholders.

     (i) To be properly nominated for election to the Board of Directors at any annual meeting, any nomination of a person for election must be (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (B) brought before the meeting by or at the direction of a majority of the total number of directors which the Corporation would have if there were no vacancies, or (C) otherwise properly requested to be brought before the meeting by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice by such shareholder as provided for in this Article II, Section 3(a), who is entitled to vote at the meeting and who has complied with the notice procedures of this Article II, Section 3(a). Article II, Section 3(a)(i)(C) shall be the exclusive means for a shareholder to nominate any person for election to the Board of Directors at any annual meeting of shareholders.

     (ii) Without qualification, for nominations to be properly brought before any annual meeting by a shareholder pursuant to Article II, Section 3(a)(i)(C), whether pursuant to the Corporation’s notice of meeting or otherwise, the shareholder must have given timely notice thereof in writing to the Secretary and if the shareholder making such nomination or any Shareholder Associated Person solicits

6

or participates in the solicitation of proxies in support of such nomination, the shareholder must have indicated each such person’s intention to so solicit or participate in the solicitation of proxies in such notice. To be timely, a shareholder’s notice of a nomination must be delivered to, or mailed to and received by, the Secretary at the principal executive offices of the Corporation during the applicable period described in Article I, Section 8 for a timely shareholder’s notice of a matter proposed to be brought before such annual meeting. In no event shall the public announcement of an adjournment or postponement of an annual meeting, or such adjournment or postponement, commence a new time period or otherwise extend any time period for the giving of a shareholder’s notice as described above.

     (iii) As to each person whom the shareholder proposes to nominate for election or re-election as a director (the “Proposed Nominee”) and each Proposed Nominee Associated Person, to be in proper form, the shareholder’s notice shall set forth and include the following:

     (A) all information relating to the person that is required to be disclosed in solicitations for proxies for election of directors in a contested election (even if a contested election is not involved) pursuant to and in accordance with Section 14 of the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

     (B) a detailed description of all direct and indirect material compensation and other monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and/or any Shareholder Associated Person, on the one hand, and each Proposed Nominee and/or Proposed Nominee Associated Person, if any, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Item 404 promulgated under Regulation S-K (or its successor Item) if the shareholder making the nomination and/or the Shareholder Associated Person, if any, were the “registrant” for purposes of such item and the Proposed Nominee and/or Proposed Nominee Associated Person, if any, were a director or executive officer of such registrant;

     (C) a detailed description of whether such shareholder and/or any Shareholder Associated Person has communicated with any other shareholder or beneficial owner of any securities of the Corporation regarding such nomination and a detailed description of every agreement, arrangement and understanding between such shareholder and/or Shareholder Associated Person, and any other person or persons (including their names) in connection with the proposal of such nomination by such shareholder; and

     (D) the completed and signed questionnaire, representation and agreement required by Article II, Section 3(d).

     (iv) As to the shareholder giving such notice and each Shareholder Associated Person, to be in proper form, the shareholder’s notice shall set forth and include the following:

     (A) the information described in Article I, Section 9(b); and

     (B) any other information relating to such shareholder and Shareholder Associated Person, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election (even if a contested election is not involved) pursuant to Section 14 of the

7

Exchange Act.

     For the purposes of this Article II, Section 3(a) and Article II, Section 3(b), the Corporation may require any Proposed Nominee to furnish such other information as may reasonably be required by the Corporation to determine the qualifications of such Proposed Nominee to serve as an independent director of the Corporation under applicable law and regulations or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such Proposed Nominee.

     (b) Special Meetings of Shareholders. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting. To be properly nominated for election to the Board of Directors at any special meeting, any nomination of a person for election must be (i) specified in the notice of meeting (or supplement thereto) given by or at the direction of the Board of Directors (or a duly authorized committee thereof), (ii) brought before the meeting by or at the direction of a majority of the total number of directors which the Corporation would have if there were no vacancies or (iii) provided that the Board of Directors has determined that directors shall be elected at such meeting, otherwise properly requested to be brought before the meeting by a shareholder of record of the Corporation who was a shareholder of record at the time of the giving of the notice by such shareholder as provided for in this Article II, Section 3(b), who is entitled to vote at the meeting and who has complied with the notice procedures of this Article II, Section 3(b). In the event a special meeting of shareholders is called for the purpose of electing one or more directors to the Board of Directors, any such shareholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the shareholder’s notice is in the proper form for a notice pursuant to Article II, Section 3(a) for a shareholder notice of a nomination at an annual meeting (including the completed and signed questionnaire, representation and agreement required by Article II, Section 3(d)) and must be delivered to, or mailed to and received by, the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public announcement of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of a special meeting of shareholders, or such adjournment or postponement, commence a new time period or otherwise extend any time period for the giving of a shareholder’s notice as described above.

     (c) General. Notwithstanding anything in these bylaws to the contrary, only such persons who are nominated in accordance with the procedures set forth in this Article II, Section 3 shall be eligible to be elected at an annual or special meeting of the shareholders of the Corporation to serve as directors. The requirements of this Article II, Section 3 shall apply to the nomination by a shareholder of a person for election as a director without regard to whether such nomination also is intended to be included in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, or whether such nomination is presented to shareholders by means of a proxy solicitation by any person other than by or on behalf of the Board of Directors. Notwithstanding the foregoing provisions of this Article II, Section 3, a shareholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth

8

in this Article II, Section 3. Any references to the Exchange Act are not intended to and shall not limit the requirements applicable to nominations to be considered pursuant to this Article II, Section 3.

     (d) Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under this Article II, Section 3, to the Secretary at the Corporation’s principal place of business a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (i) will abide by the requirements of this Article II, (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (iii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, (iv) will comply with all informational and similar requirements of applicable law and regulations and (v) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

     (e) Determination of Propriety of Nominations. At the request of the Board of Directors, any person nominated by a shareholder for election as a director shall furnish to the Secretary that information required to be set forth in the shareholder’s notice of nomination which pertains to the nominee. The presiding officer of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by this Article II, Section 3; and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded. The foregoing notice provision shall not apply to any person nominated by the Board of Directors for election as a director in the place of any person nominated by the Board of Directors who, after the notice of the meeting of shareholders has been mailed and prior to the meeting, dies or declines or is unable to serve as a director if nominated and elected.

     Section 4. Meetings. The Board of Directors may hold such regular and special meetings as it from time to time decides. These meetings may be either in person or by conference call. The actions of any person participating by way of telephone or other electronic means shall be as effective as if the person were physically present at the meeting. Special meetings may be called at any time by the Chairman of the Board, President, or any two (2) directors.

9

     Section 5. Notice of Directors’ Meetings. All regular meetings of the Board of Directors may be held without notice. Special meetings shall be preceded by at least two (2) days’ notice of the date, time and place of the meeting. Notice of an adjourned meeting need not be given if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken, and if the period of adjournment does not exceed one (1) month in any one adjournment.

     Section 6. Quorum and Vote. The presence of a majority of the directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

     Section 7. Board Committees. The Board of Directors, by a resolution adopted by a majority of its members, may create one or more committees, consisting of one or more directors, and may delegate to such committee or committees any and all such authority as is permitted by law.

ARTICLE III

OFFICERS

     Section 1. Numbers. The Corporation shall have a President, a Secretary, an Assistant Secretary, a Chairman of the Board of Directors or a Chief Executive Officer, and such other officers as the Board of Directors shall from time to time deem necessary. Any two or more offices may be held by the same person with the exception of the President and the Secretary.

     Section 2. Election and Term. The officers shall be elected by the Board of Directors. Each officer shall serve at the pleasure of the Board until such officer’s resignation or removal.

     Section 3. Duties. All officers shall have such authority and perform such duties in the management of the Corporation as are normally incident to their offices and as the Board of Directors may from time to time provide.

ARTICLE IV

RESIGNATION, REMOVALS AND VACANCIES

     Section 1. Resignations. Any officer or director may resign at any time by giving notice to the Chairman of the Board, the President, or the Secretary. Any such resignation shall take effect at the time specified therein, or, if no time is specified, then upon its delivery.

     Section 2. Removal of Officers. Any officer may be removed by the Board or its designate at any time with or without cause.

     Section 3. Removal of Directors. Any or all of the directors may be removed either with or without cause by a proper vote of the shareholders.

10

     Section 4. Vacancies. Newly created directorships resulting from an increase in the number of directors, and vacancies occurring in any office or directorship for any reason, including removal of an officer or director, may be filled by the vote of a majority of the directors then in office, even if less than a quorum exists.

ARTICLE V

CAPITAL STOCK

     Section 1. Stock Certificates. Every shareholder shall be entitled to a certificate or certificates of capital stock of the Corporation in such form as may be prescribed by the Board of Directors. Unless otherwise decided by the Board, such certificates shall be signed by the President and the Secretary of the Corporation.

     Section 2. Transfer of Shares. Shares of stock may be transferred on the books of the Corporation by delivery and surrender of the properly assigned certificate, but subject to any restrictions on transfer imposed by either the applicable securities laws or any shareholder agreement.

     Section 3. Loss of Certificates. In the case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe.

ARTICLE VI

ACTION BY CONSENT

     Whenever the directors are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken. The affirmative vote of the number of directors that would be necessary to take such action at a meeting shall be the act of the directors.

ARTICLE VII

INDEMNIFICATION

     With respect to claims of liabilities arising out of service as a director or officer of the Corporation, the Corporation shall indemnify and advance expenses to each present and future director or officer (and his or her estate, heirs, and personal representatives) to the fullest extent allowed by the laws of the State of Tennessee, both as now in effect and as hereafter adopted or amended. In the event that the Corporation indemnifies or makes any advance of expenses under this provision, the Secretary shall, in writing, report such action to the shareholders with or before the notice of the next shareholder’s meeting.

11

ARTICLE VIII

AMENDMENT OF BYLAWS

     These Bylaws may be amended, added to, or repealed either by the shareholders or the Board of Directors as provided by statute or the Charter of the Corporation, as amended from time to time. Any change in the Bylaws made by the Board of Directors, however, may be amended or repealed by the shareholders as provided in the Charter of the Corporation, as amended from time to time, or as allowed by applicable laws of the State of Tennessee.

12

CERTIFICATION

     I certify that these Second Amended and Restated Bylaws, as amended, were duly adopted by the Board of Directors as of June 29, 2010.

/s/ William L. Phillips III  

William L. Phillips III 

Corporate Secretary 

13

EX-10.1

Exhibit 10.1

EXECUTION VERSION

CREDIT AGREEMENT

Dated as of May 11, 2010,

among

KING PHARMACEUTICALS, INC.,

THE LENDERS NAMED HEREIN,

CREDIT SUISSE AG,
as Administrative Agent,
as Collateral Agent and
as Swingline Lender,

CREDIT SUISSE SECURITIES (USA) LLC,

BANK OF AMERICA, N.A.,

DNB NOR BANK ASA,

SUNTRUST BANK

and

U.S. BANK NATIONAL ASSOCIATION,
as Co-Syndication Agents

CREDIT SUISSE SECURITIES (USA) LLC
as Sole Arranger and Sole Bookrunner

TABLE OF CONTENTS

		Page
	ARTICLE I
	Definitions
SECTION 1.01.	Defined Terms		1
SECTION 1.02.	Terms Generally		28
SECTION 1.03.	Pro Forma Calculations		29
	ARTICLE II
	The Credits
SECTION 2.01.	Commitments		29
SECTION 2.02.	Loans		30
SECTION 2.03.	Swingline Loans		33
SECTION 2.04.	Letters of Credit		35
SECTION 2.05.	Borrowing Procedure		41
SECTION 2.06.	Evidence of Debt; Repayment of Loans; Scheduled Amortization of Term Loans		42
SECTION 2.07.	Fees		43
SECTION 2.08.	Interest on Loans		44
SECTION 2.09.	Default Interest		45
SECTION 2.10.	Alternate Rate of Interest		45
SECTION 2.11.	Termination and Reduction of Commitments; Scheduled Amortization of Term Loans		46
SECTION 2.12.	Conversion and Continuation of Borrowings		46
SECTION 2.13.	Voluntary Prepayment; Mandatory Prepayments		48
SECTION 2.14.	New Term Tranche		49
SECTION 2.15.	Reserve Requirements; Change in Circumstances		50
SECTION 2.16.	Change in Legality		52
SECTION 2.17.	Indemnity		53
SECTION 2.18.	Pro Rata Treatment		54
SECTION 2.19.	Sharing of Setoffs		54
SECTION 2.20.	Payments		55
SECTION 2.21.	Taxes		56
SECTION 2.22.	Assignment Under Certain Circumstances; Duty to Mitigate		59

i

	ARTICLE III
	Representations and Warranties
SECTION 3.01.	Organization; Powers	60
SECTION 3.02.	Authorization	61
SECTION 3.03.	Enforceability	61
SECTION 3.04.	Governmental Approvals	61
SECTION 3.05.	Financial Statements	61
SECTION 3.06.	No Material Adverse Effect	62
SECTION 3.07.	Title to Properties; Possession Under Leases	62
SECTION 3.08.	Subsidiaries	62
SECTION 3.09.	Litigation; Compliance with Laws	62
SECTION 3.10.	Agreements	63
SECTION 3.11.	Federal Reserve Regulations	63
SECTION 3.12.	Investment Company Act	63
SECTION 3.13.	Use of Proceeds	63
SECTION 3.14.	Tax Returns	63
SECTION 3.15.	No Material Misstatements	64
SECTION 3.16.	Employee Benefit Plans	64
SECTION 3.17.	Environmental Matters	65
SECTION 3.18.	Security Documents	65
SECTION 3.19.	Solvency	66
SECTION 3.20.	Sanctioned Persons	67
	ARTICLE IV
	Conditions of Lending
SECTION 4.01.	All Credit Events	67
SECTION 4.02.	Condition to Term Loans	68
SECTION 4.03.	Effective Date	68
	ARTICLE V
	Affirmative Covenants
SECTION 5.01.	Existence; Compliance with Laws; Businesses and Properties	71
SECTION 5.02.	Insurance	72
SECTION 5.03.	Obligations and Taxes	72
SECTION 5.04.	Financial Statements, Reports, etc	72
SECTION 5.05.	Litigation and Other Notices	75
SECTION 5.06.	Information Regarding Collateral	75
SECTION 5.07.	Maintaining Records; Access to Properties and Inspections; Maintenance of Ratings	76

ii

SECTION 5.08.	Use of Proceeds	76
SECTION 5.09.	Employee Benefits	77
SECTION 5.10.	Compliance with Environmental Laws	77
SECTION 5.11.	Compliance with Laws	77
SECTION 5.12.	Further Assurances	77
	ARTICLE VI
	Negative Covenants
SECTION 6.01.	Indebtedness	78
SECTION 6.02.	Liens	80
SECTION 6.03.	Sale and Leaseback Transactions	83
SECTION 6.04.	Investments, Loans and Advances	83
SECTION 6.05.	Mergers, Consolidations and Sales of Assets	86
SECTION 6.06.	Restricted Payments; Restrictive Agreements	88
SECTION 6.07.	Transactions with Affiliates	90
SECTION 6.08.	Business of Borrower and Subsidiaries	90
SECTION 6.09.	Other Indebtedness	90
SECTION 6.10.	Capital Expenditures	91
SECTION 6.11.	Consolidated Interest Expense Coverage Ratio	91
SECTION 6.12.	Maximum Leverage Ratio	91
SECTION 6.13.	Fiscal Year	91
	ARTICLE VII
	Events of Default
	ARTICLE VIII
	The Administrative Agent and the Collateral Agent
	ARTICLE IX
	Miscellaneous
SECTION 9.01.	Notices	99
SECTION 9.02.	Survival of Agreement	102
SECTION 9.03.	Binding Effect	102
SECTION 9.04.	Successors and Assigns	102
SECTION 9.05.	Expenses; Indemnity	108
SECTION 9.06.	Right of Setoff	109
SECTION 9.07.	APPLICABLE LAW	110
SECTION 9.08.	Waivers; Amendments	110

iii

SECTION 9.09.	Interest Rate Limitation	112
SECTION 9.10.	Entire Agreement	112
SECTION 9.11.	WAIVER OF JURY TRIAL	112
SECTION 9.12.	Severability	113
SECTION 9.13.	Counterparts	113
SECTION 9.14.	Headings	113
SECTION 9.15.	Jurisdiction; Consent to Service of Process	113
SECTION 9.16.	Confidentiality	114
SECTION 9.17.	Lender Action	115
SECTION 9.18.	Patriot Act	115
SECTION 9.19.	No Fiduciary Duty	115

iv

SCHEDULES:
Schedule 1.01(a)	Existing Letters of Credit
Schedule 1.01(b)	Subsidiary Guarantors
Schedule 2.01	Swingline Lender, Revolving Lenders and Revolving Credit Commitments
Schedule 2.04	L/C Commitments
Schedule 3.08	Subsidiaries
Schedule 3.09	Litigation
Schedule 3.18	UCC Filing Offices
Schedule 6.01	Existing Indebtedness
Schedule 6.02	Existing Liens
Schedule 6.04	Existing Investments
Schedule 6.06	Certain Agreements
EXHIBITS:
Exhibit A	Form of Administrative Questionnaire
Exhibit B	Form of Affiliate Subordination Agreement
Exhibit C	Form of Assignment and Acceptance
Exhibit D	Form of Borrowing Request
Exhibit E	Form of Guarantee and Collateral Agreement
Exhibit F	Term Loan Addendum
Exhibit G-1	Form of Opinion of James Elrod, Esq., Chief Legal Officer of the Borrower
Exhibit G-2	Form of Opinion of Covington & Burling LLP, special counsel to the Borrower
Exhibit H	Form of Compliance Certificate

v

     CREDIT AGREEMENT dated as of May 11, 2010 (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 AG, 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 capacities, respectively, the “Administrative Agent” and the “Collateral Agent”), and as swingline lender (in such capacity, the “Swingline Lender”), Credit Suisse Securities (USA) LLC, Bank of America, N.A., DnB NOR Bank ASA, SunTrust Bank and U.S. Bank National Association, as co-syndication agents (in such capacity, “Co-Syndication Agents”); and the Issuing Banks (as defined in Article I).

          The Borrower has requested the Revolving Lenders 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 Revolver Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $500,000,000. The Borrower has requested the Swingline Lender to extend credit, at any time and from time to time prior to the Revolver 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 $50,000,000 to support payment obligations incurred by the Borrower and the Subsidiaries. The Borrower has requested incremental Term Loans in an aggregate principal amount not in excess of $500,000,000. The proceeds of the 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 (if any), 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, ABR Term 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.

          “ABR Term Loan” shall mean any Term 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(k).

          “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).

          “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, any other person that, directly or indirectly, is in Control of, 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 B 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.

2

          “Aggregate Revolving Credit Exposure” shall mean the aggregate amount of the Revolving 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 highest 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%; (c) and the one-month Adjusted LIBO Rate plus 1%; 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 11:00 a.m. (London Time) by reference to the British Banker’s 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. 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, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, as the case may be.

          “Animal Health Business” shall mean the business segment of the Borrower and its Subsidiaries devoted to the research, registration and development of, manufacture, packaging, marketing, promotion or distribution of animal health products.

          “Applicable Percentage” shall mean, for any day, with respect to any Eurodollar Revolving Loan or ABR Revolving Loan or with respect to the Commitment Fees, as the case may be, the applicable percentage set forth below under the caption “Eurodollar Spread”, “ABR Spread” or “Commitment Fee Percentage”, respectively, based on the Corporate Rating in effect as of such day:

							Commitment Fee
Corporate Rating	Eurodollar Spread			ABR Spread			Percentage
Ba1/BB+ or better		2.50	%		1.50	%		0.375	%
Ba2/BB		2.75	%		1.75	%		0.375	%
Ba3/BB- or below		3.00	%		2.00	%		0.50	%

3

For the purpose of the foregoing, (a) if either (or both) of Moody’s or S&P shall not have in effect a Corporate Rating on any day, then such rating agency (or such rating agencies) shall be deemed to have established a rating in the last category (Ba3/BB- or below) set forth above, (b) if the Corporate Ratings established or deemed to have been established by Moody’s and S&P shall fall within different categories, the Applicable Percentage shall be based on the lower of the two ratings and (c) if the Corporate Ratings established or deemed established by Moody’s and S&P shall change, such change shall be effective as of the date on which it is first publicly announced by the applicable rating agency, irrespective of when such notice of such change shall have been furnished to the Borrower and the Administrative Agent. Each change to the Applicable Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change.

          “Arranger” shall mean Credit Suisse Securities (USA) LLC.

          “Asset Sale” shall have the meaning assigned to such term in Section 6.05(b).

          “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 C 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 D, or such other form as shall be approved by the Administrative Agent.

          “Breakage Event” shall have the meaning assigned to such term in Section 2.17.

4

          “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 “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, 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, but excluding in each case (a) Capital Lease Obligations permitted by Section 6.01(f), (b) 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, (c) any such expenditure constituting an investment permitted by Section 6.04(k) or (p) and (d) any such expenditure made as a tenant in leasehold improvements, to the extent reimbursed by the landlord.

          “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 beneficially own, directly or indirectly, shares representing more than 35% 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 shall occur under and as defined in any indenture or agreement in respect of Material Indebtedness or Permitted Subordinated Indebtedness to which the Borrower or any Subsidiary is a party.

          “Charges” shall have the meaning assigned to such term in Section 9.09.

5

          “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, Term Loan or Borrowing or 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, and, in the case of a Term Loan or Borrowing, when used in reference to any Commitment, refers to a Term Loan Commitment.

          “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.

          “Collateral Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

          “Commitment” shall mean a Revolving Credit Commitment, Swingline Commitment or a Term Loan 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 April 2010.

          “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 and franchise tax expense for such period, (iv) all amounts attributable to depreciation and amortization expense (including in respect of goodwill and other intangible assets) 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) cash charges and expenses related to Permitted Acquisitions and dispositions of lines of business or assets outside the ordinary course of business permitted hereunder, (ix) all other restructuring and non-recurring cash charges incurred during such period; provided that no more than $125,000,000 in the aggregate may be added back

6

pursuant to this clause during the term of this Agreement and (x) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options, any restricted stock plan or other rights to officers, directors and employees of the Borrower or any Subsidiary 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 (x) 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 (y) 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).

          “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, the amortization of debt discounts and the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense), 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 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.

          “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 or a Subsidiary), except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a Subsidiary by such person during such period, (b) the income of any Subsidiary to the extent that the declaration or payment of

7

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 or losses 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-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, term, swingline and letter of credit facilities provided for by this Agreement.

          “Corporate Rating” shall mean (i) with respect to Moody’s, the Borrower’s public corporate family rating and (ii) with respect to S&P, the Borrower’s public corporate credit rating.

          “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 any Revolving Lender, as determined by the Administrative Agent, that has (a) failed to fund any portion of its Revolving Loans or participations in Swingline Loans or Letters of Credit within three Business Days of the date required to be funded by it hereunder (unless Revolving Lenders representing a majority in interest of the Commitments of the applicable Class shall have advised the Administrative Agent in writing of their determination that such condition has not been satisfied), (b) notified the Borrower, the Administrative Agent, any Issuing Bank or any Lender in writing that it does not intend to comply with any of its funding obligations under this

8

Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit, (c) failed, within three Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Revolving Loans and participations in then outstanding Swingline Loans or Letters of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good-faith dispute, or (e) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has consented to, approved of or acquiesced in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has consented to, approved of or acquiesced in any such proceeding or appointment; provided that (i) if a Lender would be a “Defaulting Lender” solely by reason of events relating to a parent company of such Lender as described in clause (e) above, the Administrative Agent and the Borrower may, in their discretion, determine that such Lender is not a “Defaulting Lender” if and for so long as the Administrative Agent and the Borrower are satisfied that such Lender will continue to perform its funding obligations hereunder and (ii) the Administrative Agent and the Borrower may, by notice to the Borrower and the Lenders, declare that a Defaulting Lender is no longer a “Defaulting Lender” if the Administrative Agent and the Borrower determine, in their discretion, that the circumstances that resulted in such Lender becoming a “Defaulting Lender” no longer apply.

          “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 (other than a change in control so long as any rights of the holders thereof upon the occurrence of a change in control shall be subject to the occurrence of the Termination Date), matures 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, on or prior to the date that is six months after the Revolver Maturity Date (or such later date that is the latest Term Maturity Date), except to the extent that such Equity Interest is redeemable with, or solely exchangeable for, any Equity Interest of such person that is not Disqualified Stock.

          “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.

9

          “Effective Date” shall mean the date on which the conditions set forth in Section 4.03 are satisfied (or waived in accordance with Section 9.08).

          “Engagement Letter” shall mean the Engagement Letter dated March 31, 2010, among the Borrower and Credit Suisse Securities (USA) LLC.

          “environment” shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata.

          “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 (to the extent relating to exposure to Hazardous Materials), including 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.

10

          “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 right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

          “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 entity (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b), (c) or (m) 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) a determination that a Plan is subject to a funding-based limitation under Section 436 of the Code or Section 206(g) of ERISA; (c) 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; (d) 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; (e) 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 (f) the occurrence of a “prohibited transaction” with respect to which the Borrower or any of the Subsidiaries is a “disqualified person” (as such terms are defined in Section 4975 of the Code) with respect to which the Borrower or any such Subsidiary could otherwise have or incur material liabilities.

          “Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Loans.

          “Eurodollar Loan” shall mean any Eurodollar Revolving Loan or Eurodollar Term Loan.

          “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.

11

          “Eurodollar Term Loan” shall mean any Term 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.

          “Exchange Act Filings” shall mean filings made by the Borrower from time to time pursuant to the regulations of the Securities Exchange Act of 1934 and rules promulgated thereunder.

          “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 of the Loan Documents), (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 2.22(a)), any withholding or backup 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 2.21(a) or (ii) is attributable to such Foreign Lender’s failure to comply with Section 2.21(e).

          “Existing Credit Agreement” shall mean the Credit Agreement dated as of April 19, 2007, as amended by that certain Amendment No. 1 dated as of December 5, 2008, among the Borrower, the lenders named therein, and Credit Suisse, as administrative agent, collateral agent and swingline lender.

          “Existing Letters of Credit” shall mean 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.

          “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

12

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 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 letter dated as of the date hereof among the Borrower and the Administrative Agent.

          “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

13

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 E, among the Borrower, the Subsidiaries party thereto and the Collateral Agent.

          “Guarantors” shall mean the Subsidiary Guarantors.

          “Hazardous Materials” shall mean all ignitable, reactive, corrosive, radioactive, 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, mold and all other substances or wastes of any nature that are regulated, or otherwise give rise to liability under any law, rule or regulation relating to the environment.

          “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.

          “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 under conditional sale or other title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations

14

incurred in the ordinary course of business and excluding earn-out obligations until such earn-out appears in the liability section of the balance sheet), (e) 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, (f) all Guarantees by such person of Indebtedness of others, (g) all Capital Lease Obligations of such person, (h) net obligations of such person under any Hedging Agreements, valued at the Agreement Value thereof, (i) all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference), (j) all obligations of such person as an account party in respect of letters of credit and (k) 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, except to the extent such person’s liability for such Indebtedness is expressly limited by the terms of such Indebtedness. The amount of any Indebtedness referred to in clause (c) or (e) above shall, for the purposes of this Agreement, be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property or asset encumbered, as determined by such person in good faith.

          “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 or 12) 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

15

end on the last Business Day of the calendar month at the end of such Interest Period and (c) any Interest Period beginning prior to the Revolver Maturity Date (in the case of any Revolving Loan) or the Term Maturity Date (in the case of any Term Loan) which would otherwise end after such date shall end on such 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.

          “Investment” shall have the meaning assigned to such term in Section 6.04.

          “Issuing Bank” shall mean, at any time, Credit Suisse AG 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 Venture” shall mean a subsidiary of the Borrower that (i) is not a Wholly Owned Subsidiary of the Borrower, (ii) is engaged primarily in one or more businesses in which the Borrower and its Subsidiaries are engaged (or one or more businesses reasonably related thereto) and (iii) is designated by a notice in writing by the Borrower to the Administrative Agent as a “Joint Venture” for the purpose of this Agreement.

          “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.

16

          “L/C Participation Fee” shall have the meaning assigned to such term in Section 2.07(c).

          “Lender” shall mean a Revolving Lender or a Term Lender.

          “Letter of Credit” shall mean (a) any letter of credit issued pursuant to Section 2.04 and (b) the Existing Letters of Credit.

          “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 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 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.

17

          “Loan Documents” shall mean this Agreement, the Letters of Credit, the Security Documents, each Term Loan Addendum, 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, Term Loans and the Swingline Loans.

          “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 or condition (financial or otherwise) of the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform their obligations under the Loan Documents or (c) the validity or enforceability of the Loan Documents or the rights, remedies and benefits available to the parties thereunder.

          “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 $40,000,000. 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 Subsidiary” shall mean each Domestic Subsidiary and each Foreign Subsidiary that is a Material Foreign Subsidiary.

          “Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

18

          “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.

          “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

          “Non-Consenting Lender” shall mean 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.

          “Obligations” shall mean all obligations defined as “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 3.20.

          “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(k).

          “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:

19

               (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

               (g) other investment instruments approved in writing by the Administrative Agent with the consent of the Required Lenders.

     For the avoidance of doubt, auction rate securities shall not constitute Permitted Investments.

          “Permitted Refinancing Indebtedness” shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting

20

Permitted Refinancing Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium thereon), (b) the average life to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders in the aggregate as those contained in the documentation governing the Indebtedness being Refinanced, (d) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced, and (e) if the Indebtedness being Refinanced is secured by any collateral (whether equally and ratably with, or junior to, the Obligations or otherwise), such Permitted Refinancing Indebtedness may be secured by such collateral on terms no less favorable to the Secured Parties in the aggregate than those contained in the documentation governing the Indebtedness being Refinanced.

          “Permitted Subordinated Indebtedness” shall mean unsecured subordinated Indebtedness issued or incurred by the Borrower (i) the terms of which (1) do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the date that is six months after the Revolver Maturity Date (or such later date that is latest final maturity date of any Term Loan); provided that such Indebtedness may contain provision for offers to purchase upon a change of control or, subject to an exception permitting the repayment of indebtedness hereunder from the proceeds therefrom (if required hereunder), asset sales in each case no less favorable in the aggregate than would be customary for subordinated high yield securities, (2) provide for covenants and events of default customary for Indebtedness of similar nature as such Permitted Subordinated Indebtedness and (3) provide for subordination of payments in respect of such Indebtedness (and guarantees thereof) to the Loans and other obligations under the Loan Documents (and guarantees thereof) customary for subordinated high yield securities, (ii) in respect of which no Subsidiary that is not an obligor under the Loan Documents is an obligor and (iii) the proceeds of which are used to consummate a Permitted Acquisition, make any Capital Expenditure or finance the activities described in Section 6.04(l); provided that (A) immediately prior to and after giving effect to the incurrence of such Permitted Subordinated Indebtedness, no Default or Event of Default shall have occurred and be continuing and (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

21

pro forma effect to such transaction (and the application of the proceeds thereof) and to any other event occurring after such period as to which pro forma recalculation is appropriate (including any Permitted Acquisition occurring after such period with the proceeds of such Permitted Subordinated Indebtedness) as if such transaction had occurred as of the first day of such period.

          “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 436 of the Code or Section 206(g) 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 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 Revolving 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 Revolving 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.

          “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.

22

          “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.

          “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, from, under, 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 Lenders” shall mean, at any time, Lenders having Term Loans, Revolving Loans, L/C Exposures, Swingline Exposures and unused Revolving Credit Commitments representing a majority of the sum of all outstanding Term Loans, Revolving Loans, L/C Exposures, Swingline Exposures and unused Revolving Credit Commitments; provided that the Term Loans and Revolving Loans held or deemed held by, and the L/C Exposures, Swingline Exposures and unused Revolving Credit Commitments of, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

          “Required Revolving Lenders” shall mean at any time the Revolving Lenders holding a majority of the Revolving Credit Commitments, if any Revolving Credit Commitments are still in existence, or Revolving Loans, if all the Revolving Credit Commitments have been terminated; provided that the Revolving Loans held or deemed held by, and the unused Revolving Credit Commitments of, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.

23

          “Required Term Lenders” shall mean at any time the Lenders holding a majority of the Term Loan Commitments, if any Term Loan Commitments are still in existence, or a majority of the aggregate unpaid principal amount of Term Loans, if all Term Loan Commitments have been terminated; provided that the Term Loans held or deemed held by, and the unused Term Loan Commitments of, any Defaulting Lender shall be excluded for purposes of making a determination of Required Term Lenders.

          “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 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.

          “Revolver Maturity Date” shall mean May 11, 2015.

          “Revolving Borrowing” shall mean a Borrowing comprised of Revolving Loans.

          “Revolving Credit Commitment” shall mean, with respect to each Revolving Lender, the commitment of such Revolving Lender to make Revolving Loans hereunder as set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Revolving Lender assumed its Revolving Credit Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.11 and (b) reduced or increased from time to time pursuant to assignments by or to such Revolving Lender pursuant to Section 9.04. For the avoidance of doubt, the term “Revolving Credit Commitment” refers to the obligation to make Revolving Loans and not to any obligation to make Term Loans, which is in addition to, and separate from, such Revolving Credit Commitment.

          “Revolving Credit Exposure” shall mean, with respect to any Revolving Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Revolving Lender, plus the aggregate amount at such time of such Revolving Lender’s L/C Exposure, plus the aggregate amount at such time of such Revolving Lender’s Swingline Exposure.

          “Revolving Lenders” shall mean the financial institutions listed on Schedule 2.01 and any other financial institution that has become a party hereto as a “Revolving Lender” pursuant to an Assignment and Acceptance, other than any

24

such financial institution that has ceased to be a party hereto as a “Revolving Lender” pursuant to an Assignment and Acceptance. Unless the context clearly indicates otherwise, the term “Revolving Lenders” shall include the Swingline Lender.

          “Revolving Loans” shall mean the revolving loans made by the Lenders to the Borrower pursuant to Section 2.01(a). 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 have the meaning assigned to such term in the Guarantee and Collateral Agreement.

          “Security Documents” shall mean the Guarantee and Collateral Agreement and each of the security agreements and other instruments and documents executed and delivered pursuant to the foregoing or pursuant to Section 5.12.

          “SPC” shall have the meaning assigned to such term in Section 9.04(i).

          “Specified Loan Documents” shall mean this Agreement, the Letters of Credit, the Guaranty and Collateral Agreement, each Term Loan Addendum, any promissory notes issued pursuant to Section 2.06 and any other material document executed in connection with the foregoing.

          “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 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, as to any person (herein referred to as the “parent”), any corporation, partnership, limited liability company, association or

25

other business entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other governing body of such corporation, partnership or other entity are at the time owned directly or indirectly through one or more intermediaries, or both, by such person.

          “Subsidiary” shall mean any and all subsidiaries of the Borrower, excluding (other than for the purposes of Sections 3.05, 3.09, 3.15, 3.16, 3.17, 3.20, 5.04(a), (b) or (i), 5.09 and 9.16, paragraph (j) of Article VII and Article VIII) any Joint Venture.

          “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.

          “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 Section 2.11.

          “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 Revolver Maturity Date and the date that is 5 Business Days after the date on which such Loan was made.

          “Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

          “Term Borrowing” shall mean a Borrowing comprised of Term Loans.

          “Term Lender” shall mean each lender executing the Term Loan Addendum pursuant to Section 2.14 and any other financial institution that has thereafter become a party hereto as a “Term Lender” pursuant to an Assignment

26

and Acceptance, other than any such financial institution that has ceased to be a party hereto as a “Term Lender” pursuant to an Assignment and Acceptance.

          “Term Loan” shall mean a loan made or to be made by a Lender pursuant to Section 2.01(b) and to a Term Loan Addendum delivered in accordance with Section 2.14. Each Term Loan shall be a Eurodollar Term Loan or an ABR Term Loan.

          “Term Loan Addendum” shall mean the Term Loan Addendum substantially in the form of Exhibit F.

          “Term Loan Commitment” shall mean, with respect to each Term Lender, the commitment of such Term Lender to make Term Loans hereunder as set forth on an applicable Term Loan Addendum. For the avoidance of doubt, the term “Term Loan Commitment” refers to the obligation to make Term Loans and not to any obligation to make Revolving Loans, which is in addition to, and separate from, such Term Loan Commitment.

          “Term Maturity Date” shall mean the “Term Maturity Date” set forth in the Term Loan Addendum.

          “Termination Date” shall mean the date on which all 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 (other than contingent expense reimbursement and indemnification obligations) shall have been paid in full and all Letters of Credit shall have been cancelled or have expired (or have been cash collateralized in a manner reasonably satisfactory to the applicable Issuing Bank) and all amounts drawn thereunder have been reimbursed in full.

          “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 (h) (except to the extent of the Agreement Value of any Hedging Agreement that has been terminated) and (i) of the definition of such term), except, (x) Indebtedness referred to in clause (e) or (f) of the definition of such term shall be included within the calculation of Total Funded Debt only to the extent it relates to Indebtedness that would otherwise constitute Total Funded Debt under this definition, and (y) Indebtedness referred to in clause (j) of the definition of such term shall be included within the calculation of Total Funded Debt only 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.

27

          “Transactions” shall have the meaning assigned to such term in Section 3.02.

          “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.

          “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.

          “Yield Differential” shall have the meaning assigned to such term in Section 2.14(a).

          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,

28

restated, supplemented or otherwise modified from time to time, in each case in accordance with the 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 date hereof 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 II

The Credits

          SECTION 2.01. Commitments. (a) Revolving Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Revolving 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 Revolver Maturity Date and the

29

termination of the Revolving Credit Commitment of such Revolving Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Revolving Lender’s Revolving Credit Exposure, after giving effect to such Revolving Loans (and the application of the proceeds thereof), exceeding such Revolving 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 to the extent permitted in Section 2.13, prepay and reborrow Revolving Loans.

               (b) Term Loans. Subject to the terms and conditions and relying on the representations and warranties herein set forth and in the Term Loan Addendum, each Term Lender agrees, severally and not jointly, to make Term Loans to the Borrower in the amounts and on the dates set forth in the applicable Term Loan Addendum.

          SECTION 2.02. Loans. (a) (i) Each Revolving Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Revolving Lenders ratably in accordance with their applicable Revolving Credit Commitments and (ii) each Term Loan shall be made as part of a Borrowing consisting of Loans made by Term Lenders ratably in accordance with their applicable Term Loan 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 (except, with respect to any Term Loan, to the extent otherwise provided in the applicable Term Loan Addendum).

               (b) Subject to Sections 2.10 and 2.16, each Borrowing (other than Swingline Loans) shall be comprised entirely of ABR Loans or Eurodollar 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 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 Class or 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 12 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.

30

               (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, 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 (or in the case of an ABR Borrowing, prior to 12:00 (noon), New York City time, on the date of such 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 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 (i) shall not be entitled to request any Revolving Borrowing or the conversion or continuation of any Revolving Borrowing if the Interest Period requested with respect thereto would end after the Revolver Maturity Date, and (ii) shall not be entitled to request any Term Borrowing or the conversion or continuation of any Term Borrowing if the Interest Period requested with respect thereto would end after the Term Maturity Date.

31

               (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 Revolving Lender of such amount and its Pro Rata Percentage thereof. Each Revolving 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 Revolving 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 Revolving 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 Revolving 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 Revolving 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 Revolving 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 Revolving 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 Revolving Lenders that shall have made such payments and to such Issuing Bank, as their interests may appear. If any Revolving Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, such Revolving Lender and the Borrower (unless such amount relates to an ABR Loan made pursuant to this paragraph (f), in which case Section 2.08 shall apply) severally agree to pay interest on such amount, for each day from and including the date such 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 Revolving Lender, if any) and (ii) in the case of such Revolving Lender, for the first such day, the Federal Funds Effective Rate, and for each day thereafter, the Alternate Base Rate.

32

          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 Revolver 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 outstanding principal amount of all Swingline Loans exceeding $20,000,000 or (ii) the Aggregate Revolving Credit Exposure, after giving effect to any Swingline Loan (and the application of the proceeds thereof), 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 (and a minimum principal amount 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 Revolving 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, (B) of the waiver of such Default or Event of Default in accordance with Section 9.08(b) or (C) that such Default or Event of Default shall have ceased to exist.

               (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 12:00 noon, 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 Day) and amount of such Swingline Loan. The Swingline Lender shall credit the amount of each Swingline Loan to an account in the name of the Borrower designated by the Borrower in the applicable notice promptly on receipt of such notice from the Borrower on the day such Swingline Loan is so requested.

33

               (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, subject to the provisions of Section 2.09, bear interest as provided in Section 2.08(a) for ABR Loans.

               (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 Revolving 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 clause (g) or (h) of Article VII 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 Revolving Lenders will participate. The Administrative Agent will, promptly upon receipt of such notice, give notice to each Revolving Lender, specifying in such notice such Lender’s Pro Rata Percentage of such Swingline Loan or Loans. In furtherance of the foregoing, each Revolving 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 Revolving Lender’s Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving 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 Revolving 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 Revolving Lender (and Section 2.02(c) shall apply, with the necessary changes, to the payment obligations of the Revolving Lenders) and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving 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

34

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 Revolving 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 up to 30 days prior to the Revolver Maturity Date. 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 Revolving 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 Revolving Lender and each Revolving 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 Credit but shall not have entered into an Issuing

35

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, Extension; 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 (i) the L/C Exposure shall not exceed $50,000,000, (ii) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment and (iii) 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 Revolver 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 Revolving Lender, and each such Revolving Lender hereby acquires from the applicable Issuing Bank, a participation in such Letter of Credit equal to such Revolving 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 Revolving Lender hereby irrevocably, absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such Revolving Lender’s Pro Rata Percentage of each L/C

36

Disbursement made by each Issuing Bank and not reimbursed by the Borrower as provided in Section 2.04(e). Each Revolving 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 2:00 p.m., New York City time, on the date that 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 2:00 p.m., New York City time, on the immediately following Business Day; provided that if such payment is not received by such date, the Borrower’s reimbursement obligation hereunder shall be replaced with an ABR Revolving Borrowing to the extent set forth in Section 2.02(f).

               (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;

37

     (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;

     (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

38

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 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 intends to 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 Revolving Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Revolving 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 in accordance with Section 2.04(e) or Section 2.02(f), then without duplication of any interest payable by the Borrower pursuant to Section 2.02(f), 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 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 Revolving 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.

39

               (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 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 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 Revolving Lenders, an amount in cash equal to 102% of 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

40

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 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.

Provided that, notwithstanding anything herein to the contrary, Credit Suisse AG, acting in the capacity of Issuing Bank, shall have no obligation to issue Letters of Credit other than standby Letters of Credit.

          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; provided that the notice period for Borrowings with a requested Interest Period of 9 or 12 months, shall be not later than 12:00 (noon), New York City time, four Business Days before the proposed Borrowing, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period of 9 or 12 months is acceptable to all of them, and (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Not later than 11:00 a.m., New York City time, three Business Days before the requested date of such Borrowing with a proposed

41

Interest Period of 9 or 12 months, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested 9 or 12 month Interest Period has been consented to by all the Lenders. 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 aggregate amount of Loans comprising such Borrowing and whether such Loans are Revolving Loans or Term Loans; 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 2.05 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

          SECTION 2.06. Evidence of Debt; Repayment of Loans; Scheduled Amortization of Term 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 Revolver Maturity Date, (ii) the then unpaid principal amount of each Swingline Loan on the applicable Swingline Maturity Date and (iii) the then unpaid principal amount of each Term Loan on the Term Maturity Date. The Borrower shall repay the Term Loans in accordance with the amortization schedule set forth in the applicable Term Loan Addendum.

               (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 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.

42

               (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 Revolving Lender (other than any Defaulting 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 the Revolving Credit Commitments of such Revolving 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 Revolving Lender during the preceding quarter (or other period commencing with the date hereof or ending with the date on which the last of the Revolving Credit Commitments of such Revolving 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 Revolving Lender (other than any Defaulting Lender as provided above) shall commence to accrue on the date hereof and shall cease to accrue on the date on which the last of the Revolving Credit Commitments of such Revolving 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 administration fees set forth in the Engagement Letter at the times and in the amounts specified therein (the “Administrative Agent Fees”).

               (c) The Borrower agrees to pay (i) to each Revolving Lender, through the Administrative Agent, on the last Business Day of March, June, September and December of each year and on the date on

43

which the Revolving Credit Commitment of such Revolving Lender shall be terminated as provided herein, a fee (an “L/C Participation Fee”) calculated on such Revolving 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 Revolver Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Revolving 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 0.25% per annum (or otherwise agreed upon in writing 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.

               (d) The Borrower agrees to pay to each Revolving Lender, through the Administrative Agent, on the Effective Date, a fee as described in the Fee Letter.

               (e) 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 absent manifest error in the calculation of such fees; 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.

               (f) The Borrower agrees to pay to the Administrative Agent for the account of each Term Lender such fees in such amounts and at such times as shall be set forth in the applicable Term Loan Addendum.

          SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section 2.09, the Revolving 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

44

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 Revolving 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) Subject to the provisions of Section 2.09, each Term Loan shall bear interest on the outstanding principal amount thereof from the date such Term Loan is made until it becomes due at the rate or rates per annum provided in the applicable Term Loan Addendum and such interest shall be payable on the dates set forth in the applicable Term Loan Addendum.

          (d) Interest on Loans 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 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

45

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; Scheduled Amortization of Term Loans. (a)(i) 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 Revolver Maturity Date and (ii) any Term Loan Commitment will terminate in accordance with the applicable Term Loan Addendum.

          (b) Upon at least three Business Days’ prior 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. Each notice of termination or reduction delivered by the Borrower under this paragraph (b) shall be irrevocable, provided that, subject to Section 2.17, any such notice may state that such notice is conditioned upon effectiveness of other financing or the occurrence of other events, in which case such notice may be revoked by the Borrower by notice to the Administrative Agent if such condition is not satisfied.

          SECTION 2.12. Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable written 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;

46

     (ii) 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 (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 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 2.17;

     (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 the Required Lenders, after the occurrence and during the continuance of a Default or an Event of Default, no outstanding Loan may be converted into, or continued at the end of the applicable Interest Period as, a Eurodollar Loan.

          Each notice pursuant to this Section shall be irrevocable and in writing shall refer to this Agreement, and specify (i) the identity, Class, 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

47

one month’s duration. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 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 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 converted into an ABR Borrowing.

          SECTION 2.13. Voluntary Prepayment; Mandatory Prepayments. (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) before 10:00 a.m., New York City time, on 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.

          (b) Each notice of voluntary prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section shall be subject to Section 2.17 but otherwise without premium or penalty. All prepayments under this Section 2.13 (other than prepayments of ABR Revolving Loans or Swingline Loans) shall be accompanied by accrued and unpaid interest on the principal amount being prepaid to but excluding the date of payment. Each notice of prepayment delivered by the Borrower under this paragraph (b) shall be irrevocable, provided that, subject to Section 2.17, any such notice may state that such notice is conditioned upon effectiveness of other financing or the occurrence of other events, in which case such notice may be revoked by the Borrower, by notice to the Administrative Agent if such condition is not satisfied.

          (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 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)

48

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.

          (d) The Term Loans shall be subject to such mandatory prepayment requirements, if any, as are specified in the applicable Term Loan Addendum.

          SECTION 2.14. New Term Tranche. (a) On one or more but no more than four occasions following the Effective Date and prior to the Revolver Maturity Date, the Borrower may arrange for one or more Lenders or other financial institutions (approved by the Administrative Agent to the extent such approval would have been required for an assignment to such financial institution pursuant to Section 9.04 (such approval not to be unreasonably withheld)) to provide Term Loans in an aggregate principal (i.e. face) amount for all such Term Loans provided since the Effective Date not to exceed $500,000,000. The Borrower may seek Term Loans from existing Lenders, each of which shall be entitled to agree or decline to participate in its sole discretion. The Borrower and each Term Lender shall execute and deliver to the Administrative Agent a Term Loan Addendum and such other documentation as the Administrative Agent shall reasonably specify to evidence the Term Loans of each Term Lender. The terms and provisions of the Term Loans shall be as set forth herein, as supplemented by the Term Loan Addendum. Without the prior written consent of the Required Lenders, (1) the final maturity date of the Term Loans shall be no earlier than the Revolver Maturity Date, (2) the average life to maturity of the Term Loans shall be no shorter than the remaining life to maturity of the Revolving Credit Commitments and (3) if the initial yield on such Term Loans (as reasonably determined by the Administrative Agent) exceeds the yield on the Revolving Credit Commitments and Revolving Loans (in each case taking into account interest rate margins, upfront fees (including fees payable under the Engagement Letter and under the Fee Letter) and original issue discount) by more than 50 basis points (the amount of such excess above 50 basis points being referred to herein as the “Yield Differential”), then, at the Borrower’s option, either (x) the Applicable Percentage then in effect for Revolving Loans shall automatically be increased by the Yield Differential, effective upon the making of the Term Loans or (y) the Borrower, upon the making of the Term Loans, shall pay to the Administrative Agent, for the benefit of the Lenders, an upfront fee in an amount sufficient to reduce the Yield Differential to zero. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Term Loan Addendum. Each of the parties hereto hereby agrees that, upon the effectiveness of any Term Loan Addendum, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Term Loan Addendum and the Term Loans evidenced thereby, and the

49

Administrative Agent, the Borrower and the Term Lenders may, without the consent of any other party hereto, revise this Agreement to evidence such amendments and make such other changes as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section. Each tranche of Term Loans shall be in an aggregate principal amount that is not less than $50,000,000 and be in an integral multiple of $5,000,000.

          (b) Notwithstanding the foregoing, no Term Loans may be made, and no Term Loan Addendum shall become effective unless (i) on the date of such loan and such effectiveness, the conditions set forth in paragraphs (b) and (c) of Section 4.01 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower, (ii) all fees and expenses due and owing in connection with the Term Loans or the Term Loan Addendum shall have been paid in full, (iii) the Borrower shall be in pro forma compliance with the covenant set forth in Section 6.12 after giving effect to such Term Loans (and the application of the proceeds thereof), (iv) the Borrower shall be in pro forma compliance with the covenant set forth in Section 6.11 after giving effect to such Term Loans (and the application of the proceeds thereof), (v) except as otherwise specified in the applicable Term Loan Addendum, the Administrative Agent shall have received legal opinions, board resolutions and other closing certificates reasonably requested by the Administrative Agent and consistent with those delivered on the Effective Date under Section 4.03 and (vi) the other terms and documentation in respect of the Term Loans, to the extent not consistent with the terms hereof, shall be reasonably satisfactory to the Administrative Agent. If the Borrower exercises its right to issue Term Loans under this Section 2.14 on more than one occasion, each subsequent issuance of Term Loans may be subject to such further restrictions as shall be set forth in the applicable Term Loan Addendum for any prior issuance of Term Loans.

          (c) Upon execution and delivery by the Borrower and each Lender or other financial institution party thereto of a Term Loan Addendum, each such Lender or other financial institution party thereto shall become a “Term Lender” for all purposes hereunder, and each loan made pursuant to the terms of such Term Loan Addendum shall be a “Term Loan” for all purposes hereunder.

          SECTION 2.15. 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 Loan made by such

50

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 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 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 (in accordance with paragraph (c) below) 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 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

51

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 (and calculation) in reasonable detail, shall be delivered to the Borrower. In determining any additional amounts owing under this Section 2.15, 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 Section 2.15 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, agreement, guideline or other change or condition that shall have occurred or been imposed.

          SECTION 2.16. 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 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:

52

     (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 as such for an additional Interest Period 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 2.16, 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 currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.

          SECTION 2.17. 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 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 2.12) 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 Loan required to be

53

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 2.17, together with an explanation (and calculation) in reasonable detail, shall be delivered to the Borrower. In determining any additional amounts owing under this Section 2.17, 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 2.17 shall, absent manifest error, unreasonableness or bad faith, be final and conclusive and binding on all parties hereto.

          SECTION 2.18. Pro Rata Treatment. Except as provided below in this Section 2.18 with respect to Swingline Loans and as required under Section 2.16, and subject to the express provisions of this Agreement which require or permit different payments to be made to non-Defaulting Lenders as opposed to Defaulting Lenders, 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 and Loans. 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 Revolving Lenders (including those Revolving 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 2.19. 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

54

portion of its Loans and participations in Swingline Loans or 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 2.19 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 2.20. Payments. (a) Except as otherwise provided herein, 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 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 2.15, 2.17, 2.21 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.

55

          (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. Except as other 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, 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 2.21. 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 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 30 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

56

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 or other Loan Party, as applicable, 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 any applicable Law of 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 to disclose any confidential or proprietary information or be otherwise materially disadvantageous to such Lender (in form, in procedure or in the substance of information disclosed). In addition, any Lender, if requested by any Loan Party or Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by any Loan Party or Administrative Agent as will enable such Loan Party or Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

57

          Without limiting the generality of the foregoing, in the event that any Loan Party is resident for tax purposes in the United States, each Foreign Lender shall deliver to the Borrower and Administrative Agent (in such number of copies as shall be reasonably requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;

     (ii) duly completed copies of Internal Revenue Service Form W-8ECI;

     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code: (A) a certificate to the effect that such Foreign Lender is not: (1) a “bank” within the meaning of Section 881(c)(3)(A) of the Code; (2) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code; or (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code; and (B) duly completed copies of Internal Revenue Service Form W-8BEN; or

     (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Loan Parties to determine the withholding or deduction required to be made.

          (f) If the Administrative Agent, any Issuing Bank or any Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes (including by way of offset) as to which it has been indemnified by the Loan Parties or with respect to which any Loan Party has paid additional amounts pursuant to this Section, it shall pay to such Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Issuing Bank or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that each Loan Party, upon the request of the Administrative Agent, such Issuing Bank

58

or such Lender, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Issuing Bank or such Lender in the event it is required to repay such refund to such Governmental Authority; provided further, that this subsection shall not be construed to require the Administrative Agent, any Issuing Bank or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other person.

          SECTION 2.22. Assignment Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.15, (ii) any Lender or Issuing Bank delivers a notice described in Section 2.16, (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 2.21, (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 2.15 or in the withdrawal of the notice under Section 2.16 or in the reduction of payments under Section 2.21, 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 be unreasonably 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 2.15 and Section 2.17); 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 2.15 or notice under Section 2.16 or the amounts paid pursuant to Section 2.21, 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 2.16, or cease to result in amounts being

59

payable under Section 2.21, 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 claim further compensation under Section 2.15 in respect of such circumstances or event or shall withdraw its notice under Section 2.16 or shall waive its right to further payments under Section 2.21 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. The Borrower’s right to replace a Defaulting Lender pursuant to this Section 2.22 is, and shall be, in addition to, and not in lieu of, all other rights and remedies available to the Borrower against such Defaulting Lender under this Agreement, at law, in equity, or by statute.

          (b) If (i) any Lender or Issuing Bank shall request compensation under Section 2.15, (ii) any Lender or Issuing Bank delivers a notice described in Section 2.16 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 2.21 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 2.15 or enable it to withdraw its notice pursuant to Section 2.16 or would reduce amounts payable pursuant to Section 2.21, 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

60

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, in the case of the Borrower, to borrow hereunder.

          SECTION 3.02. Authorization. The execution, delivery and performance by each Loan Party of each of the Loan Documents, the Borrowings hereunder and the creation of the Liens provided in the Security Documents (collectively, the “Transactions”) (a) have been duly authorized by all requisite corporate and, if required, stockholder action, and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, (B) the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any Subsidiary, (C) any order of any Governmental Authority or (D) any provision of any material 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 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 material 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 or permitted hereunder), except, in any case in clause (b)(i)(A) or (C), as could not reasonably be expected to result in 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, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and (c) such as have been made or obtained and are in full force and effect.

          SECTION 3.05. Financial Statements. The Borrower has heretofore furnished to the Lenders its consolidated balance sheets and related statements of income, stockholders’ equity and cash flows as of the end of and for the fiscal year ended December 31, 2009, audited by and accompanied by the opinion of PricewaterhouseCoopers LLP, independent public accountants, as of

61

and for the fiscal quarter and the portion of the fiscal year ended March 31, 2010 certified by its chief financial officer. Such financial statements present fairly, subject, in the case of unaudited financial statements, to year-end audit adjustments and the absence of footnotes, 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, in the case of audited balance sheets, including the notes thereto) disclose, in accordance with and to the extent required by GAAP, all material liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the dates thereof. Such 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.

          SECTION 3.06. No Material Adverse Effect.

          (a) There has been no Material Adverse Effect since December 31, 2009.

          (b) No Default or Event of Default has occurred and is continuing.

          SECTION 3.07. Title to Properties; Possession Under Leases. 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, 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.

          SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Effective Date a list of all Subsidiaries and Joint Ventures and the direct or indirect ownership interests of the Borrower therein, and identifies each Subsidiary that is a Material Foreign Subsidiary on the date hereof. 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 Effective Date, are owned by the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents 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

62

before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against the Borrower or any Subsidiary (i) that involve the legality or validity of any Specified Loan Document or (ii) which could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

          (b) 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, the U.S. Foreign Corrupt Practices Act, employee health and safety, margin regulations, Environmental Laws, Fair Labor Standards Act, Health Care Laws or any other Federal, state, local or foreign law dealing with such matters) 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 3.10. Agreements. 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 other Loan Parties is an “investment company” as defined in the Investment Company Act of 1940.

          SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans and will request the issuance of Letters of Credit only to provide working capital and for other general corporate purposes, including permitted acquisitions.

          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,

63

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 the Confidential Information Memorandum or 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, and taken together with all publicly available information regarding the Borrower and its Subsidiaries contained as of the date thereof in filings made by the Borrower under the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2009, and thereafter on Form 10-K, Form 10-Q or Form 8-K, 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 assumptions believed by it to be reasonable (based upon accounting principles consistent with the historical audited financial statements of the Borrower, except as otherwise expressly stated therein) 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. With respect to any Plan and except as could not reasonably be expected to result in a Material Adverse Effect: (a) 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; (b) 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; and (c) 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.

64

          SECTION 3.17. Environmental Matters.

          (a) Except as could not reasonably be expected to result in a Material Adverse Effect:

     (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 (A) constitute, or constituted, a violation of, (B) require Remedial Action under, or (C) could reasonably be expected to give rise to liability under, Environmental Laws;

     (ii) The Borrower, the Subsidiaries and their respective operations are in compliance with all Environmental Laws and necessary Environmental Permits, and all necessary Environmental Permits have been obtained and are in effect;

     (iii) To the knowledge of the Borrower, there have been no Releases or threatened Releases at, from, on, to, in, into, through or under the Properties or otherwise in connection with the operations of the Borrower or the Subsidiaries;

     (iv) Neither the Borrower nor any of the Subsidiaries has received any unresolved 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, 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, 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.

          SECTION 3.18. 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,

65

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, to the extent contemplated by the Guarantee and Collateral Agreement, and (i) when the Pledged Certificated Securities (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 Certificated Securities, to the extent contemplated by the Guarantee and Collateral Agreement, and prior and superior in right to any other person (other than statutory nonconsensual Liens expressly permitted by Section 6.02), and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.18, 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), to the extent contemplated by the Guarantee and Collateral Agreement, 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 3.18, 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, to the extent contemplated by the Guarantee and Collateral Agreement, in each case prior and superior in right to any other person other than with respect to Liens expressly permitted by Section 6.02 (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 Effective Date).

          SECTION 3.19. Solvency. On the Effective Date, (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

66

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 Effective Date. For purposes of this Section 3.19, the amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

          SECTION 3.20. Sanctioned Persons. None of the Borrower or any Subsidiary nor, to the knowledge of the Borrower, any director, officer, agent, or employee 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 knowingly 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 that is currently subject to any U.S. sanctions administered by OFAC.

ARTICLE IV

Conditions of Lending

          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 the date of each Borrowing (other than a conversion or a continuation of a Borrowing, as described in Section 2.12 or 2.16), including each Borrowing of a Swingline Loan, and on the date of each issuance, amendment, extension or renewal of a Letter of Credit and (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

67

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) At the time of and immediately after such Credit Event (after giving effect to the application of the proceeds thereof), no Event of Default or Default shall have occurred and be continuing.

          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.

          SECTION 4.02. Condition to Term Loans. The obligation of any Term Lender to make a Term Loan shall be subject to the satisfaction of the following conditions:

          (a) the Administrative Agent (or its counsel) shall have received counterparts of the Term Loan Addendum signed by the Borrower and each of the Term Lenders listed on the signature pages thereof (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of facsimile or other written confirmation from such party that it has executed a counterpart thereof);

          (b) the Administrative Agent shall have received such evidence (including such opinions of counsel to the Loan Parties) as it may reasonably request to confirm the Borrower’s due authorization of the transactions contemplated by the applicable Term Loan Addendum and the validity and enforceability of the obligations of the Borrower resulting therefrom;

          (c) the Administrative Agent shall have received evidence of the fact that immediately after such Term Loan is made, the limitations in Section 2.14 shall have been complied with; and

          (d) any other conditions set forth in the Term Loan Addendum.

          SECTION 4.03. 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

68

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 favorable written opinion of James Elrod, Esquire, Chief Legal Officer of the Borrower, substantially to the effect set forth in Exhibit G-1 and (ii) a favorable written opinion of Covington & Burling LLP, special counsel to the Borrower, substantially to the effect set forth in Exhibit G-2, 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, 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

69

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, (i) certifying that the Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Transactions, are solvent; and (ii) confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.01 and paragraphs (e) and (h) below.

          (e) After giving effect to the Transactions occurring on the date hereof, 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) other Indebtedness permitted under Section 6.01 (other than clause (h) thereof) of this Agreement, and (iv) preferred stock held by the Borrower or any Subsidiary of the Borrower on the date hereof.

          (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 Engagement 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 Borrower shall have maintained a Corporate Rating of B+ or higher by S&P and a Corporate Rating of B1 or higher by Moody’s, in each case after giving effect to the Transactions.

          (i) 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), and there shall be no litigation, governmental, administrative or judicial action, actual or, to the Borrower’s knowledge, threatened, against the Borrower or its Subsidiaries that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions or the other transactions contemplated hereby.

          (j) The commitments under the Existing Credit Agreement shall have been or shall simultaneously be terminated, the principal of and all

70

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.

          (k) The Collateral Agent shall have received a fully executed copy of the Security Documents which (i) shall provide that the Obligations are guaranteed by each Domestic Subsidiary existing from time to time and (ii) shall provide that the Obligations and the guarantees thereof shall be secured by a perfected first priority lien on Collateral of the Borrower and its Domestic Subsidiaries, to the extent contemplated by the Guarantee and Collateral Agreement. 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 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.

          (l) The Collateral Agent shall have received a Perfection Certificate with respect to the Loan Parties dated the 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, as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence reasonably 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.

ARTICLE V

Affirmative Covenants

          The Borrower covenants and agrees with each Lender that at all times prior to the Termination Date, 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.

71

          (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 Maintain such insurance, to such extent and against such risks, as is customary with companies in the same or similar businesses operating in the same or similar locations.

          SECTION 5.03. Obligations and Taxes. Pay and discharge all material 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; 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.

          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 subject to a “going concern” or scope of audit qualification) to the effect that such consolidated financial statements fairly

72

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 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 and the absence of footnotes, 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 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;

          (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 reasonably satisfactory to the Administrative Agent;

73

          (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 Loan Party, 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.

          Documents required to be delivered pursuant to this Section 5.04(a), (b), (c) or (f) or Section 5.05 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address at http://www.kingpharm.com; or (ii) on which such documents are posted on the Borrower’s behalf on the Platform or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such

74

request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

          SECTION 5.05. Litigation and Other Notices. (a) Furnish to the Administrative Agent, each Issuing Bank and each Lender prompt written notice of the following:

     (i) promptly (and in any event within five Business Days) after a Responsible Officer of the Borrower obtains knowledge thereof (if such Event of Default or Default, as applicable, is still continuing), 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;

     (ii) promptly (and in any event within five Business Days) after a Responsible Officer of the Borrower obtains knowledge thereof, 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 Subsidiary or Joint Venture that could reasonably be expected to result in a Material Adverse Effect; and

     (iii) promptly (and in any event within five Business Days) after a Responsible Officer of the Borrower obtains knowledge thereof, any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect;

provided, with respect to paragraphs (i) through (iii) above, the Borrower shall be deemed to have provided notice to the extent such event warranting notice under paragraphs (i), (ii) or (iii) has been expressly disclosed in the Borrower’s Exchange Act Filings.

          (b) Furnish to the Administrative Agent, each Issuing Bank and each Lender prompt written notice of any change in the Borrower’s corporate rating by S&P, in the Borrower’s corporate family rating by Moody’s, or any notice from either such agency indicating its intent to effect such a change or to place the Borrower 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.

          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 corporate structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to

75

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, to the extent contemplated by the Guarantee and Collateral Agreement. 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, 2011, 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 any changes to the information described in clauses (i) through (iv) of paragraph (a) above or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section 5.06(b).

          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 all material respects 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 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.

76

          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 $10,000,000, 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. Except for such non-compliance as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (a) 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; (b) obtain, maintain and renew all Environmental Permits necessary for its operations and then current Properties; and (c) conduct any required 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. Compliance with Laws. In the case of the Borrower and each Material Subsidiary, 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 5.12. 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) 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. With respect to any new Domestic Subsidiary created or acquired after the Effective Date by the Borrower or any of its Subsidiaries, the Borrower will (or will cause such Subsidiary to) promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems

77

necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Equity Interests of such new Subsidiary which are owned by the Borrower or any of its Domestic Subsidiaries and required to be pledged pursuant to the Guarantee and Collateral Agreement, (ii) deliver to the Administrative Agent the certificates representing such Equity Interests, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary as contemplated by the Guarantee and Collateral Agreement and (iv) if reasonably requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinion shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent; provided that notwithstanding the foregoing, any such pledge (a) in the case of Equity Interests of Foreign Subsidiaries, (x) shall be limited to 100% of the non-voting Equity Interests (if any) and 66% of the voting equity interest of first-tier Foreign Subsidiaries, to the extent the pledge of any greater percentage would result in adverse tax consequences to the Borrower and (y) shall exclude any Equity Interests in Foreign Subsidiaries that are not Material Foreign Subsidiaries; and (b) in the case of any Joint Venture, shall not apply if the Borrower or any Subsidiary is prohibited from making such pledge by the terms of the constitutive documents of the Joint Venture or by the related joint venture agreement.

ARTICLE VI

Negative Covenants

          The Borrower covenants and agrees with each Lender that at all times prior to the Termination Date, 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 Effective Date and set forth in Schedule 6.01 and any Permitted Refinancing Indebtedness with respect thereto;

          (b) Indebtedness of the Borrower outstanding from time to time hereunder and all Guarantees thereof by the 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

78

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 and Guarantees by a Subsidiary that is not a Loan Party of Indebtedness of any other Subsidiary that is not a Loan Party;

          (e) (i) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets; provided that (x) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (y) 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 and (ii) Permitted Refinancing Indebtedness with respect thereto.

          (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 in respect of (i) workers’ compensation claims and self-insurance obligations in the ordinary course of business, (ii) the financing of insurance premiums in customary amounts in the ordinary course of business and (iii) surety, appeal and performance bonds, provided that such bonds are entered into in the ordinary course of business and are not in respect of Indebtedness;

          (h) Indebtedness incurred by Foreign Subsidiaries in an aggregate principal amount not exceeding $35,000,000 at any time outstanding;

          (i) (i) Indebtedness of any person that becomes a Subsidiary or is merged or consolidated with or into the Borrower or any Subsidiary in a transaction permitted under this Agreement, in either case, after the Effective Date; provided that (1) 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, and (2) the Borrower is in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness (and the application of the proceeds thereof), with the covenants contained in Section 6.11 and Section 6.12, in each case recomputed as at the last day of the most recently ended fiscal quarter of the Borrower for which the relevant information is available as if such incurrence had occurred on the first day of each relevant period for

79

testing such compliance; and (ii) Permitted Refinancing Indebtedness with respect thereto.

          (j) Indebtedness created under Hedging Agreements that 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;

          (k) Permitted ARS Indebtedness;

          (l) Permitted Subordinated Indebtedness;

          (m) Indebtedness of the Borrower or any Subsidiary to the seller representing all or part of the purchase price of an investment or acquisition permitted hereunder and Permitted Refinancing Indebtedness with respect thereto; provided that the aggregate principal amount of all such Indebtedness shall not exceed $35,000,000, at any one time outstanding for all Indebtedness incurred pursuant to this clause (m);

          (n) Indebtedness arising from the honoring of a check, draft or similar instrument presented by the Borrower or any Subsidiary in the ordinary course of business against insufficient funds; provided that such Indebtedness is extinguished within three Business Days of its incurrence;

          (o) Indebtedness arising from or representing deferred compensation to employees of the Borrower or its Subsidiaries that constitute or are deemed to be Indebtedness under GAAP and that are incurred in the ordinary course of business; and

          (p) other Indebtedness of the Borrower or the Subsidiaries in an aggregate principal amount not exceeding $75,000,000 at any time outstanding.

          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, except:

          (a) Liens on property or assets of the Borrower and the Subsidiaries existing on the 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 Effective Date (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien (without any modification thereof after the Effective Date)) and shall secure only those obligations which they secure on

80

the Effective Date (and any Permitted Refinancing Indebtedness referred to in Section 6.01(a));

          (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 or is merged or consolidated with or into the Borrower or any Subsidiary after the Effective Date prior to the time such person becomes a Subsidiary or is merged or consolidated with or into the Borrower or any Subsidiary, as the case may be, securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(i); provided that (i) such Lien is not created in contemplation of or in connection with such event, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien secures only those obligations which it secures on the date of such event and any Permitted Refinancing Indebtedness with respect 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’, construction, suppliers’, 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 connection with workmen’s compensation, unemployment insurance and other social security, old age pension or public liability obligations or any other liabilities of like nature;

          (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;

81

          (h) zoning restrictions, easements, covenants, rights-of-way, minor exceptions to title, 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 materially interfere with the ordinary conduct of the business of the Borrower and the Subsidiaries, taken as a whole;

          (i) Liens securing Indebtedness of the Borrower or any Subsidiary incurred pursuant to Section 6.01(e); provided that (1) such security interests are incurred, and the Indebtedness secured thereby is created, within 180 days after the acquisition or completion of such construction or improvement of fixed or capital assets referred to in Section 6.01(e), (2) the amount of Indebtedness secured thereby does not exceed the lesser of the cost or the fair market value of such fixed or capital assets, improvements or equipment at the time of such acquisition, construction or improvement and (3) 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 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 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;

82

          (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) any obligations or duties affecting any of the property of the Borrower or its Subsidiaries to any municipality or public authority with respect to any franchise, grant, license or permit;

          (r) rights of set-off or bankers’ Liens on deposits of cash in favor of banks or another depository institution created in the ordinary course of business in connection with establishment of depository relations with such bank or depository institution and not in connection with the issuance of Indebtedness; and

          (s) 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 with a principal amount not in excess of, $20,000,000 in the aggregate at any time outstanding.

          SECTION 6.03. Sale and Leaseback Transactions. Enter into any arrangement with any person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such person or to any other person to whom funds have been or are to be advanced by such person on the security of such property or rental obligations of the Borrower or such Subsidiary unless (a) the sale or transfer of such property is permitted by Section 6.05(b) and (b) any Capital Lease Obligations or Liens arising in connection therewith are permitted by Section 6.01 and Section 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 in, any other person (each, an “Investment”), except:

          (a) (i) Investments by the Borrower and the Subsidiaries existing on the date hereof in the Equity Interests of the Subsidiaries and other Investments existing on the date hereof and set forth on Schedule 6.04 and extensions, renewals, modifications or restatements or replacements thereof, provided that no such extension, renewal, modification or restatement or replacement shall (x) increase the amount of the original Investment or (y) adversely affect the interests of the Lenders with respect to such original Investment or the interests of the Lenders under this Agreement or any other Loan Document in any material respect, (ii) Investments by the Borrower and the Subsidiaries existing on the date hereof in auction rate securities and (iii) additional Investments by the Borrower and the

83

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 herein and therein) and (B) the aggregate amount of Investments made after the Effective Date by Loan Parties in, and loans and advances made after the 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 $35,000,000 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 capital stock to the extent permitted under Section 6.06;

          (e) (i) Guarantees by any Loan Party of the Convertible Notes and (ii) other Guarantees permitted under Section 6.01; provided that any Guaranty by a Loan Party of an obligation of any Subsidiary that is not a Loan Party shall comply with clause (B) of the proviso to Section 6.04(a).

          (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

84

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);

          (k) 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 related or 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(k) occurring after such period) as if such transaction had occurred as of the first day of such period; (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 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 reasonably satisfactory to the Administrative Agent and (E) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.12 and the Security Documents (any acquisition of an Acquired

85

Entity meeting all the criteria of this Section 6.04(k) being referred to herein as a “Permitted Acquisition”);

          (l) Investments, loans or advances made in connection with the license, sublicense, development, manufacture or distribution of pharmaceutical or animal health compounds or products or medical devices, in each case from, to or through third parties (including other pharmaceutical companies) by collaborative efforts or otherwise and in the ordinary course of business (as reasonably determined by the Borrower);

          (m) Investments received as consideration for Asset Sales permitted by Section 6.05(b);

          (n) Investments by the Borrower or any Subsidiary in Joint Ventures in an aggregate amount (valued at cost, without regard to any write-ups or write-downs thereof) not to exceed $35,000,000 in the aggregate;

          (o) Investments permitted by Section 6.05(a) and Section 6.06(a) and Investments constituting Capital Expenditures permitted by Section 6.10;

          (p) Investments acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Borrower, to the extent the Equity Interests so issued in the aggregate do not exceed five percent of the Borrower’s fully diluted issued and outstanding capital stock as of the date hereof; and

          (q) 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 (q) (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;

provided that the Borrower and its Subsidiaries shall not make any Investment in any Joint Venture except pursuant to clause (n) above.

          SECTION 6.05. Mergers, Consolidations and Sales of Assets.

          (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 of any Subsidiary, except that:

86

     (i) the Borrower may sell or cause any Subsidiary to sell all or any part of its Animal Health Business, including any sale of any Subsidiary engaged principally in the Animal Health Business;

     (ii) (A) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, and (B) any Subsidiary may merge into or consolidate with any other Subsidiary in a transaction in which the surviving entity is a Subsidiary (provided that (x) if any party to any such transaction is a Subsidiary Guarantor, the surviving entity of such transaction shall be a Subsidiary Guarantor or shall become a Subsidiary Guarantor; and (y) if any party to any such transaction is a Wholly Owned Subsidiary, the surviving entity of such transaction shall be a Wholly Owned Subsidiary);

     (iii) any Subsidiary may dispose of any or all of its assets (A) to the Borrower or any Subsidiary Guarantor (upon voluntary liquidation or otherwise), (B) to any other Subsidiary (provided that neither Subsidiary is a Subsidiary Guarantor) (upon voluntary liquidation or otherwise) or (C) pursuant to an Asset Sale permitted by Section 6.05(b); and

     (iv) any investment expressly permitted by Section 6.04 (other than 6.04(o)), or Asset Sale expressly permitted by Section 6.05(b), may be structured as a merger, consolidation or amalgamation.

          (b) Sell, transfer, lease, license, assign or otherwise dispose of any of its assets or property (including Equity Interests of any of the Subsidiaries (other than directors’ qualifying shares)), whether now owned or hereafter acquired (any such disposition, an “Asset Sale”), except:

     (i) dispositions of inventory (including raw material), damaged, obsolete, surplus or worn out assets, scrap, assets or property no longer useful in the conduct of the Borrower’s or such Subsidiary’s business, and Permitted Investments, in each case disposed of in the ordinary course of business, including (A) the sale of the manufacturing facility and associated warehouses and parking lots located in St. Petersburg, Florida and owned as of the Effective Date by JMI-Daniels Pharmaceuticals, Inc. and (B) the sale of the facility located at One New England Avenue, Piscataway, New Jersey;

     (ii) Asset Sales between or among Foreign Subsidiaries;

87

     (iii) Asset Sales resulting from a settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any Subsidiary;

     (iv) licenses or sublicenses of intellectual property and general intangibles and licenses, leases or subleases of other real or personal property, in each case which do not materially interfere with the business of the Borrower and its Subsidiaries;

     (v) dispositions of Margin Stock for cash and for fair market value as determined in good faith by the board of directors of the Borrower;

     (vi) the discount, write-off or sale of overdue accounts receivable or the factoring at maturity or collection of any accounts receivable, in each case, in the ordinary course of business;

     (vii) any Asset Sale or series of related Asset Sales having a value not in excess of $1,500,000;

     (viii) Asset Sales permitted under Section 6.05(a);

     (ix) Asset Sales not otherwise permitted under this Section 6.05; provided, the aggregate fair market value of all assets sold, transferred, leased or disposed of pursuant to this clause (ix) shall not exceed $200,000,000 in the aggregate during the term of this Agreement;

     (x) any sale or disposition of any investment made pursuant to Section 6.04(a)(ii), (g), (j) or (m); and

     (xi) any Asset Sale to the Borrower or any other Subsidiary without complying with the foregoing requirements of this paragraph (b) so long as the fair market value of the assets sold by any Loan Party to any person that is not a Loan Party does not exceed $35,000,000 in the aggregate during the term of this Agreement.

          SECTION 6.06. Restricted Payments; Restrictive Agreements.

          (a) Declare or make, directly or indirectly, any Restricted Payment; 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 capital stock of the Borrower, (ii) any Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders,

88

(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) in the ordinary course of business, the Borrower may make other Restricted Payments pursuant to and in connection with equity incentive plans or other benefit plans or arrangements for directors, management, employees or consultants of the Borrower and its Subsidiaries, (v) the Borrower or any Subsidiary may make Restricted Payments constituting purchases by the Borrower or any of its Subsidiaries of any other Subsidiary’s capital stock in a transaction permitted by Section 6.04, (vi) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it applying the proceeds received from a concurrent issue of new shares of its capital stock and (vii) 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.

          (b) Enter into or permit to exist any agreement 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 securing the obligations hereunder, or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests to the Borrower or a Subsidiary 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 the foregoing shall not apply to (A) restrictions and conditions imposed by law, any agreement in effect or entered into as of the Effective Date and listed on Schedule 6.06 or any Loan Document, (B) 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) restrictions and conditions imposed on any Foreign Subsidiary by the terms of any Indebtedness of such Foreign Subsidiary permitted to be incurred hereunder, (D) 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, (E) any encumbrances or restrictions imposed by reason of customary provisions contained in leases, licenses, joint ventures agreements and similar agreements entered into in the ordinary course of business, (F) any encumbrances or restrictions that are or were created by virtue of any transfer of, agreement to

89

transfer or option or right with respect to any property, assets or capital stock not otherwise prohibited by this Agreement, (G) customary restrictions contained in licenses or sublicenses by the Borrower and its Subsidiaries of intellectual property entered into in the ordinary course of business, (H) customary restrictions under any contract incurred on customary terms which prohibit transfer of such contract, (I) restrictions on cash or other deposits or net worth imposed by customers, suppliers or other third parties, in the ordinary course of business, and (J) any restrictions contained in agreements related to Indebtedness permitted by Section 6.01(h) or (i).

          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 (i) transactions solely between or among Loan Parties, (ii) transactions between or among the Borrower or its Subsidiaries that are permitted under Section 6.01(c) or (d), 6.04(a) or (c), 6.05(a)(ii) or (iii)(A) or (B) or 6.05(b)(ii) or (iii) the making of any Restricted Payment permitted under Section 6.06; (b) the Borrower or any Subsidiary may engage in any of the foregoing transactions 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; (c) the Borrower or any Subsidiary may pay reasonable and customary fees and reimbursement of expenses payable to directors; (d) Borrower or any Subsidiary may enter into employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; and (e) the Borrower or any Subsidiary may enter into any transaction or series of related transactions with a Joint Venture involving an aggregate amount (or, in the case of any loan, an aggregate principal amount) of less than $5,000,000.

          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 related or incidental thereto.

          SECTION 6.09. Other Indebtedness.

          (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 or any document relating to any Permitted Subordinated Indebtedness if such waiver, supplement, modification or amendment is adverse to the Lenders in any material respect, (ii) any waiver, supplement, modification or amendment 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 or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a

90

manner adverse in any material respect to the Borrower, any of the Subsidiaries or the Lenders (iii) any waiver, supplement, modification or amendment of its certificate of incorporation, bylaws, operating, management or partnership agreement or other organizational documents, to the extent any such waiver, supplement, modification or amendment would be adverse to the Lenders in any material respect or (iv) any waiver, supplement, modification or amendment to the subordination provisions of any Permitted Subordinated Indebtedness; provided, however, that clauses (i) and (ii) above shall in no event prevent any Permitted Refinancing Indebtedness permitted under Section 6.01.

          (b) Make any distribution, whether in cash, property, securities or a combination thereof, other than regular scheduled payments of principal and interest (or payments of fees, expenses, indemnities and similar amounts) as and when due (to the extent not prohibited by applicable subordination provisions), in respect of, or optionally pay, redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any subordinated Indebtedness (including any Permitted Subordinated Indebtedness) or any Material Indebtedness except (i) the payment of the Indebtedness created hereunder, (ii) from the proceeds of any Permitted Refinancing Indebtedness with respect thereto permitted under Section 6.01, (iii) 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, (iv) any payment of Indebtedness owed by Foreign Subsidiaries, and (v) the payment of the Indebtedness under the Convertible Notes, including through the refinancing thereof by means of an exchange offer permitted under Section 6.01.

          SECTION 6.10. Capital Expenditures. Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any fiscal year to exceed $70,000,000 for such fiscal year. The amount of permitted Capital Expenditures in respect of any fiscal year commencing with the fiscal year ending on December 31, 2011, 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 to be less than 3.5:1.

          SECTION 6.12. Maximum Leverage Ratio. Permit the Leverage Ratio as of the last day of any fiscal quarter of the Borrower to be greater than 3.0:1.

          SECTION 6.13. Fiscal Year. Change the end of its fiscal year from December 31 to any other date.

91

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 or warranty 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 (in the case of interest or Fees) or five Business Days following the delivery of written notice by the Administrative Agent to the Borrower (in the case of all other amounts);

          (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) (in the case of the Borrower and any Material Subsidiary only), 5.05(a) or 5.08 or in Article VI;

          (e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant 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 notice thereof from the Administrative Agent or any Lender to 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, or (ii) any other event or condition occurs that results in any Material Indebtedness

92

becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) 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;

          (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 Material Subsidiary, or of a substantial part of the property or assets of the Borrower or a Material 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 Material Subsidiary or for a substantial part of the property or assets of the Borrower or a Material Subsidiary or (iii) the winding-up or liquidation of the Borrower or any Material 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 Material 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 Material Subsidiary or for a substantial part of the property or assets of the Borrower or any Material 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 corporate 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, in any case, such judgment either (i) is for the payment of money in an aggregate amount in

93

excess of $40,000,000 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 $40,000,000;

          (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) the security interests purported to be created by the Security Documents shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, valid, perfected, first priority (except as otherwise expressly provided in this Agreement or the Security Documents) security interests in a material portion of 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,

94

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 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

95

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 (and in consultation with the Borrower), 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

96

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 (in consultation with the Borrower) 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 Arranger and the Co-Syndication 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 Arranger and the Co-Syndication 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 Arranger, nor the Co-Syndication 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.

97

          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 providing cash collateral equal to 102% of the face value of issued Letters of Credit pursuant to arrangements satisfactory to the Issuing Bank or entry into other 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 AG (and any successor to Credit Suisse AG in such capacities) is acting under the Security Documents in multiple capacities as the Administrative Agent, the Collateral Agent and (ii) waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against Credit Suisse AG (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 AG (and such successor) to enter into the Security Documents on behalf of such Lender and such Issuing Bank and agrees that Credit Suisse AG (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 IX

Miscellaneous

98

          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. (423) 990-0951), with a copy to James Elrod at the above address (Facsimile No. (423) 990-2566);

          (b) if to the Administrative Agent, to Credit Suisse AG, Agency Manager, One Madison Avenue, New York, NY 10010, Facsimile No. 212-322-2291, Email: agency.loanops@credit-suisse.com);

          (c) if to a Revolving 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 Revolving Lender shall have become a party hereto;

          (d) if to a Term Lender, to it at its address (or facsimile number) set forth in the Term Loan Addendum or in the Assignment and Acceptance pursuant to which such Term lender shall have become a party hereto; and

          (e) if to an Issuing Bank, to it at its address (or facsimile number) set forth on Schedule 2.04 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 and except as otherwise provided in Article V hereof, 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

99

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) the Loan Documents and (2) notification of changes in the terms of the Loan Documents.

100

          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 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

101

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 2.15, 2.17, 2.21 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.

          (b) Each Lender may assign to one or more assignees (other than the Borrower or an Affiliate of the Borrower) all or a portion of its interests, rights and obligations under this Agreement (including all or a

102

portion of its Commitments and the Loans at the time owing to it); provided, however, that (i) (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 and, in the case of the Borrower, shall be deemed to have been given if the Borrower has not responded within five Business Days of a request for such consent); 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 Event of Default and (y) the amount 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 $10,000,000 (for Revolving Credit Commitments or Revolving Loans) or $1,000,000 (for Term Loans) (or, if less, the entire remaining amount of the Lender’s Commitments or Term Loans); 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 an 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 (or such shorter period as determined by the Administrative Agent in its sole discretion), (x) 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 (y) 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 2.15, 2.17, 2.21 and 9.05 (as to matters existing prior to such assignment), as well as to any Fees accrued for its account and not yet paid).

103

          (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 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, absent manifest error, shall be prima facie evidence of the matters recorded therein and the Borrower, the

104

Administrative Agent, the 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 promptly (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, 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 2.15, 2.17 and 2.21 to the same extent as if they were Lenders; provided that no participant shall be entitled to receive any greater amount pursuant to Section 2.15 or 2.21 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 payable on the Loans, extending any scheduled principal payment date or

105

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 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 (which agreement shall survive the termination of this Agreement) that, prior

106

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 (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. 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

107

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 Arranger, 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 Arranger, 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 LLP, counsel for the Arranger, 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 Arranger, the Administrative Agent, the Collateral Agent or any Lender.

          (b) The Borrower agrees to indemnify the Arranger, 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 formerly owned, leased or operated

108

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, outstanding Term Loans 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

109

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.

110

          (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, extend any scheduled date of payment (excluding, for the avoidance of doubt, mandatory prepayments) or extend the date for reimbursement of or extend 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 adversely affected thereby, (ii) increase or extend any Revolving Credit Commitment or Term Loan 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) increase the Revolving Credit Exposure or amend or modify the provisions of Section 2.18 or 9.04(j), the provisions of this Section (other than to impose additional restrictions on amendments) or the definition of the terms “Required Lenders,” “Required Revolving Lenders,” or “Required Term Lenders”, in either case, without the prior written consent of each Lender adversely affected thereby (it being understood that with the consent of the Required Revolving Lenders or Required Term Lenders, as applicable, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Revolving Lenders or Required Term Lenders, as applicable, on substantially the same basis as the Loans and the Commitments on the date hereof), (iv) release all or substantially all the Collateral or all or substantially all of the value of the Guarantees without the prior written consent of each Lender; (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 or (vi) amend or waive any condition precedent to any Revolving Borrowing or Term Loan Borrowing without the prior written consent of the Required Revolving Lenders or Required Term Lenders, respectively. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except with respect to (x) any increase or extension of such Defaulting Lender’s Commitment and (y) any waiver, amendment or modification requiring the consent of all Lenders or, to the extent the Defaulting Lender’s consent would otherwise be required, each affected Lender.

111

For avoidance of doubt, the addition of Term Loans may be effected by an amendment hereto as contemplated by Section 2.14.

          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 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 Engagement 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

112

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 facsimile or other electronic 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)Each party hereto 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.

113

          (b) Each party hereto 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 any manner provided for notices in Section 9.01 other than by facsimile or other electronic communication. 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, the Issuing Banks and the Lenders agrees to (a) not use any Confidential Information (as defined below) for any purpose other than in the performance of its obligations and evaluation or enforcement of its rights under this Agreement and the other Loan Documents and transactions contemplated hereby or thereby and (b) maintain the confidentiality of the Confidential Information, 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 who have a need to know such Confidential Information in connection with any uses thereof permitted under clause (a) above (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 no less restrictive than 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; provided, however, that the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender, as the case may be, shall, to the extent practicable and permitted by law, provide the Borrower with reasonable prior notice of any disclosure of information referred to in clause (iii) above to allow the Borrower to

114

seek a protective order preventing such disclosure. For the purposes of this Section, “Confidential Information” shall mean all information received from the Borrower and related to the Borrower and its Subsidiaries or their respective businesses, 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 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. The parties agree that money damages may not be a sufficient remedy for breach of this Section, and that in addition to all other remedies available at law or in equity, the Borrower shall be entitled to seek equitable relief, including injunction and specific performance, without proof of actual damages. The provisions of this Section shall remain operative and in full force for two years following the expiration and termination of this Agreement.

          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

115

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.

116

     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 & Chief Executive Officer

[Signature Page to Credit Agreement]

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender, Administrative Agent, Collateral Agent, Swingline Lender and Issuing Bank
By:	/s/ Doreen Barr
	Name:	Doreen Barr
	Title:	Director
By:	/s/ Vipul Dhadda
	Name:	Vipul Dhadda
	Title:	Associate

[Signature Page to Credit Agreement]

US BANK N.A., as Lender
By:	/s/ Nathan M. Hall
	Name:	Nathan M. Hall
	Title:	AVP

[Signature Page to Credit Agreement]

UNION BANK, N.A., as Lender
By:	/s/ Sean Conlon
	Name:	Sean Conlon
	Title:	Senior Vice President

[Signature Page to Credit Agreement]

SUNTRUST BANK, as Lender
By:	/s/ Subhadra Shrivastava
	Name:	Subhadra Shrivastava
	Title:	Director

[Signature Page to Credit Agreement]

STATE BANK OF INDIA, as Lender
By:	/s/ Prabodh Parikh
	Name:	Prabodh Parikh
	Title:	Vice President & Head (Credit)

[Signature Page to Credit Agreement]

ROYAL BANK OF CANADA, as Lender
By:	/s/ Mustafa Topiwalla
	Name:	Mustafa Topiwalla
	Title:	Authorized Signatory

[Signature Page to Credit Agreement]

PNC BANK, NATIONAL ASSOCIATION, as Lender
By:	/s/ Jeffrey L. Howard
	Name:	Jeffrey L. Howard
	Title:	Senior Vice President

[Signature Page to Credit Agreement]

FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as Lender
By:	/s/ Tiffany E. Gardner
	Name:	Tiffany E. Gardner
	Title:	Senior Vice President

[Signature Page to Credit Agreement]

FIFTH THIRD BANK, as Lender
By:	/s/ John Stringfield
	Name:	John Stringfield
	Title:	Vice President

[Signature Page to Credit Agreement]

DnB NOR BANK ASA, as Lender
By:	/s/ Thomas Tangen
	Name:	Thomas Tangen
	Title:	Senior Vice President Head of Corporate Banking
By:	/s/ Kristin Riise
	Name:	Kristin Riise
	Title:	First Vice President

[Signature Page to Credit Agreement]

BANK OF AMERICA, N.A., as Lender
By:	/s/ Robert LaPorte
	Name:	Robert LaPorte
	Title:	Vice President

[Signature Page to Credit Agreement]

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender
By:	/s/ Kirk Tesch
	Name:	Kirk Tesch
	Title:	Director

[Signature Page to Credit Agreement]

EX-10.2

Exhibit 10.2

[ *** ] CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT MARKED BY BRACKETS HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT OF 1934 AS AMENDED.

June 25, 2010

Mr. Remi Barbier
Chairman, President & CEO
Pain Therapeutics, Inc.
2211 Bridgepointe Parkway
Suite 500
San Mateo, CA 94404

     Re: Amendments to License and Collaboration Agreements

Dear Remi:

This letter agreement reflects our recent communications and understandings. We have agreed to the following matters, which are intended to supersede any terms that may be inconsistent in the License and Collaboration Agreements:

1.	Up Front Payment: In consideration for the agreements made in this letter agreement, King will make a non-refundable cash payment to PTI of $5,000,000 no later than July 31, 2010. It is agreed that this payment is not a Collaboration Cost and is not subject to offset against any obligations or other amounts which may be owed by King to PTI.
2.	Royalties: King will pay PTI a flat royalty of 10% on all Net Sales made in ROW. ROW Net Sales will be excluded from the calculation of the step-up in royalty after cumulative Net Sales of $1 billion under Section 6.1.1 of the License Agreement. For clarity, this paragraph shall not affect any amounts payable by King to PTI as a result of King sublicensing to a Third Party under Section 6.1.4 (Sublicensing Revenue) of the License Agreement. For further clarity, this paragraph shall not affect any calculation of any amounts payable by King to PTI as set forth in Section 6.1.3 (Amounts Payable Under the DLA) of the License Agreement.
3.	[ *** ]: King and PTI hereby approve the Development Plan and Budget for the Development of [ *** ] by PTI up to the submission of an IND as set forth in Appendix A. [*** ]

*** Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

4.	[ *** ]: PTI hereby grants to King the right to exercise in the same manner that King assumed the Development of Remoxy under the Election Agreement, all of PTI’s rights and obligations under the Collaboration Agreement to Develop [ *** ]and King hereby accepts such grant and agrees to Develop [ *** ]in accordance with the Collaboration Agreement and in a manner consistent with PTI’s obligations under the DLA. The cost of Development by King shall be a Collaboration Cost.
5.	$100,000,000 Amount: PTI and King expressly reserve their rights in relation to the $100,000,000 amount specified in Section 3.3.2(c) of the Collaboration Agreement and any payment by King of Collaboration Costs as a result of this letter agreement in excess of that amount shall not affect any of King’s rights under Section 3.3.2(c) and shall not be deemed to be a waiver of any such rights or an estoppel or laches to bar any assertion of rights or defenses by King under Section 3.3.2(c).
6.	e-Room:_King shall establish and maintain a confidential electronic room into which King and PTI shall upload all final data/technical reports, regulatory filings and other related information for Remoxy and all other Products under the Collaboration and License Agreements. PTI shall have unlimited electronic access to such e-Room, including the right to make copies of all such material.
7.	Giving Effect: In order to give effect to the contents of this letter agreement, save as expressly reserved in this letter agreement, King and PTI may each propose to suspend, amend and/or revise certain provisions of the Collaboration and License Agreements. King and PTI shall discuss in good faith and attempt to agree on the terms of such suspension, amendment and/or revisions. Should the Parties not agree in good faith, such disagreement(s) shall not be construed or interpreted to relieve a Party of its existing duties or obligations under the Collaboration Agreement or the License Agreement, as amended by this letter agreement.
8.	Defined Terms: Defined terms used in this letter agreement have the same meaning as they do in the Collaboration Agreement and/or in the License Agreement, as applicable.
9.	No Other Changes: Save as may be affected by the provisions of this letter, all other terms of the Collaboration and License Agreements shall remain in full force and effect and shall not be altered by the terms of this letter agreement

10. No Breaches: [ *** ] PTI expressly reserves its rights in relation to the actions and failure to take actions by King prior to the date hereof which may constitute a breach of the Collaboration and/or License Agreements and this letter agreement shall not be deemed to be a waiver of any rights of PTI or an estoppel or laches to bar any assertion of rights or defenses by PTI under the Collaboration and License Agreements.

*** Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

11. Minimum Annual Spend: King agrees to reimburse PTI for its 2010 minimum annual spend (i.e., $750,000) under the DLA, irrespective of the status of approved budgets under the Collaboration Agreement.

Please sign below to acknowledge your acceptance and agreement to this letter agreement.

Sincerely,
	/s/ Brian A. Markison
	Brian A. Markison
	President and Chief Executive Officer

Accepted and Agreed:

PAIN THERAPEUTICS, INC.

/s/ Remi Barbier  

Remi Barbier 

President & Chief Executive Officer 

*** Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

Appendix A

JOC [ *** ] Plan & Budget

Goal: PTI to [ *** ]
	Cost
Tech Ops — CMC
1. [ *** ]	[ *** ]
a. [ *** ]	[ *** ]
2. [ *** ]
a. [ *** ]
b. [ *** ]
c. [ *** ]	[ *** ]
3. [ *** ]	[ *** ]
4 [ *** ]	[ *** ]
Pharm Tox
5. [ *** ]	[ *** ]
a. [ *** ]	[ *** ]
b [ *** ]	[ *** ]
c. [ *** ]	[ *** ]
6. [ *** ]	[ *** ]
a. [ *** ]	[ *** ]
b. [ *** ]	[ *** ]
Regulatory
7. [ *** ]	[ *** ]
Miscellaneous Activities/Expenses
[ *** ]project mgmt and [ *** ]	[ *** ]
[ *** ]	[ *** ]
Total [ *** ]:	[ *** ]

*** Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

EX-10.3

Exhibit 10.3

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement is made this ___ day of ______, 20___, between King Pharmaceuticals, Inc., a Tennessee corporation (the “Company”), and                                         , a director of the Company (the “Director”).

     WHEREAS, the Company desires to continue to benefit from the services of highly-qualified and experienced persons such as the Director;

     WHEREAS, the substantial increase in corporate litigation subjects directors to expensive litigation risks at the same time that the uncertainties relating to directors’ and officers’ liability insurance and to indemnification are increasing;

     WHEREAS, the Director desires to serve the Company as a director for so long as the Company is able to provide on an acceptable basis adequate and reliable indemnification against certain liabilities and expenses which may be incurred by the Director in connection with such service;

     WHEREAS, the Tennessee Business Corporation Act (the “Act”) provides for the indemnification of directors under certain circumstances and the charter and bylaws of the Company provide for the indemnification of directors in accordance with applicable Tennessee law;

     WHEREAS, the Director does not regard the protection available to directors under the Act and under the Company’s charter, bylaws and directors’ and officers’ liability insurance as adequate in all circumstances; and

     WHEREAS, the Act specifically provides that the indemnification provided thereunder is not exclusive and contemplates that indemnification agreements may be entered into between Tennessee corporations and their directors.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby agree as follows:

     Section 1. Service by Director. The Director agrees to continue to serve as a director of the Company for so long as he or she is duly elected or appointed or until the effective time of his or her resignation in accordance with the Company’s charter and bylaws. Notwithstanding anything herein to the contrary, this Agreement shall not provide the Director the right to be nominated or elected as a director of the Company or affect the right of the Company’s shareholders to remove him or her or the rights of the Company or shareholders to seek judicial removal of the Director.

     Section 2. Indemnification.

          (a) To the maximum extent permitted by law, but subject to the limitations contained in Section 4 or otherwise in this Agreement, the Company shall indemnify the Director against any Liability or Expense actually and reasonably incurred by the Director in a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, except that the

Company shall not be required to indemnify the Director for any Liabilities or Expenses incurred in a Proceeding initiated by or on behalf of the Director or to which the Director voluntarily becomes a party unless (i) the Company has joined in or the board of directors of the Company (the “Board”) has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights in connection with any other Proceeding in which the Director actually incurs Liabilities or Expenses by reason of (or arising in part out of) an Indemnifiable Event; or (iii) otherwise required under the Act. If the Director is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Liability or Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Director for the portion thereof to which the Director is entitled. Notwithstanding any other provision of this Agreement, to the extent that the Director is a party to and has been successful, on the merits or otherwise, in the defense of any Proceeding relating in whole or in part to an Indemnifiable Event, the Director shall be indemnified to the maximum extent permitted by law against all Liabilities and Expenses actually and reasonably incurred by the Director or on the Director’s behalf in connection therewith. If the Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all issues or matters in such Proceeding, the Company shall indemnify the Director against all Expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with each successfully resolved issue or matter.

          (b) The Company acknowledges that a settlement or other disposition prior to final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. If any Proceeding or any issue or matter therein is disposed of, on the merits or otherwise (including a disposition without prejudice), prior to final judgment without (i) the disposition being adverse to the Director, (ii) a plea of guilty or nolo contendere by the Director or (iii) a finding that any of the circumstances described in clauses (c) through (e) of Section 4 hereof exist, the Director shall be considered for the purposes hereof to have been wholly successful with respect thereto.

     Section 3. Expense Advances.

          (a) Subject to Section 10 hereof, if so requested by the Director the Company shall advance the reasonable Expenses incurred by the Director (which, for the avoidance of doubt, need not have been already paid by the Director) in a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, except that the Company shall not be required to advance Expenses to the Director for any Expenses incurred in a Proceeding initiated by or on behalf of the Director or to which the Director voluntarily becomes a party unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights in connection with any other Proceeding in which the Director actually incurs Liabilities or Expenses by reason of (or arising in part out of) an Indemnifiable Event; or (iii) otherwise required under the Act.

          (b) Subject to Section 10 hereof, Expense advancements shall be provided within 60 days of the Director furnishing the Company a request for such advance or advances, and:

- 2 -

               (i) a written affirmation, personally signed by or on behalf of the Director, of his or her good faith belief that he or she (A) is not liable (I) for a breach of his or her duty of loyalty to the Company or its shareholders, (II) for any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (III) for any unlawful distributions to the Company’s shareholders, (IV) for profits made from the purchase or sale by the Director of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) or any similar provisions of any federal or state statutes or regulations, or (V) in respect of any Proceeding charging improper personal benefit to the Director, on the basis that personal benefit was improperly received by the Director, and (B) is entitled to advancement of Expenses under the terms of this Agreement; and

               (ii) a written undertaking (in the form of an unlimited general obligation of the Director, which need not be secured), personally signed by or on behalf of the Director, to repay any advances, if it is ultimately determined that the Director is not entitled to indemnification by the Company in respect of such Proceeding.

          (c) All Expense advances pursuant to this Section 3 are deemed to be an obligation of the Company to the Director hereunder and shall in no event be deemed a personal loan.

     Section 4. Limitations on Indemnification. No indemnification pursuant to this Agreement may be made:

          (a) in advance of a final judgment with respect to, or other final disposition of, the Proceeding for which indemnification is sought;

          (b) for any Liability or Expenses for which the Director has been reimbursed by insurance, indemnification other than pursuant to this Agreement or otherwise;

          (c) in respect of any issue or matter as to which the Director shall have been adjudged to be liable to the Company in any Proceeding by or in the right of the Company;

          (d) in respect of any Proceeding charging improper personal benefit to the Director, whether or not involving action in the Director’s official capacity, in which the Director was adjudged liable on the basis that personal benefit was improperly received by the Director; or

          (e) if a judgment or other final adjudication adverse to the Director establishes his or her liability for (i) a breach of his or her duty of loyalty to the Company or its shareholders, (ii) any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) any unlawful distributions to the Company’s shareholders or (iv) profits made from the purchase or sale by the Director of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act or any similar provisions of any federal or state statutes or regulations.

- 3 -

     Section 5. Contribution.

          (a) Whether or not the indemnification provided in Section 2 hereof is available, but subject to Section 4, in respect of any Proceeding in which the Company is jointly liable with the Director (or would be if joined in such Proceeding), then the Company shall contribute to the amount of Liabilities and Expenses actually and reasonably incurred and paid or payable by the Director in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than the Director, who are jointly liable with the Director (or would be if joined in such Proceeding), on the one hand, and the Director, on the other hand, from the Indemnifiable Event from which such Proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to applicable law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company, other than the Director, who are jointly liable with the Director (or would be if joined in such Proceeding), on the one hand, and the Director, on the other hand, in connection with the Indemnifiable Event that resulted in such Liabilities or Expenses, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than the Director, who are jointly liable with the Director (or would be if joined in such Proceeding), on the one hand, and the Director, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

          (b) Subject to Section 4 hereof, the Company hereby agrees to fully indemnify and hold the Director harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than the Director, who may be jointly liable with the Director.

          (c) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to the Director for any reason other than the application of any limitation set forth in Section 4 hereof, the Company, in lieu of indemnifying the Director, shall contribute to the amount incurred by the Director, whether for Liabilities or Expenses, in connection with any Proceeding relating to an Indemnifiable Event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and the Director as a result of the Indemnifiable Event giving cause to such Proceeding; or (ii) the relative fault of the Company (and its directors, officers, employees and agents (other than the Director)) and the Director in connection with such event(s) or transaction(s).

     Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement other than Section 4, to the extent that the Director is, by reason of his or her official capacity with the Company, a witness, or is made (or asked to) respond to discovery requests, in any Proceeding to which the Director is not a party, the Director shall be indemnified against all Expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection therewith.

- 4 -

     Section 7. Non-Exclusive Rights. The Director’s rights to indemnification and advancement of Expenses under this Agreement are intended to be cumulative and not exclusive of other rights to which the Director may be entitled under any insurance policy, the Act, the charter or bylaws of the Company or a resolution of shareholders or directors providing for indemnification. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of the Director under this Agreement in respect of any Indemnifiable Event that occurs prior to such amendment, alteration or repeal. To the extent that a change in the Act, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Company’s charter or bylaws or this Agreement, it is the intent of the parties hereto that the Director shall enjoy by this Agreement the greater benefits so afforded by such change.

     Section 8. Liability Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, the Director shall be covered by such policy or policies in accordance with its or their terms. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Director, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

     Section 9. Notification and Defense of Claim. If a claim is to be made against the Company with respect to any Proceeding under this Agreement, the Director shall notify the Company of the commencement of such Proceeding promptly after receipt by the Director of notice of the commencement thereof and provide the Company with copies of all documents relating to such Proceeding with which the Director is served. With respect to any such Proceeding as to which the Director notifies the Company of the commencement thereof, (a) the Company shall be entitled to participate therein at its own expense and (b) except as otherwise provided below, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Director. After notice from the Company to the Director of its election to assume the defense thereof, the Company shall not be liable to the Director under this Agreement for any legal expenses subsequently incurred by the Director in connection with the defense thereof, except as provided below. The Director shall have the right to employ his or her own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Director, unless (i) the employment of such counsel by the Director has been authorized by the Company, (ii) counsel for the Director shall have reasonably concluded that there may be a conflict of interest between the Company and the Director in the conduct of his or her defense in such Proceeding or (iii) the Company shall have failed to promptly employ its counsel to assume the defense in such Proceeding, in each of which cases the fees and expenses of the Director’s counsel shall be paid by the Company. The Company shall not be entitled, without the consent of the Director, to assume the defense in any Proceeding brought by or on behalf of the Company as to which counsel for the Director shall have reasonably concluded that there may be a conflict of interest between the Company and the Director in the conduct of his or her defense.

- 5 -

     Section 10. Procedure for Indemnification.

          (a) In order to obtain indemnification or advancement of Expenses pursuant to Section 2, 3 or 6 of this Agreement, the Director shall submit to the Company a written request, including in such request such documentation and information as is reasonably available to the Director and is reasonably necessary to determine whether and to what extent the Director is entitled to indemnification or advancement of Expenses. In the case of a request for Expense advancement pursuant to Section 3, the Director also shall submit to the Company the documents required under Section 3(b). The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that the Director has requested indemnification. Notwithstanding the foregoing, any failure of the Director to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to the Director unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

          (b) Any such indemnification or advancement of Expenses shall be made promptly, and in any event within 60 days after receipt by the Company of the written request of the Director, unless the Company determines within such 60-day period that the Director did not meet the applicable standard of conduct set forth herein. Such determination shall be made in each instance:

               (i) by a majority vote of the directors of the Company consisting of persons who are not at that time parties to the Proceeding (“Disinterested Directors”), to the extent such Disinterested Directors constitute a quorum of the Board;

               (ii) if such a quorum does not then exist, by a majority vote of a committee of two or more Disinterested Directors that is designated by a majority vote of the Board;

               (iii) by independent legal counsel (which may, to the extent permitted by applicable law, be regular legal counsel to the Company), in a written opinion to the Board (a copy of which shall be provided to the Director), appointed at the discretion of (x) a majority of the Disinterested Directors, to the extent such Disinterested Directors constitute a quorum of the Board, (y) if such a quorum does not then exist, a majority vote of a committee of two or more Disinterested Directors that is designated by a majority vote of the Board or (z) if a quorum of the Board cannot be obtained under clause (x) and a committee cannot be designated under clause (y), a majority vote of the full Board; or

               (iv) if so directed by the Board, by a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of shareholders who are not at that time parties to the Proceeding.

          (c) The Company shall not settle any claim in any manner which would impose any penalty or any injunctive relief restricting the activities of the Director without the Director’s written consent. The Director shall not unreasonably withhold his or her consent to any proposed settlement which does not impose a fine or injunctive relief, if the Company

- 6 -

pays all amounts due under such settlement immediately upon such settlement becoming effective.

     Section 11. Cooperation of Director. The Director shall cooperate with the person or persons making the determination on behalf of the Company with respect to the Director’s entitlement to indemnification under this Agreement, including providing any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Director and relevant to such determination. Any costs and expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by the Director in providing such cooperation shall be borne by the Company (irrespective of the determination as to the Director’s entitlement to indemnification).

     Section 12. Certain Presumptions and Burden of Proof. The right to indemnification or advancement of Expenses as provided by this Agreement shall be enforceable by the Director in any court of competent jurisdiction if the Company denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 10; provided, however, such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days in the case the Board or a committee thereof is making such determination, if the person or persons making the determination decide in good faith that additional time is required for obtaining or evaluating documentation or other relevant information. In any suit by the Director to enforce his or her rights under this Agreement, (a) the Director shall be presumed to be entitled to indemnification, subject to the Company’s ability to rebut such presumption, and (b) the termination of a proceeding by a judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the Director did not act in good faith, did not meet a particular standard of conduct, did not have any particular belief, or that a court has determined that indemnification is not permitted by applicable law. For purposes of any determination of good faith, the Director shall be presumed to have acted in good faith if he or she relied on information, opinions, reports or statements, including financial statements or other financial data prepared or presented by one or more officers or employees of the Company whom the Director reasonably believes to be reliable and competent in the matters presented or by legal counsel, public accountants or other persons as to matters the Director reasonably believes are within the person’s professional or expert competence; provided, however, the Director shall not be presumed to be acting in good faith if he or she has actual knowledge concerning the matter in question that makes such reliance unwarranted. A director’s conduct with respect to an employee benefit plan for a purpose such director reasonably believes to be in the interests of the participants in, and beneficiaries of, such plan shall be deemed conduct not opposed to the Company’s best interests.

     Section 13. Securities Act Liabilities. The Director understands and agrees that with respect to certain liabilities incurred under the Securities Act of 1933 (the “Securities Act”), the Company’s obligations hereunder may be subject to undertakings contained in various registration statements filed by it pursuant to the Securities Act, as those undertakings relate to the possible need for court review of indemnification for such liabilities.

     Section 14. Subrogation. The Company shall be subrogated to the extent of any payment to the Director under this Agreement to all of the rights of recovery of the Director with respect to such payments against third parties (including the insurer under any insurance

- 7 -

policy, if applicable). The Director shall do everything reasonably necessary to secure such rights, including the execution of such documents as may be necessary or desirable to enable the Company to bring suit to enforce such rights.

     Section 15. Duration of Agreement. This Agreement shall continue in effect during the period the Director is a director of the Company and shall continue until the final disposition of all Proceedings for Indemnifiable Events, whether or not such Proceedings are instituted prior to the Director ceasing to serve as a director of the Company.

     Section 16. Severability. The provisions of this Agreement shall be severable in the event any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law and, to the fullest extent possible, shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

     Section 17. Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if (a) delivered personally (effective on the date delivered), (b) delivered by United States registered or certified mail, return receipt requested (effective on the date received as evidenced by return receipt), or (c) sent by United States Express Mail or overnight courier (effective on the next business day), in each case to the Parties at the following addresses with postage or delivery charges prepaid.

If to the Director, to:

or to such other address as may be furnished to the Company by the Director by notice similarly given; or

If to the Company, to:

King Pharmaceuticals, Inc.

501 Fifth Street

Bristol, Tennessee 37620

Attention: Secretary

or to such other address as may be furnished to the Director by the Company by notice similarly given.

     Section 18. Governing Law. This Agreement shall be governed by, and be construed and enforced in accordance with, the laws of the State of Tennessee applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws.

- 8 -

     Section 19. Consent to Jurisdiction. The Company and the Director each irrevocably consent to the jurisdiction of the courts of the State of Tennessee for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the courts of the State of Tennessee.

     Section 20. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and their respective successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company and the spouse, heirs and personal representatives of the Director. The Company shall require any successor to all or substantially all of the business or assets of the Company, by written agreement in form and substance satisfactory to the Director, to expressly assume this Agreement.

     Section 21. Subsequent Amendments. No amendment, termination or repeal of any provision of the charter or bylaws of the Company, or any respective successors thereto, or of any relevant provision of any applicable law, unless in the case such amendment or change in law permits the Company to provide broader indemnification rights than were permitted prior thereto, shall affect or diminish in any way the rights of the Director to indemnification, or the obligations of the Company, arising under this Agreement, whether the alleged actions or conduct of the Director giving rise to the necessity of such indemnification arose before or after any such amendment, termination or repeal.

     Section 22. Modification and Waiver. This Agreement supersedes in its entirety any existing or prior agreement between the Company and the Director pertaining to indemnification and advancement rights, other than the provisions of the Act and the Company’s charter and bylaws. No supplement, modification, amendment, termination or assignment of this Agreement shall be effective unless in writing signed by both parties hereto. No waiver of any provisions of this Agreement shall be binding unless executed in writing by the party making the waiver.

     Section 23. Definitions.

          (a) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. In addition, Expenses shall include any expenses of establishing a right to indemnification.

          (b) “Indemnifiable Event” means any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that the Director is or was a director of the Company, or while the Director is or was serving at the request of the

- 9 -

Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or related to anything done or not done by the Director in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as a director or in any other capacity while serving as a director of the Company, as described above.

          (c) “Liability” means the obligation to pay a judgment, settlement, penalty or fine (including an excise tax or penalty assessed with respect to an employee benefit plan).

          (d) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternative dispute mechanism, inquiry, administrative or legislative hearing, investigation or any other actual, threatened or completed proceeding, including any and all appeals, whether conducted by the Company or any other party, whether civil, criminal, administrative, investigative, or other, whether formal or informal, and in each case whether or not commenced prior to the date of this Agreement, that relates to an Indemnifiable Event.

     Section 24. Descriptive Headings; Certain Interpretations.

          (a) The descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.

          (b) Except as otherwise expressly provided in this Agreement or as the context otherwise requires, the following rules of interpretation apply to this Agreement: (i) the singular includes the plural and the plural includes the singular; (ii) “or” is used in the inclusive sense (and/or) and the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation”; (iii) a reference in this Agreement to a Section is to the referenced Section of this Agreement; and (iv) “hereunder,” “hereof,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision.

     Section 25. Counterparts. This Agreement (and each amendment, modification and waiver in respect of it) may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Agreement (and each amendment, modification and waiver in respect of it) by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of each such instrument.

[Remainder of page intentionally blank. Signature page follows.]

- 10 -

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.

KING PHARMACEUTICALS, INC.
By:
	[Name of Director]

EX-10.4

Exhibit 10.4

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement is made this             day of                     , 20              , between King Pharmaceuticals, Inc., a Tennessee corporation (the “Company”), and                                         , an officer of the Company (the “Officer”).

     WHEREAS, the Company desires to continue to benefit from the services of highly-qualified and experienced persons such as the Officer;

     WHEREAS, the substantial increase in corporate litigation subjects corporate officers to expensive litigation risks at the same time that the uncertainties relating to directors’ and officers’ liability insurance and to indemnification are increasing;

     WHEREAS, the Tennessee Business Corporation Act (the “Act”) provides for the indemnification of officers under certain circumstances and the charter and bylaws of the Company provide for the indemnification of officers in accordance with applicable Tennessee law;

     WHEREAS, the Officer does not regard the protection available to the Company’s officers under the Act and under the Company’s charter, bylaws and directors’ and officers’ liability insurance as adequate in all circumstances; and

     WHEREAS, the Act specifically provides that the indemnification provided thereunder is not exclusive and contemplates that indemnification agreements may be entered into between Tennessee corporations and their officers.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby agree as follows:

     Section 1. Service by Officer. The Officer agrees to continue to serve as an officer of the Company until his or her resignation or removal. Notwithstanding anything herein to the contrary, this Agreement shall not provide the Officer the right to be employed by the Company, modify the terms of any previous offer letter or employment agreement between the Officer and the Company, or otherwise affect the “at will” nature of the Officer’s employment by the Company.

     Section 2. Indemnification.

          (a) To the maximum extent permitted by law, but subject to the limitations contained in Section 4 or otherwise in this Agreement, the Company shall indemnify the Officer against any Liability or Expense actually and reasonably incurred by the Officer in a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, except that the Company shall not be required to indemnify the Officer for any Liabilities or Expenses incurred in a Proceeding initiated by or on behalf of the Officer or to which the Officer voluntarily becomes a party unless (i) the Company has joined in or the board of directors of the Company (the “Board”) has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights in connection with any other Proceeding in which the Officer actually incurs Liabilities or Expenses by reason of (or arising in part out of) an Indemnifiable

Event; or (iii) otherwise required under the Act. If the Officer is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Liability or Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Officer for the portion thereof to which the Officer is entitled. Notwithstanding any other provision of this Agreement, to the extent that the Officer is a party to and has been successful, on the merits or otherwise, in the defense of any Proceeding relating in whole or in part to an Indemnifiable Event, the Officer shall be indemnified to the maximum extent permitted by law against all Liabilities and Expenses actually and reasonably incurred by the Officer or on the Officer’s behalf in connection therewith. If the Officer is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all issues or matters in such Proceeding, the Company shall indemnify the Officer against all Expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with each successfully resolved issue or matter.

          (b) The Company acknowledges that a settlement or other disposition prior to final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. If any Proceeding or any issue or matter therein is disposed of, on the merits or otherwise (including a disposition without prejudice), prior to final judgment without (i) the disposition being adverse to the Officer, (ii) a plea of guilty or nolo contendere by the Officer or (iii) a finding that any of the circumstances described in clauses (c) through (e) of Section 4 hereof exist, the Officer shall be considered for the purposes hereof to have been wholly successful with respect thereto.

     Section 3. Expense Advances.

          (a) Subject to Section 10 hereof, if so requested by the Officer the Company shall advance the reasonable Expenses incurred by the Officer (which, for the avoidance of doubt, need not have already been paid by the Officer) in a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, except that the Company shall not be required to advance Expenses to the Officer for any Expenses incurred in a Proceeding initiated by or on behalf of the Officer or to which the Officer voluntarily becomes a party unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding; (ii) the Proceeding is one to enforce indemnification rights in connection with any other Proceeding in which the Officer actually incurs Liabilities or Expenses by reason of (or arising in part out of) an Indemnifiable Event; or (iii) otherwise required under the Act.

          (b) Subject to Section 10 hereof, Expense advancements shall be provided within 60 days of the Officer furnishing the Company a request for such advance or advances, and:

               (i) a written affirmation, personally signed by or on behalf of the Officer, of his or her good faith belief that (A) he or she conducted himself or herself in good faith and in the reasonable belief that his or her conduct was (x) in the Company’s best interests if the Officer was acting in his or her official capacity as an officer of the Company, or (y) in all other cases, not opposed to the Company’s best interests, and in the case of a criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful and (B) he or she is not liable for profits made from the purchase or sale by the Officer of securities of the

- 2 -

Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) or any similar provisions of any federal or state statutes or regulations; and

               (ii) a written undertaking (in the form of an unlimited general obligation of the Officer, which need not be secured), personally signed by or on behalf of the Officer to repay any advances, if it is ultimately determined that the Officer is not entitled to indemnification by the Company in respect of such Proceeding.

          (c) All Expense advances pursuant to this Section 3 are deemed to be an obligation of the Company to the Officer hereunder and shall in no event be deemed a personal loan.

     Section 4. Limitations on Indemnification. No indemnification pursuant to this Agreement may be made:

          (a) in advance of a final judgment with respect to, or other final disposition of, the Proceeding for which indemnification is sought;

          (b) for any Liability or Expenses for which the Officer has been reimbursed by insurance, indemnification other than pursuant to this Agreement or otherwise;

          (c) in respect of any issue or matter as to which the Officer shall have been adjudged to be liable to the Company in any Proceeding by or in the right of the Company;

          (d) in respect of any Proceeding charging improper personal benefit to the Officer, whether or not involving action in the Officer’s official capacity, in which the Officer was adjudged liable on the basis that personal benefit was improperly received by the Officer; or

          (e) if a judgment or other final adjudication adverse to the Officer establishes:

               (i) that he or she did not act in good faith and in the reasonable belief that his or her conduct was (x) in the Company’s best interests if the Officer was acting in his or her official capacity as an officer of the Company, or (y) in all other cases, not opposed to the Company’s best interests;

               (ii) in the case of a criminal Proceeding, that he or she had reasonable cause to believe his or her conduct was unlawful; or

               (iii) the Officer’s liability for profits made from the purchase or sale by the Officer of securities of the Company pursuant to the provisions of Section 16(b) of the Exchange Act or any similar provisions of any federal or state statutes or regulations.

     Section 5. Contribution.

- 3 -

          (a) Whether or not the indemnification provided in Section 2 hereof is available, but subject to Section 4, in respect of any Proceeding in which the Company is jointly liable with the Officer (or would be if joined in such Proceeding), then the Company shall contribute to the amount of Liabilities and Expenses actually and reasonably incurred and paid or payable by the Officer in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than the Officer, who are jointly liable with the Officer (or would be if joined in such Proceeding), on the one hand, and the Officer, on the other hand, from the Indemnifiable Event from which such Proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to applicable law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company, other than the Officer, who are jointly liable with the Officer (or would be if joined in such Proceeding), on the one hand, and the Officer, on the other hand, in connection with the Indemnifiable Event that resulted in such Liabilities or Expenses, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than the Officer, who are jointly liable with the Officer (or would be if joined in such Proceeding), on the one hand, and the Officer, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

          (b) Subject to Section 4 hereof, the Company hereby agrees to fully indemnify and hold the Officer harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than the Officer, who may be jointly liable with the Officer.

          (c) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to the Officer for any reason other than the application of any limitation set forth in Section 4 hereof, the Company, in lieu of indemnifying the Officer, shall contribute to the amount incurred by the Officer, whether for Liabilities or Expenses, in connection with any Proceeding relating to an Indemnifiable Event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and the Officer as a result of the Indemnifiable Event giving cause to such Proceeding; or (ii) the relative fault of the Company (and its directors, officers, employees and agents (other than the Officer)) and the Officer in connection with such event(s) or transaction(s).

     Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement other than Section 4, to the extent that the Officer is, by reason of his or her official capacity with the Company, a witness, or is made (or asked to) respond to discovery requests, in any Proceeding to which the Officer is not a party, the Officer shall be indemnified against all Expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection therewith.

     Section 7. Non-Exclusive Rights. The Officer’s rights to indemnification and advancement of Expenses under this Agreement are intended to be cumulative and not exclusive of other rights to which the Officer may be entitled under any insurance policy, the

- 4 -

Act, the charter or bylaws of the Company or a resolution of shareholders or Board providing for indemnification. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of the Officer under this Agreement in respect of any Indemnifiable Event that occurs prior to such amendment, alteration or repeal. To the extent that a change in the Act, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Company’s charter or bylaws or this Agreement, it is the intent of the parties hereto that the Officer shall enjoy by this Agreement the greater benefits so afforded by such change.

     Section 8. Liability Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, the Officer shall be covered by such policy or policies in accordance with its or their terms. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Officer, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

     Section 9. Notification and Defense of Claim. If a claim is to be made against the Company with respect to any Proceeding under this Agreement, the Officer shall notify the Company of the commencement of such Proceeding promptly after receipt by the Officer of notice of the commencement thereof and provide the Company with copies of all documents relating to such Proceeding with which the Officer is served. With respect to any such Proceeding as to which the Officer notifies the Company of the commencement thereof, (a) the Company shall be entitled to participate therein at its own expense and (b) except as otherwise provided below, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Officer. After notice from the Company to the Officer of its election to assume the defense thereof, the Company shall not be liable to the Officer under this Agreement for any legal expenses subsequently incurred by the Officer in connection with the defense thereof, except as provided below. The Officer shall have the right to employ his or her own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Officer, unless (i) the employment of such counsel by the Officer has been authorized by the Company, (ii) counsel for the Officer shall have reasonably concluded that there may be a conflict of interest between the Company and the Officer in the conduct of his or her defense in such Proceeding or (iii) the Company shall have failed to promptly employ its counsel to assume the defense in such Proceeding, in each of which cases the fees and expenses of the Officer’s counsel shall be paid by the Company. The Company shall not be entitled, without the consent of the Officer, to assume the defense in any Proceeding brought by or on behalf of the Company as to which counsel for the Officer shall have reasonably concluded that there may be a conflict of interest between the Company and the Officer in the conduct of his or her defense.

- 5 -

     Section 10. Procedure for Indemnification.

          (a) In order to obtain indemnification or advancement of Expenses pursuant to Section 2, 3 or 6 of this Agreement, the Officer shall submit to the Company a written request, including in such request such documentation and information as is reasonably available to the Officer and is reasonably necessary to determine whether and to what extent the Officer is entitled to indemnification or advancement of Expenses. In the case of a request for Expense advancement pursuant to Section 3, the Officer also shall submit to the Company the documents required under Section 3(b). The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that the Officer has requested indemnification. Notwithstanding the foregoing, any failure of the Officer to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to the Officer unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

          (b) Any such indemnification or advancement of Expenses shall be made promptly, and in any event within 60 days after receipt by the Company of the written request of the Officer, unless the Company determines within such 60-day period that the Officer did not meet the applicable standard of conduct set forth herein. Such determination shall be made in each instance:

               (i) by a majority vote of the directors of the Company consisting of persons who are not at that time parties to the Proceeding (“Disinterested Directors”), to the extent such Disinterested Directors constitute a quorum of the Board;

               (ii) if such a quorum does not then exist, by a majority vote of a committee of two or more Disinterested Directors that is designated by a majority vote of the Board;

               (iii) by independent legal counsel (which may, to the extent permitted by applicable law, be regular legal counsel to the Company), in a written opinion to the Board (a copy of which shall be provided to the Officer), appointed at the discretion of (x) a majority of the Disinterested Directors, to the extent such Disinterested Directors constitute a quorum of the Board, (y) if such a quorum does not then exist, a majority vote of a committee of two or more Disinterested Directors that is designated by a majority vote of the Board or (z) if a quorum of the Board cannot be obtained under clause (x) and a committee cannot be designated under clause (y), a majority vote of the full Board; or

               (iv) if so directed by the Board, by a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of shareholders who are not at that time parties to the Proceeding.

          (c) The Company shall not settle any claim in any manner which would impose any penalty or any injunctive relief restricting the activities of the Officer without the Officer’s written consent. The Officer shall not unreasonably withhold his or her consent to

- 6 -

any proposed settlement which does not impose a fine or injunctive relief, if the Company pays all amounts due under such settlement immediately upon such settlement becoming effective.

     Section 11. Cooperation of Officer. The Officer shall cooperate with the person or persons making the determination on behalf of the Company with respect to the Officer’s entitlement to indemnification under this Agreement, including providing any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Officer and relevant to such determination. Any costs and expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by the Officer in providing such cooperation shall be borne by the Company (irrespective of the determination as to the Officer’s entitlement to indemnification).

     Section 12. Certain Presumptions and Burden of Proof. The right to indemnification or advancement of Expenses as provided by this Agreement shall be enforceable by the Officer in any court of competent jurisdiction if the Company denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 10; provided, however, such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days in the case the Board or a committee thereof is making such determination, if the person or persons making the determination decide in good faith that additional time is required for obtaining or evaluating documentation or other relevant information. In any suit by the Officer to enforce his or her rights under this Agreement, (a) the Officer shall be presumed to be entitled to indemnification, subject to the Company’s ability to rebut such presumption, and (b) the termination of a proceeding by a judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the Officer did not act in good faith, did not meet a particular standard of conduct, did not have any particular belief, or that a court has determined that indemnification is not permitted by applicable law. For purposes of any determination of good faith, the Officer shall be presumed to have acted in good faith if he or she relied on information, opinions, reports or statements, including financial statements or other financial data prepared or presented by one or more officers or employees of the Company whom the Officer reasonably believes to be reliable and competent in the matters presented or by legal counsel, public accountants or other persons as to matters the Officer reasonably believes are within the person’s professional or expert competence; provided, however, the Officer shall not be presumed to be acting in good faith if he or she has actual knowledge concerning the matter in question that makes such reliance unwarranted. An officer’s conduct with respect to an employee benefit plan for a purpose such officer reasonably believes to be in the interests of the participants in, and beneficiaries of, such plan shall be deemed conduct not opposed to the Company’s best interests.

     Section 13. Securities Act Liabilities. The Officer understands and agrees that with respect to certain liabilities incurred under the Securities Act of 1933 (the “Securities Act”), the Company’s obligations hereunder may be subject to undertakings contained in various registration statements filed by it pursuant to the Securities Act, as those undertakings relate to the possible need for court review of indemnification for such liabilities.

     Section 14. Subrogation. The Company shall be subrogated to the extent of any payment to the Officer under this Agreement to all of the rights of recovery of the Officer with respect to such payments against third parties (including the insurer under any insurance

- 7 -

policy, if applicable). The Officer shall do everything reasonably necessary to secure such rights, including the execution of such documents as may be necessary or desirable to enable the Company to bring suit to enforce such rights.

     Section 15. Duration of Agreement. This Agreement shall continue in effect during the period the Officer is an officer of the Company and shall continue until the final disposition of all Proceedings for Indemnifiable Events, whether or not such Proceedings are instituted prior to the Officer ceasing to serve as an officer of the Company.

     Section 16. Severability. The provisions of this Agreement shall be severable in the event any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law and, to the fullest extent possible, shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

     Section 17. Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if (a) delivered personally (effective on the date delivered), (b) delivered by United States registered or certified mail, return receipt requested (effective on the date received as evidenced by return receipt), or (c) sent by United States Express Mail or overnight courier (effective on the next business day), in each case to the Parties at the following addresses with postage or delivery charges prepaid.

If to the Director, to:

or to such other address as may be furnished to the Company by the Director by notice similarly given; or

If to the Company, to:

King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attention: Secretary

or to such other address as may be furnished to the Director by the Company by notice similarly given.

     Section 18. Governing Law. This Agreement shall be governed by, and be construed and enforced in accordance with, the laws of the State of Tennessee applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws.

- 8 -

     Section 19. Consent to Jurisdiction. The Company and the Officer each irrevocably consent to the jurisdiction of the courts of the State of Tennessee for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the courts of the State of Tennessee.

     Section 20. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and their respective successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company and the spouse, heirs and personal representatives of the Officer. The Company shall require any successor to all or substantially all of the business or assets of the Company, by written agreement in form and substance satisfactory to the Officer, to expressly assume this Agreement.

     Section 21. Subsequent Amendments. No amendment, termination or repeal of any provision of the charter or bylaws of the Company, or any respective successors thereto, or of any relevant provision of any applicable law, unless in the case such amendment or change in law permits the Company to provide broader indemnification rights than were permitted prior thereto, shall affect or diminish in any way the rights of the Officer to indemnification, or the obligations of the Company, arising under this Agreement, whether the alleged actions or conduct of the Officer giving rise to the necessity of such indemnification arose before or after any such amendment, termination or repeal.

     Section 22. Modification and Waiver. This Agreement supersedes in its entirety any existing or prior agreement between the Company and the Officer pertaining to indemnification and advancement rights, other than the provisions of the Act and the Company’s charter and bylaws. No supplement, modification, amendment, termination or assignment of this Agreement shall be effective unless in writing signed by both parties hereto. No waiver of any provisions of this Agreement shall be binding unless executed in writing by the party making the waiver.

     Section 23. Definitions.

          (a) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. In addition, Expenses shall include any expenses of establishing a right to indemnification.

          (b) “Indemnifiable Event” means any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that the Officer is or was an officer of the Company, or while the Officer is or was serving at the request of the Company as a director, officer, employee or agent of another foreign or domestic corporation,

- 9 -

partnership, joint venture, employee benefit plan, trust, or other enterprise, or related to anything done or not done by the Officer in any such capacity, whether or not the basis of the Proceeding is alleged action in an official capacity as an officer or in any other capacity while serving as an officer of the Company, as described above.

          (c) “Liability” means the obligation to pay a judgment, settlement, penalty or fine (including an excise tax or penalty assessed with respect to an employee benefit plan).

          (d) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternative dispute mechanism, inquiry, administrative or legislative hearing, investigation or any other actual, threatened or completed proceeding, including any and all appeals, whether conducted by the Company or any other party, whether civil, criminal, administrative, investigative, or other, whether formal or informal, and in each case whether or not commenced prior to the date of this Agreement, that relates to an Indemnifiable Event.

     Section 24. Descriptive Headings; Certain Interpretations.

          (a) The descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.

          (b) Except as otherwise expressly provided in this Agreement or as the context otherwise requires, the following rules of interpretation apply to this Agreement: (i) the singular includes the plural and the plural includes the singular; (ii) “or” is used in the inclusive sense (and/or) and the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation”; (iii) a reference in this Agreement to a Section is to the referenced Section of this Agreement; and (iv) “hereunder,” “hereof,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision.

     Section 25. Counterparts. This Agreement (and each amendment, modification and waiver in respect of it) may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Agreement (and each amendment, modification and waiver in respect of it) by facsimile or other electronic transmission shall be effective as delivery of a manually executed original counterpart of each such instrument.

[Remainder of page intentionally blank. Signature page follows.]

- 10 -

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.

KING PHARMACEUTICALS, INC.
By:
	[Name of Officer]

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Brian A. Markison, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: August 9, 2010

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Joseph Squicciarino, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: August 9, 2010

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with this quarterly report on Form 10-Q 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: August 9, 2010

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with this quarterly report on Form 10-Q 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: August 9, 2010