Document:

Exhibit 4.8

 

Execution Copy

 

EXECUTIVE STOCK
AGREEMENT

 

THIS EXECUTIVE STOCK AGREEMENT (this “Agreement”)
is made as of June 18, 2002, by and among MWI Veterinary Supply Co. (the “Company”),
MWI Holdings, Inc. (the “Holding Company”), and Mary Pat Thompson (“Executive”).
Certain definitions are set forth in Section 9 of this Agreement.

 

The Company, the Holding Company and Executive desire
to enter into an agreement setting forth (i) the terms pursuant to which
the Holding Company shall sell to Executive certain shares of the Holding
Company’s (a) Common Stock, par value $0.01 per share (the “Common”),
and (b) Series A Preferred Stock, par value $1.00 per share (the “Preferred,”
and the Common and Preferred to be purchased hereunder, the “Securities”),
(ii) the terms pursuant to which the Holding Company is granting to
Executive options to acquire certain shares of Common, (iii) the
obligation of Executive to refrain from competing with the Company and its
Affiliates under certain circumstances as provided herein, and (iv) certain
other rights and obligations of the parties.

 

The parties hereto agree as follows:

 

1.                                       Purchase
and Sale of Securities.

 

(a)                                  Sale.  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will purchase, and the Holding Company will sell, (i) 14,416
shares of Common at a purchase price of $1.00 per share, and (ii) 72.838
shares of Preferred at a purchase price of $1,000.00 per share, for an
aggregate consideration of $87,254.00 (the “Purchase Price”).  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will deliver to the Holding Company a Promissory Note in
principal amount of the Purchase Price in the form provided to Executive by the
Company, and the Holding Company will deliver to Executive the certificates and
instruments evidencing the Securities. 
Executive shall also execute and deliver to the Company a related Pledge
Agreement in the form provided to Executive by the Company.

 

(b)                                 83(b).  Executive has delivered to the Holding
Company a completed and signed election under Section 83(b) of the
Internal Revenue Code and the regulations thereunder, a copy of which has been
attached as Exhibit A
hereto.  Executive further agrees to
complete and sign subsequent elections under such Section 83(b) upon
exercise of Options hereunder.

 

(c)                                  Vesting
of Common.  2,883.20 of the shares of Common purchased pursuant
to clause (a) above shall vest and become “Vested Purchase Shares”
on each of the first five annual anniversaries of the date hereof (each, a “Vesting
Date”), provided Executive is employed with the Company on such Vesting
Date (provided that in connection to

 

 

Executive’s voluntary termination of Executive’s
employment, if Executive in good faith gives the Company written notice that
Executive is retiring, for purposes of this clause (c) (and only for such
purposes) Executive shall be deemed to be employed by the Company on each
Vesting Date subsequent to Executive’s retirement until such time, if any, as
Executive accepts full-time employment with any Person other than the Company);
provided that all shares of Common purchased pursuant to clause (a) above
which have not previously vested pursuant to this clause (c) shall vest
and becomes Vested Purchase Shares upon the consummation of a Sale of the
Company, a Qualifying Recapitalization or an Initial Public Offering.  Shares of Common purchased pursuant to Section 1(a) which
have not vested and become Vested Purchase Shares shall be referred to as “Unvested
Purchase Shares.”

 

(d)                                 Representations.  In connection with the purchase and sale of
the Securities hereunder, Executive represents and warrants to the Holding
Company that:

 

(i)                                     Executive
has full capacity, power and authority to execute and deliver this Agreement,
to perform Executive’s obligations under this Agreement and to consummate the
transactions contemplated hereby.

 

(ii)                                  The
Securities to be acquired by Executive pursuant to this Agreement will be
acquired for Executive’s own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and such Securities will not be disposed of in
contravention of the Securities Act or any applicable state securities laws.

 

(iii)                               Executive
is able to bear the economic risk of the investment in the Securities for an
indefinite period of time because the Securities are subject to the transfer
restrictions contained herein and have not been registered under the Securities
Act.

 

(iv)                              Executive
has had an opportunity to ask questions and receive answers concerning the
terms and conditions of the offering of the Securities and has had full access
to such other information concerning the Holding Company as Executive has
requested.  Executive has reviewed, or
has had an opportunity to review copies of the following documents, (A) the
Stockholders Agreement, and (B) the certificate of incorporation and by-laws
of the Holding Company.

 

(v)                                 This
Agreement has been duly executed and delivered by Executive and constitutes the
legal, valid and binding obligation of Executive, enforceable in accordance
with its terms, and the execution, delivery, and performance of this Agreement
by Executive does not and will not conflict with, violate, or cause a breach of
any agreement, contract, or instrument to which Executive is a party or any
judgment, order, or decree to which Executive is subject.  No consent, approval, order of authorization
of, or registration, declaration or filing with, any government agency or
public or regulatory unit, agency, body or authority is required to be obtained
or made by Executive in connection with Executive’s execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.

 

2

 

(e)                                  Acknowledgment.  Executive acknowledges and agrees that,
except for information necessary for Executive to determine whether the Company
has achieved the performance targets set forth herein, none of the Holding
Company, the Company or any of their Subsidiaries shall have any duty or
obligation to disclose to Executive, and Executive shall have no right to be
advised of, any material information regarding the Holding Company, the Company
or any of their Subsidiaries at any time prior to, upon, or in connection with
the repurchase of the Securities.  The
Holding Company, the Company and their Subsidiaries shall provide Executive
with such information regarding such entities as Executive may reasonably
request in order for Executive to determine whether or not to exercise the Put
Option.  Notwithstanding anything herein
to the contrary, references herein to the employment of Executive by the
Company shall be deemed to refer to employment of Executive by the Company or
any of its Subsidiaries.

 

2.                                       Options.

 

(a)                                  Options
Grant.  Pursuant to the Holding
Company’s 2002 Stock Option Plan (the “Plan”), the Holding Company hereby
grants to Executive five (5) separate nonqualified stock options (each an “Option”
and individually referred to as the “First Option,” the “Second
Option,” the “Third Option,” the “Fourth Option,” and the “Fifth
Option”), to purchase 2,197.80 (the “Base Amount”) shares of Common
(the “Option Shares”) (which number may be adjusted as provided in the
Plan), at a price per share of $1.00 (the “Exercise Price”).  The stock options so granted shall not be
intended to be “incentive stock options” within the meaning of Section 422
of the Internal Revenue Code.  

 

(b)                                 Executive
Bound by Plan.  Attached hereto as Exhibit A
is a copy of the Plan which is incorporated herein by reference and made a part
hereof.  Executive hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions thereof.  The Plan should be
carefully examined before any decision is made to exercise an Option.

 

(c)                                  Exercisability.  Subject to the other provisions hereof, an
Option shall be exercisable, in whole or in part, to the extent it has become
Fully Vested (as set forth below), by written notice to the Holding Company at
any time, and from time to time, during the period of time after the date
hereof and prior to the tenth anniversary of the date hereof or such earlier
date upon which such Option expires as specified herein or in the Plan.  An Option may not be exercised for a fraction
of a share of Common.  Options are subject
to cancellation as provided in the Plan.

 

(d)                                 Vesting
of Option.  Each Option shall vest
and become exercisable with respect to the Option Shares subject to such Option
as follows:

 

(i)                                     Each
Option shall have a date (such Option’s “Future Date”) upon which,
subject to the satisfaction of certain conditions set forth below, such Option
shall become, in whole or in part, “Level 1 Vested.”  The Future Date for the First Option is September 30,
2002.  The Future Date for the Second
Option is September 30, 2003.  The
Future Date for the Third Option is September 30, 2004.  The Future Date for the Fourth Option is September 30,
2005.

 

3

 

The Future Date
for the Fifth Option is September 30, 2006.  Each Option shall become fully Level 1
Vested, if (x) the EBITDA for the fiscal year ending on such Option’s Future
Date (each fiscal year ending on a Future Date, a “Target Year”) equals
at least the dollar amount set forth opposite such Future Date in the table
below (each, a “Target EBITDA”), (y) the Return on Net Assets for the
Target Year ending on such Future Date equals at least the percentage set forth
opposite such Future Date in the table below (each, a “Target Return on Net
Assets”), and (z) Executive is employed with the Company on such Future
Date (any Target Year which has been completed and with respect to which all of
the foregoing 3 conditions have been satisfied, a “Target Achieved Year”
and any Target Year which has been completed with respect to which any of the
foregoing 3 conditions have not been satisfied, a “Target Failed Year”):

 

	
  Future Dates

  	
   

  	
  Target EBITDA

  	
   

  	
  Target Return on Net

  Assets

  	
   

  
	
  September 30,
  2002

  	
   

  	
  $

  	
  9,100,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2003

  	
   

  	
  $

  	
  11,700,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2004

  	
   

  	
  $

  	
  14,800,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2005

  	
   

  	
  $

  	
  18,600,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  20,600,000

  	
   

  	
  20.0

  	
  %

  

 

; provided that for the purposes of the definition of
Target Enterprise Value below, “Target EBITDA” for the Company’s fiscal
years ending after September 30, 2006 means, $24,720,000 for the Company’s
fiscal year ending on September 30, 2007, $29,664,000 for the Company’s
fiscal year ending on September 30, 2008, $35,596,800 for the Company’s
fiscal year ending on September 30, 2009, $42,716,160 for the Company’s
fiscal year ending on September 30, 2010, and $51,259,392 for the Company’s
fiscal year ending on September 30, 2011.

 

In the event that (x) the Company consummates any
acquisition of the capital stock or assets of another Person in any given year,
or (y) the Company commits to a one-time unusual capital expenditure, (A) each
Target EBITDA shall be adjusted by the Company in good faith to account for the
pro-forma EBITDA impact of such acquisition or capital expenditure, as the case
may be, and (B) each Target Return on Net Assets shall be adjusted by the
Company in good faith to account for the pro-forma impact of such acquisition
including with respect to the goodwill acquired.  If the Holding Company shall consummate a
stock split, reverse stock split, stock dividend or similar transaction, the
Base Amount and the Exercise Price shall be proportionally adjusted.

 

(ii)                                  For
the purposes of this Section 2(d), (x) the “Failed Amount” at any
given time shall equal the product of the Base Amount, multiplied by the number
of Target Failed Years which have occurred as of such time, and (y) the “Previously
Level 1 Vested Amount” at any given time shall equal the Extra Level 1
Vested Amount (as defined below) plus, for the purposes of clause (iv) below
and not for the purposes of clause (v) below, the Exit Level 1 Vested
Amount (as defined below).

 

4

 

(iii)                               With
respect to any Target Achieved Year:

 

(A)                              the
aggregate EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Actual EBITDA”;

 

(B)                                the
aggregate Target EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Target EBITDA”;

 

(C)                                the
quotient (expressed as a percentage) determined by dividing such Target
Achieved Year’s Cumulative Actual EBITDA by such Target Achieved Year’s
Cumulative Target EBITDA shall be referred to as such Target Achieved Year’s “Cumulative
Percentage;” and

 

(D)                               The
product (expressed as a percentage) of (x) such Target Achieved Year’s
Cumulative Percentage minus 90.0%, multiplied by (y) 10, shall be referred to
as such Target Achieved Year’s “Vesting Percentage;” provided that the
Vesting Percentage for any such Target Achieved Year shall not exceed 100%.

 

(iv)                              If
any Target Achieved Year occurs following a Target Failed Year and such Target
Achieved Year’s Cumulative Percentage is greater than 90.0%, then each Option
corresponding to a Target Failed Year (i.e. having a Future Date which is the
last day of a Target Failed Year) which occurred prior to such Target Achieved
Year shall become Level 1 Vested with respect to a number of shares of Common
equal to the quotient determined by dividing (A) the difference between
(x) such Target Achieved Year’s Vesting Percentage of the Failed Amount as of
such time, minus (y) the Previously Level 1 Vested Amount as of such time, by (B) the
number of Target Failed Years which occurred prior to such Target Achieved
Year.

 

At any given time the number of shares in the
aggregate which have vested pursuant to this clause (iv) shall equal the “Extra
Level 1 Vested Amount.”

 

(v)                                 Upon
the first consummation of a Sale of the Company or an Initial Public Offering
after September 30, 2002 and prior to or on September 30, 2006, if (i) the
EBITDA for the period beginning on the first day of the Company’s fiscal year
(the “Relevant Fiscal Year”) in which the date of such consummation (the
“Test Date”) occurs, and ending on the Test Date, equals at least 90% of
the pro rata amount of the Target EBITDA for the Relevant Fiscal Year as of the
Test Date (based upon a 360 day year and the number of days elapsed in the
Relevant Fiscal Year through the Test Date), (ii) the Cumulative Exit
Percentage as of the Test Date is greater than 90%, and (iii) Executive is
employed with the Company on the Test Date, then each Option corresponding to a
Target Failed Year which occurred prior to such Test Date shall become Level 1
Vested with respect to a number of shares of Common (the “Exit Level I
Vested Amount”) equal to the quotient determined by dividing (A) the
difference between (x) the Exit Vesting Percentage of the Failed Amount as of
the Test Date, minus (y) the Previously Level I Vested Amount as of the Test
Date, by (B) the number of Target Failed Years which occurred prior to
such Test Date.

 

5

 

“Cumulative Exit
Percentage” means the quotient (expressed as a percentage) determined by
dividing (i) the Company’s aggregate EBITDA for the period beginning October 1,
2001 and ending on the Test Date, by (ii) the sum of (x) the aggregate
Target EBITDA for each Target Year which has been completed as of the Test
Date, and (y) a pro rata amount of the Target EBITDA for the Relevant Fiscal
Year as of the Test Date (based upon a 360-day year and the number of days
elapsed in the Relevant Fiscal Year through the Test Date).

 

“Exit Vesting
Percentage” means the product (expressed as a percentage) of (i) the
Cumulative Exit Percentage as of the Test Date minus 90.0%, multiplied by (ii) 10.

 

(vi)                              Notwithstanding
anything to the contrary set forth herein, upon the consummation of a Sale of
the Company, Initial Public Offering or Qualifying Recapitalization, if the
Total Enterprise Value based upon such Sale of the Company, Initial Public
Offering or Qualifying Recapitalization, as applicable, equals an amount
greater than or equal to the Target Enterprise Value as of the date of
consummation of such event each Option shall become fully Level I Vested.

 

“Qualifying Recapitalization” means a
recapitalization of the Holding Company which shall not include a Sale of the
Company, pursuant to which all of the Holding Company’s Preferred Stock is
redeemed by the Holding Company for the original cost thereof plus all accrued
and unpaid dividends thereon.

 

“Total Enterprise Value” means (i) in the
case of a Sale of the Company, the sum of (x) the equity value of the Holding
Company implied by the Sale of the Company (as reasonably determined in good
faith by the Board), plus (y) the amount of debt for borrowed money of the
Holding Company and its Subsidiaries assumed by the relevant acquirer or repaid
in connection to the Sale of the Company, (ii) in the case of an Initial
Public Offering, the sum of (m) the product of the number of shares of Common
outstanding as of the Test Date immediately after the consummation of the
Initial Public Offering, multiplied by the per share price paid for Common
pursuant to the Initial Public Offering, plus (n) the amount of debt for borrowed
money of the Holding Company and its Subsidiaries as of immediately after the
consummation of the Initial Public Offering, and (iii) in the case of a
Qualifying Recapitalization, the sum of (a) the equity value of the
Holding Company implied by the Qualifying Recapitalization (as reasonably
determined in good faith by the Board), plus (y) the amount of debt for
borrowed money of the Holding Company and its Subsidiaries as of immediately
after the consummation of the Qualifying Recapitalization; provided that in all
cases, Total Enterprise Value shall not include any fees and expenses of the
relevant transaction.

 

“Target Enterprise Value” means, with respect
to any Relevant Fiscal Year, an amount equal to (i) the Target EBITDA for
such Relevant Fiscal Year, multiplied by (ii) 8.0.

 

(vii)                           Each
Option shall become “Fully Vested” with respect to (x) 20% (25% with respect to
the Fourth Option and 33.3% with respect to the Fifth Option) of the Option
Shares subject to such Option which have previously become Level I Vested, on
each of the first four annual anniversaries of such Option’s Future Date (each such date, a “Vesting Date”),
and (y) the remaining Option Shares subject to such Option which have
previously become Level I

 

6

 

Vested but which
have not become Fully Vested, on the fifth annual anniversary of such Option’s
Future Date (each such date, a “Vesting Date”), provided Executive is
employed with the Company on such Vesting Date (provided that in connection to
Executive’s voluntary termination of Executive’s employment, if Executive in
good faith gives the Company written notice that Executive is retiring, for
purposes of this clause (vii) (and only for such purposes) Executive shall
be deemed to be employed by the Company on each Vesting Date subsequent to
Executive’s retirement until such time, if any, as Executive accepts full-time
employment with any Person other than the Company); provided that, upon
the consummation of a Sale of the Company or an Initial Public Offering, each
Option shall become Fully Vested with respect to (i) if the date of such
consummation (the “Test Date”) is prior to or on September 30,
2006, 50% of the Option Shares subject to such Option which have previously
become Level I Vested but which have not previously become Fully Vested, if as
of the Test Date, the EBITDA for the period beginning on the first day of the
Company’s fiscal year in which the Test Date occurs (the “Relevant Fiscal
Year”), and ending on the Test Date equals at least the pro rata amount of
the Target EBITDA for the Relevant Fiscal Year as of the Test Date (based upon
a 360-day year and the number of days elapsed in the Relevant Fiscal Year
through the Test Date), (ii) if the Test Date is after September 30,
2006, 50% of the Option Shares subject to such Option which have previously
become Level I Vested but which have not previously become Fully Vested, if as
of the Test Date, the EBITDA for the period beginning on the first day of the
Relevant Fiscal Year and ending on the Test Date, equals at least the pro rata
amount of the 20% EBITDA Target for the Relevant Fiscal Year as of the Test
Date (based upon a 360-day year and the number of days elapsed in the Relevant
Fiscal Year through the Test Date), and (iii) all of the Option Shares
subject to such Option which have previously become Level I Vested but which
have not previously become Fully Vested, if the Total Enterprise Value based
upon such Sale of the Company or Initial Public Offering, as applicable, equals
an amount greater than or equal to the Target Enterprise Value as of the Test
Date; provided that, upon the consummation of a Qualifying
Recapitalization, each Option shall become Fully Vested with respect to all of
the Option Shares subject to such Option which have previously become Level I
Vested but which have not previously become Fully Vested, if the Total
Enterprise Value based upon such Qualifying Recapitalization, equals an amount
greater than or equal to the Target Enterprise Value as of the date of
consummation of such Qualifying Recapitalization.

 

“20% EBITDA Target” means, $24,720,000 for the
Company’s fiscal year ending on September 30, 2007, $29,664,000 for the
Company’s fiscal year ending on September 30, 2008, $35,596,800 for the
Company’s fiscal year ending on September 30, 2009, $42,716,160 for the
Company’s fiscal year ending on September 30, 2010, and $51,259,392 for
the Company’s fiscal year ending on September 30, 2011; provided that such
amounts shall be subject to adjustment on the same basis as Target EBITDA as
set forth in Section 2(a)(iii) of the Executive Stock Agreement

 

(viii)                        Notwithstanding
anything herein to the contrary, on 7 year anniversary of the date herof, if
Executive is employed with the Company on such date, each Option shall become “Fully
Vested” with respect to all Option Shares subject to such Option which have not
previously become Fully Vested regardless of whether or not such Option had
previously become Level 1 Vested with respect to such Option Shares.

 

7

 

(e)                                  Early
Expiration Upon Termination of Employment. 
If Executive’s employment with the Company is terminated for any reason
other than termination by the Company for Cause or a voluntary termination by Executive
which is not within 90 days after a Good Reason Event, or if Executive shall
retire in the ordinary course, (i) the unexercised portion of an Option
that has vested prior to or on the date of such termination or retirement (such
portion, the “Vested Portion,” and such date of termination or retirement, the “Termination
Date”) may be exercised by Executive within 120 days of the Termination Date
and such portion shall be immediately subject to the Repurchase Option pursuant
to the terms and conditions set forth in the Executive Stock Agreement, and (ii) the
portion of an Option which has not vested prior to or on the Termination Date
and any portion of the Vested Portion which Executive does not elect to
exercise within 120 days of the Termination Date shall expire and shall no
longer be exercisable (provided that portions of an Option which have not
vested prior to or on the Termination Date shall not expire, if such portions
remain eligible for vesting because of Executive’s retirement as described in
clause (vii) above).  If Executive’s
employment with the Company is terminated by the Company for Cause or in the
event of a voluntary termination by Executive which is not within 90 days after
a Good Reason Event, the portion of an Option that is unexercised (vested or
unvested) shall expire and shall no longer be exercisable (provided that
portions of an Option which have not vested prior to or on the Termination Date
shall not expire, if such portions remain eligible for vesting because of
Executive’s retirement as described in clause (vii) above).

 

(f)                                    Procedure
for Exercise.  Executive may exercise
all or a portion of an Option (to the extent it has become Fully Vested and
subject to the other provisions herein and in the Plan) by delivering written notice
of exercise to the Holding Company, together with (i) written
acknowledgment that Executive has read and has been afforded an opportunity to
ask questions of management of the Holding Company regarding all financial and
other information provided to Executive regarding the Holding Company, (ii) payment
in full (A) by delivery of a cashier’s or certified check in the amount
(the “Aggregate Exercise Amount “) equal to the sum of (x) the Exercise Price
multiplied by the number of shares of Common with respect to which Executive is
exercising such Option, and (y) the amount, if any, of any additional federal
and state income taxes required to be withheld by reason of the exercise of the
Option, or (B) by delivery of a written notice to the Company that Executive
is exercising such Option by authorizing the Company to withhold from issuance
a number of shares of Common issuable upon such exercise, which when multiplied
by the Fair Market Value of a share of Common as of the date of exercise, is
equal to the Aggregate Exercise Amount (and such withheld shares shall no
longer be issuable under such Option), and (iii) the written execution of
a joinder to the Stockholders Agreement to the extent that Executive is not
already party thereto.  As a condition to
the exercise of any part of an Option, Executive will permit the Holding
Company to, and at the request of Executive the Holding Company shall, deliver
to them all financial and other information regarding the Holding Company and
its Subsidiaries which it believes necessary to enable Executive to make an
informed investment decision.

 

8

 

(g)                                 Securities
Laws Restrictions.  Executive
represents that when Executive exercises the Option Executive will be
purchasing Option Shares for Executive’s own account and not on behalf of
others.  Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive’s right to offer, sell or otherwise dispose of any Option Shares
unless Executive’s offer, sale or other disposition thereof is registered under
the Securities Act and state securities laws or, in the opinion of the Holding
Company’ counsel, such offer, sale or other disposition is exempt from
registration thereunder.  Executive agrees
that it will not offer, sell or otherwise dispose of any Option Shares in any
manner which would:  (i) require the
Holding Company to file any registration statement (or similar filing under
state law) with the Securities and Exchange Commission or to amend or
supplement any such filing or (ii) violate or cause the Holding Company to
violate the Securities Act, the rules and regulations promulgated
thereunder or any other state or federal law. 
Executive further understands that the certificates for any Option
Shares Executive purchases will bear the legend set forth in Section 4
hereof or such other legends as the Holding Company deems necessary or
desirable in connection with the Securities Act or other rules, regulations or
laws.

 

(h)                                 Non-Transferability
of the Option.  The Options are
personal to Executive and are not transferable by Executive.  Only Executive or Permitted Transferees or
their respective estates or heirs are entitled to exercise Options.

 

(i)                                     Effect
of Transfers in Violation of Agreement. 
The Holding Company will not be required (i) to transfer on its
books any Option Shares which have been sold or transferred in violation of any
of the provisions set forth in this Agreement, or (ii) to treat as owner
of such shares, to accord the right to vote as such owner or to pay dividends
to any transferee to whom such shares have been transferred in violation of
this Agreement.

 

(j)                                     Delivery
of Shares.  The date on which
Executive has delivered to the Holding Company the items required under clause (f) above
is referred to herein as Executive’s “Exercise Date.”  Certificates for Option Shares purchased upon
exercise of an Option shall be delivered by the Holding Company to Executive
within five business days after Executive’s Exercise Date.

 

(k)                                  Date
of Issuance.  The Option Shares
issuable upon the exercise of an Option shall be deemed to have been issued to
Executive on Executive’s Exercise Date, and Executive shall be deemed for all
purposes to have become the record holder of such Option Shares on Executive’s
Exercise Date.

 

(l)                                     Fully
Paid.  The issuance of certificates
for Option Shares upon exercise of an Option shall be made without charge to
Executive for any issuance tax in respect thereof or other cost incurred by the
Holding Company in connection with such exercise.  Each Option Share issuable upon exercise of
an Option shall, upon payment of the exercise price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof.

 

9

 

(m)                               Book
Transfer.  The Holding Company shall
not close its books against the transfer of any Option Shares issued or
issuable upon the exercise of an Option in any manner which interferes with the
timely exercise of an Option.

 

(n)                                 Filings.  The Holding Company shall assist and
cooperate with Executive to make any required governmental filings or obtain
any governmental approvals prior to or in connection with any exercise of an
Option.

 

(o)                                 Reservation.  The Holding Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
solely for the purpose of issuance upon the exercise of the Options, such
number of shares of Common as are issuable upon the exercise of the Options.  The Holding Company shall take all such
actions as may be necessary to assure that all such Option Shares may be so
issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of
Common may be listed (except for official notice of issuance which shall be
immediately delivered by the Holding Company upon each such issuance).

 

3.                                       Repurchase
Option.

 

(a)                                  Repurchase
Option.  In the event that Executive
is no longer employed by the Company for any reason, the Executive Securities,
whether held by Executive, or one or more Permitted Transferees, will be
subject to repurchase by the Holding Company pursuant to the terms and
conditions set forth in this Section 3 (the “Repurchase Option”);
provided that notwithstanding anything herein to the contrary, the Option
Securities relating to each Option shall not be subject to the Repurchase
Option after the earlier to occur of (i) the fifth annual anniversary of
the applicable Future Date of an Option (or the fourth annual anniversary with
respect to the Fourth Option or the third annual anniversary with respect to
the Fifth Option), and (ii) the consummation of a Sale of the Company,
Initial Public Offering or Qualifying Recapitalization, if the Total Enterprise
Value based upon such Sale of the Company, Initial Public Offering or
Qualifying Recapitalization, as applicable, equals an amount greater than or
equal to the Target Enterprise Value as of the date of consummation of such event.

 

(b)                                 Termination
for Reasons Other than for Cause and Certain Voluntary Terminations.  If Executive’s employment with the Company is
terminated for any reason other than (x) by the Company for Cause, or (y) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the period which begins on the 6
month anniversary of the date upon which Executive’s employment with the
Company is terminated and ends on the one year anniversary of the date upon
which Executive’s employment with the Company is terminated (the “Exercise
Period”), the Holding Company may elect to purchase all or some of the
Executive Securities, at a price per share equal to (i) the Fair Market
Value thereof with respect to Vested Purchase Shares and Option Shares, (ii) the
lower of the Original Cost thereof and the Book Value thereof, with respect to
Unvested Purchase Shares, and (iii) with respect to Preferred Securities,
the original cost thereof plus all accrued and unpaid dividends

 

10

 

thereon.  In the
case of Vested Purchase Shares, Fair Market Value shall be determined as of the
later of (x) six months and one day after the date of vesting or (y) six months
and one day after the date of termination of employment.  In the case of Option Shares, Fair Market
Value shall be determined as of the date of repurchase, which date shall be no
earlier than six months and one day after the date of exercise.

 

(c)                                  Termination
for Cause and Certain Voluntary Terminations.  If Executive is no longer employed by the
Company as a result of (i) Executive’s termination for Cause, or (ii) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the Exercise Period, the Holding
Company may elect to purchase all or some of the Executive Securities, at a
price per share equal to (i) the lower of the Book Value thereof and the
Original Cost thereof with respect to Common Securities and Option Securities,
and (ii) with respect to Preferred Securities, the original cost thereof.

 

(d)                                 Repurchase
Procedures.  The Holding Company may
elect to exercise the right to purchase all or any portion of the Executive
Securities by delivering written notice (the “Repurchase Notice”), to
the holder or holders of such Executive Securities.  The Repurchase Notice will set forth the
number and type of shares of Executive Securities to be acquired from such
holder(s), the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. If any shares of Executive
Securities are held by Permitted Transferees of Executive, the Holding Company
shall purchase the shares elected to be purchased from such holder(s) of shares
of Executive Securities pro rata according to the number and type of shares of
Executive Securities held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).

 

(e)                                  Closing.  The closing of the transactions contemplated
by this Section 3 will take place on the date designated by the Holding
Company in the Repurchase Notice, which date will not be more than 90 days
after the delivery of such notice.  The
Holding Company will pay for the Executive Securities to be purchased pursuant
to the Repurchase Option by delivery of (i) a cashier’s or certified check
payable to the holder of such Executive Securities, (ii) a note or notes
payable in six equal semi-annual installments beginning on the six-month
anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the “prime rate” as announced by the
Company’s senior lender at the time, or (iii) both (i) and (ii) in
the aggregate amount of the purchase price for such shares.  Notwithstanding the foregoing, any note
issued by the Holding Company as set forth above shall provide that such note
is immediately due and payable upon the consummation of an Initial Public
Offering or a Sale of the Company.  The
Holding Company will receive customary representations and warranties from the
applicable holder(s) regarding the sale of the Executive Securities, including
but not limited to the representation that the applicable holder(s) have good
and marketable title to the Executive Securities to be transferred free and
clear of all liens, claims and other encumbrances.

 

11

 

(f)                                    12
Month True Up.  Notwithstanding
anything herein to the contrary, in the event (i) Executive’s employment
with the Company is terminated by the Company without Cause or pursuant to a
voluntary termination by Executive within 90 days after a Good Reason Event and
(ii) the Company consummates a Sale of the Company, a Qualifying Recapitalization
or an Initial Public Offering within 12 months of the date on which Executive’s
employment is terminated, then (x) to the extent the Common held by Executive
has previously been repurchased hereunder, Executive shall be entitled to be
paid by the Company, within 30 days after the consummation of such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering, as the case
may be, an amount equal to the difference between (A) the product of (i) the
Fair Market Value of a share of Common (as determined by such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering), multiplied by
(ii) the sum of the number of shares of Common which were repurchased from
Executive hereunder, plus the number of additional shares of Common (the “Additional
Option Shares”), if any, which would have been purchasable by Executive
under all Options granted to Executive hereunder as a result of the vesting,
pursuant to such Sale of the Company, Qualifying Recapitalization or Initial
Public Offering (and specifically not including any effects of “time vesting”
following the termination of employment), of such Options had Executive’s
employment with the Company continued through the consummation of such Sale of
the Company, Qualifying Recapitalization or Initial Public Offering, and (B) the
sum of the amount paid by the Company to repurchase the shares of Common
repurchased from Executive hereunder, plus the aggregate exercise price which
would have been payable with respect to the Additional Option Shares, and (y)
to the extent the Common held by Executive has not previously been repurchased
hereunder, Executive shall be entitled to be issued a number of shares of
Common equal to the Additional Options Shares, subject to the payment by Executive
of the aggregate exercise price which would have been payable with respect to
the Additional Option Shares; provided that the amount payable by the Company
pursuant to clause (x) above shall be payable in the manner described in the
second sentence of Section 3(e) or pursuant to the issuance to
Executive of shares of freely and publicly traded common equity (in the Company
or a successor entity) having a Fair Market Value equal to the amount payable
thereunder.

 

(g)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities by the Holding Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law.  If any such restrictions prohibit the
repurchase of Executive Securities hereunder which the Holding Company is
otherwise entitled or required to make, (i) the Holding Company may make
such repurchases as soon as it is permitted to do so under such restrictions,
or (ii) the Holding Company may allow Bruckmann, Rosser, Sherrill &
Co. II, L.P. and Agri Beef Co. to purchase such Executive Securities on a pro
rata basis based upon their relative ownership of the Common at such time.

 

4.                                       Put
Option.

 

(a)                                  Put
Option.  In the event that Executive
is no longer employed by the Company by reason of Executive’s death,
Disability, or retirement in the ordinary course,

 

12

 

Executive, Executive’s Permitted Transferees, and
their respective estates or heirs as applicable (the “Executive Parties”),
shall be entitled to require the Holding Company to repurchase the Executive
Securities, whether held by Executive or one or more Permitted Transferees
pursuant to the terms and conditions set forth in this Section 4 (the “Put
Option”).  At any one time during the
period that begins 184 days after the Termination Date and ends 270 days after
the Termination Date, the Executive Parties may require the Holding Company to
purchase all or some of the Executive Securities, at a price equal to (i) the
Fair Market Value thereof with respect to Vested Purchase Shares and Option
Shares, (ii) the lower of the Original Cost thereof and the Book Value
thereof, with respect to Unvested Purchase Shares, and (iii) with respect
to Preferred Securities, the original cost thereof plus all accrued and unpaid
dividends thereon.  In the case of Vested
Purchase Shares, Fair Market Value shall be determined as of the later of (x)
six months and one day after the date of vesting or (y) six months and one day
after the date of termination of employment. 
In the case of Option Shares, Fair Market Value shall be determined as
of the date of repurchase.

 

(b)                                 Put
Procedures.  The Executive Parties
may elect to exercise the right to have the Holding Company purchase all or any
portion of the Executive Securities by delivering written notice (the “Put
Notice”), to the Holding Company. 
The Put Notice will set forth the number and type of shares of Executive
Securities to be sold by such holder(s), the aggregate consideration to be paid
for such shares and the time (which shall not be less than 30 days nor more
than 90 days after the date the Put Notice is delivered) for the closing of the
transaction. If any shares of Executive Securities are held by Permitted
Transferees of Executive, the Holding Company shall purchase the shares
required to be purchased from such holder(s) of shares of Executive Securities
pro rata according to the number and type of shares of Executive Securities
held by such holder(s) at the time of delivery of such Put Notice (determined
as nearly as practicable to the nearest share).

 

(c)                                  Closing.  The closing of the transactions contemplated
by this Section 4 will take place at the Company’s executive office on the
date designated by the Executive Parties in the Put Notice.  The Holding Company will pay for the
Executive Securities to be purchased pursuant to the Put Option by delivery of (i) a
cashier’s or certified check payable to the holder(s) of such Executive
Securities, (ii) a note or notes payable in six equal semi-annual
installments beginning on the six-month anniversary of the closing of such
purchase and bearing interest (payable quarterly) at a rate per annum equal to
the “prime rate” as announced by the Company’s largest senior lender at the
time, or (iii) both (i) and (ii) in the aggregate amount of the
purchase price for such shares. 
Notwithstanding the foregoing, any note issued by the Holding Company as
set forth above shall provide that such note is immediately due and payable
upon the consummation of an Initial Public Offering or a Sale of the
Company.  The Holding Company will
receive customary representations and warranties from applicable holder(s)
regarding the sale of the Executive Securities, including but not limited to
the representation that applicable holder(s) have good and marketable title to
the Executive Securities to be transferred free and clear of all liens, claims
and other encumbrances.

 

13

 

(d)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities pursuant to this Section 4 shall be subject to (i) applicable
restrictions contained in the Delaware General Corporation Law, and (ii) the
prior approval of the Company’s senior lenders at the time (if such approval is
required at such time pursuant to the Company’s senior financing documents),
and (iii) the Company having sufficient financial stability and liquidity
to consummate such repurchase without materially and adversely affecting the
Company, as determined in the good faith reasonable discretion of the
Board.  If any such restrictions prohibit
the repurchase of Executive Securities hereunder which the Holding Company is
otherwise required to make, the Holding Company shall make such repurchases as
soon as it is permitted to do so under such restrictions.

 

5.                                       Restrictions
on Transfer.

 

(a)                                  The
certificates representing the Executive Securities shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON
                    ,
         , HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.  THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN (I) AN EXECUTIVE
STOCK AGREEMENT AMONG MWI VETERINARY SUPPLY CO., MWI HOLDINGS, INC. (THE “HOLDING
COMPANY”) AND [Executive] DATED AS OF JUNE 18, 2002, AND (II) A
STOCKHOLDERS AGREEMENT AMONG THE HOLDING COMPANY AND ITS STOCKHOLDERS DATED AS
OF JUNE 18, 2002, IN EACH CASE AS AMENDED AND MODIFIED FROM TIME TO
TIME.  A COPY OF EACH SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE HOLDING COMPANY’S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE.”

 

(b)                                 No
holder of Executive Securities may sell, transfer or dispose of any Executive
Securities (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Holding Company an opinion of
counsel (reasonably acceptable in form and substance to the Holding Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.

 

(c)                                  Notwithstanding
anything herein to the contrary, Executive agrees that Executive and his
Permitted Transferees shall not transfer any shares of Common during any “lock-up
period” imposed on executives of the Company and certain other affiliates by
the underwriters underwriting the Initial Public Offering.

 

14

 

MISCELLANEOUS
PROVISIONS

 

6.                                       Confidential
Information.  Executive acknowledges
that the information, observations and data obtained by Executive while
employed by the Company (including those obtained while employed by the Company
prior to the date of this Agreement) concerning the business or affairs of the
Company or any of its Affiliates (“Confidential Information”) are the
property of the Company or such Affiliate. 
Therefore, Executive agrees that Executive shall not disclose to any unauthorized
person or use for Executive’s own purposes any Confidential Information without
the prior written consent of the Board, unless and to the extent that (i) such
information was otherwise available to Executive from a source other than the
Company, (ii) the aforementioned matters become generally known to and
available for use by the public other than as a result of Executive’s acts or
omissions, or (iii) disclosure of such information is required by
law.  Executive shall deliver to the
Company at the termination of the Employment Period, or at any other time the
Company may request, all memoranda, notes, plans, records, reports, computer
tapes, printouts and software and other documents and data (and copies thereof)
relating to the Confidential Information, Work Product (as defined below) or
the business of the Company or any Affiliate which Executive may then possess
or have under Executive’s control.

 

7.                                       Inventions
and Patents.  Executive acknowledges
that all inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which relate to the Company’s or any of its Affiliates’ actual
or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by the Company and its Affiliates (“Work Product”) belong
to the Company or such Affiliate. 
Executive shall promptly disclose such Work Product to the Board and
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).

 

8.                                       Non-Compete,
Non-Solicitation.

 

(a)                                  In
further consideration of the compensation to be paid to Executive hereunder,
Executive acknowledges that in the course of Executive’s employment with the
Company prior to the date of this Agreement Executive has become familiar, and
during Executive’s employment with the Company after the date of this Agreement
Executive will become familiar, with the Company’s trade secrets and with other
Confidential Information concerning the Company and its Affiliates and that
Executive’s services have been and shall be of special, unique and
extraordinary value to the Company and its Affiliates.  Therefore, Executive agrees that, during the
period commencing on the date hereof and ending on the first anniversary of the
termination of the Employment Period (the “Noncompete Period”),
Executive shall not directly or indirectly own any interest in, lease, manage,
control, engage in, participate in, consult with, advise, render services for,
or otherwise assist in any manner (in each applicable case, alone or in
association with any Person), any Person in any business that the Company
conducts or has specific plans to conduct as of the date the Employment Period
is terminated.  Nothing herein shall
prohibit Executive from being a passive owner of not more than 5% of the
outstanding

 

15

 

stock of any class of a corporation which is publicly traded, so long
as Executive has no active participation in the business of such corporation.

 

(b)                                 During
the Noncompete Period, Executive shall not directly, or indirectly through
another entity, (i) induce or attempt to induce any employee of the
Company or any Affiliate to leave the employ of the Company or such Affiliate,
or in any way interfere with the relationship between the Company or any
Affiliate and any employee thereof, (ii) hire any person who was an
employee of the Company or any Affiliate at any time during the Employment
Period or (iii) induce or attempt to induce any customer, supplier,
licensee, licensor, franchisee or other business relation of the Company or any
Affiliate to cease doing business with the Company or such Affiliate, or in any
way interfere with the relationship between any such customer, supplier,
licensee, licensor, franchisee or business relation and the Company or any
Affiliate (including, without limitation, making any negative statements or
communications about the Company or its Affiliates).

 

9.                                       Enforcement.  If, at the time of enforcement of Sections 6,
7 or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.  Because Executive’s services are unique and
because Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement.  Therefore, in
the event a breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).  In addition, in the event of
an alleged breach or violation by Executive of Section 8, the Noncompete
Period shall be tolled until such breach or violation has been duly cured.  Executive agrees that the restrictions
contained in Section 8 are reasonable.

 

10.                                 Definitions.  All references to a fiscal year refer to the
Company’s fiscal year.

 

“Affiliate” means, with respect to any Person,
any other Person controlling, controlled by, or under common control with such
Person.  For purposes of this Agreement,
the term “control” (including, with correlative meanings, the terms “controlled
by” and “under common control with” as used with respect to any Person) means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through
ownership of voting securities, by contract or otherwise.

 

“Board” means the board of directors of the
Company.

 

“Book Value” for each outstanding share of
Common means an amount equal to the quotient obtained by dividing (i) the
consolidated book value of the assets of the Company and its Subsidiaries, plus
the exercise, exchange or conversion price of all Common Stock Equivalents that
are at such time convertible, exchangeable or exercisable, other than Common
Stock Equivalents for which the exercise, exchange or conversion price shall be
equal to or

 

16

 

greater than the Book Value of the shares of Common to
which they relate (determined without giving effect to the exercise, exchange
or conversion of such Common Stock Equivalents), less the consolidated
liabilities of the Company and its Subsidiaries, and less the liquidation
preference of any outstanding shares of preferred stock (including the
Preferred) of the Company, by (ii) the number of shares of Common Stock
Deemed Outstanding as of such date.

 

“Cause” means (i) the continued failure by
Executive to perform duties as reasonably directed by the Board which such
failure continues for ten days after written notice of such failure provided to
Executive, (ii) willful misconduct by Executive in the performance of
Executive’s duties, (iii) gross negligence by Executive in the performance
of Executive’s duties which materially harms the Company, (iv) Executive’s
commission of a felony or other offense involving dishonestly toward the
Company or its Subsidiaries or moral turpitude, or (v) any breach by
Executive of Executive’s obligations set forth in Sections 6, 7 or 8.

 

“Common Securities” means (i) the shares
of Common purchased hereunder which are issued and outstanding from time to
time, (ii) any other shares of Common otherwise issued to, acquired by or
held by Executive (not including Option Shares or other Option Securities), and
(iii) shares of the Holding Company issued with respect to the securities
specified in clauses (i) or (ii) above by way of a share split, share
dividend or other recapitalization; provided that Common Securities shall
continue to be Common Securities in the hands of any holder other than
Executive (except for the Holding Company and except for transferees in a
Public Sale), and except as otherwise provided herein, each such other holder
of Common Securities shall succeed to all rights and obligations attributable
to Executive as a holder of Common Securities hereunder.

 

“Common Stock Deemed Outstanding” means the
number of shares of Common outstanding as of a particular date, determined on a
fully diluted basis giving effect to all outstanding securities convertible
into or exchangeable or exercisable for Common (collectively, “Common Stock
Equivalents”), that are at such time convertible, exchangeable or
exercisable, other than Common Stock Equivalents for which the exercise price
or conversion price shall have been equal to or greater than the Book Value of
the shares of Common with respect to which they relate (determined without giving
effect to the exercise, exchange or conversion of such Common Stock
Equivalents).

 

“Consolidated EBITDA” means, for any period,
the net income of the Company and its Subsidiaries for such period taken as a
single accounting period determined in conformity with GAAP, (A) plus (to
the extent deducted in the calculation of net income and without duplication), (i) interest
expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization
expense, (v) all other non-cash charges, (vi) losses on sales of
assets (excluding sales in the ordinary course of business) and other
extraordinary or nonrecurring losses and (vii) management fees paid, (B) minus
(to the extent included in the calculation of net income and without
duplication), (x) all non-cash gains, (y) gains on sales of assets (excluding
sales in the ordinary course of business) and other extraordinary or
nonrecurring gains, and (z) interest income, all as determined on a
consolidated basis in accordance with GAAP; provided that the calculation of
Consolidated EBITDA shall ignore any and all effects under purchase accounting
of the Sale of the Company consummated on the date hereof.

 

17

 

“Disability” means Executive’s inability, due
to illness, accident, injury, physical or mental incapacity or other
disability, to carry out effectively Executive’s duties and obligations to the
Company or to participate effectively and actively in the management of the
Company for a period of at least 90 consecutive days or for shorter periods
aggregating 20 days (whether or not consecutive) during each three month period
for not less than six months, as determined by an independent physician.

 

“EBIT” means, for any period, the net income of
the Company and its Subsidiaries for such period taken as a single accounting
period determined in conformity with GAAP, (A) plus (to the extent
deducted in the calculation of net income and without duplication), (i) interest
expense, (ii) income tax expense, (iii) all other non-cash charges
other than depreciation expense and amortization expense, and (iv) losses
on sales of assets (excluding sales in the ordinary course of
business) and other extraordinary or nonrecurring losses, (B) minus
(to the extent included in the calculation of net income and without
duplication), (x) all non-cash gains, (y) gains on sales of assets
(excluding sales in the ordinary course of business) and other
extraordinary or nonrecurring gains, and (z) interest income, all as
determined on a consolidated basis in accordance with GAAP.

 

“EBITDA” means the Consolidated EBITDA of the
Company and its Subsidiaries for a particular fiscal year, derived from the
Company’s audited consolidated financial statements for such fiscal year
certified by the Company’s chief financial officer.

 

“Executive Securities” means the Common
Securities, the Option Securities and the Preferred Securities.

 

“Fair Market Value” for each outstanding share
of Common, means the market value as determined in good faith mutually by the Board
and Executive; provided that if the parties cannot agree within 30 days,
the Fair Market Value will be decided by a mutually acceptable independent
investment bank, whose determination will be final and binding (whose fees and
expense shall be paid one-half by the Company, up to a maximum of $25,000, and
the rest by Executive); provided the parties are unable to agree on a mutually
acceptable independent investment bank, the Holding Company and Executive shall
each designate an investment bank and such investment banks shall choose the
independent investment bank which shall determine Fair Market Value hereunder.

 

“GAAP” means generally accepted accounting
principles as in effect in the United States, consistently applied.

 

“Good Reason Event” means (i) the
relocation of the Company’s executive offices more than 75 miles from its
location on the date hereof, or (ii) a material reduction by the Company
of Executive’s employment responsibilities or compensation.

 

“Initial Public Offering” means the initial
underwritten public offering registered under the Securities Act of shares of
Common.

 

“Option Securities” means (i) the Option
Shares which are issued and outstanding from time to time, and (ii) shares
of the Holding Company issued with respect to the securities

 

18

 

specified in clause (i) above by way of a share
split, share dividend or other recapitalization; provided that Option
Securities shall continue to be Option Securities in the hands of any holder
other than Executive (except for the Holding Company and except for transferees
in a Public Sale), and except as otherwise provided herein, each such other
holder of Option Securities shall succeed to all rights and obligations
attributable to Executive as a holder of Option Securities hereunder.

 

“Original Cost” means for each share of Common
acquired by Executive, the amount per share paid by Executive to the Company as
the purchase price or exercise price for such share of Common, as adjusted for
any merger, consolidation, reclassification, stock split, reverse stock split,
stock dividend or other similar transaction.

 

“Permitted Transferee” has the meaning set
forth in the Stockholders Agreement.

 

“Person” means any natural person, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity.

 

“Preferred Securities” means (i) the
shares of Preferred purchased hereunder which are issued and outstanding from
time to time, (ii) any other shares of Preferred otherwise issued to,
acquired by or held by Executive, and (iii) shares of the Holding Company
issued with respect to the securities specified in clauses (i) or (ii) above
by way of a share split, share dividend or other recapitalization; provided
that Preferred Securities shall continue to be Preferred Securities in the
hands of any holder other than Executive (except for the Holding Company and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Preferred Securities shall succeed to all
rights and obligations attributable to Executive as a holder of Preferred
Securities hereunder.

 

“Public Sale” means any sale pursuant to a
registered public offering under the Securities Act or any sale to the public
pursuant to Rule 144 promulgated under the Securities Act effected through
a broker, dealer or market maker.

 

“Return on Net Assets” means, for any fiscal
year, the quotient obtained by dividing (i) EBIT for such fiscal year, by (ii) the
difference between (a) the sum of (w) Accounts Receivable plus (x)
Inventory, plus (y) Prepaid Current Assets plus (z) Net Plant, Property and
Equipment, and (b) the sum of (x) Accounts Payable, plus (y) Accrued
Expenses.  The terms “Accounts
Receivable,” “Inventory,” “Prepaid Current Assets,” “Net
Plant, Property and Equipment,” “Accounts Payable” and “Accrued
Expenses” shall refer to the Company’s consolidated Accounts Receivable,
Inventory, Prepaid Current Assets, Net Plant, Property and Equipment, Accounts
Payable and Accrued Expenses as of the end of such fiscal year, as determined
in accordance with GAAP from the Company’s audited consolidated financial
statements for such fiscal year certified by the Company’s chief financial
officer.

 

“Sale of the Company” has the meaning set forth
in the Stockholders Agreement.

 

“Securities Act” means the Securities Act of
1933, as amended from time to time.

 

19

 

“Stockholders Agreement” means that
Stockholders Agreement dated as of June 18, 2002, by and among the Holding
Company and certain other parties thereto.

 

“Subsidiary” means any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by the Company or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly,
by the Company.  For purposes hereof, the
Company shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if the Company, directly or indirectly, is
allocated a majority of partnership, association, or other business entity
gains or losses, or is or controls the managing director or general partner (or
Person having like authority) of such partnership, association or other
business entity.

 

11.                                 Notices.  Any notice provided for in this Agreement
must be in writing and must be either personally delivered, mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the addresses indicated below:

 

If to Executive:

 

Mary Pat Thompson

3790 S. Suntree Pl.

Boise, ID  83706

 

If to the Company or the Holding Company:

 

c/o MWI Veterinary
Supply Co.

2201 N. 20th
Street

Nampa, ID 83687

Attn:                    President

Fax:

 

with copies (which shall not constitute notice to the
Company or the Holding Company) to:

 

Bruckmann,
Rosser Sherrill & Co., Inc.

156
East 56th Street, 29th Floor

New
York, NY 10022

Attn:                    Bruce Bruckmann

Brett Pertuz

Fax:  (212) 521-3799

 

20

 

Kirkland &
Ellis

153
East 53rd Street

New
York, New York 10022

Attn:                    Eunu Chun, Esq.

Fax:  (212) 446-4900

 

or such other address or to the attention of such
other person as the recipient party shall have specified by prior written
notice to the sending party.  Any notice
under this Agreement shall be deemed to have been given when so delivered or
sent or, if mailed, five days after deposit in the U.S. mail.

 

12.                                 General
Provisions.

 

(a)                                  Termination
of Repurchase/Put Option.  The right
of the Holding Company to exercise the Repurchase Option and the right of the
Executive Parties to exercise the Put Option, in each case with respect to
Common Securities and Preferred Securities but expressly excluding Option
Securities, shall each expire on the earlier to occur of the (i) fifth
annual anniversary of the date hereof, (ii) date of consummation of an
Initial Public Offering, or (iii) date of consummation of a Sale of the
Company.

 

(b)                                 Severance.  If Executive’s employment with the Company is
terminated other than by the Company for Cause or pursuant to a voluntary
termination by Executive which is not within 90 days of a Good Reason Event,
then the Company shall continue to pay Executive at a rate equal to Executive’s
base salary at the time of such termination for a period of 12 months after
such termination, provided that such payments shall be made pursuant to the
Company’s normal payroll practices and shall be subject to any required
withholding.  Notwithstanding the
foregoing, the Company shall not be obligated to make such severance payments
if the Company gives Executive written notice, within 15 days after the date of
the termination of employment, that the Company has elected to waive the
provisions of Section 8(a) hereof and thus not pay the severance
described above.

 

(c)                                  Transfers
in Violation of Agreement.  Any
transfer or attempted transfer of any Executive Securities in violation of any
provision of this Agreement shall be void, and the Holding Company shall not
record such transfer on its books or treat any purported transferee of such
Executive Securities as the owner of such shares for any purpose.

 

(d)                                 Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision or any other jurisdiction, but this Agreement shall
be reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

21

 

(e)                                  Complete
Agreement.  This Agreement, those
documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.

 

(f)                                    Counterparts.  This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.

 

(g)                                 Successors
and Assigns.  Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Holding Company and their respective successors
and assigns (including subsequent holders of Executive Securities); provided
that the rights and obligations of Executive under this Agreement shall not be
assignable except in connection with a permitted transfer of Executive
Securities hereunder.

 

(h)                                 Choice
of Law.  The corporate law of the
State of Delaware shall govern all questions concerning the relative rights of
the Company, the Holding Company and Executive.  All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
any choice of law or conflict of law rules or provisions (whether of the
State of New York or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of New York.

 

(i)                                     Remedies.  Each of the parties to this Agreement shall
be entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney’s fees) caused by any breach
of any provision of this Agreement and to exercise all other rights existing in
its favor.  The parties hereto agree and
acknowledge that money damages would not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.

 

(j)                                     Amendment
and Waiver.  The provisions of this
Agreement may be amended and waived only with the prior written consent of the
Holding Company, the Company and Executive.

 

*     *     *    
*     *

 

22

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the date first written
above.

 

	
   

  	
  MWI HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
  Mary Pat
  Thompson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MWI VETERINARY
  SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
   

  	
   

  

 

 

EXHIBIT A

 

                      ,
2002

 

ELECTION TO INCLUDE PROPERTY IN GROSS INCOME PURSUANT
TO SECTION 83(b) OF THE INTERNAL REVENUE CODE

 

The undersigned purchased Common Stock (the “Stock”),
of MWI Holdings, Inc., a Delaware corporation (the “Corporation”),
on the date hereof.  Under certain
circumstances, the Corporation has the right to repurchase some or all of the
Stock, at the lesser of its cost or book value at a time in the future, from
the undersigned (or from the holder of the Stock, if different from the
undersigned) should the undersigned cease to be employed by the Corporation
(the “Employer”).  Hence, the
Stock is subject to a substantial risk of forfeiture.  The undersigned desires to make an election
to have the Stock taxed under the provision of Code §83(b) at the time the
undersigned purchased the Stock.

 

Therefore, pursuant to Code §83(b) and Treasury
Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an
election, with respect to the Stock (described below), to report as taxable
income for calendar year 2002 the excess (if any) of the Stock’s fair market
value on the date hereof over the purchase price thereof.

 

The following information is supplied in accordance
with Treasury Regulation §1.83-2(e):

 

1.                                       The
name, address and social security number of the undersigned:

 

	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SS #:

  	
   

  	
   

  

 

2.                                       A
description of the property with respect to which the election is being made:                       
shares of the Corporation’s Common Stock.

 

3.                                       The
date on which the property was transferred: the date hereof.  The taxable year for which such election is
made: calendar 2002.

 

4.                                       The
restrictions to which the property is subject: 
If the undersigned ceases to be employed by the Corporation (except in
certain circumstances) all or a portion of the Stock will be subject to
repurchase by the Corporation at the lesser of the cost paid by the undersigned
and the book value at a time in the future.

 

5.                                       The
aggregate fair market value on the date hereof of the property with respect to
which the election is being made, determined without regard to any lapse
restrictions: $                      .

 

A-1

 

6.                                       The
aggregate amount paid for such property: $                      .

 

A copy of this election has been furnished to the
Secretary of the Corporation pursuant to Treasury Regulations §1.83-2(e)(7).

 

	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  	
   

  

 

A-2Exhibit 10.1

 

CREDIT AGREEMENT

 

Dated as of June 18,
2002

 

Among

 

THE FINANCIAL
INSTITUTIONS NAMED HEREIN

 

as the Lenders

 

and

 

BANK OF AMERICA,
N.A.

 

as the Agent

 

and

 

MWI VETERINARY
SUPPLY CO.,

 

an Idaho
corporation,

 

as the Borrower

 

 

TABLE OF CONTENTS

 

 

	
  Section

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1
  LOANS AND LETTERS OF CREDIT

  	
   

  
	
   

  	
   

  
	
  1.1

  	
  Total Facility

  	
   

  
	
  1.2

  	
  Loans

  	
   

  
	
  1.3

  	
  Reserved

  	
   

  
	
  1.4

  	
  Letters
  of Credit

  	
   

  
	
  1.5

  	
  Bank
  Products

  	
   

  
	
  1.6

  	
  Joint
  and Several Obligations; Contribution Rights

  	
   

  
	
  1.7

  	
  Borrowing Agency
  Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 INTEREST AND FEES

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  Interest

  	
   

  
	
  2.2

  	
  Continuation
  and Conversion Elections

  	
   

  
	
  2.3

  	
  Maximum Interest Rate

  	
   

  
	
  2.4

  	
  Fees

  	
   

  
	
  2.5

  	
  Unused
  Line Fee

  	
   

  
	
  2.6

  	
  Letter of Credit Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3
  PAYMENTS AND PREPAYMENTS

  	
   

  
	
   

  	
   

  
	
  3.1

  	
  Loans

  	
   

  
	
  3.2

  	
  Reduction
  of Commitments; Termination of Facility

  	
   

  
	
  3.3

  	
  [Intentionally deleted]

  	
   

  
	
  3.4

  	
  [Intentionally deleted]

  	
   

  
	
  3.5

  	
  LIBOR
  Rate Loan Prepayments

  	
   

  
	
  3.6

  	
  Payments by the Borrowers

  	
   

  
	
  3.7

  	
  Payments as
  Loans

  	
   

  
	
  3.8

  	
  Apportionment,
  Application and Reversal of Payments

  	
   

  
	
  3.9

  	
  Indemnity
  for Returned Payments

  	
   

  
	
  3.10

  	
  Agent’s and Lenders’
  Books and Records; Monthly Statements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 TAXES, YIELD PROTECTION AND
  ILLEGALITY

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  Taxes

  	
   

  
	
  4.2

  	
  Illegality

  	
   

  
	
  4.3

  	
  Increased
  Costs and Reduction of Return

  	
   

  
	
  4.4

  	
  Funding Losses

  	
   

  
	
  4.5

  	
  Inability to
  Determine Rates

  	
   

  
	
  4.6

  	
  Replacement of Affected
  Lender

  	
   

  
	
  4.7

  	
  Certificates
  of Agent

  	
   

  
	
  4.8

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 BOOKS AND RECORDS; FINANCIAL
  INFORMATION; NOTICES

  	
   

  

 

i

 

	
  5.1

  	
  Books and Records

  	
   

  
	
  5.2

  	
  Financial Information

  	
   

  
	
  5.3

  	
  Notices to the Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6
  GENERAL WARRANTIES AND REPRESENTATIONS

  	
   

  
	
   

  	
   

  
	
  6.1

  	
  Authorization,
  Validity, and Enforceability of this Agreement, the Loan Documents and the
  Transaction Documents

  	
   

  
	
  6.2

  	
  Validity and
  Priority of Security Interest

  	
   

  
	
  6.3

  	
  Organization and
  Qualification

  	
   

  
	
  6.4

  	
  Corporate Name;
  Prior Transactions

  	
   

  
	
  6.5

  	
  Subsidiaries and Affiliates

  	
   

  
	
  6.6

  	
  Financial
  Statements and Projections

  	
   

  
	
  6.7

  	
  Capitalization

  	
   

  
	
  6.8

  	
  Solvency

  	
   

  
	
  6.9

  	
  Debt

  	
   

  
	
  6.10

  	
  Distributions

  	
   

  
	
  6.11

  	
  Real
  Estate; Leases

  	
   

  
	
  6.12

  	
  Proprietary
  Rights

  	
   

  
	
  6.13

  	
  Trade Names

  	
   

  
	
  6.14

  	
  Litigation

  	
   

  
	
  6.15

  	
  Labor
  Disputes

  	
   

  
	
  6.16

  	
  Environmental
  Laws

  	
   

  
	
  6.17

  	
  No Violation of Law;
  Licenses

  	
   

  
	
  6.18

  	
  No Default

  	
   

  
	
  6.19

  	
  ERISA
  Compliance

  	
   

  
	
  6.20

  	
  Taxes

  	
   

  
	
  6.21

  	
  Regulated
  Entities

  	
   

  
	
  6.22

  	
  Use of Proceeds;
  Margin Regulations

  	
   

  
	
  6.23

  	
  Copyrights,
  Patents, Trademarks and Licenses, etc.

  	
   

  
	
  6.24

  	
  No Material Adverse Change

  	
   

  
	
  6.25

  	
  Full
  Disclosure

  	
   

  
	
  6.26

  	
  Material
  Agreements

  	
   

  
	
  6.27

  	
  Bank Accounts

  	
   

  
	
  6.28

  	
  Governmental Authorization

  	
   

  
	
  6.29

  	
  Holdings

  	
   

  
	
  6.30

  	
  Representations
  and Warranties in the Recapitalization Agreement

  	
   

  
	
  6.31

  	
  Morgue
  Inventory

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7
  AFFIRMATIVE AND NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  Taxes and Other
  Obligations

  	
   

  
	
  7.2

  	
  Legal Existence and
  Good Standing

  	
   

  
	
  7.3

  	
  Compliance
  with Law and Agreements; Maintenance of Licenses

  	
   

  
	
  7.4

  	
  Maintenance
  of Property; Inspection of Property

  	
   

  
	
  7.5

  	
  Insurance

  	
   

  

 

ii

 

	
  7.6

  	
  Insurance and
  Condemnation Proceeds

  	
   

  
	
  7.7

  	
  Environmental
  Laws

  	
   

  
	
  7.8

  	
  Compliance
  with ERISA

  	
   

  
	
  7.9

  	
  Mergers, Consolidations
  or Sales

  	
   

  
	
  7.10

  	
  Distributions;
  Capital Change; Restricted Investments

  	
   

  
	
  7.11

  	
  Transactions
  Affecting Collateral or Obligations

  	
   

  
	
  7.12

  	
  Guaranties

  	
   

  
	
  7.13

  	
  Debt

  	
   

  
	
  7.14

  	
  Prepayment

  	
   

  
	
  7.15

  	
  Transactions with
  Affiliates

  	
   

  
	
  7.16

  	
  Investment Banking
  and Finder’s Fees

  	
   

  
	
  7.17

  	
  Business
  Conducted

  	
   

  
	
  7.18

  	
  Liens

  	
   

  
	
  7.19

  	
  Sale and Leaseback
  Transactions

  	
   

  
	
  7.20

  	
  New
  Subsidiaries

  	
   

  
	
  7.21

  	
  Fiscal Year

  	
   

  
	
  7.22

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
  7.23

  	
  Minimum Tangible Net Worth

  	
   

  
	
  7.24

  	
  Interest Rate Agreements

  	
   

  
	
  7.25

  	
  Use of
  Proceeds

  	
   

  
	
  7.26

  	
  Deposit Accounts,
  Cash Management

  	
   

  
	
  7.27

  	
  Feeders

  	
   

  
	
  7.28

  	
  Further
  Assurances

  	
   

  
	
  7.29

  	
  Modifications
  to Transaction Documents; Charter Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 CONDITIONS OF LENDING

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  Conditions
  Precedent to Making of Loans on the Closing Date

  	
   

  
	
  8.2

  	
  Conditions Precedent to Each Loan

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 DEFAULT; REMEDIES

  	
   

  
	
   

  	
   

  
	
  9.1

  	
  Events
  of Default

  	
   

  
	
  9.2

  	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 TERM AND TERMINATION

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  Term and Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 AMENDMENTS; WAIVERs;
  PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  Amendments and Waivers

  	
   

  
	
  11.2

  	
  Assignments;
  Participations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 THE AGENT

  	
   

  

 

iii

 

	
  12.1

  	
  Appointment and
  Authorization

  	
   

  
	
  12.2

  	
  Delegation of Duties

  	
   

  
	
  12.3

  	
  Liability of Agent

  	
   

  
	
  12.4

  	
  Reliance by Agent

  	
   

  
	
  12.5

  	
  Notice of Default

  	
   

  
	
  12.6

  	
  Credit Decision

  	
   

  
	
  12.7

  	
  Indemnification

  	
   

  
	
  12.8

  	
  Agent in Individual
  Capacity

  	
   

  
	
  12.9

  	
  Successor Agent

  	
   

  
	
  12.10

  	
  Withholding Tax

  	
   

  
	
  12.11

  	
  Collateral Matters

  	
   

  
	
  12.12

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  	
   

  
	
  12.13

  	
  Agency for Perfection

  	
   

  
	
  12.14

  	
  Payments by Agent
  to Lenders

  	
   

  
	
  12.15

  	
  Settlement

  	
   

  
	
  12.16

  	
  Letters
  of Credit; Intra-Lender Issues

  	
   

  
	
  12.17

  	
  Concerning
  the Collateral and the Related Loan Documents

  	
   

  
	
  12.18

  	
  Field
  Audit and Examination Reports; Disclaimer by Lenders

  	
   

  
	
  12.19

  	
  Relation Among Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13 MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  13.1

  	
  No Waivers;
  Cumulative Remedies

  	
   

  
	
  13.2

  	
  Severability

  	
   

  
	
  13.3

  	
  Governing
  Law; Choice of Forum; Service of Process

  	
   

  
	
  13.4

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  13.5

  	
  Survival
  of Representations and Warranties

  	
   

  
	
  13.6

  	
  Other Security and
  Guaranties

  	
   

  
	
  13.7

  	
  Fees and Expenses

  	
   

  
	
  13.8

  	
  Notices

  	
   

  
	
  13.9

  	
  Waiver of Notices

  	
   

  
	
  13.10

  	
  Binding Effect

  	
   

  
	
  13.11

  	
  Indemnity
  of the Agent and the Lenders by the Borrower

  	
   

  
	
  13.12

  	
  Limitation of Liability

  	
   

  
	
  13.13

  	
  Final Agreement

  	
   

  
	
  13.14

  	
  Counterparts

  	
   

  
	
  13.15

  	
  Captions

  	
   

  
	
  13.16

  	
  Right of Setoff

  	
   

  
	
  13.17

  	
  Confidentiality

  	
   

  
	
  13.18

  	
  Conflicts
  with Other Loan Documents

  	
   

  

 

iv

 

ANNEXES, EXHIBITS
AND SCHEDULES

 

	
  ANNEX A

  	
  -

  	
  DEFINED TERMS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  -

  	
  FORM OF NOTE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  -

  	
  FORM OF
  BORROWING BASE CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  -

  	
  FINANCIAL STATEMENTS;
  PRO FORMA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT D-

  	
   

  	
  FORM OF NOTICE
  OF BORROWING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT E

  	
  -

  	
  FORM OF NOTICE
  OF CONTINUATION/CONVERSION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT F

  	
  -

  	
  FORM OF
  ASSIGNMENT AND ACCEPTANCE AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT G

  	
  -

  	
  FORM OF
  SUBSIDIARY BORROWER JOINDER AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT H

  	
  -

  	
  LATEST PROJECTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.1 –

  	
  ASSIGNED CONTRACTS
  (ANNEX A – DEFINED TERMS)

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.2 –

  	
  LENDERS’ COMMITMENTS
  (ANNEX A – DEFINED TERMS)

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.3 –

  	
  ORGANIZATION AND
  QUALIFICATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.5 –

  	
  SUBSIDIARIES AND
  AFFILIATES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.9 –

  	
  DEBT

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.11 –

  	
  REAL ESTATE; LEASES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.12 –

  	
  PROPRIETARY RIGHTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.13 –

  	
  TRADE NAMES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.14 –

  	
  LITIGATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.15 –

  	
  LABOR DISPUTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.16 –

  	
  ENVIRONMENTAL LAW

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.19 –

  	
  ERISA COMPLIANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.26 –

  	
  MATERIAL AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.27 –

  	
  BANK ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6.31 –

  	
  MORGUE INVENTORY
  POLICIES

  	
   

  

 

v

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT,
dated as of June 18, 2002, (this “Agreement”) among the financial
institutions from time to time parties hereto (such financial institutions,
together with their respective successors and assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”),
BANK OF AMERICA, N.A. with an office at 55 South Lake Avenue, Pasadena,
California 91101, as agent for the Lenders (in its capacity as agent, the “Agent”),
and MWI VETERINARY SUPPLY CO., an Idaho corporation, with offices at 2201 N. 20th
Street, Nampa, Idaho 83687 (the “Borrower”).

 

W I  T
N  E  S  S  E  T  H:

 

WHEREAS, the Borrower has
requested the Lenders to make available to the Borrowers a line of credit for
loans and letters of credit in an amount not to exceed $70,000,000, and which
extensions of credit the Borrowers will use to provide a portion of the funding
for the Recapitalization and thereafter to provide funds for the working
capital of the Borrowers and their Subsidiaries and for the purposes permitted
hereunder;

 

WHEREAS, ABC, the
Borrower and Holdings have entered into that certain Recapitalization and Stock
Purchase Agreement pursuant to which the Borrower will redeem certain shares of
its capital stock held by ABC and Holdings will purchase the balance of the
shares held by ABC, and thereby the Borrower will become a wholly-owned
subsidiary of Holdings (the “Recapitalization”);

 

WHEREAS, capitalized
terms used in this Agreement and not otherwise defined herein shall have the
meanings ascribed thereto in Annex A which is attached hereto and
incorporated herein; the rules of construction contained therein shall
govern the interpretation of this Agreement, and all Annexes, Exhibits and
Schedules attached hereto are incorporated herein by reference; and

 

WHEREAS, the Lenders have
agreed to make available to the Borrowers a credit facility upon the terms and
conditions set forth in this Agreement;

 

NOW, THEREFORE, in
consideration of the mutual conditions and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt of which is
hereby acknowledged, the Lenders, the Agent, and the Borrower hereby agree as
follows.

 

ARTICLE 1

LOANS AND LETTERS OF CREDIT

 

1.1                                 Total Facility.  Subject to all of the terms and conditions of
this Agreement, the Lenders agree to make available a total credit facility of
up to $70,000,000 to the Borrowers from time to time during the term of this
Agreement, composed of a line of credit consisting of Loans and Letters of
Credit as described herein.  The
Obligations of the Borrower and the Subsidiary Borrowers shall be joint and
several.

 

 

1.2                                 Loans.

 

(a)                                  (i)  Amounts.  Subject to the satisfaction of the conditions
precedent set forth in Article 8, each Lender severally, but not
jointly, agrees, upon the Borrower’s request from time to time on any Business
Day during the period from the Closing Date to the Termination Date, to make
loans (the “Loans”) to the Borrowers in amounts not to exceed such
Lender’s Pro Rata Share of Availability, except for Non-Ratable Loans and Agent
Advances.  The Lenders, however, in their
unanimous discretion, may elect to make Loans or issue or arrange to have
issued Letters of Credit in excess of the Borrowing Base on one or more
occasions, but if they do so, neither the Agent nor the Lenders shall be deemed
thereby to have changed the limits of the Borrowing Base or to be obligated to
exceed such limits on any other occasion. 
If the Aggregate Revolver Outstandings would exceed Availability after
giving effect to any Borrowing, the Lenders may refuse to make or may otherwise
restrict the making of Loans as the Lenders determine until such excess has
been eliminated, subject to the Agent’s authority, in its sole discretion, to
make Agent Advances pursuant to the terms of Section 1.2(i).

 

(ii)                                  If
requested by any Lender, Borrowers shall execute and deliver to each Lender a note
to evidence the Loan of that Lender. 
Each note shall be in the principal amount of the Lender’s Pro Rata
Share of the Commitments, dated the date hereof and substantially in the form
of Exhibit A (each a “Note” and, collectively, the “Notes”).  Each Note shall represent the obligation of
Borrowers to pay the amount of the applicable Lender’s Pro Rata Share of the
Commitments, or, if less, such Lender’s Pro Rata Share of the aggregate
outstanding unpaid principal amount of all Loans to Borrowers together with
interest thereon as prescribed in Section 1.2.  The entire unpaid balance of the Loan and all
other non-contingent Obligations shall be immediately due and payable in full
in immediately available funds on the Termination Date.

 

(b)                                 Procedure for Borrowing.

 

(1)                                  Each Borrowing shall be made upon
the Borrower’s irrevocable written notice delivered to the Agent a notice of
borrowing substantially in the form attached hereto as Exhibit D (“Notice
of Borrowing”), which must be received by the Agent prior to (i) 12:00
noon (California time) three Business Days prior to the requested Funding Date,
in the case of LIBOR Rate Loans and (ii) 10:00 a.m. (California time)
on the requested Funding Date, in the case of Base Rate Loans, specifying:

 

(A)                              the amount of the Borrowing, which
in the case of a LIBOR Rate Loan must equal or exceed $2,000,000 (and
increments of $1,000,000 in excess of such amount);

 

(B)                                the requested Funding Date, which
must be a Business Day;

 

(C)                                whether the Loans requested are to
be Base Rate Loans or LIBOR Rate Loans (and if not specified, it shall be
deemed a request for a Base Rate Loan); and

 

2

 

(D)                               the duration of the Interest Period
for LIBOR Rate Loans (and if not specified, it shall be deemed a request for an
Interest Period of one month);

 

provided,
however, that with respect to the Borrowing to be made on the Closing
Date, such Borrowings will consist of Base Rate Loans only.

 

(2)                                  In lieu of delivering a Notice of
Borrowing, the Borrower may give the Agent telephonic notice of such request
for advances to the Designated Account on or before the deadline set forth
above.  The Agent at all times shall be
entitled to rely on such telephonic notice in making such Loans, regardless of whether
any written confirmation is received.

 

(3)                                  The Borrower shall have no right to
request a LIBOR Rate Loan until the Agent has determined that the primary
syndication has been completed or while a Default or Event of Default has
occurred and is continuing.

 

(c)                                  Reliance upon Authority. 
Prior to the Closing Date, the Borrower shall deliver to the Agent, a
notice setting forth the account of the Borrower (“Designated Account”)
to which the Agent is authorized to transfer the proceeds of the Loans requested
hereunder.  The Borrower may designate a
replacement account from time to time by written notice.  All such Designated Accounts must be
reasonably satisfactory to the Agent. 
The Agent is entitled to rely conclusively on any person’s request for
Loans on behalf of the Borrower, so long as the proceeds thereof are to be
transferred to the Designated Account. 
The Agent has no duty to verify the identity of any individual
representing himself or herself as a person authorized by the Borrower to make
such requests on its behalf.

 

(d)                                 No Liability. 
The Agent shall not incur any liability to the Borrowers as a result of
acting upon any notice referred to in Sections 1.2(b) and (c),
which the Agent believes in good faith to have been given by an officer or other
person duly authorized by the Borrower to request Loans on its behalf.  The crediting of Loans to the Designated
Account conclusively establishes the obligation of the Borrowers to repay such
Loans as provided herein.

 

(e)                                  Notice Irrevocable. 
Any Notice of Borrowing (or telephonic notice in lieu thereof) made
pursuant to Section 1.2(b) shall be irrevocable.  The Borrowers shall be bound to borrow the
funds requested therein in accordance therewith.

 

(f)                                    Agent’s Election. 
Promptly after receipt of a Notice of Borrowing (or telephonic notice in
lieu thereof), the Agent shall elect to have the terms of Section 1.2(g) or
the terms of Section 1.2(h) apply to such requested
Borrowing.  If the Bank declines in its
sole discretion to make a Non-Ratable Loan pursuant to Section 1.2(h),
the terms of Section 1.2(g) shall apply to the requested
Borrowing.

 

(g)                                 Making of Loans. 
If Agent elects to have the terms of this Section 1.2(g) apply
to a requested Borrowing, then promptly after receipt of a Notice of Borrowing
or telephonic notice in lieu thereof, the Agent shall notify the Lenders by
telecopy, telephone or e-mail of the requested Borrowing.  Each Lender shall transfer its Pro Rata Share
of the requested

 

3

 

Borrowing
available to the Agent in immediately available funds, to the account from time
to time designated by Agent, not later than 12:00 noon (California time) on the
applicable Funding Date.  After the Agent’s
receipt of all proceeds of such Loans, the Agent shall make the proceeds of
such Loans available to the Borrowers on the applicable Funding Date by
transferring same day funds to the Designated Account; provided, however,
that the amount of Loans so made on any date shall not exceed the Availability
on such date.

 

(h)                                 Making of Non-Ratable Loans.

 

(1)                                  If Agent elects, with the consent of
the Bank, to have the terms of this Section 1.2(h) apply to a
requested Borrowing, the Bank shall make a Loan in the amount of that Borrowing
available to the Borrower on the applicable Funding Date by transferring same
day funds to Borrower’s Designated Account. 
Each Loan made solely by the Bank pursuant to this Section is
herein referred to as a “Non-Ratable Loan”, and such Loans are
collectively referred to as the “Non-Ratable Loans.”  Each Non-Ratable Loan shall be subject to all
the terms and conditions applicable to other Loans except that all payments
thereon shall be payable to the Bank solely for its own account.  The aggregate amount of Non-Ratable Loans outstanding
at any time shall not exceed $5,000,000. 
The Agent shall not request the Bank to make any Non-Ratable Loan if (A) the
Agent has received written notice from any Lender that one or more of the
applicable conditions precedent set forth in Article 8 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (B) the
requested Borrowing would exceed Availability on that Funding Date.  

 

(2)                                  The Non-Ratable Loans shall be
secured by the Agent’s Liens in and to the Collateral and shall constitute Base
Rate Loans and Obligations hereunder.

 

(i)                                     Agent Advances.

 

(1)                                  Subject to the limitations set forth
below, the Agent is authorized by the Borrowers and the Lenders, from time to
time in the Agent’s sole discretion, (A) after the occurrence of a Default
or an Event of Default, or (B) at any time that any of the other
conditions precedent set forth in Article 8 have not been
satisfied, to make Base Rate Loans to the Borrowers on behalf of the Lenders in
an aggregate amount outstanding at any time not to exceed 10% of the Borrowing
Base which the Agent, in its reasonable business judgment, deems necessary or
desirable (1) to preserve or protect the Collateral, or any portion
thereof, (2) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (3) to pay any other
amount chargeable to the Borrowers pursuant to the terms of this Agreement,
including costs, fees and expenses as described in Section 13.7
(any of such advances are herein referred to as “Agent Advances”); provided,
that the Majority Lenders may at any time revoke the Agent’s authorization to
make Agent Advances.  Any such revocation
must be in writing and shall become effective prospectively upon the Agent’s
receipt thereof.

 

(2)                                  The Agent Advances shall be secured
by the Agent’s Liens in and to the Collateral and shall constitute Base Rate
Loans and Obligations hereunder.

 

4

 

1.3                                 Reserved.

 

1.4                                 Letters
of Credit.

 

(a)                                  Agreement to Issue or Cause To Issue. 
Subject to the terms and conditions of this Agreement, the Agent agrees (i) to
cause the Letter of Credit Issuer to issue for the account of the Borrower or a
Subsidiary Borrower one or more commercial/documentary and standby letters of
credit (each, a “Letter of Credit”) and/or (ii) to provide credit
support or other enhancement to a Letter of Credit Issuer reasonably acceptable
to Agent, which issues a Letter of Credit for the account of the Borrower or a
Subsidiary Borrower (any such credit support or enhancement being herein
referred to as a “Credit Support”) from time to time during the term of
this Agreement.

 

(b)                                 Amounts; Outside Expiration Date. 
The Agent shall not have any obligation to issue or cause to be issued
any Letter of Credit or to provide Credit Support for any Letter of Credit at
any time if: (i) the maximum face amount of the requested Letter of Credit
is greater than the Unused Letter of Credit Subfacility at such time; (ii) the
maximum undrawn amount of the requested Letter of Credit and all commissions,
fees, and charges due from the Borrowers in connection with the opening thereof
would exceed Availability at such time; or (iii) such Letter of Credit has
an expiration date less than 30 days prior to the Stated Termination Date or
more than 12 months from the date of issuance for standby letters of credit and
180 days for documentary letters of credit. 
With respect to any Letter of Credit which contains any “evergreen” or
automatic renewal provision, each Lender shall be deemed to have consented to
any such extension or renewal unless any such Lender shall have provided to the
Agent, written notice that it declines to consent to any such extension or
renewal at least thirty (30) days prior to the date on which the Letter of
Credit Issuer is entitled to decline to extend or renew the Letter of
Credit.  If all of the requirements of
this Section 1.4 are met and no Default or Event of Default has
occurred and is continuing, no Lender shall decline to consent to any such
extension or renewal.

 

(c)                                  Other Conditions. 
In addition to conditions precedent contained in Article 8,
the obligation of the Agent to issue or to cause to be issued any Letter of
Credit or to provide Credit Support for any Letter of Credit is subject to the
following conditions precedent having been satisfied in a manner reasonably
satisfactory to the Agent:

 

(1)                                  The Borrower or a Subsidiary
Borrower shall have delivered to the Letter of Credit Issuer, at such times and
in such manner as such Letter of Credit Issuer may prescribe, an application in
form and substance satisfactory to such Letter of Credit Issuer and reasonably
satisfactory to the Agent for the issuance of the Letter of Credit and such
other documents as may be required pursuant to the terms thereof, and the form,
terms and purpose of the proposed Letter of Credit shall be reasonably
satisfactory to the Agent and the Letter of Credit Issuer; and

 

(2)                                  As of the date of issuance, no order
of any court, arbitrator or Governmental Authority shall purport by its terms
to enjoin or restrain money center banks generally from issuing letters of
credit of the type and in the amount of the proposed Letter of

 

5

 

Credit,
and no law, rule or regulation applicable to money center banks generally
and no request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over money center banks generally
shall prohibit, or request that the proposed Letter of Credit Issuer refrain
from, the issuance of letters of credit generally or the issuance of such
Letters of Credit.

 

(d)                                 Issuance of Letters of Credit.

 

(1)                                  Request for Issuance. 
The Borrower or a Subsidiary Borrower must notify the Agent of a
requested Letter of Credit at least three (3) Business Days prior to the
proposed issuance date.  Such notice
shall be irrevocable and must specify the original face amount of the Letter of
Credit requested, the Business Day of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single or in partial
draws, the Business Day on which the requested Letter of Credit is to expire,
the purpose for which such Letter of Credit is to be issued, and the
beneficiary of the requested Letter of Credit. 
The Borrower or a Subsidiary Borrower shall attach to such notice the
proposed form of the Letter of Credit.

 

(2)                                  Responsibilities of the Agent;
Issuance.  As of the Business Day immediately preceding
the requested issuance date of the Letter of Credit, the Agent shall determine
the amount of the Unused Letter of Credit Subfacility and Availability.  If (i) the face amount of the requested
Letter of Credit is not greater than the Unused Letter of Credit Subfacility
and (ii) the amount of such requested Letter of Credit and all
commissions, fees, and charges due from the Borrowers in connection with the
opening thereof would not exceed Availability, the Agent shall cause the Letter
of Credit Issuer to issue the requested Letter of Credit on the requested
issuance date so long as the other conditions hereof are met.

 

(3)                                  No Extensions or Amendment. 
The Agent shall not be obligated to cause the Letter of Credit Issuer to
extend or amend any Letter of Credit issued pursuant hereto unless the
requirements of this Section 1.4 are met as though a new Letter of
Credit were being requested and issued.

 

(e)                                  Payments Pursuant to Letters of
Credit.  The Borrowers agree to reimburse immediately
the Letter of Credit Issuer for any draw under any Letter of Credit and the
Agent for the account of the Lenders upon any payment pursuant to any Credit
Support, and to pay the Letter of Credit Issuer the amount of all other charges
and fees payable to the Letter of Credit Issuer in connection with any Letter
of Credit immediately when due, irrespective of any claim, setoff, defense or
other right which any Borrower may have at any time against the Letter of
Credit Issuer or any other Person.  Each
drawing under any Letter of Credit shall constitute a request by the Borrower
to the Agent for a Borrowing of a Base Rate Loan in the amount of such
drawing.  The Funding Date with respect
to such Borrowing shall be the date of such drawing.

 

6

 

(f)                                    Indemnification; Exoneration; Power
of Attorney.

 

(1)                                  Indemnification. 
In addition to amounts payable as elsewhere provided in this Section 1.4,
the Borrowers agree to protect, indemnify, pay and save the Lenders and the
Agent harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys’
fees) which any Lender or the Agent (other than a Lender in its capacity as
Letter of Credit Issuer) may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit or the provision of any
Credit Support or enhancement in connection therewith.  The Borrowers’ obligations under this Section shall
survive payment of all other Obligations.

 

(2)                                  Assumption of Risk by the Borrowers. 
As among the Borrowers, the Lenders, and the Agent, the Borrowers assume
all risks of the acts and omissions of, or misuse of any of the Letters of
Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing,
the Lenders and the Agent shall not be responsible for:  (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any Person
in connection with the application for and issuance of and presentation of
drafts with respect to any of the Letters of Credit, even if it should prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (C) the failure of
the beneficiary of any Letter of Credit to comply duly with conditions required
in order to draw upon such Letter of Credit; (D) errors, omissions,
interruptions, or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors
in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; (H) any consequences arising from
causes beyond the control of the Lenders or the Agent, including any act or
omission, whether rightful or wrongful, of any present or future de  jure
or de  facto Governmental Authority or (I) the Letter of Credit
Issuer’s honor of a draw for which the draw or any certificate fails to comply
in any respect with the terms of the Letter of Credit; provided, however,
that the rights of the Borrowers against any Letter of Credit Issuer are
subject to clause (4) of this Section 1.4(f).  None of the foregoing shall affect, impair or
prevent the vesting of any rights or powers of the Agent or any Lender under
this Section 1.4(f).

 

(3)                                  Exoneration. 
Without limiting the foregoing, no action or omission whatsoever by
Agent or any Lender (excluding any Lender in its capacity as a Letter of Credit
Issuer) shall result in any liability of Agent or any Lender to the Borrowers,
or relieve the Borrowers of any of their obligations hereunder to any such
Person.

 

(4)                                  Rights Against Letter of Credit
Issuer.  Nothing contained in this Agreement is
intended to limit the Borrowers’ rights, if any, with respect to the Letter of
Credit Issuer which arise as a result of the letter of credit application and
related documents executed by and between the Borrower or a Subsidiary Borrower
and the Letter of Credit Issuer.

 

7

 

(5)                                  Account Party. 
The Borrowers hereby authorize and direct any Letter of Credit Issuer to
name the Borrower or a Subsidiary Borrower, as applicable, as the “Account
Party” therein and to deliver to the Agent all instruments, documents and other
writings and property received by the Letter of Credit Issuer pursuant to the
Letter of Credit, and to accept and rely upon the Agent’s instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.

 

(g)                                 Supporting Letter of Credit; Cash
Collateral.  If, notwithstanding the provisions of Section 1.4(b) and
Section 10.1, any Letter of Credit or Credit Support is outstanding
upon the termination of this Agreement, then upon such termination the
Borrowers shall deposit with the Agent, for the ratable benefit of the Agent
and the Lenders, with respect to each Letter of Credit or Credit Support then
outstanding, a standby letter of credit (a “Supporting Letter of Credit”)
in form and substance reasonably satisfactory to the Agent, issued by an issuer
reasonably satisfactory to the Agent in an amount equal to the greatest amount
for which such Letter of Credit or such Credit Support may be drawn plus any
fees and expenses associated with such Letter of Credit or such Credit Support,
under which Supporting Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments to be made by the
Agent and the Lenders under such Letter of Credit or Credit Support and any
fees and expenses associated with such Letter of Credit or Credit Support.  Such Supporting Letter of Credit shall be
held by the Agent, for the ratable benefit of the Agent and the Lenders, as
security for, and to provide for the payment of, the aggregate undrawn amount
of such Letters of Credit or such Credit Support remaining outstanding.

 

1.5                                 Bank
Products.  The Borrowers may
request and the Agent may, in its sole and absolute discretion, arrange for the
Borrowers to obtain from the Bank or the Bank’s Affiliates Bank Products
although the Borrowers are not required to do so.  If Bank Products are provided by an Affiliate
of the Bank, the Borrowers agree to indemnify and hold the Agent, the Bank and
the Lenders harmless from any and all costs and obligations now or hereafter incurred
by the Agent, the Bank or any of the Lenders which arise from any indemnity
given by the Agent to its Affiliates related to such Bank Products; provided,
however, nothing contained herein is intended to limit the Borrowers’
rights, with respect to the Bank or its Affiliates, if any, which arise as a
result of the execution of documents by and between the Borrowers and the Bank
which relate to Bank Products.  The
agreement contained in this Section shall survive termination of this
Agreement.  The Borrower acknowledges and
agrees that the obtaining of Bank Products from the Bank or the Bank’s
Affiliates (a) is in the sole and absolute discretion of the Bank or the
Bank’s Affiliates, and (b) is subject to all rules and regulations of
the Bank or the Bank’s Affiliates.

 

1.6                                 Joint
and Several Obligations; Contribution Rights.

 

(a)                                  All Obligations shall be the joint
and several Obligations of the Borrower and the Subsidiary Borrowers regardless
of which Borrower actually receives any Loans or other extensions of credit
under the Loan Documents, the amount received by any Borrower or the manner in
which any Borrower, the Agent or any Lender accounts for such Loans and other
extensions of credit.

 

8

 

(b)                                 To the extent that any Borrower is a
guarantor or a surety as a result of the joint and several obligations
hereunder, such Obligations and the Liens securing such Obligations shall not
be released or impaired by any action or inaction on the part of the Agent or
any Lender which would otherwise constitute the release of a surety.  Without limiting the generality of the
foregoing, the liability of the Borrowers under this Agreement shall not be
affected or impaired in any manner by (i) the failure of any Person to
become or remain a Borrower or guarantor or the failure of the Agent or any
Lender to preserve, protect or enforce any right to require any Person to
become or remain a Borrower or guarantor, (ii) any taking, failure to
take, failure to create, perfect or ensure the priority of, or exchange, release
or termination or lapse of any Lien securing any Obligations, or any taking,
failure to take, release or amendment or waiver of or consent to departure from
any other guaranty of, any of the Obligations, (iii) any manner or order
of sale or other enforcement of any Lien securing any of the Obligations or any
manner or order of application of the proceeds of any such Lien to the payment
of the Obligations or any failure to enforce any Lien or to apply any proceeds
thereof, (iv) any furnishing, exchange, substitution or release of any
collateral securing the Obligations, or any failure to perfect any Lien in any
of the collateral securing the Obligations, (v) any lack of validity or enforceability of this Agreement or any
other Loan Document or any other agreement, instrument or document relating
thereto, (vi) any change in the time, manner or place of payment of, or in
any other term of, any of the Obligations, or any other amendment or waiver of
or any consent to departure from the terms of this Agreement any or any other
Loan Document, including any extension or renewal of the Obligations (whether
or not for longer than the original period) and any increase in the Obligations
resulting from the extension of additional credit to any Borrower or otherwise,
(vii) any change, restructuring or termination of the corporate structure
or existence of a Borrower or any of its Subsidiaries or Affiliates, or any
other Person, or (viii) any other circumstance which might
otherwise constitute a defense (except the indefeasible final payment in full)
available to, or a discharge of, a surety or guarantor.

 

(c)                                  To the extent that any Borrower is a
guarantor or a surety as a result of the joint and several obligations
hereunder, the liability of each such Borrower under this Agreement shall
remain valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
indefeasible final payment in full of the Obligations), including the
occurrence of any of the following, whether or not such Borrower shall have had
notice or knowledge of any of them:  (i) any
failure or omission to assert or enforce or agreement or election not to assert
or enforce, or the stay or enjoining by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy (whether arising under the Loan Documents, at law, in equity or
otherwise) with respect to the Obligations or any agreement relating thereto,
or with respect to any other guaranty of or security for the payment of the
Obligations; (ii) any rescission, waiver, amendment or modification of, or
any consent to departure from, any of the terms or provisions (including
provisions relating to Events of Default) of this Agreement, any of the other
Loan Documents or any agreement or instrument executed pursuant thereto, or of
any other guaranty or security for the Obligations, in each case whether or not
in accordance with the terms of this Agreement, such Loan Document or any
agreement relating to such other guaranty or security; (iii) the
Obligations, or any agreement relating thereto, at any time being found to be
illegal, invalid or unenforceable in any respect; (iv) the application of
payments received from

 

9

 

any
source to the payment of any liability other than the Obligations, even though
the Lenders might have elected to apply such payment to any part or all of the
Obligations; (v) any consent by any Lender or the Agent to the change,
reorganization or termination of the corporate structure or existence of any
other Borrower, or any other Person and to any corresponding restructuring of
the Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Obligations; (vii) any
defenses (except the defense of indefeasible final payment in full), set-offs
or counterclaims which any Borrower, any guarantor or any other Person may
allege or assert against the Agent or any Lender in respect of the Obligations,
including, for example, failure of consideration, breach of warranty, statute
of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any
other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of any Borrower as an
obligor in respect of the Obligations.

 

(d)                                 To the extent that any Borrower is a
guarantor or a surety as a result of the joint and several obligations
hereunder, to the maximum extent permitted by law, each such Borrower hereby
waives and agrees not to assert or take advantage of:  (i) any defense now existing or
hereafter arising based upon any legal disability or other defense of any other
Borrower or any guarantor or other Person, or by reason of the cessation or
limitation of the liability of any other Borrower or any guarantor or other
Person from any cause other than full payment and performance of all
obligations due under this Agreement or any of the other Loan Documents; (ii) any
defense based upon any lack of authority of the officers, directors, partners
or agents acting or purporting to act on behalf of any other Borrower or any
guarantor or other Person, or any defect in the formation of any other Borrower
or any guarantor or other Person; (iii) the unenforceability or invalidity
of any security or guaranty or the lack of perfection or continuing perfection,
or failure of priority of any security for the Obligations; (iv) any and
all rights and defenses arising out of an election of remedies by the Agent or
any Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for an Obligation, has destroyed such
Borrower’s rights of subrogation and reimbursement against the principal; (v) any
defense based upon any failure to disclose to such Borrower any information
concerning the financial condition of any other Borrower or any guarantor or
other Person or any other circumstances bearing on the ability of any other
Borrower or any guarantor or other Person to pay and perform all obligations
due under this Agreement or any of the other Loan Documents; (vi) any
failure by the Agent or any Lender to give notice to any Borrower or any guarantor
or other Person of the sale or other disposition of security, and any defect in
notice given by the Agent or any Lender in connection with any such sale or
disposition of security; (vii) any failure of the Agent or any Lender to
comply with applicable laws in connection with the sale or disposition of
security, including, without limitation, any failure by the Lender to conduct a
commercially reasonable sale or other disposition of such security; (viii) any
defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in any other
respects more burdensome than that of a principal, or that reduces a surety’s
or guarantor’s obligations in proportion to the principal’s obligation; (ix) any
use of cash collateral under Section 363 of the Bankruptcy Code;
(x) any defense based upon an election by the Agent or any Lender, in any
proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of
the Bankruptcy Code or any successor statute; (xi) any defense based upon
any borrowing or any grant of a security interest under Section 364

 

10

 

of the
Bankruptcy Code; (xii) any right of subrogation, any right to enforce any
remedy which the Agent or any Lender may have against any other Borrower or any
guarantor or other Person and any right to participate in, or benefit from, any
security now or hereafter held by the Agent or any Lender for the Obligations;
(xiii) presentment, demand, protest and notice of any kind, including
notice of acceptance of this Agreement and of the existence, creation or
incurring of new or additional Obligations; (xiv) the benefit of any
statute of limitations affecting the liability of any other Borrower or any
guarantor or other Person, enforcement of this Agreement or any other Loan
Documents, the liability of any Borrower hereunder or the enforcement hereof;
(xv) all notices of intention to accelerate and/or notice of acceleration
of the Obligations; (xvi) relief from any applicable valuation or
appraisement laws; (xvii) any other action by the Agent or any Lender,
whether authorized by this Agreement or otherwise, or any omission by the Agent
or any Lender or other failure of the Agent or any Lender to pursue, or delay
in pursuing, any other remedy in its power; (xviii) any and all claims and/or
rights of counterclaim, recoupment, setoff or offset; and (xix) any
defense based upon the application of the proceeds of a Loan for purposes other
than the purposes represented by the Borrowers or intended or understood by the
Agent or any Lender or any Borrower. 
Each Borrower agrees that the payment and performance of all Obligations
or any part thereof or other act which tolls any statute of limitations
applicable to this Agreement or the other Loan Documents shall similarly
operate to toll the statute of limitations applicable to such Borrower’s
liability hereunder.  Without limiting
the generality of the foregoing or any other provision hereof, each Borrower
further waives any and all rights and defenses that such Borrower may have
because the debt of the Borrowers is secured by real property of other
Borrowers; this means, among other things, that:  (1) the Lenders may collect from such
Borrower without first foreclosing on any real or personal property collateral
pledged by any other Borrower, (2) if the Agent or any Lender forecloses
on any real property collateral pledged by any other Borrower, then (A) the
amount of the debt may be reduced only by the price for which that collateral
is sold at the foreclosure sale, even if the collateral is worth more than the
sale price, and (B) the Agent or any Lender may collect from such Borrower
even if the Agent or any Lender, by foreclosing on the real property
collateral, has destroyed any right such Borrower may have to collect from any
other Borrower.  The foregoing sentence
is an unconditional and irrevocable waiver of any rights and defenses each
Borrower may have because the Obligations are secured by real property of any
other Borrower.  Without limiting the
generality of the foregoing waivers contained in this subparagraph or any other
provision hereof, each Borrower expressly waives to the extent permitted by law
any and all rights and defenses (except the defense of indefeasible final
payment in full), including without limitation any rights of subrogation,
reimbursement, indemnification and contribution (except contribution pursuant
to this Agreement), which might otherwise be available to such Borrower under
applicable laws.

 

(e)                                  Each Borrower is fully aware of the
financial condition of the other Borrowers and is executing and delivering this
Agreement based solely upon such Borrower’s own independent investigation of
all matters pertinent hereto and is not relying in any manner upon any
representation or statement by the Agent or any Lender.  Each Borrower hereby assumes full
responsibility for obtaining any additional information concerning the
financial condition of the other Borrowers or any other guarantor or their
respective properties, financial condition and prospects and any other matter
pertinent hereto as such Borrower may desire, and

 

11

 

such
Borrower is not relying upon or expecting the Agent or any Lender to furnish to
such Borrower any information now or hereafter in the possession of the Agent
or any Lender concerning the same or any other matter.  By executing this Agreement, each Borrower
knowingly accepts the full range of risks encompassed within a contract of this
type, which risks such Borrower acknowledges. 
No Borrower shall have the right to require the Agent or any Lender to
obtain or disclose any information with respect to the Obligations, the
financial condition or prospects of any Borrower, the ability of any Borrower
to pay or perform the Obligations, the existence, perfection, priority or
enforceability of any collateral security for any or all of the Obligations,
the existence or enforceability of any other guaranties of all or any part of
the Obligations, any action or non-action on the part of the Agent or any
Lender, any Borrower or any other Person, or any other event, occurrence,
condition or circumstance whatsoever.

 

(f)                                    To the extent that any Borrower is a
guarantor or a surety as a result of the joint and several obligations
hereunder, the Obligations of each such Borrower shall be limited in amount to
an amount not to exceed the maximum amount of such obligations and liabilities
that can be made or assumed by such Borrower without rendering such obligation
or liability void or voidable under applicable laws relating to fraudulent
conveyance, fraudulent transfer or similar laws affecting the rights of
creditors generally, in each case giving effect to all liabilities of such
Borrower other than any liabilities in respect of intercompany indebtedness to
the extent that it would be discharged in the amount paid by such Borrower
hereunder and giving effect to all rights of subrogation, contribution,
reimbursement, indemnity or similar rights pursuant to applicable law or any
agreement (the “Maximum Liability”).

 

(g)                                 Each Borrower hereby agrees that to
the extent that a Borrower makes any payment, such Borrower shall be entitled
to seek and receive contribution and indemnification from and to be reimbursed
by each other Borrowers in an amount equal to a fraction of such payment, the
numerator of which is the Maximum Liability of the Borrower making the payment
and the denominator of which is the Maximum Liability of all Borrowers as of
the date of determination.  Each Borrower’s
right of contribution shall be subject to the terms and conditions of Section 1.6(h).  The provisions of this Section 1.6(g) shall
in no respect limit the obligations and liabilities of any Borrower to the
Lenders and each Borrower shall remain liable to the Lenders for the full
amount of its liabilities hereunder.

 

(h)                                 No Borrower shall be entitled to be
subrogated to any of the rights of the Agent or any Lender against or any other
Borrower or any collateral security or guarantee or right to offset held by the
Agent or any Lender for the payment of the Obligations of nor shall any
Borrower seek or be entitled to seek any contribution or reimbursement from or
any other Borrower in respect of payments made by such Borrower hereunder,
until all amounts owing to the Agent or any Lender on account of the
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated or have expired. 
If any amount shall be paid to any Borrower on account of such
subrogation rights at any time not permitted hereunder, such amount shall be
held by such Borrower in trust for the Agent and the Lenders, segregated from
other funds of such Borrower, and shall, forthwith upon receipt, be turned over
to the Agent in the exact form received (duly endorsed to the Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Agent may determine.

 

12

 

1.7                                 Borrowing
Agency Provisions.

 

(a)                                  At the request of, and solely as an
accommodation to, Borrowers, the Lenders have agreed to make the Loans to, and
to issue Letters of Credit for the Borrowers on a joint and several basis as
co-borrowers.  In order to facilitate the
co-borrowing arrangement, each Subsidiary Borrower, by becoming a party to this
Agreement, irrevocably designates the Borrower to be its agent and
attorney-in-fact for purposes of the Loan Documents, and irrevocably authorizes
such agent in such capacity to take such actions on behalf of the applicable
Subsidiary Borrower and to exercise such powers under this Agreement and the
other Loan Documents on such Subsidiary Borrower’s behalf as may otherwise be
exercised by such Subsidiary Borrower, together with such powers as are
incidental thereto, including without limitation to borrow Loans, to execute
and deliver Notices of Borrowing, Notices of Conversion/Continuation, requests
for Letters of Credit, Borrowing Base Certificates and such other documents,
instruments and certificates required by the Loan Documents in connection with
any Borrowing or repayment of the Loans, to borrow, repay, reborrow, convert
and continue Loans and to receive proceeds of Loans and to give all other
notices and consents hereunder.  Each
Subsidiary Borrower, by becoming a party to this Agreement, further irrevocably
authorizes the Agent to act on all such documents, instruments and certificates
delivered by the Borrower as such agent and attorney-in-fact, and to pay over
and credit the proceeds of any Loans so requested to the Designated
Account.  The Borrower hereby accepts the
appointment to act as agent and attorney in fact for the Subsidiary Borrowers.  The Agent and each Lender shall be entitled
to rely absolutely on the appointment and authorization of the Borrower to act
on behalf of the Subsidiary Borrowers with respect to all matters relating to
this Agreement and the other Loan Documents, whether or not any provision of
this Agreement or any other Loan Documents specifically provides that action
may or shall be taken by the Borrower on behalf of the Subsidiary
Borrowers.  The Agent and the Lenders may
give all notices to the Borrower on behalf of the Subsidiary Borrowers.  Each Subsidiary Borrower agrees that each
notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by the Borrower shall be deemed for all purposes
to have been made by such Subsidiary Borrower and shall be binding upon and
enforceable against such Subsidiary Borrower to the same extent as if the same
had been made directly by such Borrower.

 

(b)                                 All Borrowers acknowledge and agree
that the Borrowers are engaged in an integrated operation that requires
financing on the basis of credit availability to each Borrower, that the
co-borrowing arrangement has been established at the request of the Borrowers,
and that each Borrower expects to derive, directly or indirectly, benefit from
such credit availability to the other Borrowers.  Neither the Agent nor the Letter of Credit
Issuer nor any Lender shall incur any liability to Borrowers or any other Loan
Party as a result of the co-borrowing arrangement established by this Agreement
and shall not have any liability or responsibility to the Borrowers to inquire
into the allocation, apportionment or use of the proceeds of any Loans or
extensions of credit hereunder.  To
induce the Agent, the Letter of Credit Issuer and the Lenders to establish this
co-borrowing arrangement and in consideration thereof, each Borrower hereby
indemnifies the Agent, the Letter of Credit Issuer and the Lenders, and their
respective successors and assigns, and agrees to hold each of them harmless
from any and all liabilities, expenses, losses, damages and claims asserted
against them by any Person arising from or incurred by reason of the handling
of the financing arrangements of the

 

13

 

Borrowers
as provided in this Agreement, any reliance by the Agent, the Letter of Credit
Issuer or any Lender on any document, request or instruction given by the
Borrower, as designated by the Subsidiary Borrowers herein to act on their
behalf, or any other action taken by the Agent, the Letter of Credit Issuer or
the Lenders with respect to the co-borrowing arrangement; provided, however,
that no Borrower shall have an obligation to indemnify any of the Agent, the
Letter of Credit Issuer or any Lender under this Section 1.7(b) with
respect to any liabilities finally determined by a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of such
indemnified party.  The obligations of
the Borrowers under this Section 1.7(b) shall survive payment
of all other Obligations.

 

ARTICLE 2

INTEREST AND FEES

 

2.1                                 Interest.

 

(a)                                  Interest Rates. 
All outstanding Obligations shall bear interest on the unpaid principal
amount thereof (including, to the extent permitted by law, on interest thereon
not paid when due) from the date made until paid in full in cash at a rate
determined by reference to the Base Rate or the LIBOR Rate plus the
Applicable Margins as set forth below, but not to exceed the Maximum Rate.  If at any time Loans are outstanding with
respect to which the Borrower has not delivered to the Agent a notice specifying
the basis for determining the interest rate applicable thereto in accordance
herewith, those Loans shall bear interest at a rate determined by reference to
the Base Rate until notice to the contrary has been given to the Agent in
accordance with this Agreement and such notice has become effective.  Except as otherwise provided herein, the
outstanding Obligations shall bear interest as follows:

 

(i)                                     For all Base Rate Loans and other
Obligations (other than LIBOR Rate Loans) at a fluctuating per annum rate equal
to the Base Rate plus the Applicable Margin; and

 

(ii)                                  For all LIBOR Rate Loans at a per
annum rate equal to the LIBOR Rate plus the Applicable Margin.

 

Each change in the Base
Rate shall be reflected in the interest rate applicable to Base Rate Loans as
of the effective date of such change. 
All interest charges shall be computed on the basis of a year of 360
days and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). 
The Borrowers shall pay to the Agent, for the ratable benefit of
Lenders, interest accrued on all Loans in arrears on the first day of each
month hereafter and on the Termination Date.

 

(b)                                 Default Rate. 
If any Event of Default occurs and is continuing and the Required Lenders
in their discretion so elect, then, while any such Event of Default is
continuing, all of the Obligations shall bear interest at the Default Rate
applicable thereto.

 

14

 

2.2                                 Continuation
and Conversion Elections.

 

(a)                                  The Borrowers may:

 

(i)                                     elect, as of any Business Day, in
the case of Base Rate Loans to convert any Base Rate Loans (or any part thereof
in an amount not less than $2,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into LIBOR Rate Loans; or

 

(ii)                                  elect, as of the last day of the
applicable Interest Period, to continue any LIBOR Rate Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less than
$2,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof);

 

provided,
that if at any time the aggregate amount of LIBOR Rate Loans in respect of any
Borrowing is reduced, by payment, prepayment, or conversion of part thereof to
be less than $2,000,000, such LIBOR Rate Loans shall automatically convert into
Base Rate Loans; provided  further that if the notice shall fail
to specify the duration of the Interest Period, such Interest Period shall be
one month.

 

(b)                                 The Borrower shall deliver a notice
of continuation/conversion substantially in the form attached hereto as Exhibit E
(“Notice of Continuation/Conversion”) to the Agent not later than 12:00
noon (California time) at least three (3) Business Days in advance of the
Continuation/Conversion Date, if the Loans are to be converted into or
continued as LIBOR Rate Loans and specifying:

 

(i)                                     the proposed Continuation/Conversion
Date;

 

(ii)                                  the aggregate amount of Loans to be
converted or renewed;

 

(iii)                               the type of Loans resulting from the
proposed conversion or continuation; and

 

(iv)                              the duration of the requested
Interest Period, provided, however, the Borrower may not select an
Interest Period that ends after the Stated Termination Date.

 

(c)                                  If upon the expiration of any
Interest Period applicable to LIBOR Rate Loans, the Borrower has failed to
select timely a new Interest Period to be applicable to LIBOR Rate Loans or if
any Default or Event of Default then exists, the Borrowers shall be deemed to
have elected to convert such LIBOR Rate Loans into Base Rate Loans effective as
of the expiration date of such Interest Period.

 

(d)                                 The Agent will promptly notify each
Lender of its receipt of a Notice of Continuation/Conversion.  All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.

 

15

 

(e)                                  There may not be more than 6
different LIBOR Rate Loans in effect hereunder at any time.

 

2.3                                 Maximum Interest Rate.  In no event shall any interest rate provided
for hereunder exceed the maximum rate legally chargeable by any Lender under
applicable law for such Lender with respect to loans of the type provided for
hereunder (the “Maximum Rate”). 
If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate.  In the event that, upon
payment in full of the Obligations, the total amount of interest paid or
accrued under the terms of this Agreement is less than the total amount of
interest which would, but for this Section 2.3, have been paid or
accrued if the interest rate otherwise set forth in this Agreement had at all
times been in effect, then the Borrowers shall, to the extent permitted by
applicable law, pay the Agent, for the account of the Lenders, an amount equal
to the excess of (a) the lesser of (i) the amount of interest which
would have been charged if the Maximum Rate had, at all times, been in effect
or (ii) the amount of interest which would have accrued had the interest
rate otherwise set forth in this Agreement, at all times, been in effect over (b) the
amount of interest actually paid or accrued under this Agreement.  If a court of competent jurisdiction
determines that the Agent and/or any Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed
received on account of, and shall automatically be applied to reduce, the
Obligations other than interest, in the inverse order of maturity, and if there
are no Obligations outstanding, the Agent and/or such Lender shall refund to
the Borrower such excess.

 

2.4                                 Fees.  The Borrowers agree to pay the Agent such
fees as set forth in the fee letter dated as of the Closing Date between the
Agent and the Borrower.

 

2.5                                 Unused
Line Fee.  On the first day of
each month prior to the Termination Date and on the Termination Date the
Borrowers agree to pay to the Agent, for the account of the Lenders, in
accordance with their respective Pro Rata Shares, an unused line fee (the “Unused
Line Fee”) equal to three-eighths of one percent (0.375%) per annum
multiplied by the amount by which the Maximum Revolver Amount exceeded the sum
of the average daily outstanding amount of Loans and the average daily undrawn
face amount of outstanding Letters of Credit, during the immediately preceding
month or shorter period if calculated for the first month hereafter or on the
Termination Date.  The Unused Line Fee
shall be computed on the basis of a 360-day year for the actual number of
days elapsed.  All principal payments
received by the Agent shall be deemed to be credited to the Borrowers’ Loan
Account immediately upon receipt for purposes of calculating the Unused Line
Fee pursuant to this Section 2.5.

 

2.6                                 Letter of
Credit Fee.  The Borrowers agree
to pay (a) to the Agent, for the account of the Lenders, in accordance
with their respective Pro Rata Shares, for each Letter of Credit, a fee (the “Letter
of Credit Fee”) equal to the Applicable Margin then in effect with respect
to LIBOR Rate Loans per annum of the average daily undrawn face amount of each
Letter of Credit; (b) to Agent, for the account of the Letter of Credit
Issuer, a fronting fee (the

 

16

 

“Fronting Fee”)  equal to three-eights of one percent (0.375%)
of the face amount of each Letter of Credit issued and (c) to the Letter
of Credit Issuer, all out-of-pocket costs, fees and expenses incurred by the
Letter of Credit Issuer in connection with the application for, processing of,
issuance of, or amendment to any Letter of Credit.  The Letter of Credit Fee shall be payable
monthly in arrears on the first day of each month following any month in which
a Letter of Credit is outstanding and on the Termination Date, and the Fronting
Fee for each Letter of Credit shall be paid on the date of issuance of such
Letter of Credit.  The Letter of Credit
Fee and the Fronting Fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed.

 

ARTICLE 3

PAYMENTS AND PREPAYMENTS

 

3.1                                 Loans.  The Borrowers shall repay the outstanding
principal balance of the Loans, plus all accrued but unpaid interest thereon,
on the Termination Date.  The Borrowers
may prepay Loans at any time, and reborrow subject to the terms of this
Agreement.  In addition, and without
limiting the generality of the foregoing, upon demand the Borrowers shall pay
to the Agent, for account of the Lenders, the amount, without duplication, by
which the Aggregate Revolver Outstandings exceeds the lesser of the Borrowing
Base or the Maximum Revolver Amount.

 

3.2                                 Reduction
of Commitments; Termination of Facility.

 

(a)                                  The Borrowers may permanently reduce
the Commitments upon at least ten (10) Business Days’ prior written notice
to the Agent and the Lenders; provided that each reduction shall be in the
minimum amount of $5,000,000 and integral multiples of $5,000,000 in excess
thereof, and the Commitments may not be reduced to an amount less than
$55,000,000.  The reduction of the
Commitments shall be effective only upon payment of a fee in the amount of 2%
of the amount by which the Commitments are reduced, if such reduction occurs on
or prior to the first Anniversary Date and 1% of such amount if such reduction
occurs after the first Anniversary Date but on or prior to the second
Anniversary Date.  No fee shall be
payable in connection with any such reduction after the second Anniversary Date.  All reductions pursuant to this Section 3.2(a) shall
reduce the Commitment of each Lender ratably.

 

(b)                                 The Borrowers may terminate this
Agreement upon at least ten (10) Business Days’ prior written notice to
the Agent and the Lenders, upon (i) the payment in full of all outstanding
Loans, together with accrued interest thereon, and the cancellation and return
of all outstanding Letters of Credit, (ii) the payment of the early
termination fee, if any, set forth below, (iii) the payment in full in
cash of all reimbursable expenses and other Obligations, and (iv) with
respect to any LIBOR Rate Loans prepaid, payment of the amounts due under Section 4.4,
if any.  If this Agreement is terminated
at any time prior to the second anniversary of the Closing Date, whether
pursuant to this Section or pursuant to Section 9.2, the
Borrower shall pay to the Agent, for the account of the Lenders, an early
termination fee determined in accordance with the following table:

 

17

 

	
  Period
  during which

  early termination

  occurs

  	
   

  	
  Early Termination

  Fee

  	
   

  
	
  On
  or prior to the first Anniversary Date

  	
   

  	
  2%
  of the Maximum Revolver Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After
  the first Anniversary Date but on or prior to the second Anniversary Date

  	
   

  	
  1% of the Maximum
  Revolver Amount

  	
   

  

 

No early termination fee
shall be required for any termination of this Agreement after the second
Anniversary Date.  Notwithstanding the
foregoing, if the Borrowers refinance the Loans with a credit facility provided
by another lending department of Bank, the early termination fee will not
apply.

 

3.3                                 [Intentionally
deleted]

 

3.4                                 [Intentionally
deleted]

 

3.5                                 LIBOR
Rate Loan Prepayments. 
In connection with any prepayment of any LIBOR Rate Loans prior to the
expiration date of the Interest Period applicable thereto, the Borrowers shall
pay to the Lenders the amounts described in Section 4.4.

 

3.6                                 Payments
by the Borrowers.

 

(a)                                  All payments to be made by the
Borrowers shall be made without set-off, recoupment or counterclaim.  Except as otherwise expressly provided
herein, all payments by the Borrowers shall be made to the Agent for the
account of the Lenders, at the account designated by the Agent and shall be
made in Dollars and in immediately available funds, no later than 12:00 noon (California
time) on the date specified herein.  Any
payment received by the Agent after such time shall be deemed (for purposes of
calculating interest only) to have been received on the following Business Day
and any applicable interest shall continue to accrue.

 

(b)                                 Subject to the provisions set forth
in the definition of “Interest Period”, whenever any payment is due on a day
other than a Business Day, such payment shall be due on the following Business
Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be.

 

3.7                                 Payments
as Loans.  At the election of Agent,
all payments of principal, interest, reimbursement obligations in connection
with Letters of Credit and Credit Support for Letters of Credit, fees,
premiums, reimbursable expenses and other sums payable hereunder, may be paid
from the proceeds of Loans made hereunder. 
The Borrowers hereby irrevocably authorize the Agent to charge the Loan
Account for the purpose of paying all amounts from time

 

18

 

to time then due
hereunder and agrees that all such amounts charged shall constitute Loans
(including Non-Ratable Loans and Agent Advances).

 

3.8                                 Apportionment,
Application and Reversal of Payments. 
Principal and interest payments shall be apportioned ratably among the
Lenders (according to each Lender’s Pro Rata Share) and payments of the fees
shall, as applicable, be apportioned ratably among the Lenders, except for fees
payable solely to Agent and the Letter of Credit Issuer and except as provided
in Section 11.1(b).  All payments
shall be remitted to the Agent and all such payments not relating to principal
or interest of specific Loans, or not constituting payment of specific fees,
and all proceeds of Accounts or other Collateral received by the Agent, shall
be applied, ratably, subject to the provisions of this Agreement, first,
to pay any fees, indemnities or expense reimbursements, then due to the Agent
from the Borrowers; second, to pay any fees or expense reimbursements
then due to the Lenders from the Borrowers; third, to pay interest due
in respect of all Loans, including Non-Ratable Loans and Agent Advances; fourth,
to pay or prepay principal of the Non-Ratable Loans and Agent Advances; fifth,
to pay or prepay principal of the Loans (other than Non-Ratable Loans and Agent
Advances) and unpaid reimbursement obligations in respect of Letters of Credit;
sixth, to pay an amount to Agent equal to all outstanding Letter of
Credit Obligations to be held as cash collateral for such Obligations; and seventh,
to the payment of any other Obligation, including any amounts relating to any
Bank Products, due to the Agent or any Lender by the Borrowers.  Notwithstanding anything to the contrary
contained in this Agreement, unless so directed by the Borrowers, or unless an
Event of Default has occurred and is continuing, neither the Agent nor any
Lender shall apply any payments which it receives to any LIBOR Rate Loan,
except (a) on the expiration date of the Interest Period applicable to any
such LIBOR Rate Loan, or (b) in the event, and only to the extent, that
there are no outstanding Base Rate Loans and, in any event, the Borrowers shall
pay LIBOR breakage losses in accordance with Section 4.4, if any.  The Agent and the Lenders shall have the
continuing and exclusive right to apply and reverse and reapply any and all
such proceeds and payments to any portion of the Obligations.

 

3.9                                 Indemnity
for Returned Payments. 
If after receipt of any payment which is applied to the payment of all
or any part of the Obligations, the Agent, any Lender, the Bank or any
Affiliate of the Bank is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for
any other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such
Lender and the Borrowers shall be liable to pay to the Agent and the Lenders,
and hereby does indemnify the Agent and the Lenders and hold the Agent and the
Lenders harmless for the amount of such payment or proceeds surrendered.  The provisions of this Section 3.9
shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to the Agent’s and the Lenders’ rights under this Agreement and shall
be deemed to have been conditioned upon such payment or application of proceeds
having become final and irrevocable.  The
provisions of this Section 3.9 shall survive the termination of
this Agreement.

 

19

 

3.10                           Agent’s
and Lenders’ Books and Records; Monthly Statements.  The Agent shall record the principal amount
of the Loans owing to each Lender, the undrawn face amount of all outstanding
Letters of Credit and the aggregate amount of unpaid reimbursement obligations
outstanding with respect to the Letters of Credit from time to time on its
books.  In addition, each Lender may note
the date and amount of each payment or prepayment of principal of such Lender’s
Loans in its books and records.  Failure
by Agent or any Lender to make such notation shall not affect the obligations
of the Borrowers with respect to the Loans or the Letters of Credit.  The Borrowers agree that the Agent’s and each
Lender’s books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be admissible in
any action or proceeding arising therefrom, and shall constitute rebuttably
presumptive proof thereof, irrespective of whether any Obligation is also
evidenced by a promissory note or other instrument.  The Agent will provide to the Borrowers a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement.  Such statement shall be
deemed correct, accurate, and binding on the Borrowers and an account stated
(except for reversals and reapplications of payments made as provided in Section 3.8
and corrections of errors discovered by the Agent), unless the Borrower
notifies the Agent in writing to the contrary within thirty (30) days after
such statement is rendered.  In the event
a timely written notice of objections is given by the Borrower, only the items
to which exception is expressly made will be considered to be disputed by the
Borrowers.

 

ARTICLE 4

TAXES, YIELD PROTECTION AND ILLEGALITY

 

4.1                                 Taxes.

 

(a)                                  Except as provided in Section 4.1(c),
any and all payments by the Borrowers to each Lender or the Agent under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. 
In addition, the Borrowers shall pay all Other Taxes.

 

(b)                                 The Borrowers agree to indemnify and
hold harmless each Lender and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.1(b)) paid by any Lender or
the Agent and any liability (including penalties, interest, additions to tax
and expenses, except to the extent that such penalties, interest, additions to
tax and expenses result solely from the negligence of the indemnified Person)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted, other than Taxes or Other Taxes that
are in effect and would apply as of the date that (i) such Lender or the
Agent, as the case may be, becomes a party to this Agreement or (ii) such
Lender designates a new lending office (other than as a result of changing its
lending office or taking any of the other actions pursuant to Section 4.1(e)).  Payment under this indemnification shall be
made within 30 days after the date such Lender or the Agent makes written
demand therefor.

 

(c)                                  If the Borrowers shall be required
by law to deduct or withhold any Taxes or Other Taxes from or in respect of any
sum payable hereunder to any Lender or the Agent (other than Taxes or Other
Taxes that are in effect and would apply as of the date that

 

20

 

(i) such Lender or the Agent, as the case may be, becomes a party
to this Agreement or (ii) such Lender designates a new lending office
(other than as a result of changing its lending office or taking any of the
other actions pursuant to Section 4.1(e)), then:

 

(i)                                     the sum payable shall be increased
as necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Lender or the Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;

 

(ii)                                  the Borrowers shall make such
deductions and withholdings; and

 

(iii)                               the Borrowers shall pay the full
amount deducted or withheld to the relevant taxing authority or other authority
in accordance with applicable law.

 

(d)                                 Within 30 days after the Agent’s
request the Borrowers shall furnish the Agent the original or a certified copy
of a receipt evidencing payment by the Borrowers of Taxes or Other Taxes, or
other evidence of payment satisfactory to the Agent.

 

(e)                                  If the Borrowers are required to pay
additional amounts to any Lender or the Agent pursuant to Section 4.1,
then such Lender shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its lending office so as
to eliminate any such additional payment by the Borrowers which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.

 

(f)                                    If the Agent or any Lender receives
payment from the Borrowers for Taxes or Other Taxes for which indemnification
has been demanded pursuant to this Section 4.1, then the Agent or
such Lender, as the case may be, shall use reasonable efforts to cooperate with
the Borrower (but shall have no obligation to disclose any confidential
information, unless arrangements satisfactory to the relevant Lender or Agent
have been made to preserve the confidential nature of such information) in
seeking a refund of such payment at Borrower’s expense and provided that the
Borrower has determined in good faith that a reasonable basis exists for
contesting such Tax or Other Tax (it being understood that no Lender nor Agent
shall have any obligation to contest, or any responsibility for contesting, any
Tax or Other Tax or seeking any refund and shall have no obligation to modify
their tax planning or reporting of any computations in respect thereof).  If any portion of such challenged Tax or
Other Tax is unpaid at the time of such request, the Borrower shall pay all
such Taxes or Other Taxes prior to commencing any such challenge.  If the Agent or a Lender irrevocably receives
a final refund from any Governmental Authority expressly identified as a
payment in respect of Taxes or Other Taxes paid by the Borrowers, the Agent or
such Lender will pay to the Borrowers or credit against the Obligations the
portion of such refund equal to the extent to which the Agent or such Lender,
as the case may be, has received indemnity payments or additional amounts
pursuant to Section 4.1, net of all out-of-pocket expenses incurred
in obtaining such refund and without interest (other than the portion of any
interest paid by the relevant Governmental Authority and expressly identified
as a payment of interest with respect to such refund and allocable to such

 

21

 

portion
representing the amount payable to the Borrower hereunder) to the extent, in
each case, payment has been made in full as and when required pursuant to Section 4.1.

 

(g)                                 Notwithstanding anything contained
in this Section 4.1, the Agent and any Lender shall not be entitled
to any indemnification or additional amounts under this Section 4.1
for Taxes or Other Taxes if the imposition of such Taxes or Other Taxes results
solely from a failure by the Agent or such Lender, as the case may be, to
comply with its obligations under Section 12.10.

 

4.2                                 Illegality.

 

(a)                                  If any Lender determines in good
faith that the introduction of any Requirement of Law, or any change in any
Requirement of Law, or in the interpretation or administration of any
Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable lending office to make LIBOR Rate Loans, then, on notice thereof by
that Lender to the Borrower through the Agent, any obligation of that Lender to
make LIBOR Rate Loans shall be suspended until that Lender notifies the Agent
and the Borrower that the circumstances giving rise to such determination no
longer exist.

 

(b)                                 If a Lender determines in good faith
that it is unlawful to maintain any LIBOR Rate Loan, the Borrowers shall, upon
receipt of notice of such fact and demand from such Lender (with a copy to the
Agent), prepay in full such LIBOR Rate Loans of that Lender then outstanding,
together with interest accrued thereon and amounts required under Section 4.4,
if any, either on the last day of the Interest Period thereof, if that Lender
may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if that Lender may not lawfully continue to maintain such LIBOR
Rate Loans.  If the Borrowers is required
to so prepay any LIBOR Rate Loans, then concurrently with such prepayment, the
Borrowers shall borrow from the affected Lender, in the amount of such
repayment, a Base Rate Loan.

 

4.3                                 Increased
Costs and Reduction of Return.

 

(a)                                  If any Lender determines in good
faith that due to either (i) the introduction of or any change in the
interpretation of any law or regulation or (ii) the compliance by that
Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost (other than in each case Taxes or Other Taxes, which
shall be governed by Section 4.1, or taxes imposed or measured by
such Lender’s net income) to such Lender of agreeing to make or making, funding
or maintaining any LIBOR Rate Loans, then the Borrowers shall be liable for,
and shall from time to time, upon demand (with a copy of such demand to be sent
to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.

 

(b)                                 If any Lender shall have determined
in good faith that (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any
change in the interpretation or administration of any Capital Adequacy

 

22

 

Regulation
by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by such
Lender or any corporation or other entity controlling such Lender with any
Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by such Lender or any corporation or
other entity controlling such Lender and (taking into consideration such Lender’s
or such corporation’s or other entity’s policies with respect to capital
adequacy and such Lender’s desired return on capital) determines in good faith
that the amount of such capital is increased as a consequence of its
Commitments, loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Borrower through the Agent, the Borrowers shall
pay to such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender for such increase.

 

4.4                                 Funding
Losses.  The Borrowers shall
reimburse each Lender and hold each Lender harmless from any loss or expense
which such Lender may sustain or incur as a consequence of:

 

(a)                                  the failure of the Borrowers to make
on a timely basis any payment of principal of any LIBOR Rate Loan;

 

(b)                                 the failure of the Borrowers to
borrow, continue or convert a Loan after the Borrower has given (or is deemed
to have given) a Notice of Borrowing or a Notice of Continuation/Conversion; or

 

(c)                                  the prepayment or other payment
(including after acceleration thereof) of any LIBOR Rate Loans on a day that is
not the last day of the relevant Interest Period;

 

including any such loss
of anticipated profit and any loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Rate Loans or from
fees payable to terminate the deposits from which such funds were obtained.  Borrowers shall also pay any customary
administrative fees charged by any Lender in connection with the foregoing.

 

4.5                                 Inability
to Determine Rates.  If the Agent
determines in good faith that for any reason adequate and reasonable means do
not exist for determining the LIBOR Rate for any requested Interest Period with
respect to a proposed LIBOR Rate Loan, or that the LIBOR Rate for any requested
Interest Period with respect to a proposed LIBOR Rate Loan does not adequately
and fairly reflect the cost to the Lenders of funding such Loan, the Agent will
promptly so notify the Borrower and each Lender.  Thereafter, the obligation of the Lenders to
make or maintain LIBOR Rate Loans hereunder shall be suspended until the Agent
revokes such notice in writing.  Upon
receipt of such notice, the Borrower may revoke any Notice of Borrowing or
Notice of Continuation/Conversion then submitted by it.  If the Borrower does not revoke such Notice,
the Lenders shall make, convert or continue the Loans, as proposed by the
Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Rate Loans.

 

23

 

4.6                                 Replacement of Affected Lender.  If
the Borrowers, as a result of the requirements of either Section 4.1 or
4.3, shall be required to pay any particular Lender the additional amounts
referred to in such Section, which costs are not imposed by the other Lenders,
or if a Lender is unable to make or maintain LIBOR Rate Loans and gives a
notice of such pursuant to Section 4.2 (each Lender so affected by
the circumstances described in Section 4.1, 4.2 or 4.3 an “Affected
Lender”), then the Borrowers shall be entitled to find a replacement Lender
reasonably acceptable to the Agent, and to replace the Affected Lender within
180 days after the Affected Lender makes a demand for payment of such
additional amounts or gives a notice under Section 4.2.  The Affected Lender and the replacement
Lender shall execute an Assignment and Acceptance with respect to all of the
Affected Lender’s Commitments and all loans owing to the Affected Lender and
comply with the requirements of Article 11.  Upon the payment by the replacement Lender to
the Affected Lender of the then outstanding principal amount of Loans owing to
the Affected Lender, together with accrued interest thereon, and the payment by
the Borrowers to the Affected Lender of any compensation required by Section 4.1
or 4.3 and to the Agent of the processing fee required by Section 11.2,
the replacement Lender shall succeed to all of the Affected Lender’s rights and
obligations under this Agreement and the other Loan Documents.

 

4.7                                 Certificates of Agent.  If
any Lender claims reimbursement or compensation under this Article 4,
Agent shall determine the amount thereof and shall deliver to the Borrower
(with a copy to the affected Lender) a certificate setting forth in reasonable
detail the amount payable to the affected Lender, and such certificate shall be
conclusive and binding on the Borrowers in the absence of manifest error.

 

4.8                                 Survival. 
The agreements and obligations of the Borrowers in this Article 4
shall survive the payment of all other Obligations.

 

ARTICLE 5

BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

 

5.1                                 Books and Records.  The Borrower shall maintain and cause each of
its Subsidiaries to maintain, at all times, correct and complete books, records
and accounts in which complete, correct and timely entries are made of its transactions
in accordance with GAAP applied consistently with the audited Financial
Statements required to be delivered pursuant to Section 5.2(a).  The Borrower shall, and shall cause each of
its Subsidiaries to, by means of appropriate entries, reflect in such accounts
and in all Financial Statements proper liabilities and reserves for all taxes
and proper provision for depreciation and amortization of property and bad
debts, all in accordance with GAAP.  The
Borrower shall maintain and cause each of its Subsidiaries to maintain at all
times books and records pertaining to the Collateral in such detail, form and
scope as the Agent or any Lender shall reasonably require, including, but not
limited to, records of (a) all payments received and all credits and extensions
granted with respect to the Accounts; (b) the return, rejection,
repossession, stoppage in transit, loss, damage, or destruction of any
Inventory; and (c) all other dealings affecting the Collateral.

 

5.2                                 Financial Information.  The Borrower shall promptly furnish to each
Lender, all such financial information as the Agent shall reasonably request.
Without limiting the

 

24

 

foregoing, the Borrower
will furnish to the Agent, in sufficient copies for distribution by the Agent
to each Lender, in such detail as the Agent or the Lenders shall reasonably
request, the following:

 

(a)                                  As
soon as available, but in any event not later than ninety (90) days after the
close of each Fiscal Year, consolidated audited and consolidating unaudited
balance sheets, and income statements, cash flow statements and changes in
stockholders’ equity for Holdings and its Subsidiaries, and for Feeders, for
such Fiscal Year, and the accompanying notes thereto, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in
reasonable detail, fairly presenting the financial position and the results of
operations of Holdings and its consolidated Subsidiaries, and of Feeders, as at
the date thereof and for the Fiscal Year then ended, and prepared in accordance
with GAAP.  Such statements shall be
examined in accordance with generally accepted auditing standards by and, in
the case of such statements performed on a consolidated basis, accompanied by a
report thereon unqualified in any respect of Deloitte & Touche or
other independent certified public accountants selected by the Borrower and
reasonably satisfactory to the Agent. 
The Borrower, simultaneously with retaining such independent public
accountants to conduct such annual audit, shall send a letter to such
accountants, with a copy to the Agent and the Lenders, notifying such
accountants that one of the primary purposes for retaining such accountants’
services and having audited financial statements prepared by them is for use by
the Agent and the Lenders.  The Borrower
hereby authorizes the Agent to communicate directly with its certified public
accountants (provided that the Borrower is given reasonable prior notice
of, and an opportunity to participate in, any such communication) and, by this
provision, authorizes those accountants to disclose to the Agent any and all
financial statements and other supporting financial documents and schedules
relating to Holdings and its Subsidiaries and Feeders and to discuss directly
with the Agent the finances and affairs of Holdings and its Subsidiaries and
Feeders.

 

(b)                                 As
soon as available, but in any event not later than thirty (30) days after the
end of each month, consolidated and consolidating unaudited balance sheets of
Holdings and its consolidated Subsidiaries, and of Feeders, as at the end of
such month, and consolidated and consolidating unaudited income statements and
cash flow statements for Holdings and its consolidated Subsidiaries, and of
Feeders, for such month and for the period from the beginning of the
then-current Fiscal Year to the end of such month, all in reasonable detail,
fairly presenting the financial position and results of operations of Holdings
and its consolidated Subsidiaries and Feeders as at the date thereof and for
such periods, and, in each case, in comparable form, figures for the
corresponding period in the prior Fiscal Year and (with respect to Borrower and
its Subsidiaries) in the Borrower’s budget, and prepared in accordance with
GAAP (other than the lack of footnote disclosure) applied consistently with the
audited Financial Statements required to be delivered pursuant to Section 5.2(a).  The Borrower shall certify by a certificate
signed by a Responsible Officer that all such statements have been prepared in
accordance with GAAP (other than the lack of footnote disclosure) and present
fairly the financial position of Holdings and its Subsidiaries and Feeders as
at the dates thereof and its results of operations for the periods then ended,
subject to normal year-end audit adjustments.

 

(c)                                  With
each of the annual audited Financial Statements delivered pursuant to Section 5.2(a),
and within thirty (30) days after the end of each month, a certificate of

 

25

 

a Responsible Officer of
the Borrower setting forth in reasonable detail the calculations required to
establish that the Borrower was in compliance with the covenants set forth in Sections 7.22
and 7.23 as at the end of such period. 
Within thirty (30) days after the end of each month, a certificate of a
Responsible Officer of the Borrower stating that, except as explained in
reasonable detail in such certificate, (A) all of the representations and
warranties of Holdings and its Subsidiaries contained in this Agreement and the
other Loan Documents are correct and complete in all material respects as at
the date of such certificate as if made at such time, except for those that
speak as of a particular date, (B) the Borrower is, at the date of such
certificate, in compliance in all material respects with all of its respective
covenants and agreements in this Agreement and the other Loan Documents, (C) no
Default or Event of Default then exists or existed during the period covered by
the Financial Statements for such month, (D) describing and analyzing in
reasonable detail all material trends, changes, and developments in each and
all Financial Statements; and (E) explaining the material variances of the
figures in the corresponding budgets and prior Fiscal Year financial
statements.  If such certificate
discloses that a representation or warranty is not correct or complete, or that
a covenant has not been complied with, or that a Default or Event of Default
existed or exists, such certificate shall set forth what action the Borrower
has taken or proposes to take with respect thereto.

 

(d)                                 No
sooner than sixty (60) days and not less than thirty (30) days prior to the
beginning of each Fiscal Year, annual forecasts (to include forecasted consolidated
and consolidating balance sheets, income statements and cash flow statements)
for the Borrower and its Subsidiaries as at the end of and for each month of
such Fiscal Year.

 

(e)                                  [intentionally
omitted]

 

(f)                                    Promptly
upon the filing thereof, copies of all reports, if any, to or other documents
filed by Holdings or any of its Subsidiaries with the Securities and Exchange
Commission under the Exchange Act, and all reports, notices, or statements sent
or received by Holdings or any of its Subsidiaries to or from the holders of
any equity interests of Holdings (in their capacities as shareholders) (other
than routine non-material correspondence sent by shareholders of Holdings to
the Borrower) or any such Subsidiary or of any Debt of Holdings or any of its
Subsidiaries registered under the Securities Act of 1933 or to or from the
trustee under any indenture under which the same is issued.

 

(g)                                 As
soon as available, but in any event not later than 15 days after Holdings’ or
the Borrower’s receipt thereof, a copy of all management reports and management
letters prepared for Holdings’ or the Borrower by any independent certified
public accountants.

 

(h)                                 Promptly
after their preparation, copies of any and all proxy statements and financial
statements which Holdings or the Borrower makes available to its shareholders.

 

(i)                                     If
requested by the Agent, promptly after filing with the IRS, a copy of each tax
return filed by Holdings or the Borrower or by any of its Subsidiaries.

 

26

 

(j)                                     As
soon as available, but in any event on or before Tuesday of each week for the
preceding week, and on or before the 20th day of each month for the preceding
month, a Borrowing Base Certificate and supporting information in accordance
with Section 9 of the Security Agreement.   Borrowers may submit Borrowing Base
Certificates more frequently.

 

(k)                                  Such
additional information as the Agent and/or any Lender may from time to time
reasonably request regarding the financial and business affairs of
Holdings,  the Borrower or any
Subsidiary.

 

5.3                                 Notices to the Lenders.  The Borrower shall notify the Agent and the
Lenders in writing of the following matters at the following times:

 

(a)                                  Immediately after becoming aware of
any Default or Event of Default;

 

(b)                                 Immediately after becoming aware of
the assertion by the holder of any Capital Stock of Holdings or the Borrower or
of any Subsidiary or the holder of any Debt of Holdings or the Borrower or any
Subsidiary in a face amount in excess of $250,000 that a default exists with
respect thereto or that Holdings or the Borrower or such Subsidiary is not in
compliance with the terms thereof, or the threat or commencement by such holder
of any enforcement action because of such asserted default or non-compliance;

 

(c)                                  Immediately after becoming aware of
any event or circumstance which could reasonably be expected to have a Material
Adverse Effect;

 

(d)                                 Immediately after becoming aware of
any pending or threatened action, suit, or proceeding, by any Person, or any
pending or threatened investigation by a Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect or of any notice from
or to any Pharmaceutical Regulatory Agency of any actual or asserted violation
in any material respect of any Requirement of Law;

 

(e)                                  Immediately after becoming aware of
any pending or threatened strike, work stoppage, unfair labor practice claim,
or other labor dispute affecting the Borrower or any of its Subsidiaries in a
manner which could reasonably be expected to have a Material Adverse Effect;

 

(f)                                    Immediately after becoming aware of
any violation of any law, statute, regulation, or ordinance of a Governmental
Authority affecting Holdings,  the
Borrower or any Subsidiary which could reasonably be expected to have a
Material Adverse Effect;

 

(g)                                 Immediately after receipt of any
notice of (i) any violation by Holdings, the Borrower or any of its
Subsidiaries of any Environmental Law which could reasonably be expected to
have a Material Adverse Effect or (ii) that any Governmental Authority has
asserted in writing that Holdings, the Borrower or any Subsidiary is not in
compliance with any Environmental Law or is investigating the Borrower’s or
such Subsidiary’s compliance therewith unless such failure to comply or the
result of such investigation could not reasonably be expected to have a
Material Adverse Effect;

 

27

 

(h)                                 Immediately after receipt of any
written notice that Holdings, the Borrower or any of its Subsidiaries is or may
be liable to any Person as a result of the Release or threatened Release of any
Contaminant or that Holdings, the Borrower or any Subsidiary is subject to
investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to the Release or threatened Release of any
Contaminant which, in either case, is reasonably likely to give rise to
liability in excess of $500,000;

 

(i)                                     Immediately after receipt of any
written notice of the imposition of any Environmental Lien against any property
of Holdings, the Borrower or any of its Subsidiaries;

 

(j)                                     Any change in the name, state of
organization, locations of Collateral, or form of organization, trade names
under which the Borrower or any of its Subsidiaries will sell Inventory or
create Accounts, or to which instruments in payment of Accounts may be made
payable, in each case at least thirty (30) days prior thereto;

 

(k)                                  Within ten (10) Business Days
after the Borrower or any ERISA Affiliate knows or has reason to know, that an
ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA
and 4975 of the Code and other than a transaction that is exempt under a
statutory or administrative exemption) has occurred, and, when known, any
action taken or threatened by the IRS, the DOL or the PBGC with respect
thereto;

 

(l)                                     Upon request, or, in the event that
such filing reflects a significant change with respect to the matters covered
thereby, within ten (10) Business Days after the filing thereof with the
PBGC, the DOL or the IRS, as applicable, copies of the following:  (i) each annual report (form 5500
series), including Schedule B thereto, filed with the PBGC, the DOL or the
IRS with respect to each Plan, (ii) a copy of each funding waiver request
filed with the PBGC, the DOL or the IRS with respect to any Pension Plan and
all communications received by the Borrower or any ERISA Affiliate from the
PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of
each other filing or notice filed with the PBGC, the DOL or the IRS, with
respect to each Plan by either the Borrower or any ERISA Affiliate;

 

(m)                               Upon request, copies of each
actuarial report for any Pension Plan or Multi-employer Plan and annual report
for any Multi-employer Plan (to the extent such Multi-employer Plan documents
are reasonably available to the Borrower); and within ten (10) Business
Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of
the following:  (i) any notices of
the PBGC’s intention to terminate a Pension Plan or to have a trustee appointed
to administer such Pension Plan; (ii) any unfavorable determination letter
from the IRS regarding the qualification of a Plan under Section 401(a) of
the Code; or (iii) any notice from a Multi-employer Plan regarding the
imposition of withdrawal liability;

 

(n)                                 Within ten (10) Business Days
after the occurrence thereof: (i) any changes in the benefits of any
existing Pension Plan which increase the annual costs of Holdings or any of its
Subsidiaries with respect thereto by an amount in excess of $500,000 or the
establishment of any new Pension Plan or the commencement of contributions to
any Pension Plan to which the Borrower or any ERISA Affiliate was not
previously contributing; (ii)  any

 

28

 

changes in the benefits
of any existing Plan (other than a Pension Plan) or the establishment of any
new Plan (other than a Pension Plan) or the commencement of contributions to
any Plan (other than a Pension Plan) to which the Borrower or any ERISA
Affiliate was not previously contributing, which in each event increase the
annual costs of Holdings or any of its Subsidiaries with respect thereto by an
amount in excess of $500,000, or (iii) any failure by the Borrower or any
ERISA Affiliate to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such
installment or payment; or

 

(o)                                 Within ten (10) Business Days
after the Borrower or any ERISA Affiliate knows or has reason to know that any
of the following events has occurred or could reasonably be expected to
occur:  (i) a Multi-employer Plan
has been or will be terminated; (ii) the administrator or plan sponsor of
a Multi-employer Plan intends to terminate a Multi-employer Plan; or (iii) the
PBGC has instituted or will institute proceedings under Section 4042 of
ERISA to terminate a Multi-employer Plan.

 

Each notice given under
this Section shall describe the subject matter thereof in reasonable
detail, and shall set forth the action that the Borrower, its Subsidiary, or
any ERISA Affiliate, as applicable, has taken or proposes to take with respect
thereto.

 

ARTICLE 6

GENERAL WARRANTIES AND REPRESENTATIONS

 

The Borrower warrants and
represents to the Agent and the Lenders that except as hereafter disclosed to
and accepted by the Agent and the Required Lenders in writing, both before
and  after giving effect to the
Recapitalization (as to the Borrower and its Subsidiaries) and, as to Holdings,
after the consummation of the Recapitalization:

 

6.1                                 Authorization, Validity, and
Enforceability of this Agreement, the Loan Documents and the Transaction
Documents.  The Borrower has the
power and authority to execute, deliver and perform this Agreement and the
other Loan Documents and the Transaction Documents to which it is a party, to
incur the Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral and to effect the Recapitalization.  The Borrower has taken all necessary action
(including obtaining approval of its stockholders if necessary) to authorize
its execution, delivery, and performance of this Agreement, the other Loan
Documents and the Transaction Documents to which it is a party.  This Agreement, the other Loan Documents, and
the Transaction Documents to which it is a party have been duly executed and
delivered by the Borrower, and constitute the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with their
respective terms.  The execution,
delivery, and performance of this Agreement, the other Loan Documents and the
Transaction Documents to which it is a party do not and will not, in any
material respect, conflict with, or constitute a violation or breach of, or
result in the imposition of any Lien upon the property of the Borrower or any
of its Subsidiaries, by reason of the terms of (a) any contract, mortgage,
lease, agreement, indenture, or instrument to which any of them  is a party or which is binding upon it, except
as described on Schedule 6.1 (b) any Requirement of Law
applicable to the Borrower or any of its Subsidiaries, or (c) the
certificate or articles of incorporation or by-laws or the limited
liability company or limited partnership agreement of the Borrower or any of
its Subsidiaries.

 

29

 

6.2                                 Validity and Priority of
Security Interest.  The
provisions of this Agreement, the Mortgage(s), and the other Loan Documents
create legal and valid Liens on all the Collateral in favor of the Agent, for
the ratable benefit of the Agent and the Lenders, and such Liens constitute
perfected and continuing Liens on all the Collateral, having priority over all
other Liens on the Collateral, except for those Liens identified in clauses
(c), (d), (e) and (h) of the definition of
Permitted Liens securing all the Obligations, and enforceable against the
Borrower, its Subsidiaries and all third parties; provided that, as to
Liens in Proprietary Rights, if and to the extent that such Liens are capable,
as a matter of law, of being perfected, such Liens shall be perfected when (i) the
Patent and Trademark Security Agreements have been filed with the United States
Patent and Trademark Office or appropriate financing statements have been filed
and (ii) the Copyright Security Agreement has been filed with the United
States Copyright Office.

 

6.3                                 Organization and Qualification.  The Borrower (a) is duly organized or
incorporated and validly existing in good standing under the laws of the state
of its organization or incorporation, (b) is qualified to do business and
is in good standing in the jurisdictions set forth on Schedule 6.3
which are the only jurisdictions in which qualification is necessary in order
for it to own or lease its property and conduct its business, except such
jurisdictions where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect and (c) has all requisite power
and authority to conduct its business and to own its property .

 

6.4                                 Corporate Name; Prior
Transactions.  The Borrower has
not, during the past five (5) years, been known by or used any other
corporate or fictitious name, or been a party to any merger or consolidation,
or acquired all or substantially all of the assets of any Person, or acquired
any of its property outside of the ordinary course of business.

 

6.5                                 Subsidiaries and Affiliates.  Schedule 6.5 is a correct and
complete list of the name and relationship to the Borrower of each and all of
the Borrower’s Subsidiaries and other Affiliates.  Each Subsidiary is (a) duly incorporated
or organized and validly existing in good standing under the laws of its state
of incorporation or organization set forth on Schedule 6.5, and (b) qualified
to do business and in good standing in each jurisdiction in which the failure
to so qualify or be in good standing could reasonably be expected to have a
material adverse effect on any such Subsidiary’s business, operations,
prospects, property, or condition (financial or otherwise) and (c) has all
requisite power and authority to conduct its business and own its property.

 

6.6                                 Financial Statements and
Projections.

 

(a)                                  The Borrower has delivered to the
Agent and the Lenders the audited balance sheet and related statements of
income and cash flows for the Borrower and its consolidated Subsidiaries and
for Feeders, in each case as of September 30, 2001 and September 30,
2000, and for the Fiscal Years then ended, accompanied by the report thereon of
Deloitte & Touche.  The Borrower
has also delivered to the Agent and the Lenders the unaudited balance sheet and
related statements of income for the Borrower and its consolidated Subsidiaries
and for Feeders as of May 31, 2002. 
Such unaudited financial statements are attached hereto as Exhibit C.  All such financial statements have been
prepared in accordance with GAAP and present

 

30

 

accurately and fairly in
all material respects the financial position of the Borrower and its
consolidated Subsidiaries and Feeders, as applicable, as at the dates thereof
and their results of operations for the periods then ended, subject in the case
of the unaudited statements to the lack of footnote disclosures and changes
resulting from normal year-end audit adjustments.

 

(b)                                 The Latest Projections when
submitted to the Lenders as required herein (and the Latest Projections as of June 2002,
are attached hereto as Exhibit H) represent the Borrower’s best
estimate of the future financial performance of the Borrower and its
consolidated Subsidiaries for the periods set forth therein.  The Latest Projections have been prepared on
the basis of the assumptions set forth therein, which the Borrower believes are
fair and reasonable in light of current and reasonably foreseeable business
conditions at the time submitted to the Lenders.

 

(c)                                  The pro forma balance sheet of the
Borrower as at June 14, 2002, attached hereto as Exhibit C,
presents fairly, in all material respects, and accurately the Borrower’s
financial condition as at such date after giving effect to the Recapitalization
as if it had occurred on such date and the Closing Date had been such date, and
has been prepared in accordance with GAAP.

 

6.7                                 Capitalization.  As of the Closing Date, the Borrower’s
authorized capital stock consists of 5,000,000 shares of common stock, par
value $1.00 per share, of which 1,000,000 shares are validly issued and
outstanding immediately prior to the Recapitalization and are fully paid and
non-assessable.  Immediately prior to the
Recapitalization, all such shares are owned beneficially and of record by
ABC.  Following the Recapitalization, all
shares of the Borrower are owned beneficially and of record by Holdings.

 

6.8                                 Solvency. 
The Borrower is Solvent prior to and after giving effect to the
Borrowings to be made on the Closing Date and the issuance of the Letters of
Credit to be issued on the Closing Date and the Recapitalization, and each of
the Borrower, each Subsidiary Borrower and each other Loan Party shall, upon
the incurrence of any Obligations by such Loan Party, be Solvent.

 

6.9                                 Debt. 
After giving effect to the making of the Loans to be made on the Closing
Date and the consummation of the transactions under the Recapitalization
Agreement, as of the Closing Date, Holdings and its Subsidiaries have no Debt,
except (a) the Obligations, and (b) Debt described on Schedule 6.9.

 

6.10                           Distributions.  Since the Closing Date, no Distribution has
been declared, paid, or made upon or in respect of any capital stock or other
securities of the Borrower or any of its Subsidiaries except as expressly
permitted under Section 7.10.

 

6.11                           Real Estate; Leases.  Schedule 6.11 sets forth, as of
the Closing Date, a correct and complete list of all Real Estate owned by the
Borrower and all Real Estate owned by any of its Subsidiaries, all leases and
subleases of real or personal property held by the Borrower as lessee or
sublessee, and all leases and subleases of real or personal property held by
the Borrower or any of its Subsidiaries as lessor, or sublessor.  Each of such leases and subleases is

 

31

 

valid and enforceable in
accordance with its terms and is in full force and effect, and, to the best of
the Borrower’s knowledge, no default by any party to any such lease or sublease
exists.  The Borrower or its Subsidiary
has good and marketable title in fee simple to the Real Estate identified on Schedule 6.11
as owned by it, or valid leasehold interests in all Real Estate designated
therein as “leased” by the Borrower and its Subsidiaries have good,
indefeasible, and merchantable title to all of the other property reflected on
the most recent Financial Statements delivered to the Agent and the Lenders,
except as disposed of in the ordinary course of business since the date thereof
or as otherwise disposed of in accordance with this Agreement, free of all
Liens except Permitted Liens.

 

6.12                           Proprietary Rights.  Schedule 6.12 sets forth a
correct and complete list of all patents, patent applications, copyright
registrations and registration applications, trademark and service mark
registrations and applications for registrations, and material unregistered
trademarks and service marks, in each case of the Borrower and its
Subsidiaries.  None of the Proprietary
Rights of the Borrower and its Subsidiaries is subject to any licensing
agreement or similar arrangement (other than implied licenses granted in
connection with the sale of goods) except as set forth on Schedule 6.12.  To the best of the Borrower’s knowledge, none
of the Proprietary Rights of the Borrower and its Subsidiaries infringes on or
otherwise conflicts with any other Person’s Proprietary Rights, and no other
Person’s property infringes on or conflicts with the Proprietary Rights of the
Borrower and its Subsidiaries.  The
Proprietary Rights described on Schedule 6.12 constitute all of the
property of such type reasonably necessary to the current and anticipated
future conduct of the business of the Borrower and its Subsidiaries.

 

6.13                           Trade Names.  All trade names under which the Borrower or
any of its Subsidiaries will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule 6.13.

 

6.14                           Litigation. 
Except as set forth on Schedule 6.14, there is no pending,
or to the best of the Borrower’s knowledge threatened, action, suit,
proceeding, or counterclaim by any Person, or to the best of the Borrower’s
knowledge, investigation by any Governmental Authority, or any basis for any of
the foregoing, which could reasonably be expected to have a Material Adverse
Effect.

 

6.15                           Labor Disputes.  Except as set forth on Schedule 6.15,
as of the Closing Date (a) there is no collective bargaining agreement or
other labor contract covering employees of the Borrower or any of its
Subsidiaries, (b) no such collective bargaining agreement or other labor
contract is scheduled to expire during the term of this Agreement, (c) no
union or other labor organization is seeking to organize, or to be recognized
as, a collective bargaining unit of employees of the Borrower or any of its
Subsidiaries or for any similar purpose, and (d) there is no pending or
(to the best of the Borrower’s knowledge) threatened, strike, material work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting the Borrower or its Subsidiaries or their employees.

 

6.16                           Environmental Laws.  Except as otherwise disclosed on Schedule 6.16:

 

32

 

(a)                                  The Borrower and its Subsidiaries
have complied in all material respects with all Environmental Laws, and neither
the Borrower nor any Subsidiary nor any of its presently owned real property or
presently conducted operations, nor its previously owned real property or prior
operations, is subject to any enforcement order from or liability agreement
with any Governmental Authority or private Person respecting (i) failure
to comply in any material respect with any Environmental Law or (ii) any
potential liabilities and costs in a material amount or material remedial
action arising from the Release or threatened Release of a Contaminant.

 

(b)                                 The Borrower and its Subsidiaries
have obtained all permits necessary for their current operations under
Environmental Laws, and all such permits are in good standing and the Borrower
and its Subsidiaries are in compliance in all material respects with the terms
and conditions of such permits.

 

(c)                                  Neither the Borrower nor any of its
Subsidiaries, nor, to the best of the Borrower’s knowledge, any of its
predecessors in interest, has in violation in any material respect of
applicable law stored, treated or disposed of any hazardous waste.

 

(d)                                 Neither the Borrower nor any of its
Subsidiaries has received any summons, complaint, order or similar written
notice indicating that it is not currently in compliance in any material
respect with, or that any Governmental Authority is investigating its failure
to comply in any material respect with, any Environmental Laws or that it is or
may be liable to any other Person in any material amount as a result of a
Release or threatened Release of a Contaminant.

 

(e)                                  To the best of the Borrower’s
knowledge, none of the present or past operations of the Borrower and its
Subsidiaries is the subject of any investigation by any Governmental Authority
evaluating whether any material remedial action is needed to respond to a
Release or threatened Release of a Contaminant.

 

(f)                                    There is not now, nor to the best of
the Borrower’s knowledge has there ever been on or in the Real Estate:

 

(1)                                  any underground storage tanks or
surface impoundments,

 

(2)                                  any asbestos-containing material, or

 

(3)                                  any polychlorinated biphenyls (PCBs)
used in hydraulic oils, electrical transformers or other equipment.

 

(g)                                 Neither the Borrower nor any of its
Subsidiaries has filed any notice under any requirement of Environmental Law
reporting an accidental and unpermitted Release or discharge of a Contaminant
into the environment.

 

(h)                                 Neither the Borrower nor any of its
Subsidiaries has entered into any negotiations or settlement agreements with
any Person (including the prior owner of its property) imposing material
obligations or liabilities on the Borrower or any of its Subsidiaries

 

33

 

with respect to any
remedial action in response to the Release of a Contaminant or environmentally
related claim.

 

(i)                                     None of the products manufactured,
distributed or sold by the Borrower or any of its Subsidiaries contain asbestos
containing material.

 

(j)                                     No Environmental Lien has attached
to the Real Estate.

 

6.17                           No Violation of Law; Licenses.  Neither the Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect. 
The Borrower and its Subsidiaries have all licenses, permits and
authorizations necessary to the conduct of business including from all
Pharmaceutical Regulatory Agencies, and are in compliance in all material
respects with such licenses.

 

6.18                           No Default. 
Neither the Borrower nor any of its Subsidiaries is in default with
respect to any note, indenture, loan agreement, mortgage, lease, deed, or other
agreement to which the Borrower or such Subsidiary is a party or by which it is
bound, which default could reasonably be expected to have a Material Adverse
Effect.

 

6.19                           ERISA Compliance.  Except as specifically disclosed in Schedule 6.19:

 

(a)                                  Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
applicable federal or state law.  Each
Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS (or has applied for
a favorable determination letter within the applicable remedial amendment
period) and, to the best knowledge of the Borrower, nothing has occurred which
would cause the loss of such qualification. 
The Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code which could
result in a liability in an aggregate amount in excess of $500,000, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan
which could result in a liability in an aggregate amount in excess of $500,000.

 

(b)                                 There are no pending or, to the best
knowledge of Borrower, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.  To the best of the Borrower’s knowledge,
there has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.

 

(c)                                  (i)  No ERISA Event has
occurred or is reasonably expected to occur which will result in liability of
Holdings, the Borrower or any of its Subsidiaries under Title IV of ERISA to
any Pension Plan, Multi-employer Plan or the PBGC in an aggregate amount in
excess of $500,000; (ii) no Pension Plan has any material Unfunded Pension
Liability; (iii) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur,

 

34

 

any liability under Title
IV of ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA) in an aggregate amount in excess
of $500,000; (iv) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multi-employer Plan in an aggregate amount in excess of $500,000; and (v) neither
the Borrower nor any ERISA Affiliate has incurred or reasonably expects to
incur any liability under Section 4069 or 4212(c) of ERISA in an
aggregate amount in excess of $500,000.

 

6.20                           Taxes. 
The Borrower and its Subsidiaries have filed all federal and other
material tax returns and reports required to be filed, and have paid all
federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable unless such unpaid taxes and assessments would not
constitute or result in a Lien upon any Collateral or, if so, such Lien would
constitute a Permitted Lien.

 

6.21                           Regulated Entities.  None of Holdings, the Borrower, any Person
controlling the Borrower, or any Subsidiary, is an “Investment Company”
within the meaning of the Investment Company Act of 1940.  The Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act, any state public utilities code or law, or any
other federal or state statute or regulation limiting its ability to incur
indebtedness.

 

6.22                           Use of Proceeds; Margin
Regulations.  The proceeds of the
Loans made on the Closing Date are to be used to refinance existing Debt, to
redeem shares of the Borrower in connection with the Recapitalization and to
pay costs and expenses incurred in connection with the Transactions.  All proceeds of the Loans made thereafter are
to be used solely for working capital purposes and other corporate purposes
permitted under this Agreement, including Permitted Acquisitions.  Neither the Borrower nor any Subsidiary is
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.

 

6.23                           Copyrights, Patents,
Trademarks and Licenses, etc. 
The Borrower and each of its Subsidiaries owns, or is licensed or
otherwise has the right to use, all of the Proprietary Rights that are
reasonably necessary for the operation of their respective businesses, without
any known conflict with the rights of any other Person.  To the best knowledge of the Borrower, no
slogan or other advertising device, product, process, method, product part or
other material now employed, or now contemplated to be employed, by the
Borrower or any Subsidiary infringes upon, or is a misappropriation of, any
Proprietary Rights held by any other Person. 
No claim or litigation regarding any of the foregoing is presently
pending or, to the best knowledge of Borrower, without any independent
investigation, threatened, and to the best knowledge of Borrower, without any
independent investigation, (i) no patent, invention (whether or not
patentable), or application for registration of any Proprietary Right, and (ii) no
statute, law, rule, regulation, standard or code, is pending or proposed, which
in either case could reasonably be expected to have a Material Adverse Effect.

 

35

 

6.24                           No Material Adverse Change.  No Material Adverse Effect has occurred since
the latest date of the Financial Statements delivered to the Lenders.

 

6.25                           Full Disclosure.  None of the representations or warranties
made by Holdings, Borrower or any Subsidiary in the Loan Documents as of the
date such representations and warranties are made or deemed made, and none of
the statements contained in any exhibit, report, statement or certificate
furnished by or on behalf of Holdings, the Borrower or any Subsidiary in
connection with the Loan Documents (including the offering and disclosure
materials delivered by or on behalf of Holdings or the Borrower to the Agent or
Lenders prior to the Closing Date), contains any untrue statement of a material
fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.

 

6.26                           Material Agreements.  Schedule 6.26 hereto sets forth
as of the Closing Date all material agreements and contracts to which the
Borrower or any of its Subsidiaries is a party or is bound as of the date
hereof.

 

6.27                           Bank Accounts.  Schedule 6.27 contains as of the
Closing Date a complete and accurate list of all bank accounts maintained by
the Borrower with any bank or other financial institution.  Each of such accounts is held solely in the
name of the Borrower, and ABC has no interest in such accounts or the funds
therein.

 

6.28                           Governmental Authorization.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower or any of its Subsidiaries of this Agreement or any other Loan
Document or Transaction Document other than those approvals, consents,
exemptions, authorizations, notices or filings which the failure to obtain,
make or do could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

 

6.29                           Holdings. 
Holdings has the power and authority to execute, deliver and perform the
Loan Documents and Transaction Documents to which it is a party, to grant  to the Agent Liens upon and security
interests in the Collateral and to effect the Recapitalization.  Holdings has taken all necessary action
(including obtaining approval of its stockholders if necessary) to authorize
its execution, delivery  and performance
of the Loan Documents and Transaction Documents to which it is a party.  The Loan Documents and Transaction Documents
to which Holdings is a party are its legal, valid and binding obligations,
enforceable against it in accordance with their terms.  Holdings (a) is duly incorporated and
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and ( b) has all requisite power and authority to conduct its
business and to own its property.  Prior
to June 18, 2002, Holdings owned no assets and conducted no business.  On and after the Closing Date, the sole asset
of Holdings is the Capital Stock of the Borrower and it will conduct no
business operations and incur no Debt (other than the Obligations).

 

6.30                           Representations and
Warranties in the Recapitalization Agreement.  As of the Closing Date, each of the
representations and warranties of Holdings and, to the best of the

 

36

 

Borrower’s knowledge, the
Borrower and ABC contained in the Recapitalization Agreement is true and
correct in all material respects, and is incorporated herein by reference.

 

6.31                           Morgue Inventory.   Schedule 6.31
describes the Borrower’s policies as of the Closing Date for the designation of
Morgue Inventory.

 

ARTICLE 7

AFFIRMATIVE AND NEGATIVE
COVENANTS

 

The Borrower covenants to
the Agent and each Lender that so long as any of the Obligations remain
outstanding (other than contingent indemnification obligations as to which no
claim has been made) or this Agreement is in effect:

 

7.1                                 Taxes and Other Obligations.  The Borrower shall, and shall cause each of
its Subsidiaries to, (a) file when due all federal and other material tax
returns and other reports which it is required to file; (b) pay, or
provide for the payment, when due, of all taxes, fees, assessments and other
governmental charges against it or upon its property, income and franchises,
make all required withholding and other tax deposits, and establish adequate
reserves for the payment of all such items, and provide to the Agent and the
Lenders, upon request, satisfactory evidence of its timely compliance with the
foregoing; and (c) pay when due all claims of materialmen, mechanics,
carriers, warehousemen, landlords, processors and other like Persons, and all
other indebtedness owed by it and perform and discharge in a timely manner all
other obligations undertaken by it; provided, however, so long as
the Borrower has notified the Agent in writing with respect to claims in excess
of $50,000, neither the Borrower nor any of its Subsidiaries need pay any
amount with respect to any of the foregoing claims (regardless of the amount
asserted) (i) that it is contesting in good faith by appropriate
proceedings diligently pursued, (ii) as to which the Borrower or its
Subsidiary, as the case may be, has established proper reserves as required
under GAAP, and (iii) with respect to which the nonpayment of which does
not result in the imposition of a Lien (other than a Permitted Lien).

 

7.2                                 Legal Existence and Good
Standing.  The Borrower shall,
and shall cause each of its Subsidiaries to, maintain its legal existence and
its qualification and good standing in all jurisdictions in which the failure
to maintain such existence and qualification or good standing could reasonably
be expected to have a Material Adverse Effect.

 

7.3                                 Compliance with Law and
Agreements; Maintenance of Licenses. 
The Borrower shall comply, and shall cause each Subsidiary to comply, in
all material respects with all Requirements of Law of any Governmental
Authority having jurisdiction over it or its business (including the Federal
Fair Labor Standards Act, all Environmental Laws and all laws, rules and
regulations of Pharmaceutical Regulatory Agencies).  The Borrower shall, and shall cause each of
its Subsidiaries to, obtain and maintain all licenses, permits, franchises, and
governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date except where the failure to obtain
and maintain such licenses, permits, franchises and governmental authorizations
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.  The Borrower
shall not modify, amend or alter its certificate or articles of incorporation,
or its limited liability company

 

37

 

operating agreement or
limited partnership agreement, as applicable, other than in a manner which does
not adversely affect the rights of the Lenders or the Agent.

 

7.4                                 Maintenance of Property;
Inspection of Property.

 

(a)                                  The Borrower shall, and shall cause
each of its Subsidiaries to, maintain all of its property necessary in the
conduct of its business, in good operating condition and repair, ordinary wear
and tear excepted.

 

(b)                                 The Borrower shall permit
representatives and independent contractors of the Agent (at the expense of the
Borrower not to exceed four (4) times per year unless an Event of Default
has occurred and is continuing) and any Lender (at its own expense)
accompanying the Agent or its representatives or contractors, to visit and
inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom and to
discuss its affairs, finances and accounts with its directors, officers and
independent public accountants, at such reasonable times during normal business
hours and as soon as may be reasonably desired, upon reasonable advance notice
to the Borrower; provided, however, when an Event of Default
exists, the Agent or any Lender may do any of the foregoing at the expense of
the Borrower at any time during normal business hours and without advance
notice.

 

7.5                                 Insurance.

 

(a)                                  The Borrower shall maintain, and
shall cause each of its Subsidiaries to maintain, with financially sound and
reputable insurers having a rating of at least A or better by Best Rating
Guide, insurance against loss or damage by fire with extended coverage; theft,
burglary, pilferage and loss in transit; public liability and third party
property damage; larceny, embezzlement or other criminal liability; business
interruption; public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged in the same
or similar business, as the Agent, in its discretion, or acting at the
direction of the Required Lenders, shall specify, in amounts, and under
policies acceptable to the Agent and the Required Lenders.  Without limiting the foregoing, in the event
that any improved Real Estate covered by the Mortgages is determined to be
located within an area that has been identified by the Director of the Federal
Emergency Management Agency as a Special Flood Hazard Area (“SFHA”), the
Borrower shall purchase and maintain flood insurance on the improved Real
Estate and any Equipment and Inventory located on such Real Estate.  The amount of said flood insurance will be
reasonably determined by the Agent, and shall, at a minimum, comply with
applicable federal regulations as required by the Flood Disaster Protection Act
of 1973, as amended.  The Borrower shall
also maintain flood insurance for the Inventory and Equipment of the Borrower
and its Subsidiaries which is, at any time, located in a SFHA.

 

(b)                                 The Borrower shall cause the Agent,
for the ratable benefit of the Agent and the Lenders, to be named as secured
party or mortgagee and sole loss payee or additional insured, in a manner
reasonably acceptable to the Agent.  Each
policy of insurance shall contain a clause or endorsement requiring the insurer
to give not less than thirty (30) days’

 

38

 

prior written notice to
the Agent in the event of cancellation of the policy for any reason whatsoever
and a clause or endorsement stating that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of the Borrower or any of its
Subsidiaries or the owner of any Real Estate for purposes more hazardous than
are permitted by such policy.  All
premiums for such insurance shall be paid by the Borrower when due, and
certificates of insurance and, if requested by the Agent or any Lender,
photocopies of the policies, shall be delivered to the Agent, in each case in
sufficient quantity for distribution by the Agent to each of the Lenders.  If the Borrower fails to procure such
insurance or to pay the premiums therefor when due, the Agent may, and at the
direction of the Required Lenders shall, do so from the proceeds of  Loans.

 

7.6                                 Insurance and Condemnation
Proceeds.  The Borrower shall
promptly notify the Agent of any loss, damage, or destruction to the Collateral
in an amount greater than $100,000, whether or not covered by insurance.  The Agent is hereby authorized to collect all
insurance and condemnation proceeds in respect of Collateral directly and to
apply or remit them as follows:

 

(i)                                     With respect to insurance and
condemnation proceeds relating to Collateral other than Fixed Assets, after
deducting from such proceeds the reasonable expenses, if any, incurred by the
Agent in the collection or handling thereof, the Agent shall apply such
proceeds, ratably, to the reduction of the Obligations in the order provided
for in Section 3.8.

 

(ii)                                  With respect to insurance and
condemnation proceeds relating to Collateral consisting of Fixed Assets, the
Agent shall permit or require the Borrower to use such proceeds, or any part
thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction so long as (1) no
Default or Event of Default has occurred and is continuing, (2) the
aggregate proceeds do not exceed $500,000 and (3) the Borrower first (i) provides
the Agent and the Required Lenders with plans and specifications for any such
repair or restoration which shall be reasonably satisfactory to the Agent and
the Required Lenders and (ii) demonstrates to the reasonable satisfaction
of the Agent and the Required Lenders that the funds available to it will be
sufficient to complete such project in the manner provided therein.  In all other circumstances, the Agent shall
apply such insurance and condemnation proceeds, ratably, to the reduction of
the Obligations in the order provided for in Section 3.8.

 

7.7                                 Environmental Laws.

 

(a)                                  The Borrower shall, and shall cause
each of its Subsidiaries to, conduct its business in compliance in all material
respects with all Environmental Laws applicable to it, including those relating
to the generation, handling, use, storage, and disposal of any
Contaminant.  The Borrower shall, and
shall cause each of its Subsidiaries to, take prompt and appropriate action to
respond to any non-compliance in any material respect with Environmental Laws
and shall regularly report to the Agent on such response.

 

39

 

(b)                                 Without limiting the generality of
the foregoing, at the request of the Agent, the Borrower shall submit to the
Agent and the Lenders annually, commencing on the first Anniversary Date, and
on each Anniversary Date thereafter, an update of the status of each material environmental
compliance or liability issue.  The Agent
or any Lender may request copies of technical reports prepared by the Borrower
and its communications with any Governmental Authority to determine whether the
Borrower or any of its Subsidiaries is proceeding reasonably to correct, cure
or contest in good faith any alleged material non-compliance or material
environmental liability.  The Borrower
shall, at the Agent’s or the Required Lenders’ reasonable request and at the
Borrower’s expense, (i) retain an independent environmental engineer
acceptable to the Agent  to evaluate the
results of any such material non-compliance or liability, including tests of
the site if appropriate, where the material non-compliance or alleged material
non-compliance with Environmental Laws has occurred and prepare and deliver to
the Agent, in sufficient quantity for distribution by the Agent to the Lenders,
a report setting forth the results of such evaluation, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof, and (ii) provide to the Agent and the Lenders a
supplemental report of such engineer whenever the scope of the environmental
problems, or the response thereto or the estimated costs thereof, shall increase
in any material respect.

 

(c)                                  If the Borrower or any of its
Subsidiaries has failed to comply with the requirements of Section 7.7(a) or
(b) or if, in the judgment of the Agent or the Required Lenders, any
failure to comply with Environmental Laws or the existence of any Environmental
Claim could have a Material Adverse Effect or adversely affect the value of the
Mortgaged Property, the Agent and its representatives will have the right at
any reasonable time to enter and visit the Real Estate and any other place
where any property of the Borrower is located for the purposes of evaluating
the consequences of any of the foregoing, including, as appropriate, observing
the Real Estate, taking and removing soil or groundwater samples, and
conducting tests on any part of the Real Estate.  The Agent is under no duty, however, to visit
or observe the Real Estate or to conduct tests, and any such acts by the Agent
will be solely for the purposes of protecting the Agent’s Liens and preserving
the Agent’s and the Lenders’ rights under the Loan Documents.  No site visit, observation or testing by the
Agent and the Lenders will result in a waiver of any default of the Borrowers
or impose any liability on the Agent or the Lenders.  In no event will any site visit, observation
or testing by the Agent be a representation that hazardous substances are or
are not present in, on or under the Real Estate, or that there has been or will
be compliance with any Environmental Law. 
Neither the Borrower nor any other Person is entitled to rely on any
site visit, observation or testing by the Agent.  The Agent and the Lenders owe no duty of care
to protect the Borrower or any other Person against, or to inform the Borrower
or any other Person of, any hazardous substances or any other adverse condition
affecting the Real Estate.  The Agent may
in its discretion disclose to the Borrower or to any other Person if so
required by law any report or findings made as a result of, or in connection
with, any site visit, observation or testing by the Agent.  The Borrowers understands and agrees that the
Agent makes no warranty or representation to the Borrowers or any other Person
regarding the truth, accuracy or completeness of any such report or findings that
may be disclosed.  The Borrowers also
understand that depending on the results any site visit, observation or testing
by the Agent and disclosed to the Borrowers, the Borrowers may have a legal
obligation to notify one or more

 

40

 

environmental agencies of
the results, that such reporting requirements are site-specific, and are to be
evaluated by the Borrowers without advice or assistance from the Agent.  In each instance, the Agent will give the
Borrowers reasonable notice before entering the Real Estate or any other place
the Agent is permitted to enter under this Section 7.7(c).  The Agent will make reasonable efforts to
avoid interfering with the Borrower’s use of the Real Estate or any other
property in exercising any rights provided hereunder.

 

7.8                                 Compliance with ERISA.  The Borrower shall, and shall cause each of
its ERISA Affiliates to:  (a) maintain
each Plan in compliance in all material respects with the applicable provisions
of ERISA, the Code and other applicable law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such
qualification; (c) not fail to make all required contributions to any Plan
subject to Section 412 of the Code if such failure could result in a
liability in an aggregate amount in excess of $500,000; (d) not engage in
a prohibited transaction (as defined in Section 406 of ERISA and Section 4975
of the Code and other than a transaction that is exempt under a statutory or
administrative exemption) or violation of the fiduciary responsibility rules with
respect to any Plan that could result in liability in an aggregate amount in
excess of $500,000; and (e) not engage in a transaction that could result
in liability under Section 4069 or 4212(c) of ERISA in an aggregate
amount in excess of $500,000.

 

7.9                                 Mergers, Consolidations or Sales.  Neither the Borrower nor any of its
Subsidiaries shall enter into any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (i) for sales of Inventory in the ordinary course
of its business; (ii) for sales or other dispositions (including
trade-ins) of Equipment with net book value not to exceed $500,000 in any
Fiscal Year; (iii)  the Borrower may effect the Recapitalization; (iv) the
Borrower may make Permitted Acquisitions; and (v) the Borrower and its
Subsidiaries may enter into licenses of Proprietary Rights in the ordinary
course of business.

 

7.10                           Distributions; Capital
Change; Restricted Investments. 
Neither the Borrower nor any of its Subsidiaries shall (a) directly
or indirectly declare or make, or incur any liability to make, any
Distribution, except (i) Distributions and Restricted Investments to
effect the Recapitalization, (ii) Distributions to the Borrower by its
Subsidiaries, (iii) Distributions to Holdings in amounts necessary to pay
the consolidated tax liabilities and administrative expenses of Holdings and
its Subsidiaries and (iv) the purchase or redemption of Capital Stock held
by employees of Holdings or any of its Subsidiaries following termination of
employment if at the time of such purchase or redemption and after giving
effect thereto (and to any Loans made in connection therewith) (A) no
Default or Event of Default has occurred and is continuing or would result
therefrom, and (B) the Borrowers have sufficient Availability for the
conduct of business in the ordinary course; (b) make any change in its
capital structure which could reasonably be expected to have a Material Adverse
Effect or (c) make any Restricted Investment (other than to effect the
Recapitalization).

 

7.11                           Transactions Affecting
Collateral or Obligations. 
Neither the Borrower nor any of its Subsidiaries shall enter into any
transaction which would be reasonably expected to have a Material Adverse
Effect.

 

41

 

7.12                           Guaranties. 
Neither the Borrower nor any of its Subsidiaries shall make, issue, or
become liable on any Guaranty, except (a) Guaranties of the Obligations in
favor of the Agent and (b) Guaranties of Debt of the Borrower and its
Subsidiaries to the extent such Debt is permitted under Section 7.13.

 

7.13                           Debt. 
Neither the Borrower nor any of its Subsidiaries shall incur or maintain
any Debt, other than:  (a) the
Obligations; (b) Debt described on Schedule 6.9; (c) Capital
Leases of Equipment and purchase money secured Debt incurred to purchase
Equipment provided that (i) Liens securing the same attach only to
the Equipment acquired by the incurrence of such Debt, and (ii) the
aggregate amount of such Debt (including Capital Leases) outstanding does not
exceed $1,000,000 at any time; (d) Debt evidencing a refunding, renewal or
extension of the Debt described on Schedule 6.9; provided
that (i) the principal amount thereof is not increased, (ii) the
Liens, if any, securing such refunded, renewed or extended Debt do not attach
to any assets in addition to those assets, if any, securing the Debt to be
refunded, renewed or extended, (iii) no Person that is not an obligor or
guarantor of such Debt as of the Closing Date shall become an obligor or
guarantor thereof, and (iv) the terms of such refunding, renewal or
extension are no less favorable to the Borrower, the Agent or the Lenders than
the original Debt; (e) Interest Rate Agreements required by Section 7.24;
and (f) loans by a Borrower to another Borrower provided that such
loans are evidenced by demand intercompany notes pledged to the Agent and subordinated
to repayment of the Obligations on terms acceptable to the Agent, and at the
time of the making of the loan (and after giving effect thereto) each party is
Solvent; and (g) loans to the Borrower not to exceed $1,000,000 in the
aggregate and secured only by the Denver Property, so long as (i) no
Default or Event of Default exists at the time such loan is made or would
result therefrom, (ii) such loan is made on terms and conditions
reasonably satisfactory to the Agent and (iii) the proceeds thereof are
paid to the Agent to be applied to the Loans.

 

7.14                           Prepayment. 
Neither the Borrower nor any of its Subsidiaries shall voluntarily
prepay any Debt, except the Obligations in accordance with the terms of this
Agreement and prepayments made on the Closing Date to consummate the
transactions contemplated by the Recapitalization Agreement.

 

7.15                           Transactions with Affiliates.  Except as set forth below, neither the
Borrower nor any of its Subsidiaries shall, sell, transfer, distribute, or pay
any money or property, including, but not limited to, any fees or expenses of
any nature (including, but not limited to, any fees or expenses for management
services), to any Affiliate, or lend or advance money or property to any
Affiliate, or invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any property, of any Affiliate, or
become liable on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. 
Notwithstanding the foregoing, (a) so long as no Event of Default
has occurred and is continuing or would result therefrom, the Borrower and its
Subsidiaries may engage in transactions with (i) Affiliates (other than
ABC) in the ordinary course of business consistent with past practices, in amounts
and upon terms fully disclosed to the Agent and the Lenders and no less
favorable to the Borrower and its

 

42

 

Subsidiaries than would
be obtained in a comparable arm’s-length transaction with a third party who is
not an Affiliate, and (ii) with ABC in amounts and upon terms fully
disclosed to the Agent and the Lenders and no less favorable to the Borrower
and its Subsidiaries than would be obtained in a comparable arm’s-length
transaction with a third party who is not an Affiliate, (b) the Borrower
and its Subsidiaries may engage in transactions with Feeders, Vedco, Inc.
and Agri-Laboratories, Ltd., in the ordinary course of business consistent with
past practices on terms no less favorable to the Borrower and its Subsidiaries
than would be obtained in a comparable arm’s-length transaction with a third
party who is not an Affiliate, (c) Holdings and the Borrower may enter
into the Transaction Documents and consummate the Transactions, (d) the
Borrower may enter into and perform its obligations under the Transition
Services Agreement, and (e) as long as no Default or Event of Default has
occurred and is continuing or would result therefrom, the Borrower may make
payments to BRS and ABC when due under the Management Agreement and, during the
continuance of a Default or Event of Default, the Borrower may reimburse BRS
for its reasonable out-of-pocket expenses in accordance with the Management
Agreement.

 

7.16                           Investment Banking and Finder’s
Fees.  Neither the Borrower nor
any of its Subsidiaries shall pay or agree to pay, or reimburse any other party
with respect to, any investment banking or similar or related fee, underwriter’s
fee, finder’s fee, or broker’s fee to any Person in connection with this
Agreement other than a fee payable to BRS under the Management Agreement on the
Closing Date.  The Borrower shall defend
and indemnify the Agent and the Lenders against and hold them harmless from all
claims of any Person that the Borrower is obligated to pay for any such fees,
and all costs and expenses (including attorneys’ fees) incurred by the Agent
and/or any Lender in connection therewith.

 

7.17                           Business Conducted.  The Borrower shall not and shall not permit
any of its Subsidiaries to, engage directly or indirectly, in any line of
business other than the businesses in which the Borrower is engaged on the
Closing Date and other businesses reasonably related thereto.

 

7.18                           Liens. 
Neither the Borrower nor any of its Subsidiaries shall create, incur,
assume, or permit to exist any Lien on any property now owned or hereafter
acquired by any of them, except Permitted Liens, and Liens securing Capital
Leases and purchase money Debt permitted in Section 7.13.

 

7.19                           Sale and Leaseback Transactions.   Neither the Borrower nor any of its
Subsidiaries shall, directly or indirectly, enter into any arrangement with any
Person providing for the Borrower or such Subsidiary to lease or rent property
that the Borrower or such Subsidiary has sold or will sell or otherwise transfer
to such Person.

 

7.20                           New Subsidiaries.  The Borrower shall not, directly or
indirectly, organize, create, acquire or permit to exist any Subsidiary other
than those listed on Schedule 6.5, and those created or acquired in
connection with a Permitted Acquisition.

 

7.21                           Fiscal Year.  The Borrower shall not change its Fiscal
Year.

 

7.22                           Fixed Charge Coverage Ratio.  The Borrowers will maintain a Fixed Charge
Coverage Ratio (a) for each period of two consecutive fiscal quarters
ended on the last day of each fiscal quarter set forth below and (b) during
any four-quarter period during which

 

43

 

there have been
repurchases of Capital Stock of Holdings and its Subsidiaries, for each period
of four consecutive fiscal quarters ended on the last day of each fiscal
quarter set forth below, in each case of not less than the ratio set forth
below opposite each such fiscal quarter:

 

	
  Period
  Ending

  	
   

  	
  Fixed Charge

  Coverage Ratio

  	
   

  
	
  June 30,
  2002

  	
   

  	
  1.20:1

  	
   

  
	
  September 30,
  2002

  	
   

  	
  1.15:1

  	
   

  
	
  December 31,
  2002 and each fiscal quarter thereafter

  	
   

  	
  1.20:1

  	
   

  

 

7.23                           Minimum Tangible Net Worth.  The Borrower shall maintain at the end of
each month a Tangible Net Worth equal to at least the sum of (a) (2,532,210.00),
plus (b) on and after December 31, 2002, 50% of the positive
Adjusted Net Earnings from Operations of Holdings and its Subsidiaries on a
consolidated basis for the period from the Closing Date to September 30,
2002 (with no adjustment  to the covenant
level under this Section 7.23 for losses), plus (without
duplication) (c) on and after December 31 of each year thereafter,
50% of the positive Adjusted Net Earnings from Operations of Holdings and its
Subsidiaries for each Fiscal Year ended after the Closing Date (with no
adjustment to the covenant level under this Section 7.23 for
losses).

 

7.24                           Interest Rate Agreements.  No later than 60 days after the Closing Date,
the Borrower shall have entered into, and shall at all times thereafter
maintain in effect, one or more Interest Rate Agreements in a notional amount
of at least $12,000,000, in form and on terms acceptable to the Agent, with
Bank or another financial institution acceptable to Agent.

 

7.25                           Use of Proceeds.  The Borrower shall not, and shall not suffer
or permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Borrower or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security
in any transaction that is subject to Section 13 or 14 of the Exchange
Act.

 

7.26                           Deposit Accounts, Cash
Management.    In order to facilitate the
administration of this Agreement and to perfect the Agent’s Liens on the
Borrowers’ deposit accounts, the Borrower shall promptly, and in any event
within 60 days after the Closing Date (or with respect to any Subsidiary
Borrower promptly after becoming a party to this Agreement), establish with
Bank a cash management system, including blocked accounts, concentration
accounts and disbursement and other accounts for the conduct of its business,
all on terms satisfactory to the Agent; provided that a blocked account
agreement in favor of, and on terms satisfactory to, the Agent with respect to
the each of the accounts set forth on Schedule 6.27 hereto that are
maintained at U.S. Bank shall be
in full force and effect on the Closing Date. 
All funds received by any Loan Party, whether or not constituting
Collateral or proceeds thereof, shall be deposited into a Payment Account
subject to a Blocked Account Agreement.

 

44

 

7.27                           Feeders. 
The Borrower shall cause Feeders to make cash payments to the Borrower
on each Tuesday and Thursday (or if such day is not a Business Day, on the next
Business Day), or on the Business Day following any day on which the Accounts
for Inventory sold to Feeders exceeds $250,000, such payment to be in the outstanding
amount of the Accounts for Inventory sold by the Borrower to Feeders.

 

7.28                           Further Assurances.  (a) The Borrower shall, and shall cause
each of its Subsidiaries to, execute and deliver, or cause to be executed and
delivered, to the Agent and/or the Lenders such documents and agreements, and
shall take or cause to be taken such actions, as the Agent or any Lender may,
from time to time, reasonably request to carry out the terms and conditions of
this Agreement and the other Loan Documents.

 

(b)  On the Closing
Date, and after consummation of the Recapitalization, Holdings shall execute
and deliver to the Agent for its benefit and the benefit of the Lenders the
Holdings Guaranty, a Security Agreement, the Pledge Agreement and the
Collateral Assignment, and deliver to the Agent in pledge all of the issued and
outstanding Capital Stock of the Borrower, accompanied by undated stock powers
duly endorsed in blank.

 

(c)  Concurrently
with the formation or acquisition of a new Subsidiary which is permitted under
this Agreement, the Borrower shall promptly notify the Agent and shall (i) pledge
and deliver to the Agent certificates evidencing all of the issued and
outstanding Capital Stock of such Subsidiary owned by the Borrower or any of
its Subsidiaries, accompanied by undated stock powers duly endorsed in blank,
or grant a security interest in all uncertificated Capital Stock, and take all
actions necessary to perfect Agent’s Lien therein, (ii) cause such
Subsidiary to execute and deliver to the Agent a Guaranty of the Obligations
(or become an additional Borrower hereunder by executing and delivering a
Joinder Agreement) and a Security Agreement (or become a party to the Security
Agreement executed and delivered on the Closing Date) and such other agreements
as may be necessary or desirable to grant to the Agent for its benefit and the
benefit of the Lenders and perfect Liens on all of its real and personal
property to secure its Obligations under the Loan Documents to which it is a
party, and (iii) deliver to the Agent such evidence of due execution and
delivery of the documents and agreements required hereby (including opinions of
counsel) as the Agent may reasonably request, together with such closing
certificates, copies of organizational documents and other customary
documentation as reasonably requested by the Agent.

 

(d)  If the Borrower
or any of its Subsidiaries acquires fee title to any real property, no later
than 30 days after such acquisition, the Borrower shall, or shall cause each of
its Subsidiaries to, execute and deliver to the Agent, for its benefit and the
benefit of the Lenders, a Mortgage encumbering such real property, together
with (unless waived by the Agent) a survey and title insurance, in such amounts
and with a title insurance company reasonably acceptable to the Agent, insuring
that the Mortgage constitutes a first priority Lien subject only to such
encumbrances as approved by the Agent.

 

(e)  In connection
with each Permitted Acquisition, the Borrower shall, (i) as soon as
reasonably certain and no later than 30 days prior to consummation of such
Permitted Acquisition, deliver notice to the Agent of the Borrower’s intent to
consummate a Permitted

 

45

 

Acquisition, together
with a copy of the current draft of the applicable acquisition agreement and
all disclosure schedules and financial statements for the Person or business to
be acquired, including pro forma financial statements, statements of cash flows
and projections of Availability, all giving effect to the Acquisition, (ii) deliver
to the Agent copies of all subsequent revisions to the draft acquisition
agreement, disclosure schedules and financial information, (iii) prior to
consummation of the Permitted Acquisition, deliver to the Agent a pro forma
calculation of the financial covenants contained in Sections 7.22 and 7.23,
giving effect to the consummation of the Permitted Acquisition, certified by a
Responsible Officer and showing compliance, on a pro forma basis before and
after giving effect to the consummation of the Acquisition, and a sources and
uses of funds, (iv)  if the Accounts and Inventory acquired in such
Permitted Acquisition are proposed to be included in the determination of the
Borrowing Base, deliver to the Agent such information as is satisfactory to
Agent in order to determine the Eligible Accounts and Eligible Inventory of the
Person or business to be acquired (which determination must be made prior to
inclusion in calculation of the Borrowing Base), (v) deliver to the Agent
evidence, in form and substance reasonably satisfactory to the Agent, that the
assets being acquired, including the Capital Stock of any Person being acquired
and its assets, will be acquired free and clear of all Liens (other than
Permitted Liens) and (vi) deliver to Agent such other information as the
Agent or any Lender may reasonably request.

 

7.29                           Modifications to Transaction Documents; Charter Documents.  Neither
Holdings nor any of its Subsidiaries will agree to any material modification to
the payment terms of any Transaction Document (other than any Loan Document) or
waive any of its material rights under any Transaction Document, nor modify the
terms of its Capital Stock to require current payment of any dividends thereon
or mandatory redemption of such Capital Stock prior to repayment in full of the
Obligations and termination of all Commitments.

 

ARTICLE 8

CONDITIONS OF LENDING

 

8.1                                 Conditions Precedent to
Making of Loans on the Closing Date. 
The obligation of the Lenders to make the initial Loans on the Closing
Date, and the obligation of the Agent to cause the Letter of Credit Issuer to
issue any Letter of Credit on the Closing Date, are subject to the following
conditions precedent having been satisfied in a manner satisfactory to the
Agent and each Lender:

 

(a)                                  This Agreement and the other Loan
Documents shall have been executed by each party thereto and the Borrower shall
have performed and complied with all covenants, agreements and conditions
contained herein and the other Loan Documents which are required to be
performed or complied with by the Borrower before or on such Closing Date.

 

(b)                                 Upon making the Loans (including
such Loans made to finance the Closing Fee or otherwise as reimbursement for
fees, costs and expenses then payable under this Agreement) and with all its
obligations current, the Borrower shall have Availability of at least 10% of
the lesser of (i) the Maximum Revolver Amount and (ii) the Borrowing
Base.

 

46

 

(c)                                  All representations and warranties
made hereunder and in the other Loan Documents shall be true and correct as if
made on such date.

 

(d)                                 No Default or Event of Default shall
have occurred and be continuing after giving effect to the Loans to be made and
the Letters of Credit to be issued on the Closing Date.

 

(e)                                  The Agent and the Lenders shall have
received such opinions of counsel for the Borrower and its Subsidiaries as the
Agent or any Lender shall request, each such opinion to be in a form, scope,
and substance satisfactory to the Agent, the Lenders, and their respective
counsel.

 

(f)                                    The Agent shall have received ALTA
title policies, in form and substance reasonably acceptable to Agent, with
respect to the Mortgages.

 

(g)                                 The Agent shall have received:

 

(i)                                     acknowledgment copies of proper
financing statements, duly filed on or before the Closing Date under the UCC of
all jurisdictions that the Agent may deem necessary or desirable in order to
perfect the Agent’s Liens; and

 

(ii)                                  duly executed UCC-3 Termination
Statements and such other instruments, in form and substance satisfactory to
the Agent, as shall be necessary to terminate and satisfy all Liens on the
Property of the Borrower and its Subsidiaries except Permitted Liens.

 

(h)                                 The Borrower shall have paid all
fees and expenses of the Agent and the Attorney Costs incurred in connection
with any of the Loan Documents and the transactions contemplated thereby to the
extent invoiced.

 

(i)                                     The Agent shall have received
evidence, in form, scope, and substance, reasonably satisfactory to the Agent,
of all insurance coverage as required by this Agreement.

 

(j)                                     The Agent and the Lenders shall have
had an opportunity, if they so choose, to examine the books of account and
other records and files of the Borrower and to make copies thereof, and to
conduct a pre-closing audit which shall include, without limitation,
verification of Inventory, Accounts, and the Borrowing Base, and the results of
such examination and audit shall have been satisfactory to the Agent and the
Lenders in all respects.

 

(k)                                  All proceedings taken in connection
with the execution of this Agreement, the Term Loan Notes, all other Loan
Documents and all documents and papers relating thereto shall be satisfactory
in form, scope, and substance to the Agent and the Lenders.

 

(l)                                     The execution and delivery, in form
and substance acceptable to the Agent and its counsel, of landlord waivers for
those properties held by the Borrower as lessee or sublessee as set forth in Schedule 6.11.

 

47

 

(m)                               No Material Adverse Effect shall
have occurred (in the Agent’s sole opinion) and no change, occurrence or
development shall have occurred which the Agent determines (in its sole
opinion) could have a Material Adverse Effect.

 

(n)                                 No material adverse change shall
have occurred in, and no material disruption shall have occurred of, the
financial, banking or capital markets which the Agent, in its sole discretion,
deems material in connection with the syndication of this Agreement, which is
then continuing.

 

(o)                                 The Agent shall have received, each
in form and substance satisfactory to the Agent, (i) a pro forma balance
sheet of the Borrower dated as of May 31, 2002, which balance sheet shall
reflect no material changes from the most recent pro forma balance sheet of the
Borrower previously delivered to the Agent, and (ii) interim financial
statements for the Borrower as of a date not more than thirty (30) days
prior to the Closing Date.

 

(p)                                 The Agent shall have received
evidence to its satisfaction that the Borrower is adequately capitalized, that
the fair saleable value of the Borrower’s assets will exceed its liabilities at
closing, and that the Borrower will have sufficient working capital to pay its
debts as they become due.

 

(q)                                 The Borrower shall have obtained all
governmental and third party lessor consents and approvals as may be necessary
or appropriate in connection with the Loan Documents, the Recapitalization and
the Transactions contemplated thereby, and all waiting periods under all
Requirements of Law shall have expired without any adverse action.  No other consents or approvals will be
necessary or appropriate in connection with the foregoing other than those
that, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

(r)                                    The form and terms of the
Recapitalization Agreement and the other Transaction Documents shall be
satisfactory in all respects to the Lenders, and the Recapitalization shall be
consummated concurrently with the making of the initial Loans on the Closing
Date.

 

(s)                                  All Adjustment Indebtedness shall
have been repaid in full (or the Agent shall have received evidence
satisfactory to it that such Adjustment Indebtedness will be paid concurrently with
the initial Loans), and the Agent shall have received termination statements or
other releases of all Liens on the assets of the Borrower other than Permitted
Liens.

 

(t)                                    Without limiting the generality of
the items described above, the Borrower and each Person guarantying or securing
payment of the Obligations shall have delivered or caused to be delivered to
the Agent (in form and substance reasonably satisfactory to the Agent), the
financial statements, instruments, resolutions, documents, agreements,
certificates, opinions and other items set forth on the “Closing Checklist”
delivered by the Agent to the Borrower prior to the Closing Date.

 

48

 

The acceptance by the
Borrower of any Loans made or Letters of Credit issued on the Closing Date
shall be deemed to be a representation and warranty made by the Borrower to the
effect that all of the conditions precedent to the making of such Loans or the
issuance of such Letters of Credit set forth in Sections 8.1(a) (as
to the Borrower), (b), (c), (d), (h) and (k), and in Section 8.2
have been satisfied with the same effect as delivery to the Agent and the
Lenders of a certificate signed by a Responsible Officer of the Borrower, dated
the Closing Date, to such effect.

 

In reliance on any
representations and warranties deemed made by the Borrower pursuant to the
preceding paragraph, execution and delivery by the Agent or to the Agent by a
Lender of a counterpart of this Agreement shall be deemed confirmation by the
Agent or such Lender that (i) all conditions precedent in this Section 8.1
have been fulfilled to the satisfaction of the Agent or such Lender, as the
case may be, or waived in accordance with this Agreement, (ii) the
decision of such Lender to execute and deliver to the Agent an executed
counterpart of this Agreement was made by such Lender independently and without
reliance on the Agent or any other Lender as to the satisfaction of any
condition precedent set forth in this Section 8.1, and (iii) all
documents sent to the Agent or such Lender for approval consent, or
satisfaction were acceptable to the Agent or such Lender, as the case may be.

 

8.2                                 Conditions Precedent to Each Loan.  The obligation of the Lenders to make each
Loan, including the initial Loans on the Closing Date, and the obligation of
the Agent to cause the Letter of Credit Issuer to issue any Letter of Credit
shall be subject to the further conditions precedent that on and as of the date
of any such extension of credit:

 

(a)                                  The following statements shall be
true, and the acceptance by the Borrower of any extension of credit shall be
deemed to be a statement to the effect set forth in clauses (i), (ii) and
(iii) with the same effect as the delivery to the Agent and the
Lenders of a certificate signed by a Responsible Officer, dated the date of
such extension of credit, stating that:

 

(i)                                     The representations and warranties
contained in this Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of credit as though
made on and as of such date, other than any such representation or warranty
which relates to a specified prior date (which shall have been true and correct
on and as of such date) and except to the extent the Agent and the Lenders have
been notified in writing by the Borrower that any representation or warranty is
not correct and the Required Lenders have explicitly waived in writing
compliance with such representation or warranty; and

 

(ii)                                  No event has occurred and is continuing,
or would result from such extension of credit, which constitutes a Default or
an Event of Default; and

 

(iii)                               No event has occurred and is
continuing, or would result from such extension of credit, which has had or
would have a Material Adverse Effect.

 

49

 

(b)                                 No such Borrowing shall exceed
Availability, provided, however, that the foregoing conditions
precedent are not conditions to each Lender participating in or reimbursing the
Bank or the Agent for such Lenders’ Pro Rata Share of any Non-Ratable Loan or
Agent Advance made in accordance with the provisions of Sections 1.2(h) and
(i).

 

ARTICLE 9

DEFAULT; REMEDIES

 

9.1                                 Events of Default.  It shall constitute an event of default (“Event of
Default”) if any one or more of the following shall occur for any reason:

 

(a)                                  any failure by the Borrower to pay
the principal of or interest or premium on any of the Obligations or any fee or
other amount owing hereunder when due, whether upon demand or otherwise;

 

(b)                                 any representation or warranty made
or deemed made by the Borrower in this Agreement or by Holdings, the Borrower
or any of its Subsidiaries in any of the other Loan Documents, any Financial
Statement, or any certificate furnished by the Borrower or any of its
Subsidiaries at any time to the Agent or any Lender shall prove to be untrue in
any material respect as of the date on which made, deemed made, or furnished;

 

(c)                                  (i)  any default shall
occur in the observance or performance of any of the covenants and agreements
contained in Sections 5.2(j), 5.3(a), 7.2, 7.5, 7.9-7.29, or Section 11
of the Security Agreement, (ii) any default shall occur in the observance
or performance of any of the covenants and agreements contained in Sections
5.2 or 5.3 (other than 5.2(j) or 5.3(a)) and such default shall continue
for three (3) Business Days’ or more; or (iii) any default shall
occur in the observance or performance of any of the other covenants or
agreements contained in any other Section of this Agreement or any other
Loan Document, any other Loan Documents, or any other agreement entered into at
any time to which the Borrower or any Subsidiary and the Agent or any Lender
are party (including in respect of any Bank Products) and such default shall
continue for fifteen (15) days or more;

 

(d)                                 any default shall occur with respect
to any Debt (other than the Obligations) of the Borrower or any of its
Subsidiaries in an outstanding principal amount which exceeds $500,000, or
under any agreement or instrument under or pursuant to which any such Debt may
have been issued, created, assumed, or guaranteed by the Borrower or any of its
Subsidiaries, and such default shall continue for more than the period of
grace, if any, therein specified, if the effect thereof (with or without the
giving of notice or further lapse of time or both) is to accelerate, or to
permit the holders of any such Debt to accelerate, the maturity of any such
Debt; or any such Debt shall be declared due and payable or be required to be
prepaid (other than by a regularly scheduled required prepayment) prior to the
stated maturity thereof;

 

(e)                                  Holdings, the Borrower or any of its
Subsidiaries shall (i) file a voluntary petition in bankruptcy or file a
voluntary petition or an answer or otherwise commence any action or proceeding
seeking reorganization, arrangement or readjustment of its debts or for any
other relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy

 

50

 

or insolvency act or law,
state or federal, now or hereafter existing, or consent to, approve of, or
acquiesce in, any such petition, action or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for it or for all or any part of
its property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due;

 

(f)                                    an involuntary petition shall be
filed or an action or proceeding otherwise commenced seeking reorganization,
arrangement, consolidation or readjustment of the debts of Holdings, the
Borrower or any of its Subsidiaries or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing and such petition or
proceeding shall not be dismissed within sixty (60) days after the filing or
commencement thereof or an order of relief shall be entered with respect
thereto;

 

(g)                                 a receiver, assignee, liquidator,
sequestrator, custodian, monitor, trustee or similar officer for Holdings, the
Borrower or any of its Subsidiaries or for all or any part of its property
shall be appointed and shall continue undischarged for thirty (30) days or
more, or a warrant of attachment, execution or similar process shall be issued
against any part of the property of the Borrower or any of its Subsidiaries and
the same remains undischarged, unvacated, unbonded or unstayed for a period of
twenty (20) days or more, but in any event not later than five (5) days
prior to the date of any sale thereunder;

 

(h)                                 Holdings, the Borrower or any of its
Subsidiaries shall file a certificate of dissolution under applicable state law
or shall be liquidated, dissolved or wound-up or shall commence or have
commenced against it any action or proceeding for dissolution, winding-up or
liquidation, or shall take any corporate action in furtherance thereof;

 

(i)                                     all or any material part of the
property of Holdings, the Borrower or any of its Subsidiaries shall be
nationalized, expropriated or condemned, seized or otherwise appropriated, or
custody or control of such property or of Holdings, the Borrower or such
Subsidiary shall be assumed by any Governmental Authority or any court of
competent jurisdiction at the instance of any Governmental Authority, except
where contested in good faith by proper proceedings diligently pursued where a
stay of enforcement is in effect;

 

(j)                                     any Loan Document shall be terminated,
revoked or declared void or invalid or unenforceable or challenged by the
Borrower or any other obligor;

 

(k)                                  one or more final judgments, orders,
decrees or arbitration awards is entered against Holdings, the Borrower or any
of its Subsidiaries involving in the aggregate liability (to the extent not
covered by independent third-party insurance as to which the insurer does not
dispute coverage) as to any single or related or unrelated series of
transactions, incidents or conditions, of $500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of
thirty (30) days after the entry thereof;

 

(l)                                     any loss, theft, damage or
destruction of any item or items of Collateral or other property of Holdings,
the Borrower or any Subsidiary occurs which could

 

51

 

reasonably be expected to
cause a Material Adverse Effect and is not adequately covered by insurance;

 

(m)                               there is filed against Holdings, the
Borrower or any of its Subsidiaries any action, suit or proceeding under any
federal or state racketeering statute (including the Racketeer Influenced and
Corrupt Organization Act of 1970), which action, suit or proceeding (i) is
not dismissed within one hundred twenty (120) days, and (ii) could
reasonably be expected to result in the confiscation or forfeiture of any
material portion of the Collateral;

 

(n)                                 for any reason other than the
failure of the Agent to take any action available to it to maintain perfection
of the Agent’s Liens, pursuant to the Loan Documents, any Loan Document ceases
to be in full force and effect or any Lien with respect to any material portion
of the Collateral intended to be secured thereby ceases to be, or is not,
valid, perfected and prior to all other Liens (other than Permitted Liens) or
is terminated, revoked or declared void;

 

(o)                                 (i) an ERISA Event shall occur
with respect to a Pension Plan or Multi-employer Plan which has resulted or
could reasonably be expected to result in liability of Holdings, the Borrower
or any of its Subsidiaries under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $500,000; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $500,000; or (iii) the Borrower or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multi-employer Plan in an aggregate amount in excess of
$500,000; or

 

(p)                                 there occurs a Change of Control.

 

9.2                                 Remedies.

 

(a)                                  If a Default or an Event of Default
exists, the Agent shall, at the direction of the Required Lenders, do one or
more of the following at any time or times and in any order, without notice to
or demand on the Borrower:  (i) reduce
the Maximum Revolver Amount, or the advance rates against Eligible Accounts
and/or Eligible Inventory used in computing the Borrowing Base, or reduce one
or more of the other elements used in computing the Borrowing Base; (ii) restrict
the amount of or refuse to make Loans; and (iii) restrict or refuse to
provide Letters of Credit or Credit Support. 
If an Event of Default exists, the Agent 
shall, at the direction of the Required Lenders, do one or more of the
following, in addition to the actions described in the preceding sentence, at
any time or times and in any order, without notice to or demand on the
Borrower:  (A) terminate the
Commitments and this Agreement; (B) declare any or all Obligations to be
immediately due and payable; provided, however, that upon the
occurrence of any Event of Default described in Sections 9.1(e), 9.1(f),
9.1(g), or 9.1(h), the Commitments shall automatically and
immediately expire and all Obligations shall automatically become immediately
due and payable without notice or demand of any kind; (C) require the
Borrower to cash collateralize all outstanding Letter of Credit Obligations;
and (D) pursue its other rights and remedies under the Loan Documents and
applicable law.

 

52

 

(b)                                 If an Event of Default has occurred
and is continuing:  (i) the Agent
shall have for the benefit of the Lenders, in addition to all other rights of
the Agent and the Lenders, the rights and remedies of a secured party under the
Loan Documents and the UCC; (ii) the Agent may, at any time, take
possession of the Collateral and keep it on the Borrower’s premises, at no cost
to the Agent or any Lender, or remove any part of it to such other place or
places as the Agent may desire, or the Borrower shall, upon the Agent’s demand,
at the Borrower’s cost, assemble the Collateral and make it available to the
Agent at a place reasonably convenient to the Agent; and (iii) the Agent
may sell and deliver any Collateral at public or private sales, for cash, upon
credit or otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion, and may, if the Agent deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale.  Without in any way
requiring notice to be given in the following manner, the Borrower agrees that
any notice by the Agent of sale, disposition or other intended action hereunder
or in connection herewith, whether required by the UCC or otherwise, shall
constitute reasonable notice to the Borrower if such notice is mailed by
registered or certified mail, return receipt requested, postage prepaid, or is
delivered personally against receipt, at least five (5) Business Days
prior to such action to the Borrower’s address specified in or pursuant to Section 13.8.   If any Collateral is sold on terms other
than payment in full at the time of sale, no credit shall be given against the
Obligations until the Agent or the Lenders receive payment, and if the buyer
defaults in payment, the Agent may resell the Collateral without further notice
to the Borrower.  In the event the Agent
seeks to take possession of all or any portion of the Collateral by judicial
process, the Borrower irrevocably waives: 
(A) the posting of any bond, surety or security with respect
thereto which might otherwise be required; (B) any demand for possession
prior to the commencement of any suit or action to recover the Collateral; and (C) any
requirement that the Agent retain possession and not dispose of any Collateral
until after trial or final judgment.  The
Borrower agrees that the Agent has no obligation to preserve rights to the
Collateral or marshal any Collateral for the benefit of any Person.  The Agent is hereby granted a license or
other right to use, without charge, the Borrower’s labels, patents, copyrights,
name, trade secrets, trade names, trademarks, and advertising matter, or any
similar property, in completing production of, advertising or selling any
Collateral, and the Borrower’s rights under all licenses (including, to the
extent permitted by Requirements of Law, all licenses and permits issued by
Pharmaceutical Regulatory Agencies) and all franchise agreements shall inure to
the Agent’s benefit for such purpose.  In
connection with any sale of the Collateral, the Agent may hire Persons with
licenses issued by Pharmaceutical Regulatory Agencies to assist in such sale or
other liquidation, and all costs and expenses associated therewith shall be a
part of the Obligations.  The proceeds of
sale shall be applied first to all expenses of sale, including attorneys’ fees,
and then to the Obligations.  The Agent
will return any excess to the Borrower and the Borrower shall remain liable for
any deficiency.

 

(c)                                  If an Event of Default occurs, the
Borrower hereby waives all rights to notice and hearing prior to the exercise
by the Agent of the Agent’s rights to repossess the Collateral without judicial
process or to reply, attach or levy upon the Collateral without notice or
hearing.

 

53

 

ARTICLE 10

TERM AND TERMINATION

 

10.1         Term
and Termination.  The term of this Agreement
shall end on the Stated Termination Date unless sooner terminated in accordance
with the terms hereof.  The Agent upon
direction from the Required Lenders shall terminate this Agreement without
notice upon the occurrence of an Event of Default.  Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations (including all unpaid
principal, accrued and unpaid interest and any early termination or prepayment
fees or penalties) shall become immediately due and payable and the Borrower
shall immediately arrange for the cancellation and return of Letters of Credit
then outstanding.  Notwithstanding the
termination of this Agreement, until all Obligations are indefeasibly paid and
performed in full in cash, the Borrower shall remain bound by the terms of this
Agreement and shall not be relieved of any of its Obligations hereunder or
under any other Loan Document, and the Agent and the Lenders shall retain all
their rights and remedies hereunder (including the  Agent’s Liens in and all rights and remedies
with respect to all then existing and after-arising Collateral).  Upon indefeasible payment and performance in
full of the Obligations (other than contingent indemnification obligations as
to which no claim has been made) and termination of all Commitments and
delivery of mutual releases, the Agent shall release the Agent’s Liens on the
Collateral, without representation or warranty.

 

ARTICLE 11

AMENDMENTS; WAIVERS;
PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

 

11.1         Amendments
and Waivers.

 

(a)           No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Borrower therefrom, shall be effective unless
the same shall be in writing and signed by the Required Lenders (or by the
Agent at the written request of the Required Lenders) and the Borrower and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by
all the Lenders and the Borrower and acknowledged by the Agent, do any of the
following:

 

(i)            increase
or extend the Commitment of any Lender;

 

(ii)           postpone
or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees or other amounts due to the Lenders (or
any of them) hereunder or under any other Loan Document;

 

(iii)          reduce
the principal of, or the rate of interest specified herein on any Loan, or any
fees or other amounts payable hereunder or under any other Loan Document;

 

54

 

(iv)          change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Loans which is required for the Lenders or any of them to take any
action hereunder;

 

(v)           increase
any of the percentages set forth in the definition of the Borrowing Base;

 

(vi)          amend
this Section or any provision of this Agreement providing for consent or
other action by all Lenders;

 

(vii)         release
any Guaranties of the Obligations or release Collateral other than as permitted
by Section 12.11;

 

(viii)        change
the definitions of “Majority Lenders” or “Required Lenders”;

 

(ix)           amend
the definition of Eligible Accounts or Eligible Inventory, if such amendment
has the effect of permitting the Borrowers to borrow additional amounts under
this Agreement; or

 

(x)            increase
the Maximum Revolver Amount or the Maximum Inventory Loan Amount;

 

provided, however, the Agent
may, in its sole discretion and notwithstanding the limitations contained in clauses
(v),  (ix) and (x) above and any other terms of this
Agreement, make Agent Advances in accordance with Section 1.2(i) and,
provided  further, that no amendment, waiver or consent shall,
unless in writing and signed by the Agent, affect the rights or duties of the
Agent under this Agreement or any other Loan Document and provided  further,
that Schedule 1.2 hereto (Commitments) may be amended from time to time by
Agent alone to reflect assignments of Commitments in accordance herewith.

 

(b)           If
any fees are paid to the Lenders as consideration for amendments, waivers or
consents with respect to this Agreement, at Agent’s election, such fees may be
paid only to those Lenders that agree to such amendments, waivers or consents
within the time specified for submission thereof; provided that any
Lender who had less than two (2) Business Days’ prior written notice
(including without limitation notice via facsimile) of such proposed amendment,
waiver or consent shall be entitled to receive its Pro Rata Share of such fee
regardless of whether it has agreed to any such amendment, waiver or consent.

 

(c)           If, in connection with any proposed
amendment, waiver or consent (a “Proposed Change”):

 

(i)            requiring the consent of all
Lenders, the consent of Required Lenders is obtained, but the consent of other
Lenders is not obtained (any such Lender whose consent is not obtained as
described in this clause (i) and in clause (ii) below being referred
to as a “Non-Consenting Lender”), or

 

55

 

(ii)           requiring
the consent of Required Lenders, the consent of Majority Lenders is obtained,

 

then, so long as (x) the Agent is not a Non-Consenting Lender and (y) each such Non-Consenting
Lender had no less than two (2) Business Days’ prior written notice
(including without limitation notice via facsimile) of such proposed amendment,
waiver or consent, at the Borrower’s request, the Agent or an Eligible Assignee
shall have the right (but not the obligation) with the Agent’s approval, to
purchase from the Non-Consenting Lenders, and the Non-Consenting Lenders agree
that they shall sell, all the Non-Consenting Lenders’ Commitments for an amount
equal to the principal balances thereof and all accrued interest and fees with
respect thereto through the date of sale pursuant to Assignment and Acceptance
Agreement(s), without premium or discount.

 

11.2         Assignments; Participations.

 

(a)           Any Lender may, with the written
consent of the Agent (which consent shall not be unreasonably withheld), assign
and delegate to one or more Eligible Assignees (provided that no consent of the
Agent shall be required in connection with any assignment and delegation by a Lender
to an Affiliate of such Lender) (each an “Assignee”) all, or any ratable
part of all, of the Loans, the Commitments and the other rights and obligations
of such Lender hereunder, in a minimum amount of $10,000,000 (provided that,
unless an assignor Lender has assigned and delegated all of its Loans and
Commitments, no such assignment and/or delegation shall be permitted unless,
after giving effect thereto, such assignor Lender retains a Commitment in a
minimum amount of $15,000,000); provided, however, that the
Borrower and the Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Borrower and the Agent by such Lender and the Assignee; (ii) such Lender
and its Assignee shall have delivered to the Borrower and the Agent an
Assignment and Acceptance in the form of Exhibit F (“Assignment
and Acceptance”) together with any note or notes subject to such assignment
and (iii) the assignor Lender or Assignee has paid to the Agent a
processing fee in the amount of $3,500. 
The Borrower agrees to promptly execute and deliver new promissory notes
and replacement promissory notes as reasonably requested by the Agent to
evidence assignments of the Loans and Commitments in accordance herewith.

 

(b)           From and after the date that the
Agent notifies the assignor Lender that it has received an executed Assignment
and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations, including, but not limited to, the obligation to participate in
Letters of Credit and Credit Support have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).

 

56

 

(c)           By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows:  (i) other
than as provided in such Assignment and Acceptance, 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 or any other Loan Document furnished
pursuant hereto or the attachment, perfection, or priority of any Lien granted
by the Borrower to the Agent or any Lender in the Collateral; (ii) such
assigning Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this Agreement or
any other Loan Document furnished pursuant hereto; (iii) such Assignee
confirms that it has received a copy of this Agreement, together with 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; (iv) such
Assignee will, independently and without reliance upon the 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; (v) such
Assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers, including the
discretionary rights and incidental power, as are reasonably incidental
thereto; and (vi) such Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this Agreement
are required to be performed by it as a Lender.

 

(d)           Immediately upon satisfaction of the
requirements of Section 11.2(a), this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro  tanto.

 

(e)           Any Lender may at any time sell to
one or more commercial banks, financial institutions, or other Persons not
Affiliates of the Borrower (a “Participant”) participating interests in
any Loans, the Commitment of that Lender and the other interests of that Lender
(the “originating Lender”) hereunder and under the other Loan Documents;
provided, however, that (i) the originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such
obligations, (iii) the Borrower and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document except the matters set forth in Section 11.1(a) (i),
(ii) and (iii), and all amounts payable by the Borrower hereunder
(including without limitation amounts payable under Section 4.1 and 4.3)
shall be determined as if such Lender had not sold such participation; except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the 

 

57

 

right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent and subject to the same
limitation as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement.

 

(f)            Notwithstanding
any other provision in this Agreement, any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank in accordance
with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.

 

(g)           The
Agent shall maintain a register (the “Register”) showing each Lender of
a Loan hereunder.   Any transfer or
attempted transfer of a Note in violation of any provision of this Agreement
shall be null and void, and the Agent shall not record such transfer on the
Register or treat any purported transferee of a Note as the owner of such Note
for any purpose.

 

ARTICLE 12

THE AGENT

 

12.1         Appointment and Authorization.  Each
Lender hereby designates and appoints Bank as its Agent under this Agreement
and the other Loan Documents and each Lender hereby irrevocably authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental
thereto.  The Agent agrees to act as such
on the express conditions contained in this Article 12.  The provisions of this Article 12
are solely for the benefit of the Agent and the Lenders and the Borrower shall
have no rights as a third party beneficiary of any of the provisions contained
herein.  Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.  Without limiting the generality of the
foregoing sentence, the use of the term “agent” in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law.  Instead, such term is
used merely as a matter of market custom, and is intended to create or reflect
only an administrative relationship between independent contracting
parties.  Except as expressly otherwise
provided in this Agreement, the Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the
other Loan Documents, including (a) the determination of the applicability
of ineligibility criteria with respect to the calculation of the Borrowing
Base, (b) the making of Agent Advances pursuant to Section 1.2(i),
and (c) the exercise of remedies 

 

58

 

pursuant to Section 9.2, and any action so taken or not
taken shall be deemed consented to by the Lenders.

 

12.2         Delegation
of Duties.  The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

 

12.3         Liability
of Agent.  None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty made by the
Borrower or any Subsidiary or Affiliate of the Borrower, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower or any of the Borrower’s Subsidiaries or Affiliates.

 

12.4         Reliance
by Agent.  The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such
action.  The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Required Lenders (or all Lenders if so required by Section 11.1)
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders.

 

12.5         Notice
of Default.  The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
unless the Agent shall have received written notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.”  The Agent will notify the Lenders of its
receipt of any such notice.  The Agent
shall take such action with 

 

59

 

respect to such Default or Event of Default as may be requested by the
Required Lenders in accordance with Section 9; provided, however,
that unless and until the Agent has received any such request, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable.

 

12.6         Credit
Decision.  Each Lender acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the affairs
of the Borrower and its Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to the Agent that it
has, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower
and its Affiliates, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower. 
Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower.  Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower which may come into the possession of any of the Agent-Related
Persons.

 

12.7         Indemnification.  Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed
by or on behalf of the Borrower and without limiting the obligation of the
Borrower to do so), in accordance with their Pro Rata Shares, from and against
any and all Indemnified Liabilities as such term is defined in Section 13.11;
provided, however, that no Lender shall be liable for the payment
to the Agent-Related Persons of any portion of such Indemnified Liabilities
resulting solely from such Person’s gross negligence or willful
misconduct.  Without limitation of the
foregoing, each Lender shall reimburse the Agent upon demand for its Pro Rata
Share of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Agent is not reimbursed for such expenses by or on behalf of the Borrower.  The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of the Agent.

 

12.8         Agent in Individual Capacity.  The
Bank and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and 

 

60

 

generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Borrower and its Subsidiaries and
Affiliates as though the Bank were not the Agent hereunder and without notice
to or consent of the Lenders.  The Bank
or its Affiliates may receive information regarding the Borrower, its
Affiliates and Account Debtors (including information that may be subject to
confidentiality obligations in favor of the Borrower or such Subsidiary) and
acknowledge that the Agent and the Bank shall be under no obligation to provide
such information to them.  With respect
to its Loans, the Bank shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent, and the terms “Lender” and “Lenders” include the Bank
in its individual capacity.

 

12.9         Successor
Agent.  The Agent may resign as Agent upon at
least 30 days’ prior notice to the Lenders and the Borrower, such resignation
to be effective upon the acceptance of a successor agent to its appointment as
Agent.  In the event the Bank sells all
of its Commitment and  Loans as part of a
sale, transfer or other disposition by the Bank of substantially all of its
loan portfolio, the Bank shall resign as Agent and such purchaser or transferee
shall become the successor Agent hereunder. 
Subject to the foregoing, if the Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders.  If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Lenders and the Borrower, a successor agent
from among the Lenders.  Upon the
acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring Agent
and the term “Agent” shall mean such successor agent and the retiring
Agent’s appointment, powers and duties as Agent shall be terminated. After any
retiring Agent’s resignation hereunder as Agent, the provisions of this Article 12
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.

 

12.10       Withholding
Tax.

 

(a)           If
any Lender is a “foreign corporation, partnership or trust” within the
meaning of the Code and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender
agrees with and in favor of the Agent, to deliver to the Agent, with a copy to
the Borrower:

 

(i)            if
such Lender claims an exemption from, or a reduction of, withholding tax under
a United States of America tax treaty, two properly completed IRS Forms W-8BEN
on the date such Lender becomes a party to this Agreement and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement (or sooner if required by the Code in
order to avoid the imposition of withholding taxes);

 

(ii)           if
such Lender claims that interest paid under this Agreement is exempt from
United States of America withholding tax because it is effectively connected
with a United States of America trade or business of such Lender, two properly
completed and executed copies of IRS Form W-8ECI on the date such
Lender becomes a party to 

 

61

 

this Agreement and in each succeeding taxable year of such Lender
during which interest may be paid under this Agreement, (or sooner if required
by the Code in order to avoid the imposition of withholding taxes) and IRS Form W-9;
and

 

(iii)          such
other form or forms as may be required under the Code or other laws of the
United States of America as a condition to exemption from, or reduction of,
United States of America withholding tax.

 

Such Lender agrees to promptly notify the Agent and the Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.

 

(b)           If
any Lender described in Section 12.10(a) assigns, grants a
participation in, or otherwise transfers all or part of the Obligations owing
to such Lender, such Lender agrees to notify the Agent of the percentage amount
in which it is no longer the beneficial owner of Obligations of the Borrowers
to such Lender.  To the extent of such
percentage amount, the Agent will treat such Lender’s IRS Form W-8BEN
or Form W-8ECI as no longer valid.

 

(c)           [intentionally
deleted]

 

(d)           If
any Lender is entitled to a reduction in the applicable withholding tax, the
Agent may withhold from any interest payment to such Lender an amount
equivalent to the applicable withholding tax after taking into account such
reduction so long as the Borrowers have not already withheld such amount under Section 4.1(c) and
delivered notice thereof to the Agent. 
If the forms or other documentation required by subsection (a) of
this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.

 

(e)           If
the IRS or any other Governmental Authority of the United States of America or
other jurisdiction asserts a claim that the Agent or the Borrower did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Agent or the Borrower of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify the Agent
and the Borrower fully for all amounts paid, directly or indirectly, by the
Agent or the Borrower as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent or the Borrower under this Section, together with all costs and
expenses (including Attorney Costs).  The
obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Agent.

 

12.11       Collateral
Matters.

 

(a)           The
Lenders hereby irrevocably authorize the Agent, at its option and in its sole
discretion, to release any Agent’s Liens upon any Collateral (i) upon the 

 

62

 

termination of the Commitments and payment and satisfaction in full by
Borrower of all Loans and reimbursement obligations in respect of Letters of
Credit and Credit Support, and the termination of all outstanding Letters of
Credit (whether or not any of such obligations are due) and all other
Obligations (other than contingent indemnification obligations as to which no
claim has been made); (ii) constituting property being sold or disposed of
if the Borrower certifies to the Agent that the sale or disposition is made in
compliance with Section 7.9 (and the Agent may rely conclusively on
any such certificate, without further inquiry); (iii) constituting
property in which the Borrower or any of its Subsidiaries owned no interest at
the time the Lien was granted or at any time thereafter; (iv) constituting
property leased to the Borrower or any of its Subsidiaries under a lease which
has expired or been terminated in a transaction permitted under this Agreement;
or (v) constituting the Denver Property upon receipt by the Agent of the
proceeds of loans permitted by Section 7.13(g).  Except as provided above, the Agent will not
release any of the Agent’s Liens without the prior written authorization of the
Lenders; provided that the Agent may, in its discretion, release the
Agent’s Liens on Collateral valued in the aggregate not in excess of $500,000
during each Fiscal Year without the prior written authorization of the Lenders
and the Agent may release the Agent’s Liens on Collateral valued in the
aggregate not in excess of $2,000,000 during each Fiscal Year with the prior
written authorization of Required Lenders. 
Upon request by the Agent or the Borrower at any time, the Lenders will
confirm in writing the Agent’s authority to release any Agent’s Liens upon
particular types or items of Collateral pursuant to this Section 12.11.

 

(b)           Upon receipt by the Agent of any
authorization required pursuant to Section 12.11(a) from the
Lenders of the Agent’s authority to release Agent’s Liens upon particular types
or items of Collateral, and upon at least five (5) Business Days prior
written request by the Borrower, the Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the Agent’s Liens upon such Collateral; provided,
however, that (i) the Agent shall not be required to execute any
such document on terms which, in the Agent’s opinion, would expose the Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
Liens (other than those expressly being released) upon (or obligations of the
Borrower in respect of) all interests retained by the Borrower, including the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

 

(c)           The
Agent shall have no obligation whatsoever to any of the Lenders to assure that
the Collateral exists or is owned by the Borrower or is cared for, protected or
insured or has been encumbered, or that the Agent’s Liens have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are entitled
to any particular priority, or to exercise at all or in any particular manner
or under any duty of care, disclosure or fidelity, or to continue exercising,
any of the rights, authorities and powers granted or available to the Agent
pursuant  to any of the Loan Documents,
it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion 
given the Agent’s own interest in the Collateral in its capacity as one
of the Lenders and that the Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing.

 

63

 

12.12       Restrictions on Actions by Lenders;
Sharing of Payments.

 

(a)           Each of the Lenders agrees that it
shall not, without the express consent of all Lenders, and that it shall, to
the extent it is lawfully entitled to do so, upon the request of all Lenders,
set off against the Obligations, any amounts owing by such Lender to the
Borrower or any accounts of the Borrower now or hereafter maintained with such
Lender.  Each of the Lenders further
agrees that it shall not, unless specifically requested to do so by the Agent,
take or cause to be taken any action to enforce its rights under this Agreement
or against the Borrower, including the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral.

 

(b)           If at any time or times any Lender
shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of the
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from the Agent pursuant to the terms of this Agreement, or (ii) payments
from the Agent in excess of such Lender’s ratable portion of all such
distributions by the Agent, such Lender shall promptly (1) turn the same
over to the Agent, in kind, and with such endorsements as may be required to
negotiate the same to the Agent, or in same day funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received
shall be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess
payment received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to the
extent that such purchasing party is required to pay interest in connection
with the recovery of the excess payment.

 

12.13       Agency
for Perfection.  Each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Lenders’ security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession.  Should any
Lender (other than the Agent) obtain possession of any such Collateral, such
Lender shall notify the Agent thereof, and, promptly upon the Agent’s request
therefor shall deliver such Collateral to the Agent or in accordance with the
Agent’s instructions.

 

12.14       Payments by Agent to Lenders.  All
payments to be made by the Agent to the Lenders 
shall be made by bank wire transfer or internal transfer of immediately
available funds to each Lender pursuant to wire transfer instructions delivered
in writing to the Agent on or prior to the Closing Date (or if such Lender is
an Assignee, on the applicable Assignment and Acceptance), or pursuant to such
other wire transfer instructions as each party may designate for itself by
written notice to the Agent. 
Concurrently with each such payment, the Agent shall identify whether
such payment (or any portion thereof) represents principal, premium or interest
on the  Loans, Term Loans or
otherwise.  Unless the Agent receives
notice from the Borrower prior to the date on which any payment is due to the
Lenders that the Borrower will not make such payment in full as and when
required, the Agent may assume that the Borrower has made 

 

64

 

such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrower has not made
such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon
at the Federal Funds Rate for each day from the date such amount is distributed
to such Lender until the date repaid.

 

12.15       Settlement.

 

(a)           (i)  Each Lender’s funded
portion of the  Loans is intended by the
Lenders to be equal at all times to such Lender’s Pro Rata Share of the
outstanding  Loans.  Notwithstanding such agreement, the Agent,
the Bank, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by the Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the  Loans, the Non-Ratable
Loans and the Agent Advances shall take place on a periodic basis in accordance
with the following provisions:

 

(ii)           The
Agent shall request settlement (“Settlement”) with the Lenders on at
least a weekly basis, or on a more frequent basis at Agent’s election, (A) on
behalf of the Bank, with respect to each outstanding Non-Ratable Loan, (B) for
itself, with respect to each Agent Advance, and (C) with respect to
collections received, in each case, by notifying the Lenders of such requested
Settlement by telecopy, telephone or other similar form of transmission, of
such requested Settlement, no later than 10:00 a.m. (California time) on
the date of such requested Settlement (the “Settlement Date”).  Each Lender (other than the Bank, in the case
of Non-Ratable Loans and the Agent in the case of Agent Advances) shall
transfer the amount of such Lender’s Pro Rata Share of the outstanding
principal amount of the Non-Ratable Loans and Agent Advances with respect to
each Settlement to the Agent, to Agent’s account, not later than 2:00 p.m.
(California time), on the Settlement Date applicable thereto.  Settlements may occur during the continuation
of a Default or an Event of Default and whether or not the applicable
conditions precedent set forth in Article 8 have then been
satisfied.  Such amounts made available
to the Agent shall be applied against the amounts of the applicable Non-Ratable
Loan or Agent Advance and, together with the portion of such Non-Ratable Loan
or Agent Advance representing the Bank’s Pro Rata Share thereof, shall
constitute  Loans of such Lenders.  If any such amount is not transferred to the
Agent by any Lender on the Settlement Date applicable thereto, the Agent shall
be entitled to recover such amount on demand from such Lender together with
interest thereon at the Federal Funds Rate for the first three (3) days
from and after the Settlement Date and thereafter at the Interest Rate then
applicable to the  Loans (A) on
behalf of the Bank, with respect to each outstanding Non-Ratable Loan, and (B) for
itself, with respect to each Agent Advance.

 

(iii)          Notwithstanding
the foregoing, not more than one (1) Business Day after demand is made by
the Agent (whether before or after the occurrence of a Default or an Event of
Default and regardless of whether the Agent has requested a Settlement with
respect to a Non-Ratable Loan or Agent Advance), each other Lender (A) shall
irrevocably and unconditionally purchase and receive from the Bank or the
Agent, as applicable, without 

 

65

 

recourse or warranty, an undivided interest and participation in such
Non-Ratable Loan or Agent Advance equal to such Lender’s Pro Rata Share of such
Non-Ratable Loan or Agent Advance and (B) if Settlement has not previously
occurred with respect to such Non-Ratable Loans or Agent Advances, upon demand
by Bank or Agent, as applicable, shall pay to Bank or Agent, as applicable, as
the purchase price of such participation an amount equal to one-hundred percent
(100%) of such Lender’s Pro Rata Share of such Non-Ratable Loans or Agent
Advances.  If such amount is not in fact
made available to the Agent by any Lender, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest thereon
at the Federal Funds Rate for the first three (3) days from and after such
demand and thereafter at the Interest Rate then applicable to Base Rate  Loans.

 

(iv)          From
and after the date, if any, on which any Lender purchases an undivided interest
and participation in any Non-Ratable Loan or Agent Advance pursuant to clause
(iii) above, the Agent shall promptly distribute to such Lender, such
Lender’s Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such Non-Ratable
Loan or Agent Advance.

 

(v)           Between
Settlement Dates, the Agent, to the extent no Agent Advances are outstanding,
may pay over to the Bank any payments received by the Agent, which in
accordance with the terms of this Agreement would be applied to the reduction
of the  Loans, for application to the
Bank’s  Loans including Non-Ratable
Loans.  If, as of any Settlement Date,
collections received since the then immediately preceding Settlement Date have
been applied to the Bank’s  Loans (other
than to Non-Ratable Loans or Agent Advances in which such Lender has not yet
funded its purchase of a participation pursuant to clause (iii) above),
as provided for in the previous sentence, the Bank shall pay to the Agent for
the accounts of the Lenders, to be applied to the outstanding  Loans of such Lenders, an amount such that
each Lender shall, upon receipt of such amount, have, as of such Settlement
Date, its Pro Rata Share of the 
Loans.  During the period between
Settlement Dates, the Bank with respect to Non-Ratable Loans, the Agent with
respect to Agent Advances, and each Lender with respect to the  Loans other than Non-Ratable Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the actual average daily amount of funds employed by
the Bank, the Agent and the other Lenders.

 

(vi)          Unless
the Agent has received written notice from a Lender to the contrary, the Agent
may assume that the applicable conditions precedent set forth in Article 8
have been satisfied and the requested Borrowing will not exceed Availability on
any Funding Date for a  Loan or
Non-Ratable Loan.

 

(b)           Lenders’ Failure to Perform.  All Loans (other than Non-Ratable Loans and
Agent Advances) shall be made by the Lenders simultaneously and in accordance
with their Pro Rata Shares.  It is
understood that (i) no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any  Loans hereunder, nor shall any Commitment of
any Lender be increased or decreased as a result of any failure by any other
Lender to perform its obligation to make any 
Loans hereunder, (ii) no failure by any Lender to perform its
obligation to make any  Loans hereunder
shall excuse any other Lender from its 

 

66

 

obligation to make any  Loans
hereunder, and (iii) the obligations of each Lender hereunder shall be
several, not joint and several.

 

(c)           Defaulting Lenders.  Unless the Agent receives notice from a
Lender on or prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, at least one Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required hereunder
to the Agent that Lender’s Pro Rata Share of a Borrowing, the Agent may assume
that each Lender has made such amount available to the Agent in immediately
available funds on the Funding Date. 
Furthermore, the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount.  If any Lender has not transferred its full
Pro Rata Share to the Agent in immediately available funds and the Agent has
transferred corresponding amount to the Borrower on the Business Day following
such Funding Date that Lender shall make such amount available to the Agent,
together with interest at the Federal Funds Rate for that day.  A notice by the Agent submitted to any Lender
with respect to amounts owing shall be conclusive, absent manifest error.  If each Lender’s full Pro Rata Share is
transferred to the Agent as required, the amount transferred to the Agent shall
constitute that Lender’s  Loan for all
purposes of this Agreement.  If that
amount is not transferred to the Agent on the Business Day following the
Funding Date, the Agent will notify the Borrower of such failure to fund and,
upon demand by the Agent, the Borrower shall pay such amount to the Agent for
the Agent’s account, together with interest thereon for each day elapsed since
the date of such Borrowing, at a rate per annum equal to the Interest Rate
applicable at the time to the  Loans
comprising that particular Borrowing. 
The failure of any Lender to make any 
Loan on any Funding Date (any such Lender, prior to the cure of such
failure, being hereinafter referred to as a “Defaulting Lender”) shall
not relieve any other Lender of its obligation hereunder to make a  Loan on that Funding Date.  No Lender shall be responsible for any other
Lender’s failure to advance such other Lenders’ Pro Rata Share of any
Borrowing.

 

(d)           Retention of Defaulting Lender’s
Payments.  The Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrower to
the Agent for the Defaulting Lender’s benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder.  Amounts payable to a Defaulting Lender shall
instead be paid to or retained by the Agent. 
In its discretion, the Agent may loan Borrower the amount of all such
payments received or retained by it for the account of such Defaulting
Lender.  Any amounts so loaned to the
Borrower shall bear interest at the rate applicable to Base Rate  Loans and for all other purposes of this
Agreement shall be treated as if they were 
Loans, provided, however, that for purposes of voting or consenting to
matters with respect to the Loan Documents and determining Pro Rata Shares,
such Defaulting Lender shall be deemed not to be a “Lender”.  Until a Defaulting Lender cures its failure
to fund its Pro Rata Share of any Borrowing (A) such Defaulting Lender
shall not be entitled to any portion of the Unused Line Fee and (B) the
Unused Line Fee shall accrue in favor of the Lenders which have funded their
respective Pro Rata Shares of such requested Borrowing and shall be allocated
among such performing Lenders ratably based upon their relative
Commitments.  This Section shall
remain effective with respect to such Lender until such time as the Defaulting
Lender shall no longer be in default of any of its obligations under this
Agreement.  The terms of this Section shall
not be construed to increase or 

 

67

 

otherwise affect the Commitment of
any Lender, or relieve or excuse the performance by the Borrower of its duties
and obligations hereunder.

 

(e)           Removal of Defaulting Lender.  At the Borrower’s request, the Agent or an
Eligible Assignee reasonably acceptable to the Agent and the Borrower shall
have the right (but not the obligation) to purchase from any Defaulting Lender,
and each Defaulting Lender shall, upon such request, sell and assign to the
Agent or such Eligible Assignee, all of the Defaulting Lender’s outstanding
Commitments hereunder.  Such sale shall
be consummated promptly after Agent has arranged for a purchase by Agent or an
Eligible Assignee pursuant to an Assignment and Acceptance, and at a price
equal to the outstanding principal balance of the Defaulting Lender’s Loans,
plus accrued interest and fees, without premium or discount.

 

12.16       Letters of Credit; Intra-Lender Issues.

 

(a)           Notice of Letter of Credit Balance.  On each Settlement Date the Agent shall
notify each Lender of the issuance of all Letters of Credit since the prior
Settlement Date.

 

(b)           Participations in Letters of
Credit.

 

(i)            Purchase of Participations.  Immediately upon issuance of any Letter of
Credit in accordance with Section 1.4(d), each Lender shall be
deemed to have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation equal to such
Lender’s Pro Rata Share of the face amount of such Letter of Credit or the
Credit Support provided through the Agent to the Letter of Credit Issuer, if
not the Bank, in connection with the issuance of such Letter of Credit (including
all obligations of the Borrower with respect thereto, and any security therefor
or guaranty pertaining thereto).

 

(ii)           Sharing of Reimbursement
Obligation Payments.  Whenever the
Agent receives a payment from the Borrower on account of reimbursement
obligations in respect of a Letter of Credit or Credit Support as to which the
Agent has previously received for the account of the Letter of Credit Issuer
thereof payment from a Lender, the Agent shall promptly pay to such Lender such
Lender’s Pro Rata Share of such payment from the Borrower.  Each such payment shall be made by the Agent
on the next Settlement Date.

 

(iii)          Documentation.  Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, Credit Support for
any Letter of Credit, reimbursement agreements executed in connection
therewith, applications for any Letter of Credit, and such other documentation
as may reasonably be requested by such Lender.

 

(iv)          Obligations Irrevocable.  The obligations of each Lender to make
payments to the Agent with respect to any Letter of Credit or with respect to
their participation therein or with respect to any Credit Support for any
Letter of Credit or with respect to the 
Loans made as a result of a drawing under a Letter of Credit and the
obligations of the Borrower for whose account the Letter of Credit or Credit
Support was issued to make payments 

 

68

 

to the Agent, for the account of the
Lenders, shall be irrevocable and shall not be subject to any qualification or
exception whatsoever, including any of the following circumstances:

 

(1)           any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;

 

(2)           the existence of any claim, setoff,
defense or other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
the Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between the Borrower or any other Person and the beneficiary named
in any Letter of Credit);

 

(3)           any draft, certificate or any other
document presented under the 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;

 

(4)           the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents;

 

(5)           the occurrence of any Default or
Event of Default; or

 

(6)           the failure of the Borrower to satisfy
the applicable conditions precedent set forth in Article 8.

 

(c)           Recovery or Avoidance of Payments;
Refund of Payments In Error.  In the
event any payment by or on behalf of the Borrower received by the Agent with
respect to any Letter of Credit or Credit Support provided for any Letter of
Credit and distributed by the Agent to the Lenders on account of their
respective participations therein is thereafter set aside, avoided or recovered
from the Agent in connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by the Agent upon the
amount required to be repaid by it. 
Unless the Agent receives notice from the Borrower prior to the date on
which any payment is due to the Lenders that the Borrower will not make such
payment in full as and when required, the Agent may assume that the Borrower
has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Borrower has
not made such payment in full to the Agent, each Lender shall repay to the
Agent on demand such amount distributed to such Lender, together with interest
thereon at the Federal Funds Rate for each day from the date such amount is
distributed to such Lender until the date repaid.

 

(d)           Indemnification by Lenders.  To the extent not reimbursed by the Borrower
and without limiting the obligations of the Borrower hereunder, the Lenders
agree to 

 

69

 

indemnify the Letter of Credit Issuer
ratably in accordance with their respective Pro Rata Shares, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys’ fees) or disbursements of any kind
and nature whatsoever that may be imposed on, incurred by or asserted against
the Letter of Credit Issuer in any way relating to or arising out of any Letter
of Credit or the transactions contemplated thereby or any action taken or
omitted by the Letter of Credit Issuer under any Letter of Credit or any Loan
Document in connection therewith; provided that no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the Person to be indemnified.  Without limitation of the foregoing, each
Lender agrees to reimburse the Letter of Credit Issuer promptly upon demand for
its Pro Rata Share of any costs or expenses payable by the Borrower to the
Letter of Credit Issuer, to the extent that the Letter of Credit Issuer is not
promptly reimbursed for such costs and expenses by the Borrower.  The agreement contained in this Section shall
survive payment in full of all other Obligations.

 

12.17       Concerning the Collateral and the
Related Loan Documents.  Each Lender authorizes
and directs the Agent to enter into the other Loan Documents, for the ratable
benefit and obligation of the Agent and the Lenders.  Each Lender agrees that any action taken by
the Agent, Majority Lenders or Required Lenders, as applicable, in accordance
with the terms of this Agreement or the other Loan Documents, and the exercise
by the Agent, the Majority Lenders, or the Required Lenders, as applicable, of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.  The Lenders acknowledge that
the Loans, Agent Advances, Non-Ratable Loans, Hedge Agreements, Bank Products
and all interest, fees and expenses hereunder constitute one Debt, secured pari
passu by all of the Collateral.

 

12.18       Field Audit and Examination Reports;
Disclaimer by Lenders.  By signing this
Agreement, each Lender:

 

(a)           is deemed to have requested that the
Agent furnish such Lender, promptly after it becomes available, a copy of each
field audit or examination report (each a “Report” and collectively, “Reports”)
prepared by or on behalf of the Agent;

 

(b)           expressly agrees and acknowledges
that neither the Bank nor the Agent (i) makes any representation or
warranty as to the accuracy of any Report, or (ii) shall be liable for any
information contained in any Report;

 

(c)           expressly agrees and acknowledges
that the Reports are not comprehensive audits or examinations, that the Agent
or the Bank or other party performing any audit or examination will inspect
only specific information regarding the Borrower and will rely significantly
upon the Borrower’s books and records, as well as on representations of the
Borrower’s personnel;

 

(d)           agrees to keep all Reports
confidential and strictly for its internal use, and not to distribute except to
its participants, or use any Report in any other manner; and

 

70

 

(e)           without limiting the generality of
any other indemnification provision contained in this Agreement, agrees:  (i) to hold the Agent and any such other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to the Borrower, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
the Borrower; and (ii) to pay and protect, and indemnify, defend and hold
the Agent and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses and other
amounts (including Attorney Costs) incurred by the Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.

 

12.19       Relation
Among Lenders.  The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.

 

ARTICLE 13

MISCELLANEOUS

 

13.1         No Waivers; Cumulative Remedies.  No
failure by the Agent or any Lender to exercise any right, remedy, or option
under this Agreement or any present or future supplement thereto, or in any
other agreement between or among the Borrower and the Agent and/or any Lender,
or delay by the Agent or any Lender in exercising the same, will operate as a
waiver thereof.  No waiver by the Agent
or any Lender will be effective unless it is in writing, and then only to the
extent specifically stated.  No waiver by
the Agent or the Lenders on any occasion shall affect or diminish  the Agent’s and each Lender’s rights
thereafter to require strict performance by the Borrower of any provision of
this Agreement.  The Agent and the
Lenders may proceed directly to collect the Obligations without any prior recourse
to the Collateral.  The Agent’s and each
Lender’s rights under this Agreement will be cumulative and not exclusive of
any other right or remedy which the Agent or any Lender may have.

 

13.2         Severability.  The
illegality or unenforceability of any provision of this Agreement or any Loan
Document or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.

 

13.3         Governing Law; Choice of Forum;
Service of Process.

 

(a)           THIS AGREEMENT SHALL BE INTERPRETED
AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED
THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9
OF THE UCC) OF THE STATE OF NEW 

 

71

 

YORK; PROVIDED THAT THE AGENT AND THE
LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA LOCATED IN
THE BOROUGH OF MANHATTAN, STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE LENDERS CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS.  EACH OF THE BORROWER, THE
AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO.  NOTWITHSTANDING THE
FOREGOING:  (1) THE AGENT AND THE
LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR
THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL
OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO
ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE
JURISDICTIONS.

 

(c)           THE BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED
TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID.  NOTHING CONTAINED HEREIN SHALL AFFECT THE
RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER
PERMITTED BY LAW.

 

(d)           NOTWITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG
THE PARTIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT
THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY BINDING ARBITRATION.  The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association (“AAA”).  The arbitrator(s) shall give effect to
statutes of limitation in determining any claim.  Any controversy concerning whether an issue
is arbitrable shall be determined by the arbitrator(s).  Judgment upon the arbitration award may be
entered in any 

 

72

 

court having jurisdiction.  The institution and maintenance of an action
for judicial relief or pursuant to a provisional or ancillary remedy shall not
constitute a waiver  of the right of
either party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.

 

(e)           Notwithstanding the provisions of (d) above,
no controversy or claim shall be submitted to arbitration without the consent
of all parties if, at the time of the proposed submission, such controversy or
claim arises from or related to an obligation to the Lenders which is secured
by real estate property collateral (exclusive of real estate space lease
assignments).  If all the parties do not
consent to submission of such a controversy or claim to arbitration, the
controversy or claim shall be determined as provided in Section 13.3(f).

 

(f)            At the request of either party a
controversy or claim which is not submitted to arbitration as provided and
limited in Section 13.3(d) and (e) shall be
determined by judicial reference.  If
such an election is made, the parties shall designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings.  The presiding referee of the panel, or the
referee if there is a single referee, shall be an active attorney or retired
judge.  Judgment upon the award rendered
by such referee or referees shall be entered in the court in which such
proceeding was commenced.

 

(g)           No provision of Sections (d) through
(g) shall limit the right of the Agent or the Lenders to exercise
self-help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding.  The exercise of a remedy does not waive the
right of either party to resort to arbitration or reference.  At the Agent’s option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.

 

13.4         WAIVER
OF JURY TRIAL.  SUBJECT TO THE PROVISIONS OF SECTION 13.3(d),
THE BORROWER, THE LENDERS AND THE AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. 
THE BORROWER, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION
OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.  THIS WAIVER SHALL APPLY TO ANY

 

73

 

SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

13.5         Survival of Representations and
Warranties.  All of the Borrower’s representations
and warranties contained in this Agreement shall survive the execution,
delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Agent or the Lenders or their respective agents.

 

13.6         Other Security and Guaranties.  The
Agent, may, without notice or demand and without affecting the Borrower’s
obligations hereunder, from time to time: 
(a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and
hold any endorsement or guaranty of payment of all or any part of the
Obligations and release or substitute any such endorser or guarantor, or any
Person who has given any Lien in any other collateral as security for the
payment of all or any part of the Obligations, or any other Person in any way
obligated to pay all or any part of the Obligations.

 

13.7         Fees
and Expenses.  The Borrower agrees to pay to
the Agent, for its benefit, on demand, all out-of-pocket costs and expenses
that Agent pays or incurs in connection with the negotiation, preparation,
syndication, consummation, administration, enforcement, and termination of this
Agreement or any of the other Loan Documents, including: (a) Attorney
Costs; (b) out-of-pocket costs and expenses (including Attorney Costs) for
any amendment, supplement, waiver, consent, or subsequent closing in connection
with the Loan Documents and the transactions contemplated thereby; (c) out-of-pocket
costs and expenses of lien and title searches and title insurance; (d) taxes,
fees and other charges for recording the Mortgages, filing financing statements
and continuations, and other actions to perfect, protect, and continue the
Agent’s Liens (including costs and expenses paid or incurred by the Agent in
connection with the consummation of Agreement); (e) sums paid or incurred
to pay any amount or take any action required of the Borrower under the Loan
Documents that the Borrower fails to pay or take; (f) out-of-pocket costs
of appraisals, inspections, and verifications of the Collateral, including
travel, lodging, and meals for inspections of the Collateral and the Borrower’s
operations by the Agent plus the Agent’s then customary charge for field
examinations and audits and the preparation of reports thereof (such charge is
currently $850 per day (or portion thereof) for each Person retained or
employed by the Agent with respect to each field examination or audit); and (g) costs
and expenses of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining Payment Accounts and out-of-pocket
costs and expenses of preserving and protecting the Collateral.  In addition, the Borrower agrees to pay costs
and expenses incurred by the Agent (including Attorneys’ Costs) to the Agent,
for its benefit, on demand, and to the other Lenders for their benefit, on
demand, and all reasonable fees, expenses and disbursements incurred by such
other Lenders for one law firm retained by such other Lenders, in each case,
paid or incurred to obtain payment of the Obligations, to enforce the Agent’s
Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of the Loan Documents, or to defend any claims made or threatened
against the Agent or any Lender arising out of the transactions contemplated
hereby (including preparations for and consultations concerning any such
matters).  The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and 

 

74

 

expenses to be paid by the Borrower. 
All of the foregoing costs and expenses shall be charged to the Borrower’s
Loan Account as  Loans as described in Section 3.7.

 

13.8         Notices.  Except
as otherwise provided herein, all notices, demands and requests that any party
is required or elects to give to any other shall be in writing, or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof,
including, but not limited to, delivery by overnight mail and courier service, (b) four
(4) days after it shall have been mailed by United States mail, first
class, certified or registered, with postage prepaid, or (c) in the case
of notice by such a telecommunications device, when properly transmitted, in
each case addressed to the party to be notified as follows:

 

If to the Agent or to the
Bank:

 

Bank of America, N.A. 

55 South Lake Avenue, Suite 900

Pasadena, CA 
91101

Attention: 
Business Credit-Account Executive – 

MWI Veterinary Supply, Co.

Facsimile No.: 
626-397-1273

 

If to the Borrower:

 

MWI Veterinary Supply Co.

2201 N. 20th Street

Nampa, ID  83687

Attention: 
President

Facsimile No.: 
208-463-2230

 

With courtesy copies to:

 

Bruckmann, Rosser, Sherrill & Co.

126 East 56th Street

29th Floor

New York, NY 
10022

Attention: 
Bruce Bruckmann

Brett Pertuz

Facsimile No.: 
212-521-3799

 

Kirkland & Ellis

153 East 53rd Street

New York, NY 10022

Attention:  Eunu
Chun

Facsimile No.: 
212-446-4900

 

75

 

or to such other address as each party may designate for itself by like
notice.  Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies shall not
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.

 

13.9         Waiver of
Notices.  Unless otherwise expressly provided
herein, the Borrower waives presentment, and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations
and notice of acceleration of the Obligations, as well as any and all other
notices to which it might otherwise be entitled.  No notice to or demand on the Borrower which
the Agent or any Lender may elect to give shall entitle the Borrower to any or
further notice or demand in the same, similar or other circumstances.

 

13.10       Binding
Effect.  The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however,
that no interest herein may be assigned by the Borrower without prior written
consent of the Agent and each Lender. 
The rights and benefits of the Agent and the Lenders hereunder shall, if
such Persons so agree, inure to any party acquiring any interest in the Obligations
or any part thereof.

 

13.11       Indemnity of the Agent and the Lenders
by the Borrower.

 

(a)           The Borrower agrees to defend,
indemnify and hold the Agent-Related Persons, and each Lender and each of its
respective officers, directors, employees, counsel, representatives, agents and
attorneys-in-fact (each, an “Indemnified Person”) harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any
Lender)  be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this
Agreement, any other Loan Document, or the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the “Indemnified Liabilities”); provided,
that the Borrower shall have no obligation hereunder to any Indemnified Person
with respect to Indemnified Liabilities resulting solely from the willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.

 

(b)           The Borrower agrees to indemnify,
defend and hold harmless the Agent and the Lenders from any loss or liability
directly or indirectly arising out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance relating to the Borrower’s operations,
business or property.  

 

76

 

This indemnity will apply whether the
hazardous substance is on, under or about the Borrower’s property or operations
or property leased to the Borrower.  The
indemnity includes but is not limited to Attorneys Costs.  The indemnity extends to the Agent and the
Lenders, their parents, affiliates, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns.  “Hazardous substances” means any
substance, material or waste that is or becomes designated or regulated as “toxic,”
“hazardous,” “pollutant,” or “contaminant” or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including petroleum or natural gas. 
This indemnity will survive repayment of all other Obligations.

 

13.12       Limitation
of Liability.  NO CLAIM MAY BE MADE BY THE
BORROWER, ANY LENDER OR OTHER PERSON AGAINST THE AGENT, ANY LENDER, OR THE
AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR
ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER
THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER AND EACH LENDER HEREBY
WAIVE, RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR
NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

 

13.13       Final
Agreement.  This Agreement and the other Loan
Documents are intended by the Borrower, the Agent and the Lenders to be the
final, complete, and exclusive expression of the agreement between them.  This Agreement supersedes any and all prior
oral or written agreements relating to the subject matter hereof, except for
that certain “fee letter” dated as of the Closing Date, between the Borrower
and the Agent.  No modification,
rescission, waiver, release, or amendment of any provision of this Agreement or
any other Loan Document shall be made, except by a written agreement signed by
the Borrower and a duly authorized officer of each of the Agent and the requisite
Lenders.

 

13.14       Counterparts.  This
Agreement may be executed in any number of counterparts, and by the Agent, each
Lender and the Borrower in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the same
agreement; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages are
physically attached to the same document.

 

13.15       Captions.  The
captions contained in this Agreement are for convenience of reference only, are
without substantive meaning and should not be construed to modify, enlarge, or
restrict any provision.

 

13.16       Right
of Setoff.  In addition to any rights and
remedies of the Lenders provided by law, if an Event of Default exists or the
Loans have been accelerated, each Lender is authorized at any time and from
time to time, without prior notice to the Borrower, any such notice being
waived by the Borrower to the fullest extent permitted by law, to set off and
apply 

 

77

 

any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by,
such Lender or any Affiliate of such Lender to or for the credit or the account
of the Borrower against any and all Obligations owing to such Lender, now or
hereafter existing, irrespective of whether or not the Agent or such Lender
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured.  Each Lender agrees promptly to notify the
Borrower and the Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.  NOTWITHSTANDING THE FOREGOING, NO LENDER
SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER’S LIEN, OR THE LIKE AGAINST ANY
DEPOSIT ACCOUNT OR PROPERTY OF THE BORROWER HELD OR MAINTAINED BY SUCH LENDER
WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.

 

13.17       Confidentiality.

 

(a)           The Borrower hereby consents that the
Agent and each Lender may issue and disseminate to the public general
information describing the credit accommodation entered into pursuant to this
Agreement, including the name and address of the Borrower and a general
description of the Borrower’s business and may use the Borrower’s name in
advertising and other promotional material.

 

(b)           Each Lender severally agrees to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as “confidential” or “secret” by
the Borrower and provided to the Agent or such Lender by or on behalf of the
Borrower, under this Agreement or any other Loan Document, except to the extent
that such information (i) was or becomes generally available to the public
other than as a result of disclosure by the Agent or such Lender, or (ii) was
or becomes available on a nonconfidential basis from a source other than the
Borrower, provided that such source is not bound by a confidentiality
agreement with the Borrower known to the Agent or such Lender; provided,
however, that the Agent and any Lender may disclose such information (1) at
the request or pursuant to any requirement of any Governmental Authority to
which the Agent or such Lender is subject or in connection with an examination
of the Agent or such Lender by any such Governmental Authority; (2) pursuant
to subpoena or other court process; (3) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (4) to
the extent reasonably required in connection with any litigation or proceeding
(including, but not limited to, any bankruptcy proceeding) to which the Agent,
any Lender or their respective Affiliates may be party; (5) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (6) to the Agent’s or such Lender’s
independent auditors, accountants, attorneys and other professional advisors; (7) to
any prospective Participant or Assignee under any Assignment and Acceptance,
actual or potential, provided that such prospective Participant or Assignee
agrees to keep such information confidential to the same extent required of the
Agent and the Lenders hereunder;  (8) as
expressly permitted under the terms of any other document or agreement
regarding confidentiality to which the Borrower is party or is deemed party
with the Agent or such Lender; and (9) to its Affiliates; provided,
however, that if the Agent or Lender discloses information pursuant to subsection (2),
(3) or (4)

 

78

 

of this Section 13.17,
such Agent or Lender shall, to the extent it is reasonably able to do so, and
to the extent permitted by law, give sufficient notice thereof to Borrower.

 

13.18       Conflicts with Other Loan Documents.  Unless
otherwise expressly provided in this Agreement (or in another Loan Document by
specific reference to the applicable provision contained in this Agreement), if
any provision contained in this Agreement conflicts with any provision of any
other Loan Document, the provision contained in this Agreement shall govern and
control.

 

[Remainder of page blank]

 

79

 

IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.

 

	
   

  	
  “BORROWER”

  	 

	
   

  	
   

  	 

	
   

  	
  MWI VETERINARY SUPPLY CO.

  	 

	
   

  	
  an Idaho
  corporation

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Mary Pat B Thompson

  	
   

  	 

	
   

  	
   

  	
  Name: 

  	
  Mary Pat B Thompson

  	
   

  	 

	
   

  	
   

  	
  Titke:

  	
  VP & CEO

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  “AGENT”

  	 

	
   

  	
   

  	 

	
   

  	
  BANK OF AMERICA, N.A., as the Agent

  	 

	
   

  	
   

  	 

	
   

  	
  By: 

  	
  /s/ Steven N.
  Sharp

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Steven N. Sharp

  	
   

  	 

	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  “LENDERS”

  	 

	
   

  	
   

  	 

	
   

  	
  BANK OF AMERICA, N.A., as a Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By: 

  	
  /s/ Steven N.
  Sharp

  	
   

  	 

	
   

  	
   

  	
  Name: 

  	
  Steven N. Sharp

  	
   

  	 

	
   

  	
   

  	
  Title: 

  	
  Vice President

  	
   

  	 

												

 

[Credit Agreement]

 

S-1

 

ANNEX A

to

Credit Agreement

Definitions

Capitalized terms used in
the Loan Documents shall have the following respective meanings (unless
otherwise defined therein), and all section references in the following
definitions shall refer to sections of the Agreement:

 

“ABC” means Agri
Beef Co., an Idaho corporation, and the “Stockholder” under the
Recapitalization Agreement.

 

“Accounts” means,
as to any Loan Party,  all of such Loan
Party’s now owned or hereafter acquired or arising accounts, as defined in the
UCC, including any rights to payment for the sale or lease of goods or
rendition of services, whether or not they have been earned by performance.

 

“Account Debtor”
means each Person obligated in any way on or in connection with an Account.

 

“ACH Transactions”
means any cash management or related services including the automatic clearing
house transfer of funds by the Bank for the account of the Borrower or any of
its Subsidiaries pursuant to agreement or overdrafts.

 

“Acquisition”
means the acquisition of (a) all or substantially all of the Capital Stock
of any Person or (b) all or substantially all of the assets or any line of
business of any Person, whether effected by purchase or by merger or other
consolidation.

 

“Adjusted Net Earnings
from Operations” means, with respect to any fiscal period, the consolidated
net income of Holdings and its Subsidiaries after provision for income taxes
for such fiscal period, as determined in accordance with GAAP and reported on
the Financial Statements for such period, excluding any and all of the
following included in such net income:  (a) gain
or loss arising from the sale of any capital assets; (b) non-cash gain or
non-cash loss arising from any write-up in the book value of any asset; (c) earnings
of any Person, substantially all the assets of which have been acquired by the
Borrower in any manner, to the extent realized by such other Person prior to
the date of acquisition; (d) earnings of any Person (other than a
wholly-owned Subsidiary) in which the Borrower has an ownership interest unless
(and only to the extent) such earnings shall actually have been received by the
Borrower in the form of cash distributions; (e) earnings of any Person to
which assets of the Borrower or any of its Subsidiaries shall have been sold,
transferred or disposed of, or into which the Borrower or any of its
Subsidiaries shall have been merged, or which has been a party with the
Borrower or any of its Subsidiaries to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) non-cash gain
or non-cash loss arising from the acquisition of debt or equity securities of
Holdings or any of its Subsidiaries or from cancellation or forgiveness of
Debt; (g) non-cash gain or non-cash loss arising from extraordinary items,
as determined in accordance

 

A-1

 

with GAAP, or from
any other non-recurring transaction; and (h) unamortized transaction costs
incurred in connection with the Recapitalization to the extent the same have
been reimbursed by ABC.

 

“Adjustment
Indebtedness” has the meaning given such term in the Recapitalization
Agreement.

 

“Affected Lender”
has the meaning specified in Section 4.6.

 

 “Affiliate” means, as to any Person,
any other Person which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person or which owns, directly or
indirectly, five percent (5%) or more of the outstanding equity interest of
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.

 

“Agent” means the
Bank, solely in its capacity as agent for the Lenders, and any successor agent.

 

“Agent Advances”
has the meaning specified in Section 1.2(i).

 

“Agent’s Liens”
means the Liens in the Collateral granted to the Agent, for the benefit of the
Lenders, Bank, and Agent pursuant to this Agreement and the other Loan
Documents.

 

“Agent-Related Persons”
means the Agent, together with its Affiliates, and the officers, directors,
employees, counsel, representatives, agents and attorneys-in-fact of the Agent
and such Affiliates.

 

“Aggregate Revolver
Outstandings” means, at any date of determination:  the sum of (a) the unpaid balance
of  Loans, (b) the aggregate amount
of Pending  Loans, (c) one hundred
percent (100%) of the aggregate undrawn face amount of all outstanding Letters
of Credit, and (d) the aggregate amount of any unpaid reimbursement
obligations in respect of Letters of Credit.

 

“Agreement” means
the Credit Agreement to which this Annex A is attached, as from time to time
amended, modified or restated.

 

“Anniversary Date”
means each anniversary of the Closing Date.

 

“Applicable Margin”
means

 

(i)                                     with
respect to Base Rate  Loans and all other
Obligations (other than LIBOR Rate Loans), 0%; and

 

(ii)                                  with
respect to LIBOR  Rate Loans, 2.25%.

 

A-2

 

The Applicable Margins
shall be adjusted (up or down) prospectively on a quarterly basis as determined
by Holdings’ consolidated financial performance, commencing with the first day
of the first calendar month that begins after the fifth day after delivery of
Holdings’ Financial Statements to Lenders for the month ending December 31,
2002.  Adjustments
in Applicable Margins shall be determined by reference to the following grids:

 

	
  If Fixed Charge

  Coverage Ratio is:

  	
   

  	
  Level of

  Applicable Margins:

  	
   

  
	
  >1.60:1.00

  	
   

  	
  Level I

  	
   

  
	
  >1.35:1.00, <
  1.60:1.00

  	
   

  	
  Level II

  	
   

  
	
  <1.35:1.00

  	
   

  	
  Level III

  	
   

  

 

Low to
High

	
   

  	
   

  	
  Applicable
  Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level
  III

  	
   

  
	
  Base Rate Loans

  	
   

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.25

  	
  %

  
	
  LIBOR Rate Loans

  	
   

  	
  2.0

  	
  %

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  
	
  Applicable L/C Margin

  	
   

  	
  2.0

  	
  %

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  

 

All adjustments in the
Applicable Margins after December 31, 2002, shall be implemented quarterly
on a prospective basis, for each calendar month commencing at least 5 days
after the date of delivery to the Lenders of the monthly unaudited Financial
Statements for March, June, September and December evidencing the need
for an adjustment; provided, however that if the Applicable Margin is
adjusted based upon the unaudited Financial Statements for the last month in
any Fiscal Year, and if the audited Financial Statements for such Fiscal Year
would result in a different Applicable Margin, then the Applicable Margins
shall be adjusted retroactively, and any adjustment in the amount that is then
payable by the Borrower shall be made on the next interest payment date.  Concurrently with the delivery of those
Financial Statements, the Borrower shall deliver to the Agent and the Lenders a
certificate, signed by its chief financial officer, setting forth in reasonable
detail the basis for the continuance of, or any change in, the Applicable
Margins.  Failure to timely deliver such
Financial Statements shall, in addition to any other remedy provided for in
this Agreement, result in an increase in the Applicable Margins to the highest
level set forth in the foregoing grid, until the first day of the first
calendar month following the delivery of those Financial Statements
demonstrating that such an increase is not required.  If a Default or Event of Default has occurred
and is continuing at the time any reduction in the Applicable Margins is to be
implemented, no reduction may occur until the first day of the first calendar
month following the date on which such Default or Event of Default is waived or
cured.

 

“Assigned Contracts”
means, collectively, all of the rights and remedies of Holdings and each of its
Subsidiaries under, and all moneys and claims for money due or to become due to
the Borrower under the Recapitalization Agreement and those contracts set forth
on Schedule 1.1, and any other material contracts, and any and all
amendments, supplements, extensions, and renewals thereof including all rights
and claims of the Borrower now or hereafter existing:  (i) under any insurance, indemnities,
warranties, and guarantees provided for or arising out of or in connection with
any of the foregoing agreements; (ii) for any damages arising out of

 

A-3

 

or for breach or
default under or in connection with any of the foregoing contracts ; (iii) to
all other amounts from time to time paid or payable to Holdings or any of its
Subsidiaries under or in connection with any of the foregoing agreements; or (iv) to
exercise or enforce any and all covenants, remedies, powers and privileges
thereunder.

 

“Assignee” has the
meaning specified in Section 11.2(a).

 

“Assignment and
Acceptance” has the meaning specified in Section 11.2(a).

 

“Attorney Costs”
means and includes all reasonable fees, expenses and disbursements of any law
firm or other counsel engaged by the Agent, the reasonably allocated costs and
expenses of internal legal services of the Agent.

 

“Availability”
means, at any time (a) the lesser of (i) the Maximum Revolver Amount
or (ii) the Borrowing Base, minus (b) Reserves other than
Reserves deducted in the calculation of the Borrowing Base, minus (c) in
each case, the Aggregate Revolver Outstandings.

 

“Bank” means Bank
of America, N.A., a national banking association, or any successor entity
thereto.

 

“Bank Products”
means any one or more of the following types of services or facilities extended
to the Borrower or any of its Subsidiaries by the Bank or any affiliate of the
Bank in reliance on the Bank’s agreement to indemnify such affiliate:  (i) credit cards; (ii) ACH
Transactions; (iii) cash management, including controlled disbursement
services; and (iv) Hedge Agreements.

 

“Bank Product Reserves”
means all reserves which the Agent from time to time establishes in its
reasonable commercial discretion for the Bank Products then provided or
outstanding.

 

“Bankruptcy Code”
means Title 11 of the United States Code (11 U.S.C. § 101 et  seq.).

 

“Base Rate” means,
for any day, the rate of interest in effect for such day as publicly announced
from time to time by the Bank in Charlotte, North Carolina as its “prime rate”
(the “prime rate” being a rate set by the Bank based upon various
factors including the Bank’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate).  Any change in the prime rate announced by the
Bank shall take effect at the opening of business on the day specified in the
public announcement of such change.  Each
Interest Rate based upon the Base Rate shall be adjusted simultaneously with
any change in the Base Rate.

 

 “Base Rate Loan” means a Loan during
any period in which it bears interest based on the Base Rate.

 

“Blocked Account
Agreement” means an agreement among the Borrower or any Subsidiary
Borrower, the Agent and a Clearing Bank, in form and substance reasonably

 

A-4

 

satisfactory to
the Agent, concerning the collection of payments which represent the proceeds
of Accounts or of any other Collateral.

 

“Borrower” has the
meaning specified in the preamble to the Agreement.

 

“Borrowers” means,
collectively, the Borrower and each Subsidiary Borrower, and each of them is
sometimes referred to herein as “a Borrower.”

 

“Borrowing” means
a borrowing hereunder consisting of Loans made on the same day by the Lenders
to the Borrower or by Bank in the case of a Borrowing funded by Non-Ratable
Loans or by the Agent in the case of a Borrowing consisting of an Agent
Advance, or the issuance of Letters of Credit hereunder.

 

“Borrowing Base”
means, at any time, an amount equal to (a) the sum of (A) eighty-five
percent (85%) of the Net Amount of Eligible Accounts; plus (B) seventy
percent (70%) of the value of Eligible Inventory; minus (b) Reserves
from time to time established by the Agent in its reasonable credit judgment;
provided that the aggregate  Loans advanced
against Eligible Inventory shall not exceed the Maximum Inventory Loan Amount.

 

“Borrowing Base
Certificate” means a certificate by a Responsible Officer of the Borrower,
substantially in the form of Exhibit B (or another form reasonably
acceptable to the Agent) setting forth the calculation of the Borrowing Base,
including a calculation of each component thereof, all in such detail as shall
be reasonably satisfactory to the Agent. 
All calculations of the Borrowing Base in connection with the preparation
of any Borrowing Base Certificate shall originally be made by the Borrower and
certified to the Agent; provided, that the Agent shall have the right to
review and adjust, in the good faith exercise of its reasonable credit
judgment, any such calculation (1) to reflect its reasonable estimate of
declines in value of any of the Collateral described therein, and (2) to
the extent that such calculation is not in accordance with this Agreement.

 

“BRS” means
Bruckmann, Rosser, Sherrill & Co., L.L.C.

 

“Business Day”
means (a) any day that is not a Saturday, Sunday, or a day on which banks
in Los Angeles, California or Charlotte, North Carolina are required or
permitted to be closed, and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBOR Rate or
LIBOR Rate Loans, any day that is a Business Day pursuant to clause (a) above
and that is also a day on which trading in Dollars is carried on by and between
banks in the London interbank market.

 

“Capital Adequacy
Regulation” means any guideline, request or directive of any central bank
or other Governmental Authority, or any other law, rule or regulation,
whether or not having the force of law, in each case, regarding capital
adequacy of any bank or of any corporation controlling a bank.

 

“Capital Expenditures”
means all payments due (whether or not paid during any fiscal period) in
respect of the cost of any fixed asset or improvement, or replacement,
substitution, or addition thereto, including, without limitation, those costs
arising in connection

 

A-5

 

with the direct or
indirect acquisition of such asset by way of increased product or service
charges or in connection with a Capital Lease, all as determined in accordance
with GAAP.

 

“Capital Lease”
means any lease of property by the Borrower or any of its Subsidiaries which,
in accordance with GAAP, should be reflected as a capital lease on the balance
sheet of such Person.

 

“Capital Stock”
means all equity interests in a Person, whether common stock, preferred stock,
partnership interests, limited liability company interests, membership
interests, options, warrants, stock or equity appreciation rights, or
otherwise.

 

“Change of Control”
means (a) prior to consummation of a Qualified Public Offering, the Fund
shall cease to have the power to elect (whether by ownership of Capital Stock,
contract or otherwise) a majority of the Board of Directors of Holdings, or
shall cease to own and control all of the economic and voting rights associated
with ownership of at least a majority of the Capital Stock of Holdings, on a
fully diluted basis; (b) after consummation of a Qualified Public
Offering, (i) any Person or “group” of Persons (within the meaning of the
Securities Exchange Act of 1934, as amended) (other than the Fund) shall
acquire or become the beneficial owner of shares representing 30% or more of
(and the Fund shall cease to beneficially own more than 50% of) the shares of
the Capital Stock of Holdings having the power to elect directors of Holdings
under ordinary circumstances; (ii) the Fund shall cease to beneficially
own more than 50% of the shares of the Capital Stock of Holdings having the
power to elect directors of Holdings under ordinary circumstances; or (iii) during
any period of twelve (12) months, individuals who at the beginning of such
period constituted the Board of Directors of Holdings (together with any new
directors whose election to the Board of Directors of Holdings or whose
nomination for election was approved by a vote of at least two-thirds of the
directors still in office who either were directors at the beginning of such
period  or whose election or nomination
was so previously approved) cease for any reason other than death or disability
to constitute a majority of the directors of Holdings then in office; or (c) at
any time,  the Borrower ceases to be a
wholly-owned Subsidiary of Holdings or any Subsidiary of the Borrower ceases to
be a wholly-owned Subsidiary of the Borrower or (d) at any time, the sale
of all or substantially all of the assets of the Borrower or Holdings.

 

“Chattel Paper”
means, with respect to any Person, all of its now owned or hereafter acquired
chattel paper, as defined in the UCC, including electronic chattel paper.

 

“Clearing Bank”
means the Bank or any other banking institution with whom a Payment Account has
been established pursuant to a Blocked Account Agreement.

 

“Closing Date”
means the date of this Agreement.

 

“Code” means the
Internal Revenue Code of 1986, and the regulations promulgated thereunder.

 

A-6

 

“Collateral” means
all of real and personal property of Holdings and its Subsidiaries and all
other assets of any Person from time to time subject to Agent’s Liens securing
payment or performance of the Obligations.

 

“Collateral Assignment”
means the Collateral Assignment of Rights under Recapitalization Agreement,
dated as of the Closing Date, from Holdings and Fund to the Agent, and the
Consent of Stockholder by ABC, each as amended, supplemented or otherwise
modified from time to time.

 

“Commitment”
means, at any time with respect to a Lender, the principal amount set forth
beside such Lender’s name under the heading “Commitment” on Schedule 1.2
attached to the Agreement or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 11.2, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section 11.2,
and “Commitments” means, collectively, the aggregate amount of the
commitments of all of the Lenders.

 

“Contaminant”
means any waste, pollutant, hazardous substance, toxic substance, hazardous
waste, special waste, petroleum or petroleum-derived substance or waste,
asbestos in any form or condition, or polychlorinated biphenyls (“PCBs”).

 

“Continuation/Conversion
Date” means the date on which a Loan is converted into or continued as a
LIBOR Rate Loan.

 

“Copyright Security
Agreement” means, collectively, the Copyright Security Agreements dated as
of the date hereof or hereafter, in each case made by a Loan Party and
delivered to the Agent, for the benefit of the Agent and the Lenders, for
recordal purposes with the U.S. Copyright Office.

 

“Credit Support”
has the meaning specified in Section 1.4(a).

 

“Dating Program
Receivables” means Accounts arising from Inventory sold by the Borrower or
a Subsidiary Borrower under a program providing for terms greater than 90 days.

 

“Debt” of a Person
means, without duplication, all liabilities, obligations and indebtedness of
such Person to any Person, of any kind or nature, now or hereafter owing,
arising, due or payable, howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise,
consisting of indebtedness for borrowed money or the deferred purchase price of
property, including (a) all Obligations; (b) all obligations and
liabilities of any Person secured by any Lien on such Person’s property, even
though such Person shall not have assumed or become liable for the payment
thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such property shall be included in
Debt only to the extent of the book value of such property as would be shown on
a balance sheet of such Person prepared in accordance with GAAP; (c) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention

 

A-7

 

agreement with
respect to property used or acquired by such Person, even if the rights and
remedies of the lessor, seller or lender thereunder are limited to repossession
of such property; provided, however, that all such obligations
and liabilities which are limited in recourse to such property shall be
included in Debt only to the extent of the book value of such property as would
be shown on a balance sheet of such Person, prepared in accordance with GAAP; (d) all
obligations and liabilities under Guaranties, (e) the present value
(discounted at the Base Rate) of lease payments due under synthetic leases; and
(f) Hedge Agreements.  Liabilities
in respect of endorsements of negotiable instruments for collection in the
ordinary course of business and trade payables incurred in the ordinary course
of business do not constitute “Debt”.

 

“Default” means
any event or circumstance which, with the giving of notice, the lapse of time,
or both, would (if not cured, waived, or otherwise remedied during such time)
constitute an Event of Default.

 

“Default Rate”
means a fluctuating per annum interest rate at all times equal to the sum of (a) the
otherwise applicable Interest Rate (without giving effect to the Default Rate) plus
(b) two percent (2%) per annum. 
Each Default Rate shall be adjusted simultaneously with any change in
the applicable Interest Rate.  In
addition, the Default Rate shall result in an increase in the Letter of Credit
Fee by 2 percentage points per annum.

 

“Defaulting Lender”
has the meaning specified in Section 12.15(c).

 

“Denver Property”
means the Real Property owned by the Borrower on the Closing Date, more
commonly known as 10801 East 54th Street, Denver, Colorado 80239.

 

“Derivative Reserve”
means, at any time that a Default or Event of Default has occurred and is
continuing or Availability is less than $5,000,000, a reserve for credit
exposure with respect to any Interest Rate Agreement in such amount as
determined by Bank in its reasonable commercial discretion and notified to the
Agent.

 

“Designated Account”
has the meaning specified in Section 1.2(c).

 

“Dilution” means
any and all potential offsets to an Account, including pricing adjustments,
customer returns, customer cancellations, and other claims.

 

“Dilution Reserve”
means, as of any date of determination, a reserve equal to 2% of Eligible
Accounts for every 1% of Dilution in excess of 7.5% of gross sales, measured
for the preceding quarter.

 

“Distribution”
means, in respect of any Capital Stock of any Person: (a) the payment or
making of any dividend or other distribution of cash or other property in
respect of such Capital Stock of such Person, other than distributions in
Capital Stock of the same class; or (b) the redemption or other
acquisition by such Person of any Capital Stock (or any options or warrants for
such stock) of such Person.

 

A-8

 

“Documents” means
all documents as such term is defined in the UCC, including bills of lading,
warehouse receipts or other documents of title, now owned or hereafter acquired
by the Borrower or any of its Subsidiaries.

 

“DOL” means the
United States Department of Labor or any successor department or agency.

 

“Dollar” and “$”
means dollars in the lawful currency of the United States.  Unless otherwise specified, all payments
under the Agreements shall be made in Dollars.

 

“EBITDA” of a
Person means, with respect to any fiscal period of such Person, Adjusted Net
Earnings from Operations, plus, to the extent deducted in the determination
of Adjusted Net Earnings from Operations for that fiscal period, interest
expenses, Federal, state, local and foreign income taxes, depreciation and
amortization.

 

“Eligible Accounts”
means the Accounts of Borrower or a Subsidiary Borrower which the Agent in the
exercise of its reasonable commercial discretion determines to be Eligible
Accounts.  Without limiting the
discretion of the Agent to establish other criteria of ineligibility, Eligible
Accounts shall not, unless the Agent in its sole discretion elects, include any
Account:

 

(a)                                  with
respect to which more than 97 days have elapsed since the date of the original
invoice therefor or which is more than 52 days past due (other than Dating
Program Receivables);

 

(b)                                 with
respect to which any of the representations, warranties, covenants, and
agreements contained in the Security Agreement are incorrect or have been
breached;

 

(c)                                  with
respect to which Account (or any other Account due from such Account Debtor),
in whole or in part, a check, promissory note, draft, trade acceptance or other
instrument for the payment of money has been received, presented for payment
and returned uncollected for any reason;

 

(d)                                 which
represents a progress billing (as hereinafter defined) or as to which the
Borrower or a Subsidiary Borrower has extended the time for payment without the
consent of the Agent; for the purposes hereof, “progress billing” means
any invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor’s obligation to pay such invoice
is conditioned upon the Borrower’s completion of any further performance under
the contract or agreement;

 

(e)                                  with
respect to which any one or more of the following events has occurred to the
Account Debtor on such Account:  death or
judicial declaration of incompetency of an Account Debtor who is an individual;
the filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as
a bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the

 

A-9

 

Account Debtor,
including, without limitation, the appointment of or taking possession by a “custodian,”
as defined in the Federal Bankruptcy Code; the institution by or against the
Account Debtor of any other type of insolvency proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against, or winding
up of affairs of, the Account Debtor; the nonpayment generally by the Account
Debtor of its debts as they become due; or the cessation of the business of the
Account Debtor as a going concern;

 

(f)                                    if
fifty percent (50%) or more of the aggregate Dollar amount of outstanding
Accounts owed at such time by such Account Debtor thereon is classified as
ineligible under clause (a) above;

 

(g)                                 owed
by an Account Debtor which: (i) does not maintain its chief executive
office in the United States of America or Canada (other than the Province of
Newfoundland); or (ii) is not organized under the laws of the United
States of America or Canada or any state or province thereof; or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof;
except to the extent that such Account is secured or payable by a letter of
credit reasonably satisfactory to the Agent in its discretion;

 

(h)                                 owed
by an Account Debtor which is an Affiliate or employee of any Loan Party;

 

(i)                                     except
as provided in clause (k) below, with respect to which either the
perfection, enforceability, or validity of the Agent’s Liens in such Account,
or the Agent’s right or ability to obtain direct payment to the Agent of the
proceeds of such Account, is governed by any federal, state, or local statutory
requirements other than those of the UCC;

 

(j)                                     owed
by an Account Debtor to which Holdings or any of its Subsidiaries, is indebted
in any way, or which is subject to any right of setoff or recoupment by the
Account Debtor, unless the Account Debtor has entered into an agreement
acceptable to the Agent to waive setoff rights; or if the Account Debtor
thereon has disputed liability or made any claim with respect to any other
Account due from such Account Debtor; but in each such case only to the extent
of such indebtedness, setoff, recoupment, dispute, or claim;

 

(k)                                  owed
by the government of the United States of America, or any department, agency,
public corporation, or other instrumentality thereof, unless the Federal
Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et  seq.),
and any other steps necessary to perfect the Agent’s Liens therein, have been
complied with to the Agent’s satisfaction with respect to such Account;

 

(l)                                     owed
by any state, municipality, or other political subdivision of the United States
of America, or any department, agency, public corporation, or other
instrumentality thereof and as to which the Agent determines that its Lien
therein is not or cannot be perfected;

 

A-10

 

(m)                               which
represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on
approval, consignment, or other repurchase or return basis;

 

(n)                                 which
is evidenced by a promissory note or other instrument or by chattel paper;

 

(o)                                 if
the Agent believes, in the exercise of its commercially reasonable judgment,
that the prospect of collection of such Account is impaired or that the Account
is reasonably likely not to be paid by reason of the Account Debtor’s financial
inability to pay;

 

(p)                                 with
respect to which the Account Debtor is located in any state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit the Borrower to seek judicial enforcement in such State of payment of
such Account, unless such Borrower has qualified to do business in such state
or has filed a Notice of Business Activities Report or equivalent report for
the then current year;

 

(q)                                 which
arises out of a sale not made in the ordinary course of business;

 

(r)                                    with
respect to which the goods giving rise to such Account have not been shipped
and delivered to and accepted by the Account Debtor or the services giving rise
to such Account have not been performed by the Borrower or the applicable
Subsidiary Borrower, and, if applicable, accepted by the Account Debtor, or the
Account Debtor revokes its acceptance of such goods or services;

 

(s)                                  owed
by an Account Debtor which is obligated to the Borrower or any Subsidiary
Borrower respecting Accounts which are otherwise Eligible Accounts the aggregate
unpaid balance of which exceeds ten percent (10%) (except for Banfield-The Pet
Hospital, which is subject to a limit of twenty percent (20%)) of the aggregate
unpaid balance of all Eligible Accounts owed to the Borrower and the Subsidiary
Borrowers at such time by all of the Account Debtors, but only to the extent of
such excess;

 

(t)                                    which
is not subject to a first priority and perfected security interest in favor of
the Agent for the benefit of the Lenders.

 

(u)                                 which
is payable in cash on delivery of the Inventory;

 

(v)                                 which
is a Dating Program Receivable with respect to which more than 240 days have
elapsed since the date of the original invoice therefor or which is more than
20 days past due;

 

(w)                               which
is a Dating Program Receivable to the extent that such Account, together with
all other Dating Program Receivables which are otherwise Eligible Accounts,
exceeds 20% of the aggregate unpaid balance of all Eligible Accounts owed to
the Borrower and the Subsidiary Borrowers by all Account Debtors; or

 

(x)                                   finance
charges or accrued incentive credits of any kind.

 

A-11

 

If any Account at any
time ceases to be an Eligible Account, then such Account shall promptly be
excluded from the calculation of Eligible Accounts.

 

“Eligible Assignee”
means (a) a commercial bank, commercial finance company or other asset
based lender, having total assets in excess of $1,000,000,000; (b) any
Lender listed on the signature page of this Agreement; (c) any
Affiliate of any Lender; and (d) if an Event of Default has occurred and
is continuing, any Person reasonably acceptable to the Agent.

 

“Eligible Inventory”
means Inventory, valued at the lower of cost (on a weighted average basis) or
market, which the Agent, in its reasonable commercial discretion, determines to
be Eligible Inventory.  Without limiting
the discretion of the Agent to establish other criteria of ineligibility,
Eligible Inventory shall not, unless the Agent in its sole discretion elects,
include any Inventory:

 

(a)                                  that
is not owned by the Borrower or a Subsidiary Borrower;

 

(b)                                 that
is not subject to the Agent’s Liens, which are perfected as to such Inventory,
or that are subject to any other Lien whatsoever (other than the Liens
described in clause (d) of the definition of Permitted Liens
provided that such Permitted Liens (i) are junior in priority to the Agent’s
Liens or subject to Reserves and (ii) do not impair directly or indirectly
the ability of the Agent to realize on or obtain the full benefit of the
Collateral);

 

(c)                                  that
is not finished goods;

 

(d)                                 that
consists of raw materials, work-in-process, chemicals, samples, prototypes,
supplies, or packing and shipping materials;

 

(e)                                  that
is Morgue Inventory, is not in good condition, is unmerchantable, or does not
meet all standards imposed by any Governmental Authority, having regulatory
authority over such goods, their use or sale (including any Pharmaceutical
Regulatory Authority);

 

(f)                                    that
is Excess Pro Heart Inventory or other Inventory to the extent that the amount
of any product is in excess of the amount reasonably estimated to be salable
within the next 12 months, or that is otherwise not currently either usable or
salable, at prices approximating at least cost, in the normal course of
business;

 

(g)                                 that
is obsolete or returned or repossessed or used goods taken in trade;

 

(h)                                 that
is located outside the United States of America (or that is in-transit);

 

(i)                                     that
is located in a public warehouse or in possession of a bailee or in a facility
leased by the Borrower, unless either (x) the warehouseman, or the bailee, or
the lessor has delivered to the Agent, if requested by the Agent, a
subordination or lien waiver agreement in form and substance reasonably
satisfactory to the Agent or (y) a Reserve for rents or storage charges has
been established for Inventory at that location;

 

A-12

 

(j)                                     that
contains or bears any Proprietary Rights licensed to the Borrower or any
Subsidiary Borrower by any Person, if the Agent is not satisfied that it may
sell or otherwise dispose of such Inventory in accordance with the terms of the
Security Agreement and Section 9.2 without infringing the rights of
the licensor of such Proprietary Rights or violating any contract with such
licensor (and without payment of any royalties other than any royalties due
with respect to the sale or disposition of such Inventory pursuant to the
existing license agreement), and, as to which the Borrower or the applicable
Subsidiary Borrower has not delivered to the Agent a consent or sublicense
agreement from such licensor in form and substance reasonably acceptable to the
Agent if requested;

 

(k)                                  that
is not reflected in the details of a current perpetual inventory report; or

 

(l)                                     that
is Inventory placed or held on consignment;

 

(m)                               that
is warranty repair or damaged inventory; or

 

(n)                                 that
is in possession of a salesperson, or is special order or trade show Inventory.

 

If any Inventory at any
time ceases to be Eligible Inventory, such Inventory shall promptly be excluded
from the calculation of Eligible Inventory.

 

“Environmental Claims”
means all claims, however asserted, by any Governmental Authority or other
Person alleging potential liability or responsibility for violation of any
Environmental Law, or for a Release or injury to the environment.

 

“Environmental Compliance Reserve”
means any reserve which the Agent establishes in its reasonable commercial
discretion after prior written notice to the Borrower from time to time for
amounts that are reasonably likely to be expended by the Borrower or any of its
Subsidiaries in order for the Borrower or any of its Subsidiaries and its
operations and property (a) to comply with any notice from a Governmental
Authority asserting material non-compliance with Environmental Laws, or (b) to
correct any such material non-compliance identified in a report delivered to
the Agent and the Lenders pursuant to Section 7.7.

 

“Environmental Laws”
means all federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative orders,
directed duties, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case relating to environmental, health,
safety and land use matters.

 

“Environmental Lien”
means a Lien in favor of any 
Governmental Authority for (a) any liability under Environmental
Laws, or (b) damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a Contaminant into
the environment.

 

“Equipment” of a
Person means all of such Person’s now owned and hereafter acquired machinery,
equipment, furniture, furnishings, fixtures, and other tangible personal
property (except Inventory), including embedded software, motor vehicles with
respect to which

 

A-13

 

a certificate of
title has been issued, aircraft, dies, tools, jigs, molds and office equipment,
as well as all of such types of property leased by such Person and all of such
Person’s rights and interests with respect thereto under such leases
(including, without limitation, options to purchase); together with all present
and future additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, and regulations promulgated
thereunder.

 

“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with the Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).

 

“ERISA Event”
means (a) a Reportable Event with respect to a Pension Plan, (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA, (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA, (d) the filing of a notice of intent to terminate, the treatment of
a Pension Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-employer Plan, (e) the occurrence of an event or condition
which might reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan or Multi-employer Plan, or (f) the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA
Affiliate.

 

“Event of Default”
has the meaning specified in Section 9.1.

 

“Excess Pro Heart
Inventory” means Pro Heart 6 manufactured by Fort Dodge representing the
amount reasonably estimated to be in excess of the amount which is salable in
the next 12 months.

 

“Exchange Act”
means the Securities Exchange Act of 1934, and regulations promulgated
thereunder.

 

“FDIC” means the
Federal Deposit Insurance Corporation, and any Governmental Authority
succeeding to any of its principal functions.

 

“Federal Funds Rate”
means, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100  of 1%) equal to the weighted average of the rates on
overnight

 

A-14

 

Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is
so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate charged to the Bank on such day on such
transactions as determined by the Agent.

 

“Federal Reserve Board”
means the Board of Governors of the Federal Reserve System or any successor
thereto.

 

“Feeders” means
Feeder’s Advantage, LLC, an Idaho limited liability company and an Affiliate of
Borrower.

 

“Financial Statements”
means, according to the context in which it is used, the financial statements
referred to in Sections 5.2 and 6.6 or any other financial
statements required to be given to the Lenders pursuant to this Agreement.

 

“Fiscal Year”
means the fiscal year of Holdings and its Subsidiaries for financial accounting
purposes.  The current Fiscal Year will
end on September 30, 2002.

 

“Fixed Assets”
means the Equipment and Real Estate of the Borrower and its Subsidiaries.

 

“Fixed Charge Coverage
Ratio” means, with respect to any fiscal period, the ratio of EBITDA of Holdings
and its Subsidiaries to Fixed Charges of Holdings and its Subsidiaries.

 

“Fixed Charges”
means, with respect to any fiscal period of any Person on a consolidated basis,
without duplication, cash interest expense, Capital Expenditures (excluding (i) computer
hardware acquired from ABC in June 2002 and (ii) Capital Expenditures
funded with Debt other than Loans, but including, without duplication, all
scheduled principal payments with respect to such Debt), scheduled principal
payments of Debt, Federal, state, local and foreign income taxes, excluding
deferred taxes, cash dividends on Capital Stock of Holdings and repurchases of
Capital Stock of Holdings or any of its Subsidiaries.

 

“Fronting Fee” has
the meaning specified in Section 2.6.

 

“Fund” means Bruckmann,
Rosser, Sherrill & Co. II, L.P., a Delaware limited partnership, and,
prior to the consummation of the Transactions, the sole shareholder of
Holdings.

 

“Funding Date”
means the date on which a Borrowing occurs.

 

 “GAAP” means generally accepted accounting
principles and practices set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of

 

A-15

 

the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the Closing Date.

 

“General Intangibles”
of a Person means all of such Person’s now owned or hereafter acquired general
intangibles, choses in action and causes of action and all other intangible
personal property of such Person of every kind and nature (other than
Accounts), including, without limitation, all contract rights, payment
intangibles, Proprietary Rights, corporate or other business records, designs,
blueprints, plans, specifications, goodwill, computer software, customer lists,
licenses, franchises, tax refund claims, any funds which may become due to such
Person in connection with the termination of any Plan or other employee benefit
plan or any rights thereto and any other amounts payable to such Person from
any Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which such Person is beneficiary, rights to receive dividends, distributions,
cash, Instruments and other property in respect of or in exchange for pledged
equity interests or Investment Property and any letter of credit, guarantee,
claim, security interest or other security held by or granted to such Person.

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory
authority) thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

 

“Guaranty” means,
with respect to any Person, all obligations of such Person which in any manner
directly or indirectly guarantee or assure, or in effect guarantee or assure,
the payment or performance of any indebtedness, dividend or other obligations
of any other Person (the “guaranteed obligations”), or assure or in effect
assure the holder of the guaranteed obligations against loss in respect
thereof, including any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed obligations or any
property constituting security therefor; (b) to advance or supply funds
for the purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition; or (c) to lease property
or to purchase any debt or equity securities or other property or services.

 

“Hedge Agreement”
means any and all transactions, agreements or documents now existing or
hereafter entered into, which provides for an interest rate, credit, commodity
or equity swap, cap, floor, collar, forward foreign exchange transaction,
currency swap, cross currency rate swap, currency option, or any combination
of, or option with respect to, these or similar transactions, for the purpose
of hedging the exposure to fluctuations in interest or exchange rates, loan,
credit exchange, security or currency valuations or commodity prices.

 

“Holdings” means
MWI Holdings, Inc., a Delaware corporation, and immediately following
consummation of the Transactions, the sole stockholder of Borrower.

 

A-16

 

“Holdings Guaranty”
means the Guaranty executed by Holdings on the Closing Date for the benefit of
the Agent and the Lenders.

 

“Instruments”
means all instruments as such term is defined in the UCC, now owned or hereafter
acquired by the Borrower or any of its Subsidiaries.

 

“Interest Period”
means, as to any LIBOR Rate Loan, the period commencing on the Funding Date of
such Loan or on the Continuation/Conversion Date on which the Loan is converted
into or continued as a LIBOR Rate Loan, and ending on the date one, two, or
three months thereafter as selected by the Borrower in its Notice of Borrowing,
in the form attached hereto as Exhibit D, or Notice of
Continuation/Conversion, in the form attached hereto as Exhibit E,
provided that:

 

(a)                                  if
any Interest Period would otherwise end on a day that is not a Business Day,
that Interest Period shall be extended to the following Business Day unless the
result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day;

 

(b)                                 any
Interest Period pertaining to a LIBOR Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at the end of such
Interest Period; and

 

(c)                                  no
Interest Period shall extend beyond the Stated Termination Date.

 

“Interest Rate”
means each or any of the interest rates, including the Default Rate, set forth
in Section 2.1.

 

“Interest Rate
Agreement” means a Hedge Agreement between the Borrower and a Lender
providing for hedging of interest rate fluctuations, which Hedge Agreement
shall be in form and substance satisfactory to the Agent

 

“Inventory” of a
Person means all of such Person’s now owned and hereafter acquired inventory,
goods and merchandise, wherever located, to be furnished under any contract of
service or held for sale or lease, all returned goods, raw materials,
work-in-process, finished goods (including embedded software), other materials
and supplies of any kind, nature or description which are used or consumed in
such Person’s business or used in connection with the packing, shipping,
advertising, selling or finishing of such goods, merchandise, and all documents
of title or other Documents representing them.

 

“Investment Property”
of a Person means all of such Person’s right title and interest in and to any and
all: (a) securities whether certificated or uncertificated; (b) securities
entitlements; (c) securities accounts; (d) commodity contracts; or (e) commodity
accounts.

 

“IRS” means the
Internal Revenue Service and any Governmental Authority succeeding to any of
its principal functions under the Code.

 

A-17

 

“Joinder Agreement”
means an agreement, substantially in the form of Exhibit G hereto,
pursuant to which any Subsidiary of the Borrower formed or acquired in
connection with a Permitted Acquisition becomes a “Subsidiary Borrower” under
this Agreement and a Loan Party.

 

“Latest Projections”
means:  (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to Section 5.2(d),
the projections of the financial condition, results of operations, and cash
flows of the Borrower and its Subsidiaries, for the period commencing on June 1,
2002, and ending on September 30, 2004, and delivered to the Agent prior
to the Closing Date and attached at Exhibit H hereto; and (b) thereafter,
the projections most recently received by the Agent pursuant to Section 5.2(d).

 

“Lender” and “Lenders”
have the meanings specified in the introductory paragraph hereof and shall
include the Agent to the extent of any Agent Advance outstanding and the Bank
to the extent of any Non-Ratable Loan outstanding; provided that no such
Agent Advance or Non-Ratable Loan shall be taken into account in determining
any Lender’s Pro Rata Share.

 

“Letter of Credit”
has the meaning specified in Section 1.4(a).

 

“Letter of Credit Fee”
has the meaning specified in Section 2.6.

 

“Letter of Credit
Issuer” means the Bank, any affiliate of the Bank or any other financial
institution that issues any Letter of Credit pursuant to this Agreement.

 

“Letter of Credit
Subfacility” means $5,000,000.

 

“LIBOR Rate”
means, for any Interest Period, with respect to LIBOR Rate Loans, the rate of
interest per annum determined pursuant to the following formula:

 

	
  LIBOR Rate =

  	
  Offshore
  Base Rate

  	
   

  
	
   

  	
  1.00
  - Eurodollar Reserve Percentage

  	
   

  

 

Where,

 

“Offshore Base Rate” means the rate per annum
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. 
If for any reason such rate is not available, the Offshore Base Rate
shall be, for any Interest Period, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.  If for any reason none
of the foregoing rates is available, the Offshore Base Rate shall be, for any
Interest Period, the rate per annum determined by Agent as the rate of interest
at which dollar deposits in the approximate amount of the LIBOR Rate Loan
comprising part of

 

A-18

 

such Borrowing would be
offered by the Bank’s London Branch to major banks in the offshore dollar
market at their request at or about 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period.

 

“Eurodollar Reserve Percentage” means, for any
day during any Interest Period, the reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day
applicable to member banks under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).  The Offshore Rate for
each outstanding LIBOR Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.

 

“LIBOR  Rate Loan” means a  Loan during any period in which it bears
interest based on the LIBOR Rate.

 

“Lien” means:  (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes; (b) to
the extent not included under clause (a), any reservation, exception,
encroachment, easement, right-of-way, covenant, condition, restriction, lease
or other title exception or encumbrance affecting property; and (c) any
contingent or other agreement to provide any of the foregoing.

 

“Loan Account”
means the loan account of the Borrower and the Subsidiary Borrowers, which
account shall be maintained by the Agent.

 

“Loan Documents”
means this Agreement, the Notes, each Joinder Agreement, the Patent and
Trademark Security Agreements, the Copyright Security Agreement, the Security
Agreement, the Mortgages, the Holdings Guaranty, any other Guaranty of the
Obligations, the Collateral Assignment, and any other agreements, instruments,
and documents heretofore, now or hereafter evidencing, securing, guaranteeing
or otherwise relating to the Obligations, the Collateral, or any other aspect
of the transactions contemplated by this Agreement.

 

“Loan Party” means
each of Holdings, the Borrower, each Subsidiary Borrower, and each other Person
guaranteeing or otherwise liable for the Obligations.

 

“Loans” means,
collectively, all loans and advances provided for in Article 1, including
each Agent Advance and Non-Ratable Loan.

 

“Majority Lenders”
means at any date of determination Lenders whose Pro Rata Shares aggregate more
than 50%.

 

A-19

 

“Management Agreement”
means that certain Management and Consulting Services Agreement dated as of the
Closing Date among the Borrower, BRS and ABC, as amended or otherwise modified
to the extent permitted hereunder.

 

“Margin Stock”
means “margin stock” as such term is defined in Regulation T, U  or X of the Federal Reserve Board.

 

“Material Adverse
Effect” means (a) a material adverse change in, or a material adverse
effect upon, the operations, business, properties, condition (financial or
otherwise) or prospects of (i) the Borrower, (ii) any Subsidiary
Borrower, (iii) the Collateral (taken as a whole) or (iv) the
Borrowers and all guarantors of the Obligations (taken as a whole); (b) a
material impairment of the ability of the Borrower or any Affiliate of Borrower
to perform under any Loan Document to which it is a party; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against Holdings or any of its Subsidiaries of any Loan Document
to which it is a party.

 

“Maximum Inventory
Loan Amount” means $45,000,000.

 

“Maximum Liability”
has the meaning specified in Section 1.6(f).

 

“Maximum Rate” has
the meaning specified in Section 2.3.

 

“Maximum Revolver
Amount” means $70,000,000.

 

“Morgue Inventory”
means Inventory which the Borrower or any Subsidiary Borrower has determined is
unmerchantable due to limited shelf life, as reflected on the  “Morgue Inventory Report” prepared by the
Borrower or such Subsidiary Borrower in the ordinary course of business and in
accordance with the standards described on Schedule 6.31 hereto times
1.5.

 

“Mortgages” means
and includes any and all of the mortgages, deeds of trust, deeds to secure
debt, assignments and other instruments executed and delivered by the
Borrower  or any of its Subsidiaries to
or for the benefit of the Agent by which the Agent, on behalf of the Lenders,
acquires a Lien on the Real Estate or a collateral assignment of such Person’s
interest under leases of Real Estate, and all amendments, modifications and
supplements thereto.

 

“Multi-employer Plan”
means a “multi-employer plan” as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately preceding
six (6) years contributed to by the Borrower or any ERISA Affiliate.

 

“Net Amount of
Eligible Accounts” means, at any time, the gross amount of Eligible
Accounts less sales, excise or similar taxes, and less returns, discounts,
claims, credits, allowances, accrued rebates, offsets, deductions, finance
charges, incentive payments, counterclaims, disputes and other defenses of any
nature at any time issued, owing, granted, outstanding, available or claimed
(without duplication of any amounts excluded from Eligible Accounts).

 

A-20

 

“Non-Ratable Loan”
and “Non-Ratable Loans” have the meanings specified in Section 1.2(h).

 

“Notes” has the
meaning specified in Section 1.2(a)(ii).

 

“Notice of Borrowing”
has the meaning specified in Section 1.2(b).

 

“Notice of
Continuation/Conversion” has the meaning specified in Section 2.2(b).

 

“Obligations”
means all present and future loans, advances, liabilities, obligations,
covenants, duties, and debts owing by Holdings or any of its Subsidiaries to
the Agent and/or any Lender, arising under or pursuant to this Agreement or any
of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect, absolute or contingent, due or to become due,
primary or secondary, as principal or guarantor, and including all principal,
interest, charges, expenses, fees, attorneys’ fees, filing fees and any other
sums chargeable to Holdings or any of its Subsidiaries hereunder or under any
of the other Loan Documents. 
“Obligations” includes, without limitation, (a) all debts,
liabilities, and obligations now or hereafter arising from or in connection
with the Letters of Credit and (b) all debts, liabilities and obligations
now or hereafter arising from or in connection with Bank Products provided to
Holdings or any of its Subsidiaries.

 

“Other Taxes” means
any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.

 

“Participant”
means any Person who shall have been granted the right by any Lender to
participate in the financing provided by such Lender under this Agreement, and
who shall have entered into a participation agreement in form and substance
satisfactory to such Lender.

 

“Patent and Trademark Security
Agreements” means, collectively, each Patent and Trademark Security
Agreement, dated as of the date hereof or hereafter, in each case made by a
Loan Party and delivered to the Agent, for the benefit of the Agent and the
Lenders, for recordal purposes with the U.S. Patent and Trademark Office.

 

“Payment Account”
means each bank account established pursuant to the Security Agreement, to
which the proceeds of Accounts and other Collateral and all other receipts are
deposited or credited, and which is maintained in the name of the Agent or the
Borrower or a Subsidiary Borrower, as the Agent may determine, on terms
reasonably acceptable to the Agent giving Agent control of such bank account
(within the meaning of the UCC).

 

“PBGC” means the
Pension Benefit Guaranty Corporation or any Governmental Authority succeeding
to the functions thereof.

 

A-21

 

“Pending  Loans” means, at any time, the aggregate
principal amount of all  Loans requested
in any Notice of Borrowing received by the Agent which have not yet been
advanced.

 

“Pension Plan”
means a pension plan (as defined in Section 3(2) of ERISA) subject to
Title IV of ERISA which Holdings or any of its Subsidiaries sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multi-employer Plan has made contributions
at any time during the immediately preceding five (5) plan years.

 

“Permitted Acquisition”
means an Acquisition consummated by the Borrower if all of the following
conditions are satisfied or waived in accordance with the Agreement:

 

 (a) the Person acquired or from whom the
assets or line of business are acquired is in the same line of business as that
engaged in by the Borrower on the Closing Date or reasonably related thereto;

 

(b) such Acquisition
is not a hostile or contested acquisition;

 

 (c) the business acquired is located in
the United States and any Person whose Capital Stock is acquired is organized
under the Requirements of Law of the United States and will become a
wholly-owned Subsidiary of the Borrower;

 

(d) at the time of
such Acquisition and after giving effect to any Loans made to consummate such
Acquisition, Availability is no less than the greater of (i) $5,000,000
and (ii) 10% of the lesser of (x) the Maximum Revolver Amount and (y) the
Borrowing Base, and the Agent shall have received a certificate of a
Responsible Officer so certifying and demonstrating in reasonable detail
compliance with such requirement;

 

(e) no Default or
Event of Default has occurred and is continuing or would result from
consummation of such Acquisition;

 

(f) before and after
giving effect to the Acquisition, each representation and warranty in the Loan
Documents shall be true and correct in all material respects (except those
specifically applying to a particular date, and except to the extent that the
Agent and the Lenders have been notified in writing that any such
representation and warranty is not correct and the Required Lenders have waived
such compliance);

 

(g) all assets so
acquired, and any assets of the Person whose Capital Stock is so acquired,
shall be free and clear of all Liens, other than Permitted Liens;

 

(h) no Loan Party
shall, as a result of or in connection with such Acquisition assume or incur
any direct or contingent liabilities (including those relating to Environmental
Laws, taxes, litigation or similar proceedings, or otherwise) that could
reasonably be expected to have a Material Adverse Effect; and

 

(i)  the Borrower
complies with the requirements of Section 7.28.

 

A-22

 

“Permitted Liens”
means:

 

(a)                                  Liens imposed by a Governmental
Authority for taxes not delinquent or statutory Liens for taxes in an amount
not to exceed $100,000 provided that the payment of such taxes which are
due and payable is being contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial reserves have been
established on Borrower’s books and records and a stay of enforcement of any
such Lien is in effect;

 

(b)                                 the
Agent’s Liens;

 

(c)                                  Liens
consisting of pledges or deposits made in the ordinary course of business in
connection with, or to secure payment of, obligations under worker’s
compensation, unemployment insurance, social security and other similar laws,
or to secure the performance of bids, tenders or contracts (other than for the
repayment of Debt) or to secure indemnity, performance or other similar bonds
for the performance of bids, tenders or contracts (other than for the repayment
of Debt) or to secure statutory obligations (other than liens arising under
ERISA or Environmental Liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds;

 

(d)                                 Liens
securing the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, provided that if any
such Lien arises from the nonpayment of such claims or demand when due, such
claims or demands do not exceed $100,000 in the aggregate and such claims or
demands are not more than 30 days past due;

 

(e)                                  Liens
constituting encumbrances in the nature of reservations, exceptions,
encroachments, easements, rights of way, covenants running with the land, and
other similar title exceptions or encumbrances affecting any Real Estate; provided
that they do not in the aggregate materially detract from the value of the Real
Estate or materially interfere with its use in the ordinary conduct of the
Borrower’s business;

 

(f)                                    Liens
arising from judgments and attachments in connection with court proceedings
provided that the attachment or enforcement of such Liens would not result in
an Event of Default pursuant to Section 9.1(k) and such Liens are
being contested in good faith by appropriate proceedings, adequate reserves
have been set aside and no material Property is subject to a material risk of
loss or forfeiture and the claims in respect of such Liens are fully covered by
insurance (subject to ordinary and customary deductibles) and a stay of
execution pending appeal or proceeding for review is in effect;

 

(g)                                 bankers
liens with respect to deposit accounts (other than the Payment Account);

 

(h)                                 Liens
in existence on the Closing Date and listed on Schedule 6.9
encumbering only the assets described on such Schedule;

 

(i)                                     licenses
of Proprietary Rights in the ordinary course of business; and

 

A-23

 

(j)                                     Liens
securing Debt permitted under Section 7.13(g).

 

“Person” means any
individual, sole proprietorship, partnership, limited liability company, joint
venture, trust, unincorporated organization, association, corporation,
Governmental Authority, or any other entity.

 

“Pharmaceutical
Regulatory Agency” means any federal, state or local department, agency or
other instrumentality having jurisdiction over the Borrower or any of its
Subsidiaries and the purchase, sale, processing or storage of Inventory
consisting of pharmaceuticals or controlled substances.

 

“Plan” means an
employee benefit plan (as defined in Section 3(3) of ERISA) which
Holdings or any of its Subsidiaries sponsors or maintains or to which Holdings
or any of its Subsidiaries makes, is making, or is obligated to make
contributions and includes any Pension Plan.

 

“Proprietary Rights”
of a Person means all of such Person’s now owned and hereafter arising or
acquired:  patents, patent rights, patent
applications, inventions (whether or not patentable), copyrights, works which
are the subject matter of copyrights, trademarks, service marks, trade names,
trade dress, trademark and service mark registrations and applications
therefor, including any of the foregoing set forth on Schedule 6.12
hereto, trade secrets, confidential information and know-how, rights to use
names and likenesses, and all licenses to any of the foregoing, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing,
and all rights to sue for past, present and future infringement of any of the
foregoing.

 

“Pro Rata Share”
means, (a) with respect to a Lender, a fraction (expressed as a
percentage), the numerator of which is the amount of such Lender’s Commitment
and the denominator of which is the sum of the amounts of all of the Lenders’
Commitments, or (b) if no Commitments are outstanding, a fraction
(expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders, in each case of the numerator
and denominator in this clause (b) giving effect to a Lender’s
participation in Non-Ratable Loans and Agent Advances.

 

“Qualified Public
Offering” means a fully underwritten public offering of the shares of the
Capital Stock of Holdings which results in Holdings’ receipt of net cash
proceeds of at least $25,000,000.

 

“Real Estate”
means all of now or hereafter owned or leased estates in real property of the
Borrower and its Subsidiaries, including, without limitation, all fees,
leaseholds and future interests, together with all now or hereafter owned or
leased interests of the Borrower and its Subsidiaries in the improvements
thereon, the fixtures attached thereto and the easements appurtenant thereto.

 

A-24

 

“Recapitalization
Agreement” means that certain Recapitalization and Stock Purchase Agreement
dated as of June 18, 2002 by and among Holdings, Borrower and ABC, as
amended, restated or modified from time to time to the extent permitted
hereunder.

 

“Recapitalization”
has the meaning given such term in the recitals to this Agreement.

 

“Register” has the
meaning specified in Section 11.2(g).

 

“Release” means a
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration of a Contaminant into the indoor or
outdoor environment or into or out of any Real Estate or other property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or Real Estate or other property.

 

“Reportable Event”
means, any of the events set forth in Section 4043(c) of ERISA or the
regulations thereunder, other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the PBGC.

 

“Required Lenders”
means at any time Lenders whose Pro Rata Shares aggregate more than 66-2/3%.

 

“Requirement of Law”
means, as to any Person, any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its property or to
which the Person or any of its property is subject.

 

“Reserves” means
reserves that limit the availability of credit hereunder, consisting of
reserves against Availability, Eligible Accounts or Eligible Inventory,
established by Agent from time to time in Agent’s reasonable credit
judgment.  Without limiting the
generality of the foregoing, the following types of reserves shall be deemed to
be a reasonable exercise of Agent’s credit judgment: (a) Bank Product
Reserves, (b) a reserve for accrued, unpaid interest on the Obligations, (c) the
Derivative Reserve, (d) reserves for rent at leased locations for which an
agreement, in form and substance reasonably satisfactory to the Agent, has not
been delivered to the Agent, (e) Environmental Compliance Reserves, (f) customs
charges, (g) the Dilution Reserve, and (h) warehousemen’s or
bailees’ charges.

 

“Responsible Officer”
means the chief executive officer or the president of the Borrower, or any
other officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, certifications of
financial statements and the preparation of the Borrowing Base Certificate, the
chief financial officer or the treasurer of the Borrower, or any other officer
having substantially the same authority and responsibility.

 

“Restricted Investment”
means any acquisition of property by Holdings or any of its Subsidiaries in
exchange for cash or other property, whether in the form of an acquisition of
stock, debt, or other indebtedness or obligation, or the purchase or
acquisition of any other property, or a loan, advance, capital contribution, or
subscription, except the following:

 

A-25

 

(a) acquisitions
of Equipment to be used in the business of the Borrower and its Subsidiaries so
long as no Default or Event of Default would occur as a result of the
acquisition thereof; (b) acquisitions of Inventory in the ordinary course
of business of the Borrower and its Subsidiaries ; (c) acquisitions of
current assets acquired in the ordinary course of business of the Borrower and
its Subsidiaries; (d) direct obligations of the United States of America,
or any agency thereof, or obligations guaranteed by the United States of
America, provided that such obligations mature within one year from the
date of acquisition thereof; (e) acquisitions of certificates of deposit
maturing within one year from the date of acquisition, bankers’ acceptances,
Eurodollar bank deposits, or overnight bank deposits, in each case issued by,
created by, or with a bank or trust company organized under the laws of the
United States of America or any state thereof having capital and surplus
aggregating at least $100,000,000; (f) acquisitions of commercial paper
given a rating of “A2” or better by Standard & Poor’s Corporation or
“P2” or better by Moody’s Investors Service, Inc. and maturing not more
than 90 days from the date of creation thereof; (g) Permitted
Acquisitions; (h) Interest Rate Agreements; (i) evidences of
Debt or Capital Stock received from customers and suppliers in settlement of
Accounts owed to, or claims of, the Borrower or any of its Subsidiaries; and
(j) investments by the Borrower in Feeders, Vedco, Inc. and
Agri-Laboratories, Ltd., in amounts not to exceed the investment existing as of
the Closing Date.

 

“Security Agreement”
means the Security Agreement of even date herewith among Holdings, Borrower and
Agent for the benefit of Agent and other Lenders.

 

“Settlement” and “Settlement
Date” have the meanings specified in Section 12.15(a)(ii).

 

“Solvent” means,
when used with respect to any Person, that at the time of determination:

 

(a)                                  the
assets of such Person, at a fair valuation, are in excess of the total amount
of its debts (including contingent liabilities); and

 

(b)                                 the
present fair saleable value of its assets is greater than its probable
liability on its existing debts as such debts become absolute and matured; and

 

(c)                                  it
is then able and expects to be able to pay its debts (including contingent
debts and other commitments) as they mature; and

 

(d)                                 it
has capital sufficient to carry on its business as conducted and as proposed to
be conducted.

 

For purposes of
determining whether a Person is Solvent, the amount of any contingent liability
shall be computed as the amount that, in 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.

 

“Stated Termination
Date” means June 18, 2007.

 

A-26

 

“Stockholders
Agreement” means that certain Stockholders Agreement, dated as of the
Closing Date, among ABC, Fund, and the other stockholders of Holdings, as it
may be amended, supplemented or otherwise modified to the extent not prohibited
hereunder.

 

“Subsidiary” of a
Person means any corporation, association, partnership, limited liability
company, joint venture or other business entity of which more than fifty
percent (50%) of the voting Capital Stock or other equity interests, is owned
or controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof.  Unless the context otherwise clearly
requires, references herein to a “Subsidiary” refer to a Subsidiary of the
Borrower.

 

“Subsidiary Borrower”
means each wholly-owned Subsidiary of the Borrower acquired in (or formed to
effect) a Permitted Acquisition which becomes a Borrower hereunder.

 

“Supporting Letter of
Credit” has the meaning specified in Section 1.4(g).

 

“Supporting
Obligations” means all supporting obligations as such term is defined in
the UCC.

 

“Tangible Assets”
means all assets of Holdings and its consolidated Subsidiaries except: (a) deferred
assets, other than prepaid insurance premiums and prepaid taxes; (b) Proprietary
Rights, franchises, goodwill, and other similar intangibles; (c) Restricted
Investments; (d) unamortized debt discount and expense; (e) assets
constituting Accounts from or Debt owed by Affiliates; and (f) fixed
assets to the extent of any write-up in the book value thereof resulting from a
revaluation effective after the Closing Date. 
For the avoidance of doubt, Tangible Assets shall include the book value
of Borrower’s equity investments in Feeders, Vedco, Inc. and
Agri-Laboratories, Ltd.

 

“Tangible Net Worth”
means, at any date: (a) the book value (after deducting related
depreciation, obsolescence, amortization, valuation and other proper reserves
as determined in accordance with GAAP) at which the Tangible Assets would be
shown on a consolidated balance sheet of Holdings at such date prepared in
accordance with GAAP less (b) the amount at which the liabilities
of Holdings and its consolidated Subsidiaries would be shown on such balance
sheet, including as liabilities all reserves for contingencies and other
potential liabilities which would be shown on such balance sheet or disclosed
in the notes thereto.

 

“Taxes” means any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Agent, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the Agent’s or each Lender’s net income
in any the jurisdiction (whether federal, state or local and including any
political subdivision thereof) under the laws of which such Lender or the
Agent, as the case may be, is organized or maintains a lending office.

 

“Termination Date”
means the earliest to occur of (i) the Stated Termination Date, (ii) the
date this Agreement is terminated either by the Borrower pursuant to Section 3.2
or by

 

A-27

 

the Required
Lenders pursuant to Section 9.2, and (iii) the date this
Agreement is otherwise terminated for any reason whatsoever pursuant to the
terms of this Agreement.

 

“Transaction Documents”
means the Loan Documents, the Recapitalization Agreement, the Stockholders
Agreement, the Transition Services Agreement, the Management Agreement, others.

 

“Transactions”
means (a) the Recapitalization, (b) the repayment of the Debt of the
Borrower on the Closing Date, and (c) the loan transactions contemplated
by the Credit Agreement.

 

“Transition Services
Agreement” means that certain Transition Services Agreement dated as of the
Closing Date by and among ABC, Holdings and Borrower, as it may be amended,
supplemented or otherwise modified to the extent not prohibited hereunder.

 

“UCC” means the
Uniform Commercial Code, as in effect from time to time, of the State of New
York or of any other state the laws of which are required as a result thereof
to be applied in connection with the issue of perfection of security interests.

 

“Unfunded Pension
Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16)
of ERISA, over the current value of that Pension Plan’s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.

 

“Unused Letter of
Credit Subfacility” means an amount equal to $5,000,000 minus the
sum of (a) the aggregate undrawn amount of all outstanding Letters of
Credit plus, without duplication, (b) the aggregate unpaid
reimbursement obligations with respect to all Letters of Credit.

 

“Unused Line Fee”
has the meaning specified in Section 2.5.

 

Accounting Terms.  Any accounting term used in the Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations in
the Agreement shall be computed, unless otherwise specifically provided therein,
in accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial
Statements.  In the event that any
accounting change of the Financial Accounting Standards Board shall be promulgated
resulting in a change in the method of calculation of financial covenants,
financial standards or other terms in this Agreement, then the Borrower and the
Agent agree to enter into negotiations in order to amend such provisions of
this Agreement so as to equitably reflect such accounting changes to the effect
that the criteria for evaluating the financial condition of Holdings and its
Subsidiaries shall be the same after such accounting changes as if such
accounting changes had not been made.  Until
such time as such an amendment shall have been executed and delivered by the
Borrower, the Agent and the Required Lenders, all financial covenants,
financial standards and other terms in this Agreement shall continue to be
calculated or construed as if such accounting changes had not occurred.

 

A-28

 

Interpretive Provisions.  (a)  The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.

 

(b)                                 The
words “hereof,” “herein,” “hereunder” and similar words refer to the Agreement
as a whole and not to any particular provision of the Agreement; and
Subsection, Section, Schedule and Exhibit references are to the
Agreement unless otherwise specified.

 

(c)                                  (i)                                     The
term “documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.

 

(ii)                                  The
term “including” is not limiting and means “including without limitation.”

 

(iii)                               In the computation of
periods of time from a specified date to a later specified date, the word
“from” means “from and including,” the words “to” and “until” each mean “to but
excluding” and the word “through” means “to and including.”

 

(iv)                              The
word “or” is not exclusive.

 

(d)                                 Unless
otherwise expressly provided herein, (i) references to agreements
(including the Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting
the statute or regulation.

 

(e)                                  The
captions and headings of the Agreement and other Loan Documents are for
convenience of reference only and shall not affect the interpretation of the
Agreement.

 

(f)                                    The
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters.  All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with their terms.

 

(g)                                 For
purposes of Section 9.1, a breach of a financial covenant contained
in Sections 7.22 and 7.23 shall be deemed to have occurred as of
any date of determination thereof by the Agent or as of the last day of any
specified measuring period, regardless of when the Financial Statements
reflecting such breach are delivered to the Agent.

 

(h)                                 The
Agreement and the other Loan Documents are the result of negotiations among and
have been reviewed by counsel to the Agent, the Borrower and the other parties,
and are the products of all parties. 
Accordingly, they shall not be construed against the Lenders or the
Agent merely because of the Agent’s or Lenders’ involvement in their
preparation.

 

A-29

 

EXHIBIT A

 

FORM OF NOTE

 

	
  $                                            

  	
   

  	
   

  	
  June      ,
  2002

  

 

FOR VALUE RECEIVED, the
undersigned, MWI VETERINARY SUPPLY CO., an Idaho corporation (the “Borrower”)
promises to pay to the order of
                                      
(the “Lender”) at the office of Bank of America, N.A., at 55 South Lake
Avenue, Suite 900, Pasadena, California 91101, as Agent (in its capacity as
agent, the “Agent”) for the financial institutions from time to time
parties to that certain Credit Agreement (as defined below), in lawful money of
the United States of America and in immediately available funds, the principal
amount of
                                      
Dollars
($                                 ),
or such lesser amount as may then constitute the unpaid aggregate principal amount
on the Termination Date of the Loans made to the Borrower.

 

The Borrower further
agrees to pay interest at said office, in like money, on the unpaid principal
amount owing hereunder from time to time from the date hereof on the dates and
at the rate specified in Article 2 of the Credit Agreement.

 

If any payment on this
promissory note becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day, and
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.

 

This promissory note is
one of the Notes referred to in the Credit Agreement, dated as of
June    , 2002, by and among MWI VETERINARY SUPPLY CO., an
Idaho corporation, as the Borrower, the Agent and the Lenders (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Credit Agreement”).  Capitalized
terms used herein without definition shall have the meanings given to such terms
in the Credit Agreement.  The Credit
Agreement, among other things, provides for the making of Loans by the Lenders
to the Borrower from time to time in an amount not to exceed such Lender’s Pro
Rata Share of Availability.

 

Upon the occurrence of
any one or more of the Events of Default specified in the Credit Agreement, all
amounts then remaining unpaid on this promissory note shall become, or may be
declared to be, immediately due and payable, all as provided therein.

 

This promissory note is
secured by security agreements and other collateral documents pursuant to the
Credit Agreement.

 

The Borrower hereby
waives presentment, demand, protest and notice of any kind.  No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.

 

This Note is not
assignable or otherwise transferable except in accordance with the Credit
Agreement.

 

 

THE VALIDITY,
INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY NOTE SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.

 

	
   

  	
  MWI VETERINARY
  SUPPLY CO.,

  
	
   

  	
  an Idaho
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT B

 

FORM OF BORROWING
BASE CERTIFICATE

 

 

EXHIBIT C

 

FINANCIAL
STATEMENTS

 

 

EXHIBIT D

 

NOTICE OF BORROWING

 

Date:
                                   ,
200  

 

To:                              Bank
of America, N.A. as Agent for the Lenders who are parties to the Credit
Agreement dated as of
                      ,
2002 (as extended, renewed, amended or restated from time to time, the “Credit
Agreement”) among MWI Veterinary Supply Co., certain Lenders which are
signatories thereto and Bank of America, N.A., as Agent

 

Ladies and Gentlemen:

 

The undersigned, MWI
Veterinary Supply Co (the “Borrower”), refers to the Credit Agreement,
the terms defined therein being used herein as therein defined, and hereby
gives you notice irrevocably of the Borrowing specified below:

 

1.                                       The
Business Day of the proposed Borrowing is
                       ,
200   .

 

2.                                       The
aggregate amount of the proposed Borrowing is
$                    
..

 

3.                                       The
Borrowing is to be comprised of
$            of Base Rate and
$              of LIBOR Rate Loans.

 

4.                                       The
duration of the Interest Period for the LIBOR Rate Loans, if any, included in
the Borrowing shall be
             
months.

 

The undersigned hereby
certifies that the following statements are true on the date hereof, and will
be true on the date of the proposed Borrowing, before and after giving effect
thereto and to the application of the proceeds therefrom:

 

(a)                                  The
representations and warranties of Holdings and its Subsidiaries contained in
the Credit Agreement and the other Loan Documents are true and correct in all
material respects as though made on and as of such date as though made on and
as of such date, other than any representation and warranty which relates
specifically to a prior date;

 

(b)                                 No
Default or Event of Default has occurred and is continuing, or would result
from such proposed Borrowing;

 

1

 

(c)                                  No
event has occurred and is continuing, or would result from such Borrowing,
which has had or would have a Material Adverse Effect; and

 

(d)                                 The
proposed Borrowing will not cause the aggregate principal amount of all
outstanding Loans plus the aggregate amount available for drawing under
all outstanding Letters of Credit, to exceed the Borrowing Base or the combined
Commitments of the Lenders.

 

	
   

  	
  MWI VETERINARY SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

2

 

EXHIBIT E

 

NOTICE OF CONTINUATION/CONVERSION

 

Date: 
                ,
200  

 

To:                              Bank
of America, N.A. as Agent for the Lenders to the Credit Agreement dated as of
              ,
2002 (as extended, renewed, amended or restated from time to time, the “Credit
Agreement”) among MWI Veterinary Supply Co., certain Lenders which are
signatories thereto and Bank of America, N.A., as Agent

 

Ladies and Gentlemen:

 

The undersigned, MWI
Veterinary Supply Co. (the “Borrower”), refers to the Credit Agreement,
the terms defined therein being used herein as therein defined, and hereby
gives you notice irrevocably of the [conversion] [continuation] of the Loans
specified herein, that:

 

1.                                       The
Continuation/Conversion Date is
            ,
200  .

 

2.                                       The
aggregate amount of the Loans to be [converted] [continued] is
$              .

 

3.                                       The
Loans are to be [converted into] [continued as] [LIBOR Rate] [Base Rate] Loans.

 

4.                                       The
duration of the Interest Period for the LIBOR Rate Loans included in the
[conversion] [continuation] shall be       months.

 

The undersigned hereby
certifies that the following statements are true on the date hereof, and will
be true on the proposed Continuation/Conversion Date, before and after giving
effect thereto and to the application of the proceeds therefrom:

 

(a)                                  The
representations and warranties of Holdings and its Subsidiaries contained in
the Credit Agreement and the other Loan Documents are true and correct in all
material respects as though made on and as of such date as though made on and
as of such date, other than any representation and warranty which relates
specifically to a prior date;

 

(b)                                 No
Default or Event of Default has occurred and is continuing, or would result
from such proposed Borrowing;

 

1

 

(c)                                  No
event has occurred and is continuing, or would result from such Borrowing,
which has had or would have a Material Adverse Effect; and

 

(d)                                 The
proposed conversion-continuation will not cause the aggregate principal amount
of all outstanding  Loans plus the
aggregate amount available for drawing under all outstanding Letters of Credit
to exceed the Borrowing Base or the combined Commitments of the Lenders.

 

	
   

  	
  MWI VETERINARY SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

2

 

EXHIBIT F

 

[FORM OF]
ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND
ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of
                                 ,
200    is made between
                                                      
(the “Assignor”) and
                                                      
(the “Assignee”).

 

RECITALS

 

WHEREAS, the Assignor is
party to that certain Credit Agreement dated as of
                     ,
2002 (as amended, amended and restated, modified, supplemented or renewed, the
“Credit Agreement”) among MWI Veterinary Supply Co., an Idaho
corporation (the “Borrower”), the several financial institutions from time
to time party thereto (including the Assignor, the “Lenders”), and Bank
of America, N. A., as agent for the Lenders (the “Agent”).  Any terms defined in the Credit Agreement and
not defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;

 

WHEREAS, as provided
under the Credit Agreement, the Assignor has committed to making Loans (the “Committed
Loans”) to the Borrower in an aggregate amount not to exceed
$                   
(the “Commitment”);

 

WHEREAS, the Assignor has
made Committed Loans in the aggregate principal amount of
$                  
to the Borrower

 

WHEREAS, [the Assignor
has acquired a participation in its pro rata share of the Lenders’ liabilities
under Letters of Credit in an aggregate principal amount of
$                   
(the “L/C Obligations”)] [no Letters of Credit are outstanding under the
Credit Agreement]; and

 

WHEREAS, the Assignor
wishes to assign to the Assignee [part of the] [all] rights and obligations of
the Assignor under the Credit Agreement in respect of its Commitment, together
with a corresponding portion of each of its outstanding Committed Loans and L/C
Obligations, in an amount equal to
$                   
(the “Assigned Amount”) on the terms and subject to the conditions set
forth herein and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions;

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual agreements contained herein, the
parties hereto agree as follows:

 

1.                                       Assignment
and Acceptance.

 

(a)                                  Subject
to the terms and conditions of this Assignment and Acceptance, (i) the
Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the
Assignee hereby purchases, assumes and undertakes from the Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance)     % (the

 

1

 

“Assignee’s
Percentage Share”) of (A) the Commitment, the Committed Loans and the
L/C Obligations of the Assignor and (B) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in
connection with the Credit Agreement and the Loan Documents.

 

(b)                                 With
effect on and after the Effective Date (as defined in Section 5 hereof),
the Assignee shall be a party to the Credit Agreement and succeed to all of the
rights and be obligated to perform all of the obligations of a Lender under the
Credit Agreement, including the requirements concerning confidentiality and the
payment of indemnification, with a Commitment in an amount equal to the
Assigned Amount.  The Assignee agrees
that it will perform in accordance with their terms all of the obligations
which by the terms of the Credit Agreement are required to be performed by it
as a Lender.  It is the intent of the
parties hereto that the Commitment of the Assignor shall, as of the Effective
Date, be reduced by an amount equal to the Assigned Amount and the Assignor
shall relinquish its rights and be released from its obligations under the
Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Sections       and       of
the Credit Agreement to the extent such rights relate to the time prior to the
Effective Date.

 

(c)                                  After
giving effect to the assignment and assumption set forth herein, on the
Effective Date the Assignee’s Commitment will be
$                   .

 

(d)                                 After
giving effect to the assignment and assumption set forth herein, on the
Effective Date the Assignor’s Commitment will be
$                   .

 

2.                                       Payments.

 

(a)                                  As
consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, the Assignee shall pay to the Assignor on the Effective
Date in immediately available funds an amount equal to
$                   ,
representing the Assignee’s Pro Rata Share of the principal amount of all
Committed Loans.

 

(b)                                 The
Assignee further agrees to pay to the Agent a processing fee in the amount
specified in Section 11.2(a) of the Credit Agreement.

 

3.                                       Reallocation
of Payments.

 

Any interest, fees and
other payments accrued to the Effective Date with respect to the Commitment,
and Committed Loans and L/C Obligations shall be for the account of the
Assignor.  Any interest, fees and other
payments accrued on and after the Effective Date with respect to the Assigned
Amount shall be for the account of the Assignee.  Each of the Assignor and the Assignee agrees
that it will hold in trust for the other party any interest, fees and other
amounts which it may receive to which the other party is entitled pursuant to
the preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.

 

2

 

4.                                       Independent
Credit Decision.

 

The Assignee
(a) acknowledges that it has received a copy of the Credit Agreement and
the Schedules and Exhibits thereto, together with copies of the most recent
financial statements of the Borrower, and such other documents and information
as it has deemed appropriate to make its own credit and legal analysis and
decision to enter into this Assignment and Acceptance; and (b) agrees that
it will, independently and without reliance upon the Assignor, the Agent 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 and legal decisions in
taking or not taking action under the Credit Agreement.

 

5.                                       Effective
Date; Notices.

 

(a)                                  As
between the Assignor and the Assignee, the effective date for this Assignment
and Acceptance shall be
                        ,
200   (the “Effective Date”); provided that the
following conditions precedent have been satisfied on or before the Effective
Date:

 

(i)                                     this
Assignment and Acceptance shall be executed and delivered by the Assignor and
the Assignee;

 

[(ii)                              the
consent of the Agent required for an effective assignment of the Assigned
Amount by the Assignor to the Assignee shall have been duly obtained and shall
be in full force and effect as of the Effective Date;]

 

(iii)                               the
Assignee shall pay to the Assignor all amounts due to the Assignor under this
Assignment and Acceptance;

 

[(iv)                          the
Assignee shall have complied with Section 11.2 of the Credit Agreement (if
applicable);]

 

(v)                                 the
processing fee referred to in Section 2(b) hereof and in Section 11.2(a)
of the Credit Agreement shall have been paid to the Agent; and

 

(b)                                 Promptly
following the execution of this Assignment and Acceptance, the Assignor shall
deliver to the Borrower and the Agent for acknowledgment by the Agent, a Notice
of Assignment in the form attached hereto as Schedule 1.

 

6.                                       [Agent.  [INCLUDE ONLY IF ASSIGNOR IS AGENT]

 

(a)                                  The
Assignee hereby appoints and authorizes the Assignor to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Agent by the Lenders pursuant to the terms of the Credit
Agreement.

 

(b)                                 The
Assignee shall assume no duties or obligations held by the Assignor in its
capacity as Agent under the Credit Agreement.]

 

3

 

7.                                       Withholding
Tax.

 

The Assignee (a)
represents and warrants to the Lender, the Agent and the Borrower that under
applicable law and treaties no tax will be required to be withheld by the
Lender with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Agent and the Borrower
prior to the time that the Agent or Borrower is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form
W-8BEN (wherein the Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payments hereunder) and agrees to provide new Forms W-8ECI or W-8BEN
upon the expiration of any previously delivered form or comparable statements
in accordance with applicable U.S. law and regulations and amendments thereto,
duly executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.

 

8.                                       Representations
and Warranties.

 

(a)                                  The
Assignor represents and warrants that (i) it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any Lien or other adverse claim; (ii) it is duly
organized and existing and it has the full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to
fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding obligation
of the Assignor, enforceable against the Assignor in accordance with the terms
hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.

 

(b)                                 The
Assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or
any other instrument or document furnished pursuant thereto.  The Assignor makes no representation or
warranty in connection with, and assumes no responsibility with respect to, the
solvency, financial condition or statements of the Borrower, or the performance
or observance by the Borrower, of any of its respective obligations under the
Credit Agreement or any other instrument or document furnished in connection
therewith.

 

(c)                                  The
Assignee represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute

 

4

 

and deliver this
Assignment and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and Acceptance,
and to fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed
and delivered by it and constitutes the legal, valid and binding obligation of
the Assignee, enforceable against the Assignee in accordance with the terms
hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles; [and (iv) it is an
Eligible Assignee.]

 

9.                                       Further
Assurances.

 

The Assignor and the
Assignee each hereby agree to execute and deliver such other instruments, and
take such other action, as either party may reasonably request in connection
with the transactions contemplated by this Assignment and Acceptance, including
the delivery of any notices or other documents or instruments to the Borrower
or the Agent, which may be required in connection with the assignment and
assumption contemplated hereby.

 

10.                                 Miscellaneous.

 

(a)                                  Any
amendment or waiver of any provision of this Assignment and Acceptance shall be
in writing and signed by the parties hereto. 
No failure or delay by either party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof and any waiver
of any breach of the provisions of this Assignment and Acceptance shall be
without prejudice to any rights with respect to any other or further breach
thereof.

 

(b)                                 All
payments made hereunder shall be made without any set-off or counterclaim.

 

(c)                                  The
Assignor and the Assignee shall each pay its own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Assignment and Acceptance.

 

(d)                                 This
Assignment and Acceptance may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute one and the
same instrument.

 

(e)                                  THIS
ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF
                        
[Note: 
confirm choice of law]. 
The Assignor and the Assignee each irrevocably submits to the
non-exclusive jurisdiction of any State or Federal court sitting in
[              ]
over any suit, action or proceeding arising out of or relating to this
Assignment and Acceptance and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and

 

5

 

determined in such
[              ]
State or Federal court.  Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

 

(f)                                    THE
ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT
AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR
WRITTEN).

 

IN WITNESS WHEREOF, the
Assignor and the Assignee have caused this Assignment and Acceptance to be
executed and delivered by their duly authorized officers as of the date first
above written.

 

	
   

  	
  [ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
						

 

6

 

SCHEDULE 1

to

ASSIGNMENT AND ACCEPTANCE

 

NOTICE OF
ASSIGNMENT AND ACCEPTANCE

 

                                     ,
200  

 

Bank of America, N.A

55 South Lake Avenue

Suite 900

Pasadena, CA 91101

Attn:                                       

 

Re:  [Name and Address of Borrower]

 

Ladies and Gentlemen:

 

We refer to the Credit
Agreement dated as of
                ,
2002 (as amended, amended and restated, modified, supplemented or renewed from
time to time the “Credit Agreement”) among MWI Veterinary Supply Co.
(the “Borrower”), the Lenders referred to therein and Bank of America,
N. A., as agent for the Lenders (the “Agent”).  Terms defined in the Credit Agreement are
used herein as therein defined.

 

1.                                       We
hereby give you notice of, and request your consent to, the assignment by
                                   
(the “Assignor”) to
                                   
(the “Assignee”) of
            % of
the right, title and interest of the Assignor in and to the Credit Agreement
(including the right, title and interest of the Assignor in and to the
Commitments of the Assignor, all outstanding Loans made by the Assignor and the
Assignor’s participation in the Letters of Credit pursuant to the Assignment
and Acceptance Agreement attached hereto (the “Assignment and Acceptance”).  We understand and agree that the Assignor’s
Commitment, as of
             ,
200 , is
$                       ,
the aggregate amount of its outstanding Loans is
$                         ,
and its participation in L/C Obligations is
$                       .

 

2.                                       The
Assignee agrees that, upon receiving the consent of the Agent and, if
applicable, the Borrower to such assignment, the Assignee will be bound by the
terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Lender originally holding such interest in the Credit
Agreement.

 

1

 

3.                                       The
following administrative details apply to the Assignee:

 

	
   

  	
  (A)

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Assignee name:

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
  Telephone:
  (        )

  	
   

  
	
   

  	
   

  	
  Telecopier:
  (        )

  	
   

  
	
   

  	
   

  	
  Telex
  (Answerback):

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (B)

  	
  Payment
  Instructions:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Account No.:

  	
   

  
	
   

  	
   

  	
                 At:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Reference:

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  

 

4.                                       You
are entitled to rely upon the representations, warranties and covenants of each
of the Assignor and Assignee contained in the Assignment and Acceptance.

 

IN WITNESS WHEREOF, the
Assignor and the Assignee have caused this Notice of Assignment and Acceptance
to be executed by their respective duly authorized officials, officers or
agents as of the date first above mentioned.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

2

 

ACKNOWLEDGED AND
ASSIGNMENT

CONSENTED TO:

 

BANK OF AMERICA, N. A.

as Agent

 

	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

3

 

EXHIBIT G

 

FORM OF SUBSIDIARY BORROWER JOINDER AGREEMENT

 

THIS SUBSIDIARY BORROWER
JOINDER AGREEMENT (this “Joinder Agreement”) is made and entered into as of
                            
by                                     ,
a
                            
(“Subsidiary”), and BANK OF AMERICA, N.A., as agent under the Credit
Agreement (as hereinafter defined) (the “Agent”).  Capitalized terms used herein without
definition shall have the meanings assigned to those terms in the Credit
Agreement.

 

W
I  T  N  E  S  S  E  T  H

 

WHEREAS, MWI Veterinary
Supply Co., an Idaho corporation (the “Borrower”), the financial
institutions from time to time party thereto (together with their respective
successors and assigns, the “Lenders”) and the Agent have entered into
that certain Credit Agreement, dated as of June      ,
2002 (as the same has heretofore been or may hereafter be amended,
supplemented, restated, amended and restated or otherwise modified from time to
time, the “Credit Agreement”), providing for extensions of credit to be
made by the Lenders to the Borrower and the issuance of Letters of Credit for
the account of the Borrower and, upon satisfaction of the conditions set forth
in the Credit Agreement, to Subsidiaries of the Borrower which become
Subsidiary Borrowers thereunder;

 

WHEREAS, pursuant to Section
7.28(c) of the Credit Agreement, Subsidiary has been designated as a
Subsidiary Borrower under the Credit Agreement and is required to enter into
such other Credit Documents as are executed by the Borrower; and

 

WHEREAS, the Borrower and
Subsidiary desire that Subsidiary become a “Subsidiary Borrower” under the
Credit Agreement in accordance with the terms thereof and enter into such other
Loan Documents as are necessary or desirable to grant to the Agent, for the
benefit of the Lenders, Liens on and security interests in the assets of
Subsidiary;

 

NOW THEREFORE, in
consideration of the foregoing and to induce the Agent and the Lenders to allow
Subsidiary to become a “Subsidiary Borrower” under the Credit Agreement and the
other Loan Documents, Subsidiary agrees as follows:

 

AGREEMENT

 

1.                                       Joinder
to Credit Agreement and other Loan Documents.  Subsidiary hereby agrees that by its
execution and delivery to the Agent of this Joinder Agreement, it shall become
a “Subsidiary Borrower” under the Credit Agreement and the other Loan Documents
listed on Schedule I hereto and hereby expressly and unconditionally assumes
and agrees to pay, perform and discharge all of the obligations and liabilities
as a “Subsidiary Borrower”

 

 

thereunder, with
the same effect as if the Credit Agreement and such other Loan Documents had
been executed and delivered initially by Subsidiary to the Agent.  Without limiting the generality of the
foregoing, attached hereto as Schedule II, are all such schedules,
exhibits, annexes, appendices or other attachments to the Credit Agreement and
such other Loan Documents as are required to be delivered thereunder or
required to make the representations, warranties and covenants of the Borrower
true, complete and correct.  This Joinder
Agreement shall constitute a Loan Document.

 

2.                                       Grant
of Security Interest; Guaranty. 
Without limiting the provisions of Section 1 above, Subsidiary
acknowledges that by its execution and delivery of this Joinder Agreement, it
shall become a “Pledgor” under the Pledge Agreement, and a “Grantor” under the
Security Agreement, as such agreements have been amended, supplemented, amended
and restated or otherwise modified prior to the date hereof.  In furtherance thereof, Subsidiary hereby
grants to the Agent for its benefit and the ratable benefit of the Lenders a
security interest in and Lien upon all of its right, title and interest in the
assets, now owned or hereafter acquired, which are “Pledged Collateral” under
the Pledge Agreement and “Collateral” under the Security Agreement, with the
same effect as if such Loan Documents had been initially executed and delivered
by it to the Agent.

 

3.                                       Additional
Loan Documents.  On or prior to the
date hereof, Subsidiary shall have executed and delivered to the Agent a
Revolving Note for each Lender and such financing statements, intellectual
property security agreements or assignments, mortgages, deeds of trust, bank
account control agreements and other documents as are necessary or which the
Agent deems desirable to grant to the Agent a perfected first priority security
interest in Subsidiary’s assets, and the Borrower shall have executed and
delivered to the Agent a Pledge Amendment to the Pledge Agreement, together
with stock certificates or other certificated securities, accompanied by stock
powers duly endorsed in blank, evidencing all of the issued and outstanding
capital stock or other equity interests of Subsidiary which are certificated
(or a control agreement, in form satisfactory to the Agent with respect to
uncertificated interests), and Subsidiary shall have delivered to the Agent all
promissory notes and other instruments in favor of Subsidiary, with all
endorsements deemed necessary or advisable by the Agent, evidencing each of the
notes and other instruments pledged by Subsidiary under the Loan Documents  In addition, on or prior to the date hereof,
the Borrower or Subsidiary shall have, or caused to be, provided to the Agent,
the acquisition documents, legal opinions, evidence of solvency, certificates,
lien search results and other documents required to be provided to the Agent
under the Loan Documents including, without limitation, under Section 7.28
of the Credit Agreement, in connection with a Permitted Acquisition.

 

4.                                       Unconditional
Joinder.  Subsidiary acknowledges
that Subsidiary’s obligations as a party to this Joinder Agreement are
unconditional and are not subject to the

 

2

 

execution of one
or more Joinder Agreements or any other Loan Documents by other Subsidiaries of
the Borrower or any other Person.

 

5.                                       Reliance.  The Agent and the Lenders shall be entitled
to rely on this Joinder Agreement as evidence that Subsidiary has joined (i) as
a “Subsidiary Borrower” and a “Loan Party” under the Credit Agreement and the
other Loan Documents listed on Schedule I hereto and is fully obligated
thereunder as a Subsidiary Borrower and a Loan Party, (ii) as “Grantor” under
the Security Agreement and (iii) as a “Pledgor” under the Pledge Agreement, and
is fully obligated in each such capacity under each of such Loan Documents.

 

6.                                       Representations
and Warranties.  Subsidiary hereby
represents and warrants that it has reviewed the terms of the Credit Agreement
and the other Loan Documents.  Subsidiary
also represents and warrants that, after giving effect to the schedules set
forth on Schedule II hereto, all representations and warranties of the
Borrower set forth in the Loan Documents are true, correct and complete with
respect to Subsidiary.  Subsidiary
further represents and warrants that Subsidiary was in compliance with, and
upon delivery of this Joinder Agreement shall be in compliance with, all
agreements, affirmative covenants and negative covenants contained in the Loan
Documents applicable to Subsidiary as a Subsidiary Borrower or a Loan Party or
a Subsidiary of the Borrower, including without limitation in the Credit
Agreement and each of the Loan Documents listed on Schedule I
hereto.  Subsidiary shall execute and
deliver all other documents, agreements and instruments required to be executed
by a Subsidiary Borrower under the terms of the Credit Agreement and the other
Loan Documents.

 

7.                                       Consent.  Upon satisfaction of the conditions set forth
in Section 8.1 of the Credit Agreement, Subsidiary shall have all of the
rights and interests of a Subsidiary Borrower or a Loan Party under the Credit
Agreement and the other Loan Documents with the same effect as if the Credit
Agreement and such other Loan Documents had been initially entered into by
Subsidiary with, or for the benefit of, the Agent and the Lenders.

 

8.                                       Incorporation
by Reference.  All terms and
conditions of the Credit Agreement and the other Loan Documents applicable to
any Subsidiary Borrower, any Loan Party or any Subsidiary of the Borrower under
the Credit Agreement and the other Loan Documents including, without
limitation, all applicable representations, warranties, covenants, indemnities,
guaranties and other obligations thereunder, are hereby incorporated by
reference in this Joinder Agreement as if set forth in full.

 

9.                                       GOVERNING
LAW.  THIS AGREEMENT  SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT  PERFECTION ISSUES WITH RESPECT TO ARTICLE 9
OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE

 

3

 

OR CONFLICT OF LAW
RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF NEW YORK; PROVIDED
THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL
LAW.

 

10.                                 Address
for Notices.  All notices, requests
and other communications to Subsidiary hereunder or under any other Loan
Document shall be in writing, addressed to the Borrower at the address set
forth in, and shall be deemed delivered in accordance with, the Credit
Agreement.

 

11.                                 Counterparts.  This Joinder Agreement may be executed in any
number of counterparts, and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument.

 

12.                                 Severability.  The provisions of this Joinder Agreement are
severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Joinder Agreement in any jurisdiction.

 

13.                                 Headings.  The headings in this Joinder Agreement are
for purposes of reference only and shall not otherwise affect the meaning or
construction of any provision of this Joinder Agreement.

 

14.                                 Final
Expression.  This Joinder Agreement,
together with the Credit Agreement and the other Loan Documents, constitute the
final, entire agreement among the parties hereto and thereto and supersede any
and all prior commitments, agreements, representations and understandings,
whether written or oral, relating to the subject matter hereof and thereof and
may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto.  There are no oral agreements among the
parties hereto.

 

15.                                 Binding
Effect.  This Joinder Agreement shall
be binding on and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided,
however that Subsidiary may not assign or transfer its interest under this
Joinder Agreement, the Credit Agreement or any of the other Loan Documents
without the prior written consent of the Agent and the Lenders in accordance
with the Credit Agreement.

 

4

 

IN WITNESS WHEREOF, each
of the undersigned has caused this Joinder Agreement to be duly executed and
delivered by it as of the day and year first above written.

 

	
   

  	
  [NAME OF NEW SUBSIDIARY
  BORROWER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							

 

 

CONSENT OF
BORROWER, SUBSIDIARY BORROWERS AND GUARANTORS

 

Each of the undersigned,
as a Borrower or Subsidiary Borrower under the Credit Agreement and the other
Loan Documents referred to in the foregoing Joinder Agreement, or as a
guarantor under the Guaranty , hereby acknowledges that by the execution,
delivery and performance of the Joinder Agreement by Subsidiary and the Agent,
Subsidiary has become a Subsidiary Borrower and a Loan Party under the Loan
Documents.  The execution and delivery of
the Joinder Agreement shall not impair the Obligations and liabilities of the
undersigned to the Agent and the Lenders , and each of the undersigned
acknowledges that the Credit Agreement and the other Loan Documents executed by
it remain in full force and effect, enforceable against the undersigned in
accordance with their respective terms.

 

	
   

  	
  MWI VETERINARY SUPPLY CO., 

  an Idaho
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  [Subsidiary Borrowers]

  
	
   

  	
   

  
	
   

  	
  MWI
  HOLDINGS, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  [other Guarantors]

  
							

 

1

 

EXHIBIT H

 

LATEST PROJECTIONS

 

[To be attached]

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