amerisourecebergenform 10-k for 2005

FORM 10-KAMERISOURCEBERGEN CORP - ABCFiled: December 09, 2005 (period: September 30, 2005)

Annual report which provides a comprehensive overview of the company for the past year

Table of Contents

Part III

- Registrant s Proxy Statement for the 2006 Annual Meeting of Stockholders. PART I

ITEM 1. BUSINESS ITEM 2. PROPERTIES ITEM 3. LEGAL PROCEEDINGS ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART II

ITEM 5. MARKET FOR REGISTRANT S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF E

ITEM 6. SELECTED FINANCIAL DATA ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES ITEM 9B. OTHER INFORMATION PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES

EX-4.4 (PURCHASE AGREEMENT)

EX-4.5 (INDENTURE)

EX-4.6 (5 5/8% SENIOR NOTES DUE 2012)

EX-4.7 (5 7/8% SENIOR NOTES DUE 2015)

EX-4.8 (EXCHANGE AND REGISTRATION RIGHTS AGREEMENT)

EX-10.17 (2001 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)

EX-10.34 (CREDIT AGREEMENT DATED AS OF DECEMBER 2)

EX-10.36 (FIRST AMENDMENT TO THE CREDIT AGREEMENT)

EX-10.37 (THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT)

EX-10.38 (CREDIT AGREEMENT DATED AS OF OCTOBER 3)

EX-10.39 (FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT)

EX-21 (SUBSIDIARIES OF THE REGISTRANT)

EX-23 (CONSENT OF ERNST YOUNG LLP)

EX-31.1 (SECTION 302 CEO CERTIFICATION)

EX-31.2 (SECTION 302 CFO CERTIFICATION)

EX-32.1 (SECTION 906 CEO CERTIFICATION)

EX-32.2 (SECTION 906 CFO CERTIFICATION)

Table of Contents

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

⌧ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended September 30, 2005

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

AMERISOURCEBERGEN CORPORATION(Exact name of registrant as specified in its charter)

CommissionFile Number

Registrant, State of IncorporationAddress and Telephone Number

IRS EmployerIdentification No.

1-16671

AmerisourceBergen Corporation(a Delaware Corporation)

1300 Morris DriveChesterbrook, PA 19087-5594

(610) 727-7000

23-3079390

Securities Registered Pursuant to Section 12(b) of the Act: AmerisourceBergen Corporation: None

Securities Registered Pursuant to Section 12(g) of the Act:

AmerisourceBergen Corporation:Common Stock, $.01 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ⌧ No ¨

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ⌧ No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes¨ No ⌧

The aggregate market value of voting stock held by non-affiliates of the registrant on March 31, 2005, based upon the closing price of such stock on theNew York Stock Exchange on March 31, 2005, was $4,216,774,879.

The number of shares of common stock of AmerisourceBergen Corporation outstanding as of November 30, 2005 was 104,260,664.

Documents Incorporated by Reference

Portions of the following document are incorporated by reference in the Part of this report indicated below:

Part III - Registrant’s Proxy Statement for the 2006 Annual Meeting of Stockholders.

Source: AMERISOURCEBERGEN CO, 10-K, December 09, 2005

Table of Contents

TABLE OF CONTENTS

ITEM

PAGE

PART I

1. Business 3

2. Properties 15

3. Legal Proceedings 16

4. Submission of Matters to a Vote of Security Holders 16

Executive Officers of the Registrant 17

PART II

5.

Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases ofEquity Securities 18

6. Selected Financial Data 20

7.

Management’s Discussion and Analysis of FinancialCondition and Results of Operations 21

7A.

Quantitative and Qualitative Disclosures AboutMarket Risk 41

8. Financial Statements and Supplementary Data 42

9.

Changes in and Disagreements with Accountants onAccounting and Financial Disclosure 82

9A. Controls and Procedures 82

9B. Other Information 84

PART III

10. Directors and Executive Officers of the Registrant 84

11. Executive Compensation 84

12.

Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters 84

13. Certain Relationships and Related Transactions 84

14. Principal Accountant Fees and Services 84

PART IV

15. Exhibits and Financial Statement Schedules 85

Signatures 90

2


Table of Contents

PART I

ITEM 1. BUSINESS AmerisourceBergen Corporation (“AmerisourceBergen” or the “Company”) is one of the largest pharmaceutical services companies in the United States.Serving both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel, the Company provides drug distribution and relatedservices designed to reduce costs and improve patient outcomes. More specifically, we distribute a comprehensive offering of brand name and genericpharmaceuticals, over-the-counter healthcare products, and home healthcare supplies and equipment to a wide variety of healthcare providers located throughoutthe United States, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order facilities, physicians, clinics and otheralternate site facilities, and skilled nursing and assisted living centers. We also provide pharmaceuticals and pharmacy services to long-term care, workers’compensation and specialty drug patients. Additionally, we furnish healthcare providers and pharmaceutical manufacturers with an assortment of related services,including pharmacy automation, supply management software, pharmaceutical packaging, inventory management, reimbursement and pharmaceutical consultingservices, logistics services, and physician education, all of which are designed to reduce costs and improve patient outcomes.

Industry Overview We have benefited from the significant growth of the pharmaceutical industry in the United States. According to IMS Healthcare, Inc., an independentthird party provider of information to the pharmaceutical and healthcare industry, industry sales in the United States are expected to grow between 8% and 9% in2006 and annually between 7% and 10% through 2009.

The factors contributing to the growth of the pharmaceutical industry in the United States, and other industry trends, include:

Aging Population. The number of individuals over age 55 in the United States grew from approximately 52 million in 1990 to approximately 59 million in2000 and is projected to increase to more than 75 million by the year 2010. This age group suffers from chronic illnesses and disabilities more than the rest of thepopulation and is estimated to account for approximately two-thirds of total healthcare expenditures in the United States.

Introduction of New Pharmaceuticals. Traditional research and development, as well as the advent of new research, production and delivery methods, suchas biotechnology and gene research and therapy, continue to generate new compounds and delivery methods that are more effective in treating diseases. Thesecompounds have been responsible for significant increases in pharmaceutical sales. We believe ongoing research and development expenditures by the leadingpharmaceutical manufacturers will contribute to continued growth of the industry.

Increased Use of Drug Therapies. In response to rising healthcare costs, governmental and private payors have adopted cost containment measures thatencourage the use of efficient drug therapies to prevent or treat diseases. While national attention has been focused on the overall increase in aggregate healthcarecosts, we believe drug therapy has had a beneficial impact on overall healthcare costs by reducing expensive surgeries and prolonged hospital stays.Pharmaceuticals currently account for approximately 10% of overall healthcare costs. Pharmaceutical manufacturers’ continued emphasis on research anddevelopment is expected to result in the continuing introduction of cost-effective drug therapies.

Pharmaceutical Supply Channel Changes. Historically, we and our major pharmaceutical distribution competitors derived a significant portion of ourpharmaceutical distribution gross margin from manufacturer price increases, which have historically equaled or exceeded the overall Consumer Price Index. Webelieve these increases were due in large part to the relatively inelastic demand for brand name drugs notwithstanding higher prices charged for patented drugs aspharmaceutical manufacturers attempted to recoup costs associated with the development, clinical testing and regulatory approval of new products. Recently,pharmaceutical manufacturers have been under significant pressure to reduce the rate of pharmaceutical price increases. While we expect such price increases tooccur in the future, we cannot predict the rate at which such prices will increase or the frequency of increases.

Our industry is in a transition to a fee-for-service model whereby we and our major competitors are compensated for the services provided tomanufacturers versus one that is dependent upon manufacturer price increases. There can be no assurance that the fee-for-service transition will be successful orthat our profitability will not be significantly reduced by the transition (see further description of business model transition on page 6 under the section titled“Suppliers”).

3


Table of ContentsMedicare and Medicaid Legislative Developments. Medicare reimbursement rates for certain pharmaceuticals were impacted by implementation of the

Medicare Prescription Drug Improvement and Modernization Act of 2003 (“Medicare Modernization Act”) by the U.S. Department of Health and HumanServices (“HHS”), and further Medicare reimbursement reductions and policy changes are scheduled to be implemented in the future. In addition, the U.S.Congress is considering reductions in Medicaid reimbursement for certain prescription drugs. These policies may adversely affect our specialty distribution andour long-term care institutional pharmacy businesses directly and our wholesale drug distribution and specialty distribution businesses indirectly.

Expiration of Patents for Brand Name Pharmaceuticals. A significant number of patents for widely-used brand name pharmaceutical products will expireduring the next several years. These products are expected to be marketed by generic pharmaceutical manufacturers and distributed by distributors like us. Weconsider this a favorable trend because generic products have historically provided a greater gross profit margin opportunity than brand name products.

The Company The Company was formed by the merger of AmeriSource Health Corporation (“AmeriSource”) and Bergen Brunswig Corporation (“Bergen”) in August2001. We currently serve our customers, including healthcare providers, pharmaceutical manufacturers, and patients throughout the United States and PuertoRico and recently, Canada, through a geographically diverse network of distribution and service centers. We typically are the primary source of supply forpharmaceutical and related products to our healthcare provider customers and certain patients. We offer a broad range of services to our customers designed toenhance the efficiency and effectiveness of their operations, thereby allowing them to improve the delivery of healthcare to patients and to lower overall costs inthe pharmaceutical supply channel.

Strategy Our business strategy is focused solely on the pharmaceutical supply channel where we provide value-added distribution and service solutions tohealthcare providers and pharmaceutical manufacturers that increase channel efficiencies and improve patient outcomes. Implementing this disciplined, focusedstrategy has allowed us to significantly expand our business, and we believe we are well-positioned to continue to grow revenue and increase operating incomethrough the execution of the following key elements of our business strategy:

• Optimize and Grow Our Distribution Business. We believe we are well-positioned in size and market breadth to continue to grow our distributionbusiness as we invest to improve our operating and capital efficiencies. Distribution anchors our growth and position in the pharmaceutical supplychannel as we provide superior distribution services and deliver value-added solutions which improve the efficiency and competitiveness of bothhealthcare providers and pharmaceutical manufacturers, thus allowing the pharmaceutical supply channel to better deliver healthcare to patients.

In an effort to supplement our organic growth, we continue to utilize a disciplined approach to seek acquisitions that will assist us with our overallstrategic growth plans. In October 2005, we acquired Trent Drugs (Wholesale) Ltd (“Trent”), a Canadian wholesaler of pharmaceutical products. Theacquisition of Trent provides the Company a solid foundation to expand its pharmaceutical distribution capability into the Canadian marketplace. Webelieve the Canadian market is well-positioned for future growth, and we anticipate capitalizing on that growth with our recent acquisition of Trent.

We believe we have one of the lowest cost operating structures among our major national competitors, and to further improve our position welaunched our Optimiz™ program in fiscal 2001 for AmerisourceBergen Drug Corporation. As revised, the Optimiz™ program consists of reducingthe distribution facility network from 51 facilities in 2001 to a distribution facility network numbering in the mid-20’s within the next two years. Theplan includes building six new facilities (four of which were operational as of September 30, 2005), closing facilities (twenty-three of which havebeen closed) and implementing a new warehouse operating system. The fifth new facility opened in October 2005 and the sixth facility is scheduledto open during fiscal 2006. We closed six facilities in fiscal 2005 and anticipate closing six additional facilities during fiscal 2006, thereby reducingthe total number of distribution facilities to 28 by the end of fiscal 2006. These measures have been designed to reduce operating costs, to providegreater access to financing sources and to reduce our cost of capital. In addition, we believe we will continue to achieve productivity and operatingincome gains as we invest in and continue to implement warehouse automation technology, adopt “best practices” in warehousing activities, andincrease operating leverage by increasing volume per full-service distribution facility.

4


Table of Contents

• Grow Our Specialty Pharmaceutical Business. Representing more than $7.4 billion in annual operating revenue, our specialty pharmaceuticalsbusiness has a significant presence in this rapidly growing part of the pharmaceutical supply channel. With distribution and value-added services tophysicians who specialize in a variety of disease states and a broad array of commercialization services for manufacturers, our specialtypharmaceuticals business is a well-developed platform for growth. We are the leader in distribution and physician services to community oncologistsand have leading positions in nephrology and rheumatology. We also distribute vaccines and blood plasma and are well-positioned to service andsupport many of the new biotech therapies which will be coming to market in the near future.

We expect to continue to expand our manufacturer services, which help pharmaceutical manufacturers, especially in the biotechnology sector,commercialize their products in the channel. We believe we are the largest provider of reimbursement services that assist pharmaceutical companieslaunch drugs with targeted populations and support the products in the channel. We provide physician education services, third party logistics andspecialty pharmacy services to help speed products to market. We expect to seek opportunities to enhance and expand the specialty pharmaceuticalbusiness.

• Expand Services in the Pharmaceutical Supply Channel. We offer value-added services and solutions to assist manufacturers and healthcare providersto improve their efficiency and their patient outcomes. Programs for manufacturers such as assistance with rapid new product launches, promotionaland marketing services to accelerate product sales, custom packaging, product data reporting, logistical support, and workers’ compensation are allexamples of value-added solutions we currently offer. We are continually seeking to expand our offerings.

Our provider solutions include: our Good Neighbor Pharmacy® program, which enables independent community pharmacies and small chaindrugstores to compete more effectively through pharmaceutical benefit and merchandising programs; best-priced generic product purchasing services;hospital pharmacy consulting designed to improve operational efficiencies; scalable automated pharmacy dispensing equipment; and packagingservices that deliver unit dose, punch card and other compliance packaging for institutional and retail pharmacy customers. We also continue topursue enhancements to our services and programs.

Operations

Operating Structure. We are organized based upon the products and services we provide to our customers, and substantially all of our operations are in theUnited States. The Company’s operations are comprised of two reportable segments: Pharmaceutical Distribution and PharMerica.

The Pharmaceutical Distribution segment includes the operations of AmerisourceBergen Drug Corporation (“ABDC”) and the AmerisourceBergenSpecialty and Packaging groups. The operations of the former AmerisourceBergen Technology Group became a part of the overall ABDC operations in fiscal2005. The Pharmaceutical Distribution segment’s operations provide drug distribution and related services throughout the United States, Puerto Rico and Canada(as a result of the Trent acquisition). ABDC distributes a comprehensive offering of brand name and generic pharmaceuticals, over-the-counter healthcareproducts, and home healthcare supplies and equipment to a wide variety of healthcare providers, including acute care hospitals and health systems, independentand chain retail pharmacies, mail order facilities, physicians, clinics and other alternate site facilities. ABDC also provides scalable automated pharmacydispensing equipment, medication and supply dispensing cabinets and supply management software to a variety of retail and institutional healthcare providers.AmerisourceBergen Specialty Group (“ABSG”), through a number of individual operating businesses, provides distribution and other services, including grouppurchasing services to physicians and alternate care providers who specialize in a variety of disease states, including oncology, nephrology, and rheumatology.ABSG also distributes vaccines, other injectables, plasma and other blood products. In addition, through its manufacturer services and physician and patientservices businesses, ABSG provides a number of commercialization, third party logistics and other services for biotech and other pharmaceutical manufacturers,reimbursement consulting, practice management, and physician education. The AmerisourceBergen Packaging Group consists of American Health Packagingand Anderson Packaging (“Anderson”). American Health Packaging delivers unit dose, punch card, unit-of-use and other packaging solutions to institutional andretail healthcare providers. Anderson is a leading provider of contracted packaging services for pharmaceutical manufacturers. The drug distribution operationsof ABDC and ABSG comprised over 90% of the segment’s operating revenue and over 80% of the segment’s operating income in the fiscal year endedSeptember 30, 2005.

The PharMerica segment includes the operations of the PharMerica long-term care business (“Long-Term Care”) and a workers’ compensation-relatedbusiness (“Workers’ Compensation”). Long-Term Care is a leading national provider of pharmacy products and services to patients in long-term care andalternate site settings, including skilled nursing facilities,

5


Table of Contentsassisted living facilities and residential living communities. Long-Term Care’s institutional pharmacy business involves the purchase of bulk quantities ofprescription and nonprescription pharmaceuticals, principally from our Pharmaceutical Distribution segment, and the dispensing of those products to residents inlong-term care and alternate site facilities. Unlike hospitals, most long-term and alternate care facilities do not have onsite pharmacies to dispense prescriptiondrugs, but depend instead on institutional pharmacies, such as Long-Term Care, to provide the necessary pharmacy products and services and to play an integralrole in monitoring patient medication. Long-Term Care pharmacies dispense pharmaceuticals in patient specific packaging in accordance with physician orders.In addition, Long-Term Care provides infusion therapy services and Medicare Part B products, as well as formulary management and other pharmacy consultingservices. Workers’ Compensation provides mail order and on-line pharmacy services to chronically and catastrophically ill patients under workers’ compensationprograms, and provides pharmaceutical claims administration services for payors. Workers’ Compensation services include home delivery of prescription drugs,medical supplies and equipment, and an array of computer software solutions to reduce the payors’ administrative costs.

Sales and Marketing. ABDC has a sales force organized regionally and specialized by healthcare provider type. Customer service representatives arelocated in distribution facilities in order to respond to customer needs in a timely and effective manner. ABDC also has support professionals focused on itsvarious technologies and service offerings. Our Specialty and Packaging groups and the PharMerica businesses each have independent sales forces that specializein its respective product and service offerings. Our corporate marketing department designs and develops an array of AmerisourceBergen value-added healthcareprovider solutions and marketing materials. Tailored to specific groups, these programs and materials can be further customized at the distribution facility levelto adapt to local market conditions. Corporate sales and marketing also serves national account customers through close coordination with local distributioncenters and with the management of the Specialty and Packaging groups. Corporate sales and marketing ensures that our customers are receiving the mix ofservice offerings that meet their needs.

Customers. We have a diverse customer base that includes institutional and retail healthcare providers as well as pharmaceutical manufacturers.Institutional healthcare providers include acute care hospitals, health systems, mail order pharmacies, long-term and alternate care facilities, and physicianoffices. Retail healthcare providers include national and regional retail drugstore chains, independent community pharmacies and pharmacy departments ofsupermarkets and mass merchandisers. We are typically the primary source of supply for our customers. In addition, we offer a broad range of value-addedsolutions designed to enhance the operating efficiencies and competitive positions of our customers, thereby allowing them to improve the delivery of healthcareto patients and consumers. During fiscal 2005, operating revenue for our Pharmaceutical Distribution segment was comprised of 57% institutional and 43%retail.

Our top ten customers represented approximately 31% of fiscal 2005 operating revenue. Our largest non-bulk customer represented 7.5% of our operatingrevenue in fiscal 2005. Revenues generated from sales to Medco Health Solutions, Inc. (“Medco”) accounted for approximately 93% of bulk deliveries tocustomer warehouses and approximately 6% of operating revenue in fiscal 2005. Other than our largest non-bulk customer and Medco, no individual customeraccounted for more than 5% of our fiscal 2005 operating revenue. In addition, we have contracts with group purchasing organizations (“GPOs”), each of whichfunctions as a purchasing agent on behalf of its members, who are healthcare providers. Approximately 13% of our operating revenue in fiscal 2005 was derivedfrom our three largest GPO relationships (Novation, LLC, United Drugs and Premier Purchasing Partners, L.P.). The loss of any major customer or GPOrelationship could adversely affect future operating revenue. In October 2005, ABDC received notice of termination of its GPO contract with United Drugseffective mid-December 2005. United Drugs is a GPO for independent retail pharmacies. We expect that a substantial majority of the members of United Drugswill terminate their affiliation with United Drugs and elect to continue to do business with us. Among other things, the majority of the members of United Drugsare participants in one or more of our retail programs, including Good Neighbor Pharmacy®, Performance Plus Network® and Diabetes Shoppe®, and a numberof them also have separate contracts directly with us. However, there can be no assurance that we will retain a substantial majority of the members of UnitedDrugs as customers following the termination of our contract with United Drugs. Purchases by the members of United Drugs represented approximately 4% ofthe Company’s operating revenues for the fiscal year ended September 30, 2005.

Suppliers. We obtain pharmaceutical and other products from manufacturers, none of which accounted for more than approximately 7% of our purchasesin fiscal 2005. The loss of a supplier could adversely affect our business if alternate sources of supply are unavailable. We believe that our relationships with oursuppliers are generally good. The ten largest suppliers in fiscal 2005 accounted for approximately 42% of our purchases. Effective October 1, 2005, the Companyvoluntarily made a decision to purchase all pharmaceuticals directly from manufacturers in an effort to further protect the integrity of the supply channel.

ABDC is in a business model transition with respect to how manufacturers compensate us for our services. Historically, supplier arrangements allowed usto generate gross profit in several ways, including cash discounts for prompt payments,

6


Table of Contentsinventory buying opportunities, rebates, inventory management and other agreements, vendor program arrangements, negotiated deals and other promotionalopportunities. A significant portion of ABDC’s gross margin had been derived from our ability to purchase merchandise inventories in advance ofpharmaceutical manufacturer price increases and to hold these inventories until pharmaceutical prices increase, thereby generating a larger gross margin uponsale of the inventories. Over the last two years, pharmaceutical manufacturers have been increasing their control over the pharmaceutical supply channel by usingproduct allocation methods, including the imposition of inventory management agreements (“IMAs”). Under a typical IMA arrangement, the Company iscompensated based on specific contract defined formulas for maintaining a certain level of inventory for a pre-defined period prior to, as of, or subsequent to thedate of a manufacturer price increase. The payment from the manufacturer to us is triggered upon the manufacturer price increase. Because the payment trigger isthe date of the manufacturer price increase and the size of the payment is typically dependent on the percentage price increase, changes in manufacturers’ pricingpatterns can cause significant volatility to the Company’s periodic earnings. Additionally, pharmaceutical manufacturers have been imposing restrictions on ourability to purchase their products from alternate sources and have been requesting more product and distribution sales data from us.

All of the above has led to significant volatility in ABDC’s gross margin and, therefore, we are continuing our efforts to shift our pharmaceuticaldistribution business to a fee-for-service model where we are compensated for the services we provide manufacturers rather than one that is dependent uponmanufacturer price increases (as is the case with the IMA model). We continue to work with our pharmaceutical manufacturer partners to define fee-for-serviceterms that will adequately compensate us for our services, such as our distribution services, inventory management, service level management, and otherservices. Under a typical fee-for-service agreement, the Company is compensated for its services based on a percentage of purchases over a defined time period,with payment of fees being made directly or through a combination of direct payments and price increase entitlements. As of September 30, 2005, we havesigned agreements with a number of the large branded pharmaceutical manufacturers that we consider fee-for-service arrangements as well as some that weconsider hybrid agreements with some attributes of IMAs and some attributes of fee-for-service arrangements. We believe the transition to a fee-for-servicemodel will improve the efficiency of the supply channel and may establish a more predictable earnings pattern for ABDC, while expanding our servicerelationship with pharmaceutical manufacturers. The fee-for-service arrangements may establish a more predictable earnings pattern because under many of theagreements the Company earns a fee for its services performed on a monthly basis in contrast to the IMA model where earnings are largely predicated upon thetiming and amount of pharmaceutical price increases. We continue to have discussions with pharmaceutical manufacturers regarding fee-for-servicearrangements and expect to have agreements in place with a substantial majority of the large branded manufacturers by the end of calendar 2005. During fiscal2006, we expect that more than 75% of ABDC’s brand name manufacturer gross margin will not be contingent on manufacturer price increases. However, therecan be no assurance that this business model transition will provide all of the desired benefits or that the Company will be able to retain those benefits.

Information Systems. ABDC’s information systems provide for, among other things, electronic order entry by customers, invoice preparation andpurchasing, and inventory tracking. As a result of electronic order entry, the cost of receiving and processing orders has not increased as rapidly as sales volume.ABDC’s customized systems strengthen customer relationships by allowing the customer to lower its operating costs and by providing a platform for a number ofthe value-added services offered to our customers, including marketing, product demand data, inventory replenishment, single-source billing, computer priceupdates and price labels.

ABDC operates its full-service wholesale pharmaceutical distribution facilities on two different centralized information systems, while continuing tomigrate to one system and maintaining our customers’ access through either order-entry system. ABDC plans to complete its migration to one system in the firstquarter of fiscal 2006.

ABDC plans to continue to make system investments to further improve its information capabilities and meet its customer and operational needs. ABDCcontinues to expand its electronic interface with its suppliers and currently processes a substantial portion of its purchase orders, invoices and paymentselectronically. ABDC is implementing a new warehouse operating system that is expected to improve its productivity and operating leverage. ABDC willcontinue to invest in advanced information systems and automated warehouse technology. As of September 30, 2005, approximately one-third of our distributionfacilities have successfully implemented the new warehouse operating system.

In an effort to maintain and improve its information technology infrastructure, the Company decided to outsource a significant portion of its corporate andABDC information technology activities and entered into a ten-year commitment, effective July 1, 2005, with IBM Global Services (“IBM”), which will assumeresponsibility for performing the outsourced information technology activities following the completion of certain transition matters. The Company estimates thatit will incur approximately $20 million to $25 million of transition costs in connection with this plan. These transition costs will include employee severance andother contract expenses. The Company incurred approximately one-half of these costs in the fourth quarter of fiscal 2005. The minimum commitment under theoutsourcing arrangement is approximately $200 million (excluding

7


Table of Contentsthe above-mentioned transition costs) over a ten-year period; however, the Company believes it will likely spend between $300 million and $400 million underthe outsourcing arrangement to maintain and improve its information technology infrastructure during that period.

ABSG operates its specialty distribution business on a common, centralized ERP platform resulting in operating efficiencies as well as the ability torapidly deploy new capabilities. The convenience of ordering via the Internet is very important to ABSG’s customers. Over the last three years, we haveintroduced and enhanced our web capabilities such that currently more than 30% of orders are initiated on the web.

PharMerica’s Long-Term Care business operates a proprietary information technology infrastructure that automates order entry of medications, dispensingof medications, invoicing, and payment processing. These systems provide medical records, consulting drug review, and regulatory compliance information tohelp ensure patient safety. PharMerica’s Workers’ Compensation business provides proprietary information technology for workers’ compensation solutions.These systems provide eligibility authorization and reimbursement payments to participating pharmacies. They also provide order taking, shipment andcollection of service fees for medications and specialty services. The systems also provide billing and reimbursement for other services rendered. PharMericacontinues to invest in technologies that help improve data integrity, critical information access and system availability.

Competition We face a highly competitive environment in the distribution of pharmaceuticals and related healthcare solutions. ABDC competes with both national andregional distributors within pharmaceutical distribution. Our national competitors include Cardinal Health, Inc. and McKesson Corporation. In addition, wecompete with regional and local distributors, direct-selling manufacturers, warehousing chain drugstores, specialty distributors, and packaging and healthcaretechnology companies. The provider and alternate site product distribution channels serviced by ABSG are also highly competitive. Specialty distributionchannel competitors include Oncology Therapeutics Network, FFF Enterprises, Henry Schein, Inc., Med-Path, and Priority Healthcare Corporation, amongothers. Competitors in the business of providing specialty pharmaceutical services to manufacturers include US Oncology, Inc., Covance Inc., and UPS Logistics,among others. In all areas, competitive factors include price, value-added service programs, product offerings, service and delivery, credit terms, and customersupport.

PharMerica’s competitors principally include Omnicare, Inc., a national competitor, which is significantly larger than PharMerica, as well as regional andlocal pharmacies that specialize in long-term care. We believe that the competitive factors most important in PharMerica’s lines of business are quality and rangeof service offered, pricing, reputation with referral sources, ease of doing business with the provider, and the ability to develop and maintain relationships withreferral sources. In addition, there are relatively few barriers to entry in the local markets served by PharMerica and it may encounter substantial competitionfrom local market entrants. PharMerica also competes with numerous billing companies in connection with the portion of its business that electronicallyadjudicates workers’ compensation claims for payors.

Intellectual Property We use a number of trademarks and service marks. All of the principal trademarks and service marks used in the course of our business have beenregistered in the United States or are the subject of pending applications for registration.

We have developed or acquired various proprietary products, processes, software and other intellectual property that are used either to facilitate theconduct of our business or that are made available as products or services to customers. We generally seek to protect such intellectual property through acombination of trade secret, patent and copyright laws and through confidentiality and other contractually imposed protections.

We hold patents and have patent applications pending that relate to certain of our products, particularly our automated pharmacy dispensing equipment andour medication and supply dispensing equipment. We seek patent protection for our proprietary intellectual property from time to time as appropriate.

Although we believe that our patents or other proprietary products and processes do not infringe upon the intellectual property rights of any third parties,third parties may assert infringement claims against us from time to time.

8


Table of ContentsEmployees

As of September 30, 2005, we employed approximately 13,400 persons, of which approximately 12,300 were full-time employees. Approximately 5% offull and part-time employees are covered by collective bargaining agreements. The Company believes that its relationship with its employees is good.

Government Regulation The U.S. Drug Enforcement Administration (“DEA”), the U.S. Food and Drug Administration (“FDA”) and various state regulatory authorities regulatethe distribution of pharmaceutical products and controlled substances. Wholesale distributors of these substances are required to register for permits, meetvarious security and operating standards, and comply with regulations governing their sale, marketing, packaging, holding and distribution. The FDA, DEA andstate regulatory authorities have broad enforcement powers, including the ability to seize or recall products and impose significant criminal, civil andadministrative sanctions for violations of these laws and regulations. As a wholesale distributor of pharmaceuticals and certain related products, we are subject tothese regulations. We have received all necessary regulatory approvals and believe that we are in substantial compliance with all applicable pharmaceuticalwholesale distribution requirements.

We and our customers are subject to fraud and abuse laws which prohibit, among other things, (a) persons from soliciting, offering, receiving or payingany remuneration in order to induce the referral of a patient for treatment or for inducing the ordering or purchasing of items or services that are in any way paidfor by Medicare, Medicaid, or other government healthcare programs and (b) physicians from making referrals to certain entities with whom they have afinancial relationship. The fraud and abuse laws and regulations are broad in scope and are subject to frequent modification and varied interpretation. Theoperations of PharMerica and the Specialty Group are particularly subject to these laws and regulations, as are certain aspects of our Pharmaceutical Distributionoperations.

Under the Prospective Payment System (“PPS”) for Medicare patients in skilled nursing facilities, Medicare pays a federal daily rate for virtually allcovered skilled nursing facility services. Under PPS, PharMerica’s Long-Term Care skilled nursing facility customers are not able to pass through to Medicaretheir costs for certain products and services provided by PharMerica. Instead, Medicare provides such customers a federal daily rate to cover the costs of allcovered goods and services provided to Medicare patients, which may include certain pharmaceutical and other goods and services provided by PharMerica.Because this Medicare reimbursement is limited by PPS, facility customers have an increased incentive to negotiate with PharMerica to minimize the costs ofproviding goods and services to patients covered under Medicare. PharMerica bills skilled nursing facilities based on a negotiated fee schedule.

The Medicare Modernization Act reduced Medicare payments for most Part B drugs from 95 percent to 85 percent of average wholesale price (“AWP”)for 2004, and instituted an “average sales price” or “ASP” methodology beginning in 2005. Beginning on July 1, 2006, physicians will have the option ofcontinuing to obtain Part B reimbursed drugs under the traditional “buy and bill” approach or acquiring drugs through a new competitive acquisition program orCAP. It is currently anticipated that physicians who participate in CAP will bill the Medicare program only for the drug administration, while the CAP vendorwill bill Medicare for the actual CAP drug and also will collect applicable beneficiary copayments.

The Medicare Modernization Act also significantly expanded Medicare coverage for outpatient prescription drugs. Specifically, on January 1, 2006, thenew, voluntary Medicare Part D prescription drug benefit will go into effect. Beneficiaries who choose to participate in Part D will select from a range ofstand-alone prescription drug plans or Medicare Advantage managed care plans that include prescription drug coverage along with other Medicare services (“PartD Plans”). The Part D Plans will be required to make available certain drugs on their formularies. Reimbursement for Part D drugs will be negotiated by eachPart D Plan.

PharMerica’s Long-Term Care business also receives reimbursement directly for dispensed pharmaceuticals in some cases under state Medicaid programs.Over the last several years, state Medicaid programs have lowered reimbursement through a variety of mechanisms, principally reductions in Average WholesalePrice (AWP) levels, expansion of Federal Upper Limit (FUL) pricing, and general reductions in contract payment methodology to pharmacies. Congress also isconsidering budget reconciliation legislation that would further reduce Medicaid reimbursement for pharmaceuticals, although to date Congress has not adopted afinal budget package. Moreover, Medicaid drug coverage will be affected by the new Medicare Part D drug benefit to be implemented in 2006, since MedicarePart D, not Medicaid, will cover most outpatient drug expenses for beneficiaries who qualify for both Medicare and Medicaid coverage (so-called “dualeligibles”), including dual eligibles residing in nursing homes.

9


Table of ContentsIn recent years, some states have passed or have proposed laws and regulations that are intended to protect the integrity of the supply channel. For

example, Florida and other states are implementing pedigree requirements that require drugs to be accompanied by paperwork tracing drugs back to themanufacturers. These and other requirements are expected to increase the Company’s cost of operations. Effective October 1, 2005, the Company voluntarilymade a decision to purchase all pharmaceuticals only from manufacturers in an effort to further protect the integrity of the supply channel.

As a result of political, economic and regulatory influences, the healthcare delivery industry in the United States is under intense scrutiny and subject tofundamental changes. We cannot predict which reform proposals will be adopted, when they may be adopted, or what impact they may have on us.

The costs associated with complying with federal and state regulations could be significant and the failure to comply with any such legal requirementscould have a significant impact on the Company’s results of operations and financial condition.

See “Certain Risk Factors” for a discussion of additional regulatory developments that may affect the Company’s results of operations and financialcondition.

Health Information Practices The Health Information Portability and Accountability Act of 1996 (“HIPAA”) and the regulations promulgated thereunder by HHS set forth healthinformation standards in order to protect security and privacy in the exchange of individually identifiable health information. Significant criminal and civilpenalties may be imposed for violation of these standards. We have a HIPAA compliance program to facilitate our ongoing effort to comply with the HIPAAregulations.

Certain Risk Factors The following discussion describes certain risk factors that we believe could affect our business and prospects. These risk factors are in addition to thoseset forth elsewhere in this report.

Intense competition may erode our profit margins.

The distribution of pharmaceuticals and related healthcare solutions is highly competitive. We compete with national wholesale distributors ofpharmaceuticals such as Cardinal Health, Inc. and McKesson Corporation; regional and local distributors of pharmaceuticals; chain drugstores that warehousetheir own pharmaceuticals; manufacturers who distribute their products directly to customers; specialty distributors; and other healthcare providers. TheLong-Term Care and Workers’ Compensation businesses in which PharMerica operates also are highly competitive.

Competitive pressures have contributed to a decline in our gross profit margins on operating revenue from 5.42% in fiscal 2001 to 3.96% in fiscal 2005.This trend may continue and our business could be adversely affected as a result.

Our operating revenue and profitability may suffer upon the loss of a significant customer.

Our top ten customers represented approximately 31% of operating revenue for the fiscal year ended September 30, 2005. Our largest individual customeraccounted for approximately 7.5% of our operating revenue for the fiscal year ended September 30, 2005. We also have contracts with group purchasingorganizations (“GPOs”), each of which functions as a purchasing agent on behalf of its members, who are hospitals, pharmacies or other healthcare providers.Approximately 13% of our operating revenue for the fiscal year ended September 30, 2005 was derived from our three largest GPO relationships (Novation,LLC, United Drugs and Premier Purchasing Partners, L.P.). We may lose a significant customer or GPO relationship if any existing contract with such customeror GPO expires without being extended, renewed, renegotiated or replaced or is terminated by the customer or GPO prior to expiration, to the extent such earlytermination is permitted by the contract. A number of our contracts with significant customers or GPOs are typically subject to expiration each year and we maylose any of these customers or GPO relationships if we are unable to extend, renew, renegotiate or replace the contracts. The loss of any significant customer orGPO relationship could adversely affect future operating revenue and profitability. In October 2005, ABDC received notice of termination of its GPO contractwith United Drugs effective mid-December 2005. United Drugs is a GPO for independent retail pharmacies. We expect that a substantial majority of themembers of United Drugs will terminate their affiliation with United Drugs and elect to continue to do business with us. Among other things, the majority of themembers of United Drugs are participants in one or more of our retail programs, including Good Neighbor Pharmacy®, Performance Plus Network® and DiabetesShoppe®, and a number of them also have separate contracts directly with us. However, there can be no

10


Table of Contentsassurance that we will retain a substantial majority of the members of United Drugs as customers following the termination of our contract with United Drugs.Purchases by the members of United Drugs represented approximately 4% of the Company’s operating revenues for the fiscal year ended September 30, 2005.

Approximately 11% of PharMerica’s operating revenue in the fiscal year ended September 30, 2005 was derived from Long-Term Care’s contract withBeverly Enterprises, Inc. The initial term of this contract is scheduled to expire in the middle part of fiscal 2006 and the contract is expected to be renewed at orbefore the expiration of the initial term. A termination of this contract or a renewal of this contract on significantly less favorable economic terms wouldadversely affect PharMerica’s operating revenue and results of operations.

Our operating revenue and profitability may suffer upon the bankruptcy, insolvency or other credit failure of a significant customer.

Most of our customers buy pharmaceuticals and other products and services from us on credit. Credit is made available to customers based on ourassessment and analysis of creditworthiness. Although we often try to obtain a security interest in assets and other arrangements intended to protect our creditexposure, we generally are either subordinated to the position of the primary lenders to our customers or substantially unsecured. The bankruptcy, insolvency orother credit failure of any customer at a time when the customer has a substantial account payable balance due to us could have a material adverse affect on ourresults of operations. At September 30, 2005, the largest trade receivable due from a single customer represented approximately 13% of accounts receivable, net.

Our results of operations may suffer upon the bankruptcy, insolvency or other credit failure of a significant supplier.

Our relationships with pharmaceutical suppliers give rise to substantial amounts that are due to us from the suppliers, including amounts due to us forreturned goods or defective goods and amounts due to us for services provided to the suppliers. The bankruptcy, insolvency or other credit failure of any supplierat a time when the supplier has a substantial account payable balance due to us could have a material adverse affect on our results of operations.

The Company’s Pharmaceutical Distribution segment is transitioning its business model.

The Company’s Pharmaceutical Distribution segment is in a business model transition with respect to how it is compensated for services it provides topharmaceutical manufacturers. Historically, supplier arrangements allowed us to generate gross profit in several ways, including cash discounts for promptpayments, inventory buying opportunities, rebates, inventory management and other agreements, vendor program arrangements, negotiated deals and otherpromotional opportunities.

A significant portion of the gross margin for our pharmaceutical business had been derived from our ability to purchase merchandise inventories inadvance of pharmaceutical price increases and then hold these inventories until pharmaceutical prices increase, thereby generating a larger gross margin uponsale of the inventories. Over the last two years, however, pharmaceutical manufacturers have been increasing their control over the pharmaceutical supplychannel by using product allocation methods, including imposition of inventory management agreements (“IMAs”). Under most IMAs we are paid for notspeculating with respect to pharmaceutical price increases. However, in most cases our compensation under IMAs continues to be predicated uponpharmaceutical price increases. Additionally, pharmaceutical manufacturers have imposed restrictions on our ability to purchase their products from alternatesources. Effective October 1, 2005, the Company voluntarily made a decision to purchase all pharmaceuticals only from manufacturers in an effort to furtherprotect the integrity of the supply channel.

All of the above has resulted in significant volatility in the gross margin for our pharmaceutical distribution business and, therefore, we are in an effort toshift our business to a fee-for-service model where we are compensated for the services we provide manufacturers rather than one that is dependent uponmanufacturer price increases (as is the case with the IMA model). We have been and are continuing to work with our pharmaceutical manufacturer partners todefine fee-for-service terms that will adequately compensate us for our services. We expect to have agreements—either fee-for-service agreements or hybridagreements that have some attributes of IMAs and some attributes of fee-for-service agreements—in place with a substantial majority of the large brandedmanufacturers by the end of calendar 2005. During fiscal 2006, we expect that more than 75% of ABDC’s brand name manufacturer gross margin will not becontingent on manufacturer price increases. There can be no assurance that this business model transition will be successful or that the timing of that transitionwill occur as anticipated by the Company. If the transition does not proceed successfully, the Company may not be adequately compensated and its profitabilitymay be significantly reduced.

11


Table of ContentsThe supply channel business model transition may reduce our profitability.

The supply channel business model transition described above has the potential to affect the profitability of customer contracts that were developed under

a business model that was predicated on price increases and high inventory levels. Many of our contracts with healthcare providers are multi-year contracts thatcannot be terminated or amended in the event of such changes in our relationships with manufacturers. Accordingly, the advent of such changes may have theeffect of reducing, or even eliminating, our profitability on such contracts through the end of the applicable contract periods.

Increasing governmental efforts to regulate the pharmaceutical supply channel may increase our costs and reduce our profitability.

The healthcare industry is highly regulated at the federal and state level. Consequently, we are subject to the risk of changes in various federal and statelaws, which include operating and security standards of the DEA, the FDA, various state boards of pharmacy and comparable agencies. In recent years, somestates have passed or have proposed laws and regulations, including pedigree tracking requirements, that are intended to protect the integrity of the supplychannel but that also may substantially increase the costs and burden of pharmaceutical distribution.

Legal and regulatory changes affecting rates of reimbursement for pharmaceuticals and/or medical treatments or services may reduce our profitability.

Both our own profit margins and the profit margins of our customers may be adversely affected by laws and regulations reducing reimbursement rates forpharmaceuticals and/or medical treatments or services or changing the methodology by which reimbursement levels are determined. Many of our contracts withhealthcare providers are multi-year contracts from which we derive profit based upon reimbursement rates and methodology. Many of these contracts cannot beterminated or amended in the event of such legal and regulatory changes. Accordingly, such changes may have the effect of reducing, or even eliminating, ourprofitability on such contracts until the end of the applicable contract periods.

ABSG’s business may be adversely affected in the future by recent and proposed changes in the Medicare reimbursement rates for certain pharmaceuticals,including oncology drugs. The reimbursement changes that have been implemented by HHS starting in January 2004 and continuing in 2005 pursuant to theMedicare Modernization Act, along with additional reforms scheduled to go into effect in 2006, may have the effect of reducing the amount of and/or margins onmedications purchased by physicians for administration in their offices and may force patients to other healthcare providers. In particular, under the upcomingcompetitive acquisition program or CAP, physicians may choose to forgo purchasing drugs for Medicare patients and instead opt to obtain products from a CAPvendor that bills Medicare directly. Since ABSG provides a number of services to or through physicians, patient shifts from physicians to other healthcareproviders may result in slower growth or lower revenues for ABSG. Although ABSG has contingency plans to enable it to retain and grow the business itconducts with and through physicians, there can be no assurance that it will retain or replace all of the revenue currently going through the physician channel orthat such revenue will be as profitable.

The Medicare Modernization Act also includes a major expansion of the Medicare prescription drug benefit under the new Medicare Part D. Beginning in2006, Medicare beneficiaries will be eligible to enroll in prescription drug plans that will be offered by private entities and will be eligible for varying levels ofcoverage for outpatient prescription drugs. Medicare beneficiaries who will have all or a substantial portion of their prescription drug costs covered by the newMedicare drug benefit include those nursing home residents served by the Long-Term Care business whose drug costs are currently covered by state Medicaidprograms. In January 2005, the Centers for Medicare & Medicaid Services (“CMS”) of HHS published final rules for the new voluntary prescription drug benefitprogram. While these rules established a framework for the new benefit, further information and guidance continues to be provided by CMS. The rules permitlong-term care pharmacies to provide covered Medicare Part D drugs to enrollees of the new Medicare Part D plans. Under the rules, long-term care pharmacieswill be able to participate on an in-network basis by contracting directly with the plan sponsor. The changes contemplated by the rules are expected to take fulleffect in 2006. At this time, we cannot determine the future impact of Medicare Part D on the Long-Term Care business, but the implementation of Medicare PartD could have an adverse effect on the Long-Term Care business.

Long-Term Care receives rebates from pharmaceutical manufacturers for undertaking certain activities that the manufacturers believe may increase thelikelihood that their respective products will be dispensed. In answer to a frequently asked question (“FAQ”), CMS recently indicated that it is examiningwhether long-term care pharmacies should be permitted to receive “access/performance” rebates from pharmaceutical manufacturers with respect to prescriptionscovered under the Medicare Part D benefit. CMS defined these as rebates that manufacturers provide to long-term pharmacies that are designed to “prefer,protect or maintain” that manufacturers’ product selection by the long-term care pharmacy or to increase the volume of the manufacturers’ products that aredispensed by

12


Table of Contentsthe pharmacy under its formulary. CMS subsequently withdrew the FAQ and, to date, has not provided any additional guidance on this issue. The elimination ofmanufacturer rebates could have an adverse effect on the Long-Term Care business. Long-Term Care’s business could be adversely affected if CMS should takeany action that has the effect of eliminating or significantly reducing the rebates that Long-Term Care receives from manufacturers.

The changing United States healthcare environment may negatively impact our revenue and income.

Our products and services are intended to function within the structure of the healthcare financing and reimbursement system currently existing in theUnited States. In recent years, the healthcare industry has undergone significant changes in an effort to reduce costs and government spending. These changesinclude an increased reliance on managed care; cuts in Medicare funding affecting our healthcare provider customer base; consolidation of competitors, suppliersand customers; and the development of large, sophisticated purchasing groups. We expect the healthcare industry to continue to change significantly in thefuture. Some of these potential changes, such as a reduction in governmental support of healthcare services or adverse changes in legislation or regulationsgoverning prescription drug pricing, healthcare services or mandated benefits, may cause healthcare industry participants to reduce the amount of our productsand services they purchase or the price they are willing to pay for our products and services. Changes in pharmaceutical manufacturers’ pricing or distributionpolicies could also significantly reduce our income.

If we fail to comply with laws and regulations in respect of healthcare fraud, we could suffer penalties or be required to make significant changes to ouroperations.

We are subject to extensive and frequently changing federal and state laws and regulations relating to healthcare fraud. The federal government continuesto strengthen its position and scrutiny over practices involving healthcare fraud affecting the Medicare, Medicaid and other government healthcare programs. Ourrelationships with pharmaceutical manufacturers and healthcare providers subject our business to laws and regulations on fraud and abuse which, among otherthings, (i) prohibit persons from soliciting, offering, receiving or paying any remuneration in order to induce the referral of a patient for treatment or for inducingthe ordering or purchasing of items or services that are in any way paid for by Medicare, Medicaid or other government-sponsored healthcare programs and(ii) impose a number of restrictions upon referring physicians and providers of designated health services under Medicare and Medicaid programs. Legislativeprovisions relating to healthcare fraud and abuse give federal enforcement personnel substantially increased funding, powers and remedies to pursue suspectedfraud and abuse. While we believe that we are in substantial compliance with all applicable laws, many of the regulations applicable to us, including thoserelating to marketing incentives offered by pharmaceutical suppliers, are vague or indefinite and have not been interpreted by the courts. They may be interpretedor applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations. If we fail to comply withapplicable laws and regulations, we could suffer civil and criminal penalties, including the loss of licenses or our ability to participate in Medicare, Medicaid andother federal and state healthcare programs.

We may not realize all of the anticipated benefits of our integration plan to consolidate our distribution network and eliminate duplicative administrativefunctions.

We are proceeding with an integration plan to consolidate our ABDC distribution facilities from 51 to a distribution facility network numbering in themid-20’s within the next two years; implement new warehouse information technology systems and eliminate duplicative administrative functions. The programis designed to focus capacity on growing markets, significantly increase warehouse efficiencies and streamline our transportation activities. The plan includesbuilding six new facilities (four of which were operational as of September 30, 2005), closing facilities (twenty-three of which have been closed as ofSeptember 30, 2005) and implementing a new warehouse operating system. The fifth new facility opened in October 2005 and the sixth facility is scheduled toopen during fiscal 2006. We closed a total of six facilities during fiscal 2005 and we expect to close an additional six facilities during fiscal 2006, therebyreducing the total number of distribution facilities to 28 by the end of fiscal 2006. We believe our enhanced distribution network will result in the lowest costs inpharmaceutical distribution and the highest accuracy and speed of customer order fulfillment. We may not realize all of the anticipated benefits of enhancing ourdistribution network if we experience delays in building the new facilities or closing existing facilities, we incur significant cost overruns associated with theprogram, or the new warehouse information technology systems do not function as planned.

Effective July 1, 2005, we outsourced a significant portion of our information technology activities to IBM as part of the integration plan. There can be noassurance that our business operations will not be affected adversely by the outsourcing of such activities or that IBM will perform satisfactorily.

13


Table of ContentsOur operating results and/or financial condition may be adversely affected if we undertake acquisitions of businesses that do not perform as we expect or

that are difficult for us to integrate.

We expect to continue to implement our growth strategy, in part, by acquiring companies. At any particular time, we may be in various stages ofassessment, discussion and negotiation with regard to one or more potential acquisitions, not all of which will be consummated. We make public disclosure ofpending and completed acquisitions when appropriate and required by applicable securities laws and regulations.

Acquisitions involve numerous risks and uncertainties. If we complete one or more acquisitions, our results of operations and financial condition may beadversely affected by a number of factors, including: the failure of the acquired businesses to achieve the results we have projected in either the near or longterm; the assumption of unknown liabilities; the difficulties of imposing adequate financial and operating controls on the acquired companies and theirmanagement and the potential liabilities that might arise pending the imposition of adequate controls; the difficulties in the integration of the operations,technologies, services and products of the acquired companies; and the failure to achieve the strategic objectives of these acquisitions.

Our operating results and our financial condition may be adversely affected by foreign operations.

We recently acquired a pharmaceutical distributor based in Canada and expect to consider additional foreign acquisitions in the future. Our existingforeign operations and any operations we may acquire in the future carry risks in addition to the risks of acquisition, as described above. At any particular time,foreign operations may encounter risks and uncertainties regarding the governmental, political, economic, business and competitive environment within thecountries in which those operations are based. Additionally, foreign operations expose us to foreign currency fluctuations that could impact our results ofoperations and financial condition based on the movements of the applicable foreign currency exchange rates in relation to the U.S. Dollar.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, our management may not beable to provide its report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for the fiscal year endingSeptember 30, 2006 as required pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and our independent registered public accounting firm may not beable to provide an unqualified attestation, or any attestation, on management’s assessment of the operating effectiveness of our internal controls over financialreporting.

Pursuant to Section 404 of the Sarbanes-Oxley Act, our management will be required to deliver a report in our Annual Report on Form 10-K for the fiscalyear ending September 30, 2006, similar to the one delivered herein, that assesses the effectiveness of our internal control over financial reporting. We also willbe required to deliver an attestation report, similar to the one delivered herein, of our independent registered public accounting firm on our management’sassessment of, and operating effectiveness of, internal controls. We have undertaken substantial effort to assess, enhance and document our internal controlsystems, financial processes and information systems and expect to continue to do so during fiscal 2006 in preparation for the required annual evaluation process.Significant use of resources, both internal and external, will be required to make the requisite evaluation of the annual effectiveness of the Company’s internalcontrols. While the Company believes it has adequate internal controls and will meet its obligations, there can be no assurance that the Company will be able tocomplete the work necessary for the Company’s management to issue its report in a timely manner or that management or the Company’s independent registeredpublic accounting firm will conclude that the Company’s internal controls are effective.

Risks generally associated with the Company’s sophisticated information systems may adversely affect the Company’s operating results.

The Company relies on sophisticated information systems in its business to obtain, rapidly process, analyze, and manage data to facilitate the purchase anddistribution of thousands of inventory items from numerous distribution centers; receive, to process, and ship orders on a timely basis; to manage the accuratebilling and collections for thousands of customers; and to process payments to suppliers. The Company’s business and results of operations may be adverselyaffected if these systems are interrupted or damaged by unforeseen events or if they fail for any extended period of time, including due to the actions of thirdparties. A third party service provider is responsible for managing a significant portion of the Company’s information systems. The Company’s business andresults of operations may be adversely affected if the third party service provider does not perform satisfactorily.

14


Table of ContentsAvailable Information

For more information about us, visit our website at www.amerisourcebergen.com. The contents of the website are not part of this Form 10-K. Ourelectronic filings with the Securities and Exchange Commission (including all Forms 10-K, 10-Q and 8-K, and any amendments to these reports) may be viewedusing their website at www.sec.gov and are available free of charge through the “Investors” section of our website immediately after we electronically file withor furnish them to the Securities and Exchange Commission.

ITEM 2. PROPERTIES As of September 30, 2005, we conducted our business from office and operating facilities at owned and leased locations throughout the United States andPuerto Rico. In the aggregate, our facilities occupy approximately 8.1 million square feet of office and warehouse space, which is either owned or leased underagreements that expire from time to time through 2018.

Our 32 full-service ABDC wholesale pharmaceutical distribution facilities range in size from approximately 39,000 square feet to 314,000 square feet,with an aggregate of approximately 5.0 million square feet. Our six new distribution facilities, including office space, will each have approximately 300,000square feet. Leased facilities are located in Puerto Rico plus the following states: Arizona, California, Colorado, Florida, Hawaii, Illinois, Minnesota, Missouri,North Carolina, New Jersey, Utah, and Washington. Owned facilities are located in the following states: Alabama, California, Georgia, Illinois, Indiana,Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas and Virginia. We consider our operatingproperties to be in satisfactory condition. The current leases expire through 2018. See Optimize and Grow Our Distribution Business on Page 4 for a discussionof our facility consolidation and expansion plan.

As of September 30, 2005, the other business units within the Pharmaceutical Distribution segment (including the Specialty and Packaging Groups and ourother operations) were located in fifty-two leased locations and four owned locations. The locations range in size from approximately 300 square feet to 310,000square feet and have a combined area of approximately 1.8 million square feet, of which the Packaging Group, due to the nature of its operations, occupiesapproximately 0.9 million square feet. The leases expire through 2015.

As of September 30, 2005, our PharMerica operations were located in 96 leased locations (92 of which are pharmacies) ranging in size from approximately100 square feet to 111,000 square feet and had a combined area of approximately 1.0 million square feet. The leases expire through 2010.

We lease approximately 134,000 square feet of general and executive offices in Chesterbrook, Pennsylvania and own and lease approximately 186,000square feet of administrative and data processing offices in Orange, California and Montgomery, Alabama. The leases expire through 2010.

15


Table of Contents

ITEM 3. LEGAL PROCEEDINGS In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, includingantitrust, environmental, product liability, regulatory and other matters. Significant damages or penalties may be sought from the Company in some matters, andsome matters may require years for the Company to resolve. The Company establishes reserves based on its periodic assessment of estimates of probable losses.There can be no assurance that an adverse resolution of one or more matters during any subsequent reporting period will not have a material adverse effect on theCompany’s results of operations for that period. However, on the basis of information furnished by counsel and others and taking into consideration the reservesestablished for pending matters, the Company does not believe that the resolution of currently pending matters (including those matters specifically describedbelow), individually or in the aggregate, will have a material adverse effect on the Company’s financial condition. (See Note 12 to the Consolidated FinancialStatements).

Stockholder Derivative Lawsuit The Company has been named as a nominal defendant in a stockholder derivative action on behalf of the Company under Delaware law that was filed inMarch 2004 in the U.S. District Court for the Eastern District of Pennsylvania. Also named as defendants in the action are all of the individuals who were servingas directors of the Company prior to the date of filing of the action and certain current and former officers of the Company and its predecessors. The derivativeaction alleged, among other things, breach of fiduciary duty, abuse of control and gross mismanagement against all the individual defendants. It further alleged,among other things, waste of corporate assets, unjust enrichment and usurpation of corporate opportunity against certain of the individual defendants. Thederivative action sought compensatory and punitive damages in favor of the Company, attorneys’ fees and costs, and further relief as may be determined by thecourt. The defendants believe that this derivative action is wholly without merit. In May 2004, the defendants filed a motion to dismiss the action on bothprocedural and substantive grounds. In February 2005, the District Court granted the defendants’ motion to dismiss the entire action. Following the dismissal ofthe action, the derivative plaintiff made demand upon the Company to inspect the Company’s books and records. The Company believes that the demand isimproper under Delaware law and has refused to allow the inspection. The derivative plaintiff obtained the right from the District Court to file an amendedcomplaint within 30 days after resolution of the inspection demand and, thereafter, filed a complaint in the Delaware Chancery Court seeking to compelinspection of certain of the Company’s books and records. On November 30, 2005, the Delaware Chancery Court denied the plaintiff’s request to inspect theCompany’s books and records.

New York Attorney General Subpoena In April 2005, the Company received a subpoena from the Office of the Attorney General of the State of New York (the “NYAG”) requesting documentsand responses to interrogatories concerning the manner and degree to which the Company purchases pharmaceuticals from other wholesalers, often referred to asthe alternate source market, rather than directly from manufacturers. Similar subpoenas have been issued by the NYAG to other pharmaceutical distributors. TheCompany has not been advised of any allegations of misconduct by the Company. The Company has engaged in discussions with the NYAG, initially to clarifythe scope of the subpoena and subsequently to provide background information requested by the NYAG. The Company continues to produce responsiveinformation and documents and to cooperate with the NYAG. The Company believes that it has not engaged in any wrongdoing, but cannot predict the outcomeof this matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders for the quarter ended September 30, 2005.

16


Table of Contents

EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of the Company’s principal executive officers, their ages and their positions, as of December 1, 2005. Each executive officer servesat the pleasure of the Company’s board of directors.

Name

Age

Current Position with the Company

R. David Yost 58 Chief Executive Officer and Director

Kurt J. Hilzinger 45 President, Chief Operating Officer and Director

Michael D. DiCandilo 44 Executive Vice President and Chief Financial Officer

Steven H. Collis 44

Senior Vice President and President, AmerisourceBergenSpecialty Group

Terrance P. Haas 40

Senior Vice President and President, AmerisourceBergenDrug Corporation

Unless indicated to the contrary, the business experience summaries provided below for the Company’s executive officers describe positions held by the

named individuals during the last five years.

Mr. Yost has been Chief Executive Officer and a Director of the Company since August 2001 and was President of the Company until October 2002. Hewas Chairman and Chief Executive Officer of AmeriSource from December 2000 until August 2001. Mr. Yost previously served as President and ChiefExecutive Officer of AmeriSource from May 1997 to December 2000. Mr. Yost served as a director of AmeriSource from 1997 until August 2001.

Mr. Hilzinger was elected to the Company’s Board of Directors in March 2004. He was named President and Chief Operating Officer of the Company inOctober 2002. Prior to that date, he was the Company’s Executive Vice President and Chief Operating Officer since August 2001; the President and ChiefOperating Officer of AmeriSource from December 2000 until August 2001; the Senior Vice President and Chief Operating Officer of AmeriSource from January1999 to December 2000; and the Senior Vice President, Chief Financial Officer of AmeriSource from 1997 to 1999.

Mr. DiCandilo has been Chief Financial Officer of the Company since March 2002. Since May 2005, he has been an Executive Vice President of theCompany. From March 2002 to May 2005, Mr. DiCandilo was a Senior Vice President. Previously, he was the Company’s Vice President and Controller sinceAugust 2001 and AmeriSource’s Vice President and Controller from 1995 to August 2001.

Mr. Collis has been a Senior Vice President of the Company and President of AmerisourceBergen Specialty Group since August 2001. He was SeniorExecutive Vice President of Bergen from February 2000 until August 2001 and President of ASD Specialty Healthcare, Inc. from September 2000 until August2001. Mr. Collis was also Executive Vice President of ASD Specialty Healthcare, Inc. from 1996 to August 2000.

Mr. Haas was named Senior Vice President, and President of AmerisourceBergen Drug Corporation in February 2004. He was Senior Vice President,Operations from February 2003 to February 2004. Previously, he was Senior Vice President, Integration since October 2001 and Senior Vice President, SupplyChain Management from August 2001 to October 2001. Prior to August 2001, Mr. Haas served as AmeriSource’s Senior Vice President, Supply ChainManagement since November 2000 and Senior Vice President, Operations of AmeriSource from 1999 to 2000.

17


Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES

The Company’s common stock is traded on the New York Stock Exchange under the trading symbol “ABC.” As of November 30, 2005, there were 2,974record holders of the Company’s common stock. The following table sets forth the high and low closing sale prices of the Company’s common stock for theperiods indicated.

PRICE RANGE OF COMMON STOCK

High

Low

Fiscal Year Ended September 30, 2005 First Quarter $ 63.68 $ 50.45Second Quarter 62.78 54.03Third Quarter 69.15 56.36Fourth Quarter 78.43 69.20

Fiscal Year Ended September 30, 2004 First Quarter 65.89 55.00Second Quarter 59.15 52.56Third Quarter 61.64 54.20Fourth Quarter 56.58 49.91

The Company has paid quarterly cash dividends of $0.025 per share on its common stock since the first quarter of fiscal 2002. On November 15, 2005, the

Company’s board of directors increased the quarterly dividend by 100% and declared a dividend of $0.05 per share, which will be paid on December 12, 2005 tostockholders of record as of close of business on November 25, 2005. The Company anticipates that it will continue to pay quarterly cash dividends in the future.However, the payment and amount of future dividends remain within the discretion of the Company’s board of directors and will depend upon the Company’sfuture earnings, financial condition, capital requirements and other factors.

Additionally, on November 15, 2005, the Company declared a two-for-one stock split of the Company’s outstanding shares of common stock. The stocksplit will occur in the form of a stock dividend, where each stockholder receives one additional share for each share owned. The stock dividend is payable onDecember 28, 2005 to stockholders of record at the close of business on December 13, 2005. Subsequent quarterly cash dividends will be adjusted to reflect thetwo-for-one stock split.

ISSUER PURCHASES OF EQUITY SECURITIES

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of common stock, subjectto market conditions and to compliance with the stock repurchase restrictions contained in the indentures governing the Company’s senior notes and in the creditagreement for the Company’s senior credit facility. Through June 30, 2005, the Company had purchased $94.2 million of its common stock under this programfor a weighted average price of $65.50. In August 2005, the Company’s board of directors authorized an increase in the amount available under this program byapproximately $394 million, bringing the total remaining availability to $750 million, and the total repurchase program to approximately $844 million. Theincrease in repurchase authority was subject to the completion of the tender and repurchase of the Company’s $500 million principal amount 8.125% senior notesdue 2008 and $300 million principal amount 7.25% senior notes due 2012 and the offering and sale of $400 million principal amount 5.625% senior notes due2012 and $500 million principal amount 5.875% senior notes due 2015 (collectively, the “Refinancing”). The Refinancing was completed in September 2005. Asof September 30, 2005, the Company has $750 million of remaining authorization to repurchase its common stock under this program.

18


Table of ContentsIn February 2005, the Company’s board of directors authorized the Company to purchase up to 5.7 million shares of its outstanding common stock, subject

to market conditions. The Company completed the purchase of all the shares authorized under this program for a total of $319.7 million in March 2005. In April2005, the Company paid $16.6 million to settle the purchase of the 5.7 million shares. See Note 7 (Stockholders’ Equity and Earnings Per Share) of the Notes tothe Consolidated Financial Statements set forth under Item 8 of Part II of this report.

In August 2004, the Company’s board of directors authorized the Company to purchase up to $500 million of its outstanding shares of common stock,subject to market conditions. The Company completed the purchase of $500 million of its common stock under this program in February 2005 for a weightedaverage price of $53.81.

The following tables set forth the number of shares purchased during the fiscal year ended September 30, 2005, the average price paid per share, and thedollar value that may yet be purchased under these programs. $844 Million Repurchase Program:

Period

TotalNumber of

SharesPurchased

AveragePrice Paidper Share

Total Number of SharesPurchased as Part of the$844 Million Repurchase

Program

Maximum Dollar Value ofShares that May Yet Be

Purchased Under the $844Million Repurchase Program

May 1 to May 31 443,000 $ 64.92 443,000 $ 815,411,688June 1 to June 30 994,700 $ 65.76 1,437,700 750,000,000 Total 1,437,700 $ 65.50 1,437,700 750,000,000

From October 1, 2005 to November 30, 2005, the Company purchased an additional 844,674 shares of its common stock for a total cost of $62.9 million. 5.7 Million Share Repurchase Program:

Period

TotalNumber of

SharesPurchased


Total Number of SharesPurchased as Part of the

5.7 Million ShareRepurchase Program

Maximum number of Sharesthat May Yet Be Purchased

Under the 5.7 MillionRepurchase Program

February 1 to February 28 435,600 $ 59.46 435,600 5,264,400March 1 to March 31 5,264,400 $ 55.80 5,700,000 — Total 5,700,000 $ 56.08 5,700,000 — $500 Million Repurchase Program:

Period

TotalNumber of

SharesPurchased


Total Number of SharesPurchased as Part of the$500 Million Repurchase

Program

Maximum Dollar Value ofShares that May Yet Be

Purchased Under the $500Million Repurchase Program

October 1 to October 31 4,818,000 $ 52.52 7,579,500 $ 102,280,881January 1 to January 31 100,000 $ 55.99 7,679,500 96,681,403February 1 to February 28 1,612,850 $ 59.94 9,292,350 — 6,530,850 $ 54.41 9,292,350 —

19


Table of Contents

ITEM 6. SELECTED FINANCIAL DATA On August 29, 2001, AmeriSource and Bergen merged to form the Company. The merger was accounted for as an acquisition of Bergen under thepurchase method of accounting. Accordingly, the financial data for the fiscal year ended September 30, 2001 reflects the operating results for the full year ofAmeriSource and approximately one month of Bergen, and the financial position of the combined company. The following table should be read in conjunctionwith the Consolidated Financial Statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results ofOperations beginning on the next page of this report.

Fiscal year ended September 30,

(amounts in thousands,except per shareamounts)

2005 (a)

2004 (b)

2003 (c)

2002 (d)

2001 (e)

Statement ofOperationsData:

Operating revenue $ 50,012,598 $ 48,812,452 $ 45,463,400 $ 40,163,387 $ 15,768,511Bulk deliveries to

customerwarehouses 4,564,723 4,308,339 4,120,639 4,994,080 368,718

Total revenue 54,577,321 53,120,791 49,584,039 45,157,467 16,137,229Gross profit 1,980,184 2,166,430 2,225,613 2,009,821 692,265Operating expenses 1,343,238 1,265,471 1,339,484 1,294,209 431,452Operating income 636,946 900,959 886,129 715,612 260,813Income from

continuingoperations 291,922 474,874 443,065 343,243 124,683

Net income 264,645 468,390 441,229 344,941 123,796Earnings per share

from continuingoperations –diluted (f) (g) 2.73 4.12 3.91 3.14 2.11

Earnings per share –diluted (f) (g) 2.48 4.06 3.89 3.16 2.10

Cash dividendsdeclared percommon share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ —

Weighted averagecommon sharesOutstanding -diluted 107,770 117,779 115,954 112,228 62,807

Balance SheetData:

Cash and cashequivalents $ 1,315,683 $ 871,343 $ 800,036 $ 663,340 $ 297,626

Accounts receivable- net (h) 2,640,646 2,260,973 2,295,437 2,222,156 2,142,663

Merchandiseinventories (h) 4,003,690 5,135,830 5,733,837 5,437,878 5,056,257

Property andequipment - net 514,758 465,264 353,170 282,578 289,569

Total assets 11,381,174 11,654,003 12,040,125 11,213,012 10,291,245Accounts payable 5,292,253 4,947,037 5,393,769 5,367,837 4,991,884Long-term debt,

including currentportion 952,711 1,438,471 1,784,154 1,817,313 1,874,379

Stockholders’ equity 4,280,357 4,339,045 4,005,317 3,316,338 2,838,564Total liabilities and

stockholders’equity 11,381,174 11,654,003 12,040,125 11,213,012 10,291,245

(a) Includes $14.0 million of facility consolidations and employee severance costs, net of income tax benefit of $8.7 million, a $71.4 million loss on earlyretirement of debt, net of income tax benefit of $40.5 million, a $24.7 million gain from antitrust litigation settlements, net of income tax expense of $15.4million and an impairment charge of $3.2 million, net of income tax benefit of $2.1 million.

(b) Includes $4.6 million of facility consolidations and employee severance costs, net of income tax benefit of $2.9 million, a $14.5 million loss on earlyretirement of debt, net of income tax benefit of $9.1 million, and a $23.4 million gain from an antitrust litigation settlement, net of income tax expense of$14.6 million.

(c) Includes $5.4 million of facility consolidations and employee severance costs, net of income tax benefit of $3.5 million and a $2.6 million loss onearly retirement of debt, net of income tax benefit of $1.6 million.


(d) Includes $14.6 million of merger costs, net of income tax benefit of $9.6 million.

(e) Includes $8.0 million of merger costs, net of income tax benefit of $5.1 million, $6.8 million of costs related to facility consolidations and employeeseverance, net of income tax benefit of $4.1 million, and a $1.7 million reduction in an environmental liability, net of income tax expense of $1.0 million.

(f) Effective October 1, 2004, the Company changed its method of recognizing cash discounts and other related manufacturer incentives. The Companyrecorded a $10.2 million charge for the cumulative effect of change in accounting (net of income tax benefit of $6.3 million) in the consolidated statementof operations for the fiscal year ended September 30, 2005. This $10.2 million cumulative effect charge reduced diluted earnings per share by $0.09 for thefiscal year ended September 30, 2005.

Had the Company used its current method of accounting for recognizing cash discounts and other related manufacturer incentives for each of the fourfiscal years ended September 30, 2004, diluted earnings per share from continuing operations would have been higher by $0.05 for fiscal 2001, higher by$0.02 for fiscal 2002, lower by $0.08 for fiscal 2003, and lower by $0.02 for fiscal 2004.

(g) Includes the amortization of goodwill, net of income taxes, during fiscal 2001. Had the Company not amortized goodwill, diluted earnings per share wouldhave been $0.02 higher in fiscal 2001.

(h) Balances as of September 30, 2004 reflect a change in accounting to accrue for customer sales returns. The impact of the accrual was to decrease accountsreceivable, increase merchandise inventories, and decrease operating revenue and cost of goods sold by $316.8 million. The accrual for customer salesreturns had no impact on net income.

20


Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained herein.

The Company is a national pharmaceutical services company providing drug distribution and related healthcare services and solutions to its customers.The Company also provides pharmaceuticals to long-term care and workers’ compensation patients.

The Company is organized based upon the products and services it provides to its customers, and substantially all of its operations are located in theUnited States. The Company’s operations are comprised of two reportable segments: Pharmaceutical Distribution and PharMerica.

Pharmaceutical Distribution The Pharmaceutical Distribution reportable segment includes the operations of AmerisourceBergen Drug Corporation (“ABDC”) and theAmerisourceBergen Specialty and Packaging groups. The operations of the former AmerisourceBergen Technology Group became a part of the overall ABDCoperations in fiscal 2005. The Pharmaceutical Distribution reportable segment is comprised of two operating segments: ABDC and AmerisourceBergen SpecialtyGroup (“ABSG”). The ABDC operating segment includes the operations of the AmerisourceBergen Packaging Group. Servicing both pharmaceuticalmanufacturers and healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment’s operations provide drug distributionand related services designed to reduce costs and improve patient outcomes throughout the United States and Puerto Rico. The drug distribution operations ofABDC and ABSG comprised over 90% of the segment’s operating revenue and over 80% of the segment’s operating income in fiscal 2005.

ABDC distributes a comprehensive offering of brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcaresupplies and equipment to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies,mail order facilities, physicians, clinics and other alternate site facilities.

ABDC is in a business model transition with respect to how manufacturers compensate us for our services. Historically, supplier arrangements allowed usto generate gross profit in several ways, including cash discounts for prompt payments, inventory buying opportunities, rebates, inventory management and otheragreements, vendor program arrangements, negotiated deals and other promotional opportunities. A significant portion of ABDC’s gross margin had beenderived from our ability to purchase merchandise inventories in advance of pharmaceutical price increases and then hold these inventories until pharmaceuticalprices increase, thereby generating a larger gross margin upon sale of the inventories. Over the last two years, pharmaceutical manufacturers have beenincreasing their control over the pharmaceutical supply channel by using product allocation methods, including the imposition of inventory managementagreements (“IMAs”). Under a typical IMA arrangement, the Company is compensated based on specific contract defined formulas for maintaining a certainlevel of inventory for a pre-defined period prior to, as of, or subsequent to the date of a manufacturer price increase. The payment is triggered upon themanufacturer price increase and is recognized as a reduction of cost of goods sold over the longer of the product sell-through period or post-price increasemonitoring period. Because the payment trigger is the date of the manufacturer price increase and the size of the payment is typically dependent on thepercentage price increase, changes in manufacturers’ pricing patterns can cause significant volatility to the Company’s periodic earnings. Additionally,pharmaceutical manufacturers imposed restrictions on our ability to purchase their products from alternate sources and have been requesting more product anddistribution sales data from us. Effective October 1, 2005, the Company voluntarily made a decision to purchase all pharmaceuticals only from manufacturers inan effort to further protect the integrity of the supply channel.

All of the above has led to significant volatility in ABDC’s gross margin and, therefore, we are continuing our efforts to shift our pharmaceuticaldistribution business to a fee-for-service model where we are compensated for the services we provide manufacturers versus one that is dependent uponmanufacturer price increases (as is the case with the IMA model). We continue to work with our pharmaceutical manufacturer partners to define fee-for-serviceterms that will adequately compensate us for our services, such as our distribution services, inventory management, service level management, and otherservices. Under a typical fee-for-service agreement, the Company is compensated for its services based on a percentage of purchases over a defined time period.Amounts due for services rendered in the current period would typically be earned in the following month as a reduction of cost of goods sold as the relatedproduct is sold. As of September 30, 2005, we have signed agreements with a number of the

21


Table of Contentslarge branded pharmaceutical manufacturers that we consider fee-for-service arrangements as well as some that we consider hybrid agreements with someattributes of IMAs and some attributes of fee-for-service arrangements. We believe the transition to a fee-for-service model will improve the efficiency of thesupply channel and may establish a more predictable earnings pattern for ABDC, while expanding our service relationship with pharmaceutical manufacturers.The fee-for-service arrangements may establish a more predictable earnings pattern because under many of the agreements the Company earns a fee for itsservices performed on a monthly basis in contrast to the IMA model where earnings are largely predicated upon the timing and amount of pharmaceutical priceincreases. We continue to have discussions with pharmaceutical manufacturers regarding fee-for-service arrangements and expect to have agreements in placewith a substantial majority of the large branded manufacturers by the end of calendar 2005. During fiscal 2006, we expect that more than 75% of ABDC’s brandname manufacturer gross margin will not be contingent on manufacturer price increases. The business model transition has had the effect of reducingmerchandise inventories because IMA and fee-for-service agreements both limit the amount of inventory we can carry and, as a result, we have experienced asignificant increase in cash flow from operations. The majority of the reduction in merchandise inventories has been realized as of September 30, 2005 as daysheld in inventory have decreased from 50 days during the fourth quarter of fiscal 2003 to 42 days during the fourth quarter of fiscal 2004 to 32 days during thefourth quarter of fiscal 2005. In fiscal 2006, we would expect merchandise inventories to stabilize as the large majority of branded manufacturers are expected tobe under some form of fee-for-service contract and, as a result, we would expect future cash flow from operations to track more closely to net income.

ABDC also provides scalable automated pharmacy dispensing equipment, medication and supply dispensing cabinets and supply management software toa variety of retail and institutional healthcare providers.

ABSG, through a number of individual operating businesses, provides distribution and other services, including group purchasing services, to physiciansand alternate care providers who specialize in a variety of disease states, including oncology, nephrology, and rheumatology. ABSG also distributes vaccines,other injectables, plasma and other blood products. In addition, through its manufacturer services and physician and patient services businesses, ABSG provides anumber of commercialization, third party logistics, and other services for biotech and other pharmaceutical manufacturers, reimbursement consulting, practicemanagement, and physician education.

ABSG’s business may be adversely impacted in the future by changes in the Medicare reimbursement rates for certain pharmaceuticals, includingoncology drugs. The reimbursement changes that have been implemented by the U.S. Department of Health and Human Services (“HHS”) pursuant to theMedicare Prescription Drug, Improvement and Modernization Act of 2003 (“Medicare Modernization Act”), and that are scheduled to be implemented in thefuture, may have the effect of reducing the amount and/or margins of medications purchased by physicians for administration in their offices and may forcepatients to other healthcare providers. Since ABSG provides a number of services to or through physicians, patient shifts from physicians to other healthcareproviders may result in slower or reduced growth in revenues for ABSG. Although ABSG has contingency plans to enable it to retain and grow the business itconducts with and through physicians, there can be no assurance that it will retain or replace all of the revenue currently going through the physician channel orthat such revenue will be as profitable.

The AmerisourceBergen Packaging Group consists of American Health Packaging and Anderson Packaging (“Anderson”). American Health Packagingdelivers unit dose, punch card, unit-of-use and other packaging solutions to institutional and retail healthcare providers. Anderson is a leading provider ofcontracted packaging services for pharmaceutical manufacturers.

22


Table of ContentsPharMerica

The PharMerica segment includes the operations of the PharMerica long-term care business (“Long-Term Care”) and a workers’ compensation-relatedbusiness (“Workers’ Compensation”). The PharMerica reportable segment encompasses only the PharMerica operating segment.

Long-Term Care is a leading national provider of pharmacy products and services to patients in long-term care and alternate site settings, including skillednursing facilities, assisted living facilities and residential living communities. Long-Term Care’s institutional pharmacy business involves the purchase of bulkquantities of prescription and nonprescription pharmaceuticals, principally from our Pharmaceutical Distribution segment, and the distribution of those productsto residents in long-term care and alternate site facilities. Unlike hospitals, most long-term and alternate care facilities do not have onsite pharmacies to dispenseprescription drugs, but depend instead on institutional pharmacies, such as Long-Term Care, to provide the necessary pharmacy products and services and to playan integral role in monitoring patient medication. Long-Term Care pharmacies dispense pharmaceuticals in patient-specific packaging in accordance withphysician orders. In addition, Long-Term Care provides infusion therapy services and Medicare Part B products, as well as formulary management and otherpharmacy consulting services.

The Company is currently evaluating the effect that the Medicare Modernization Act may have on the Long-Term Care business. The ongoingimplementation of Medicare Part D (including coverage and reimbursement changes associated with the voluntary drug benefit program for seniors) could havean adverse effect on the Long-Term Care business. At this time, the future impact of the Medicare Modernization Act on the Long-Term Care business cannot bedetermined.

Workers’ Compensation provides mail order and on-line pharmacy services to chronically and catastrophically ill patients under workers’ compensationprograms, and provides pharmaceutical claims administration services for payors. Workers’ Compensation services include home delivery of prescription drugs,medical supplies and equipment and an array of computer software solutions to reduce the payor’s administrative costs.

23


Table of Contents

AmerisourceBergen CorporationSummary Segment Information

(dollars in thousands)

Operating RevenueFiscal year ended September 30,

2005vs.

2004Change

2004vs.

2003Change

2005

2004

2003

Pharmaceutical

Distribution $ 49,319,371 $ 48,113,015 $ 44,657,911 3% 8%PharMerica 1,571,369 1,575,255 1,608,203 — (2)Intersegment

eliminations (878,142) (875,818) (802,714) — (9)

Total $ 50,012,598 $ 48,812,452 $ 45,463,400 2% 7%

(dollars in thousands)

Operating IncomeFiscal year ended September 30,

2005vs.

2004Change

2004vs.

2003Change

2005

2004

2003

Pharmaceutical

Distribution $ 532,887 $ 748,625 $ 791,216 (29)% (5)%PharMerica 91,947 121,846 103,843 (25) 17 Facility

consolidations,employee severanceand other (22,723) (7,517) (8,930) (202) 16

Gain on litigationsettlements 40,094 38,005 — 5 n/a

Impairment charge (5,259) — — n/a n/a

Total $ 636,946 $ 900,959 $ 886,129 (29)% 2% Percentages of

operating revenue: Pharmaceutical

Distribution Gross profit 3.03% 3.43% 3.81% Operating

expenses 1.95% 1.87% 2.03% Operating

income 1.08% 1.56% 1.77% PharMerica

Gross profit 28.40% 30.45% 32.69% Operating


income 5.85% 7.74% 6.46% AmerisourceBergen

Corporation Gross profit 3.96% 4.44% 4.90% Operating


income 1.27% 1.85% 1.95%

24


Table of ContentsYear ended September 30, 2005 compared with Year ended September 30, 2004

Consolidated Results Operating revenue, which excludes bulk deliveries, for the fiscal year ended September 30, 2005 increased 2% to $50.0 billion from $48.8 billion in theprior fiscal year. This increase was primarily due to increased operating revenue in the Pharmaceutical Distribution segment.

The Company reports as revenue bulk deliveries to customer warehouses, whereby the Company acts as an intermediary in the ordering and delivery ofpharmaceutical products. Bulk delivery transactions are arranged by the Company at the express direction of the customer, and involve either shipments from thesupplier directly to customers’ warehouse sites or shipments from the supplier to the Company for immediate shipment to the customers’ warehouse sites. Bulkdeliveries for the fiscal year ended September 30, 2005 increased 6% to $4.6 billion from $4.3 billion in the prior fiscal year due to an increase in demand fromthe Company’s largest bulk customer. The Company is a principal to these transactions because it is the primary obligor and has general inventory risk, physicalloss inventory risk, and customer credit risk. As a result, and in accordance with the Emerging Issues Task Force No. 99-19, “Reporting Revenue Gross as aPrincipal versus Net as an Agent,” the Company records bulk deliveries to customer warehouses as gross revenues. Due to the insignificant service feesgenerated from bulk deliveries, fluctuations in volume have no significant impact on operating margins. However, revenue from bulk deliveries has a positiveimpact on the Company’s cash flows due to favorable timing between the customer payments to the Company and payments by the Company to its suppliers.

In connection with the transition to a fee-for-service model, we changed our method of recognizing cash discounts and other related manufacturerincentives, effective October 1, 2004. ABDC previously recognized cash discounts as a reduction of cost of goods sold when earned, which was primarily uponpayment of vendor invoices. ABDC now records cash discounts as a component of inventory cost and recognizes such discounts as a reduction of cost of goodssold upon the sale of the inventory. We believe the change in accounting method provides a more objectively determinable method of recognizing cash discountsand a better matching of inventory cost to revenue, as inventory turnover rates are expected to continue to improve.

We recorded a $10.2 million charge for the cumulative effect of change in accounting (net of tax of $6.3 million) in the consolidated statement ofoperations for the fiscal year ended September 30, 2005. This $10.2 million cumulative effect charge reduced diluted earnings per share by $0.09 for the fiscalyear ended September 30, 2005. The accounting change is incorporated in our results of operations for the fiscal year ended September 30, 2005. The changeimproved earnings from continuing operations in the fiscal year ended September 30, 2005 by approximately $11.5 million, net of tax, or $0.11 per diluted sharefrom continuing operations. The accounting change had the effect of increasing gross profit and operating income by $18.5 million for the fiscal year endedSeptember 30, 2005.

Gross profit of $1,980.2 million in the fiscal year ended September 30, 2005 decreased 9% from $2,166.4 million in the prior fiscal year. During the fiscalyears ended September 30, 2005 and 2004, the Company recognized gains of $40.1 million and $38.0 million, respectively, from antitrust litigation settlementswith pharmaceutical manufacturers. These gains were recorded as reductions to cost of goods sold and contributed 2% of gross profit for the fiscal years endedSeptember 30, 2005 and 2004. As a percentage of operating revenue, gross profit in the fiscal year ended September 30, 2005 was 3.96%, as compared to theprior-year percentage of 4.44%. The decrease in gross profit and gross profit percentage in comparison with the prior fiscal year reflects declines in both thePharmaceutical Distribution and PharMerica segments due to a decline in profits related to pharmaceutical price increases and other buy-side profits, changes incustomer mix and competitive selling price pressures.

Distribution, selling and administrative expenses, depreciation and amortization (“DSAD&A”) of $1,315.3 million in the fiscal year ended September 30,2005 reflects an increase of 4.6% from $1,258.0 million in the prior fiscal year. As a percentage of operating revenue, DSAD&A in the fiscal year endedSeptember 30, 2005 was 2.63%, compared to 2.58% in the prior fiscal year. The increase in the DSAD&A and the DSAD&A percentage in the fiscal year endedSeptember 30, 2005 from the prior fiscal year was due to an increase in the Pharmaceutical Distribution segment DSAD&A, including bad debt expenses. Totalbad debt expense increased to $33.4 million in the fiscal year ended September 30, 2005 from a benefit of $10.3 million in the prior fiscal year. This increase wasprimarily due to a $15.5 million increase in bad debt expense relating to one of the operating companies within the Specialty Group. Additionally, the prioryear’s bad debt expense was favorably impacted by $26.6 million of customer recoveries.

In 2001, the Company developed an integration plan to consolidate its distribution network and eliminate duplicative administrative functions. During thefiscal year ended September 30, 2005, the Company decided to outsource a significant

25


Table of Contentsportion of its information technology activities as part of the integration plan. The Company’s plan, as revised, is to have a distribution facility networknumbering in the mid-20s within the next two years and to have successfully completed the outsourcing of such information technology activities by the end offiscal 2006. The plan includes building six new facilities (four of which were operational as of September 30, 2005) and closing facilities (twenty-three of whichhave been closed through September 30, 2005). The fifth facility opened in October 2005 and the sixth facility is scheduled to open during fiscal 2006, therebyreducing the total number of distribution facilities to 28 by the end of fiscal 2006. During fiscal 2005 and 2004, the Company closed six and four distributionfacilities, respectively. The Company anticipates closing six additional facilities in fiscal 2006.

During the fiscal year ended September 30, 2003, the Company closed six distribution facilities and eliminated certain administrative and operationalfunctions (“the fiscal 2003 initiatives”). During the fiscal years ended September 30, 2004 and 2003, the Company recorded $0.9 million and $10.3 million,respectively, of employee severance costs relating to the fiscal 2003 initiatives. Through September 30, 2004, approximately 780 employees received terminationnotices as a result of the fiscal 2003 initiatives, of which substantially all have been terminated. During the fiscal year ended September 30, 2003, severanceaccruals of $1.8 million recorded in September 2001 were reversed into income because certain employees who were expected to be severed either voluntarilyleft the Company or were retained in other positions within the Company.

During the fiscal year ended September 30, 2004, the Company closed four distribution facilities and eliminated duplicative administrative functions (“thefiscal 2004 initiatives”). During the fiscal year ended September 30, 2004, the Company recorded $5.4 million of employee severance costs in connection withthe fiscal 2004 initiatives.

During the fiscal year ended September 30, 2005, the Company announced plans to continue to consolidate and eliminate certain administrative functions,and to outsource a significant portion of the Company’s information technology activities (the “fiscal 2005 initiatives”).

As of September 30, 2005, approximately 700 employees had received termination notices as a result of the 2004 and 2005 initiatives, of whichapproximately 630 have been terminated. Additional amounts for integration initiatives will be recognized in subsequent periods as facilities to be consolidatedare identified and specific plans are approved and announced.

During the fiscal year ended September 30, 2005, the Company recorded $13.3 million of employee severance and lease cancellation costs primarilyrelated to the 2005 initiatives and $9.4 million of transition costs associated with the outsourcing of information technology activities.

The Company paid a total of $13.5 million and $9.5 million for employee severance, lease cancellation and other costs in the fiscal years endedSeptember 30, 2005 and 2004, respectively, related to the aforementioned integration plan. Remaining unpaid amounts of $12.3 million for employee severance,lease cancellation and other costs are included in accrued expenses and other in the accompanying consolidated balance sheet at September 30, 2005. Mostemployees receive their severance benefits over a period of time, generally not to exceed 12 months, while others may receive a lump-sum payment.

During the fiscal year ended September 30, 2005, the Company recorded an impairment charge of $5.3 million relating to certain intangible assets withinthe technology operations of ABDC.

Operating income of $636.9 million for the fiscal year ended September 30, 2005 reflects a decrease of 29% compared to $901.0 million in the prior fiscalyear. The Company’s operating income as a percentage of operating revenue was 1.27% in the fiscal year ended September 30, 2005 compared to 1.85% in theprior fiscal year. The decline in operating income was primarily due to the decline in gross profit. The gain on litigation settlements, less the costs of facilityconsolidations, employee severance and other, and the impairment charge increased operating income by $12.1 million in the fiscal year ended September 30,2005. The gain on litigation settlement, less the costs of facility consolidations, employee severance and other, increased operating income by $30.5 million inthe fiscal year ended September 30, 2004.

During the fiscal year ended September 30, 2004, a technology company in which the Company had an equity investment sold substantially all of its assetsand paid a liquidating dividend. As a result, the Company recorded a gain of $8.4 million in other income during the fiscal year ended September 30, 2004.

Interest expense, net, decreased 49% in the fiscal year ended September 30, 2005 to $57.2 million from $112.7 million in the prior fiscal year due to a netdecline in average borrowings. Average borrowings, net of cash, under the Company’s debt facilities during the fiscal year ended September 30, 2005 were$183.1 million as compared to average borrowings, net of cash, of $1.1 billion in the prior fiscal year. The reductions in average borrowings, net of cash, wereachieved due to the Company’s

26


Table of Contentsstrong cash flows generated from operations, including reduced merchandise inventories resulting from the aforementioned business model transition.

During the fiscal years ended September 30, 2005 and 2004, the Company recorded $111.9 million and $23.6 million, respectively, in losses resultingfrom the early retirement of debt.

Income tax expense of $176.9 million in the fiscal year ended September 30, 2005 reflects an effective income tax rate of 37.7%, versus 38.4% in the priorfiscal year. The reduction in tax rates resulted from the resolution of certain federal and state income tax issues during the fiscal year ended September 30, 2005.The Company expects to have an effective income tax rate in the range of approximately 38% in future periods.

Income from continuing operations of $291.9 million for the fiscal year ended September 30, 2005 reflects a decrease of 39% from $474.9 million in theprior fiscal year primarily due to the decline in operating income and the loss from the early retirement of debt partially offset by the decrease in interest expense.Diluted earnings per share from continuing operations of $2.73 in the fiscal year ended September 30, 2005 reflects a 34% decrease from $4.12 per diluted sharein the prior fiscal year. The gain on litigation settlements less the costs of facility consolidations, employee severance and other, the impairment charge and theloss on early retirement of debt decreased income from continuing operations by $64.2 million and decreased diluted earnings per share from continuingoperations by $0.60 for the fiscal year ended September 30, 2005. The gain on litigation settlement less the costs of facility consolidations, employee severanceand other and the loss on early retirement of debt increased income from continuing operations by $4.2 million and increased diluted earnings per share fromcontinuing operations by $0.04 for the fiscal year ended September 30, 2004.

Loss from discontinued operations, net of tax, for the fiscal years ended September 30, 2005 and 2004, relates to the December 2004 sale of theCompany’s Rita Ann cosmetics distribution business as well as the sale of substantially all of the assets of Bridge Medical, Inc. (“Bridge”) in July 2005. TheCompany incurred a $6.5 million loss, net of tax, on the sale of the Rita Ann business, and a $4.6 million loss, net of tax, on the sale of the Bridge business, bothof which are reflected in the loss from discontinued operations in the fiscal year ended September 30, 2005.

Net income of $264.6 million for the fiscal year ended September 30, 2005 reflects a decrease of 43% from $468.4 million in the prior fiscal year. Dilutedearnings per share of $2.48 in the fiscal year ended September 30, 2005 reflects a decrease of 39% as compared to $4.06 per share in the prior fiscal year. Thedecline in diluted earnings per share was less than the decline in net income due to the reduced number of weighted average common shares outstanding resultingfrom the Company’s purchase of its common stock in connection with its stock buyback programs (see Liquidity and Capital Resources) offset in part by theincrease in the number of stock option exercises.

Segment Information Pharmaceutical Distribution Segment Results Pharmaceutical Distribution operating revenue of $49.3 billion for the fiscal year ended September 30, 2005 increased 3% from $48.1 billion in the priorfiscal year. In fiscal 2004, the Company discontinued servicing the U.S. Department of Veterans Affairs (“VA”) and AdvancePCS. These former customerscontributed 4.8% and 4.4%, respectively, of the segment’s operating revenue in the fiscal year ended September 30, 2004. The lost business was offset by theabove market growth of the specialty pharmaceutical distribution business and the market growth of ABDC. During the fiscal year ended September 30, 2005,57% of operating revenue was from sales to institutional customers and 43% was from sales to retail customers; this compared to a customer mix in the priorfiscal year of 59% institutional and 41% retail. In comparison with the prior-year results, sales to institutional customers were flat primarily due to the abovemarket growth of the specialty pharmaceutical distribution business, offset by the loss of the VA and AdvancePCS business. Sales to retail customers increased7% over the prior-year primarily due to market growth and an increase in sales to one of the Company’s larger retail customers.

This segment’s growth largely reflects U.S. pharmaceutical industry conditions, including increases in prescription drug utilization and higherpharmaceutical prices offset, in part, by the increased use of lower-priced generics. The segment’s growth has also been impacted by industry competition andchanges in customer mix. Industry sales in the United States, as estimated by industry data firm IMS Healthcare, Inc., are expected to grow between 8% and 9%in 2006 and annually between 7% and 10% through 2009. Future operating revenue growth will continue to be affected by competition within the industry,customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, changes in Federal government rules andregulations and industry growth trends, such as the likely increase in the number of generic drugs that will be available over the next few years as a result of theexpiration of certain drug patents held by brand manufacturers. The Company’s Specialty Group has been growing at rates in excess of overall pharmaceuticalmarket growth. The majority of this Group’s revenue is generated

27


Table of Contentsfrom the distribution of pharmaceuticals to physicians who specialize in a variety of disease states, such as oncology, nephrology, and rheumatology.Additionally, the Specialty Group distributes vaccines and blood plasma. The Specialty Group’s oncology business has continued to outperform the market andcontinues to be the Specialty Group’s most significant contributor to revenue growth. The Specialty Group’s business may be adversely impacted in the future bychanges in the Medicare reimbursement rates for certain pharmaceuticals, including oncology drugs. The reimbursement changes that have been implemented byHHS pursuant to the Medicare Modernization Act, or that may be proposed or implemented in the future, may have the effect of reducing the amount and/ormargins of medications purchased by physicians for administration in their offices and may force patients to other healthcare providers. Since the SpecialtyGroup provides a number of services to or through physicians, patient shifts from physicians to other healthcare providers may result in slower or reduced growthin revenues for the Specialty Group. Although the Specialty Group has contingency plans to enable it to retain and grow the business it conducts with andthrough physicians, there can be no assurance that it will retain or replace all of the revenue currently going through the physician channel or that such revenuewill be as profitable.

Pharmaceutical Distribution gross profit of $1,493.9 million in the fiscal year ended September 30, 2005 reflects a decrease of 9% from $1,648.7 millionin the prior fiscal year. As a percentage of operating revenue, gross profit in the fiscal year ended September 30, 2005 was 3.03%, as compared to 3.43% in theprior fiscal year. The decline in gross profit was primarily due to a decrease in the buy-side component of the gross margin, including a decline in inventoryappreciation profits, fewer alternate source and deal opportunities and the loss of the VA business in fiscal 2004. Contributing to the decline in inventoryappreciation profits were lower levels of inventory on-hand during the current fiscal year as a result of the business model transition, and fewer than expectedmanufacturer price increases prior to the national election in November 2004. The Company’s cost of goods sold includes a last-in, first-out (“LIFO”) provisionthat is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other externalinfluences. During the fiscal years ended September 30, 2005 and 2004, inventory balances declined, which resulted in liquidation of LIFO layers carried atlower costs prevailing in prior years. The effects of the liquidations in fiscal 2005 and fiscal 2004 were to decrease cost of goods sold by $30.6 million and $10.3million, respectively.

Pharmaceutical Distribution operating expenses of $961.0 million in the fiscal year ended September 30, 2005 reflect an increase of 7% from $900.1million in the prior fiscal year. As a percentage of operating revenue, operating expenses in the fiscal year ended September 30, 2005 were 1.95%, as comparedto 1.87% in the prior fiscal year. The increases were primarily due to an increase in bad debt expense of $49.2 million (which included a $15.5 million increase inbad debt relating to one of the operating companies within the Specialty Group) and fiscal 2005 start-up costs incurred in connection with the new distributionfacilities which were primarily offset by continued productivity gains achieved throughout the Company’s distribution network. Additionally, prior year’s baddebt expense was favorably impacted by a $17.5 million recovery from a large former customer.

Pharmaceutical Distribution operating income of $532.9 million in the fiscal year ended September 30, 2005 reflects a decrease of 29% from $748.6million in the prior fiscal year. As a percentage of operating revenue, operating income in the fiscal year ended September 30, 2005 was 1.08%, as compared to1.56% in the prior fiscal year. The decline from the prior-year percentage was primarily due to a reduction in gross profit. While management historically hasbeen able to lower expense ratios, this did not occur in the fiscal year ended September 30, 2005 and there can be no assurance that reductions will occur in thefuture, or that expense ratio reductions, if they should occur, will offset possible declines in gross margins. PharMerica Segment Results PharMerica operating revenue of $1,571.4 million for the fiscal year ended September 30, 2005 was flat compared to $1,575.3 million in the prior fiscalyear. PharMerica’s operating revenue was impacted by competitive pressures that affected both the Long-Term Care and Workers’ Compensation businesses andincreasing reductions in Medicaid reimbursement rates. The future operating revenue growth rate will likely continue to be impacted by competitive pressures,changes in the regulatory environment (including the reimbursement changes that have been implemented pursuant to the Medicare Modernization Act as well asthe implementation of the voluntary prescription drug benefit program for seniors thereunder) and the pharmaceutical inflation rate.

PharMerica gross profit of $446.2 million for the fiscal year ended September 30, 2005 reflects a decrease of 7% from $479.7 million in the prior fiscalyear. As a percentage of operating revenue, gross profit in the fiscal year ended September 30, 2005 was 28.40%, as compared to 30.45% in the prior fiscal year.The decline in gross profit was primarily due to industry competitive pressures, and a reduction in the rates of reimbursement for the services provided byPharMerica, which continue to adversely affect gross profit margins in both the Workers’ Compensation and Long-Term Care businesses.

PharMerica operating expenses of $354.3 million for the fiscal year ended September 30, 2005 decreased 1% from $357.9 million in the prior fiscal year.As a percentage of operating revenue, operating expenses decreased slightly to 22.54% in

28


Table of Contentsthe fiscal year ended September 30, 2005 from 22.72% in the prior fiscal year. PharMerica’s fiscal 2005 operating expenses were favorably impacted byaggressive cost reductions in response to the decline in operating revenue, including the consolidation of local pharmacy administrative functions to regionalcenters for the Long-Term Care business, a reduction in bad debt expense of $5.5 million due to continued improvements made in credit and collection practices,and continued improvements in operating practices of both the Workers’ Compensation and Long-Term Care businesses. The prior year’s operating expenseswere favorably impacted by a $12.1 million reduction in sales and use tax liability due to favorable audit experience and other settlements.

PharMerica operating income of $91.9 million for the fiscal year ended September 30, 2005 decreased 25% from $121.8 million in the prior fiscal year. Asa percentage of operating revenue, operating income in the fiscal year ended September 30, 2005 was 5.85%, as compared to 7.74% in the prior fiscal year. Thedecline was due to the aforementioned reduction in the gross profit margin. While management historically has been able to lower expense ratios there can be noassurance that reductions will occur in the future, or that expense ratio reductions will exceed possible further declines in gross margins. Intersegment Eliminations These amounts represent the elimination of the Pharmaceutical Distribution segment’s sales to PharMerica. ABDC is the principal supplier ofpharmaceuticals to PharMerica.

Year ended September 30, 2004 compared with Year ended September 30, 2003 Consolidated Results Operating revenue, which excludes bulk deliveries, for the fiscal year ended September 30, 2004 increased 7% to $48.8 billion from $45.5 billion in theprior fiscal year. This increase was primarily due to increased operating revenue in the Pharmaceutical Distribution segment, offset slightly by a decline inoperating revenue in the PharMerica segment.

The Company’s customer sales return policy generally allows customers to return products only if the products can be resold at full value or returned tosuppliers for full credit. During the fiscal year ended September 30, 2004, the Company changed its accounting policy for customer sales returns to reflect anaccrual for estimated customer returns at the time of sale to the customer. Previously, the Company accounted for customer sales returns as a reduction of salesand cost of goods sold at the time of the return. As a result of this accounting policy change, operating revenue and cost of goods sold were each reduced by$316.8 million for the fiscal year ended September 30, 2004.

The Company reports as revenue bulk deliveries to customer warehouses, whereby the Company acts as an intermediary in the ordering and delivery ofpharmaceutical products. Bulk delivery transactions are arranged by the Company at the express direction of the customer, and involve either shipments from thesupplier directly to customers’ warehouse sites or shipments from the supplier to the Company for immediate shipment to the customers’ warehouse sites. Bulkdeliveries for the fiscal year ended September 30, 2004 increased 5% to $4.3 billion from $4.1 billion in the prior fiscal year due to an increase in demand fromthe Company’s largest bulk customer. The Company is a principal to these transactions because it is the primary obligor and has general inventory risk, physicalloss inventory risk, and customer credit risk. As a result, and in accordance with the Emerging Issues Task Force No. 99-19, “Reporting Revenue Gross as aPrincipal versus Net as an Agent,” the Company records bulk deliveries to customer warehouses as gross revenues. Due to the insignificant service feesgenerated from bulk deliveries, fluctuations in volume have no significant impact on operating margins. However, revenue from bulk deliveries has a positiveimpact on the Company’s cash flows due to favorable timing between the customer payments to the Company and payments by the Company to its suppliers.

Gross profit of $2,166.4 million in the fiscal year ended September 30, 2004 decreased 3% from $2,225.6 million in the prior fiscal year. During the fiscalyear ended September 30, 2004, the Company recognized a $38.0 million gain from an antitrust litigation settlement with a pharmaceutical manufacturer. Thisgain was recorded as a reduction of cost of goods sold and contributed 2% of gross profit for the fiscal year ended September 30, 2004. As a percentage ofoperating revenue, gross profit in the fiscal year ended September 30, 2004 was 4.44%, as compared to the prior-year percentage of 4.90%. The decrease in grossprofit percentage in comparison with the prior fiscal year reflects declines in both the Pharmaceutical Distribution and PharMerica segments due to a decline inprofits related to pharmaceutical manufacturer price increases, changes in customer mix and competitive selling price pressures, offset in part by the antitrustlitigation settlement.

DSAD&A of $1,258.0 million in the fiscal year ended September 30, 2004 reflects a decrease of 5% compared to $1,330.6 million in the prior fiscal year.As a percentage of operating revenue, DSAD&A in the fiscal year ended September 30, 2004 was 2.58% compared to 2.93% in the prior fiscal year. The declinein the DSAD&A percentage from the prior fiscal year

29


Table of Contentsreflects improvements in both the Pharmaceutical Distribution and PharMerica segments due to: (a) a $56.3 million reduction of bad debt expense primarily dueto a $17.5 million recovery from a former customer in the Pharmaceutical Distribution segment, a $9.1 million recovery from a customer in the PharMericasegment, and the continued improvements made in the credit and collection practices in both segments (see further discussion below); (b) a $12.1 millionreduction in PharMerica’s sales and use tax liability; (c) a reduction in employee headcount resulting from our integration efforts; and (d) operational efficienciesprimarily derived from our integration plan.

Within Pharmaceutical Distribution, credit and collection practices improved following the consolidation and relocation of the national account credit andcollection process from Orange, California to the Company’s executive headquarters in Chesterbrook, Pennsylvania in early 2004. This consolidation led toincreased management control and facilitated the favorable resolution of certain long-standing disputes with major national account customers. Additionally, theCompany placed significant emphasis on reducing past due and disputed receivables that had accumulated at one of our distribution centers as a result of asystems conversion in fiscal 2003. PharMerica’s credit and collection practices were improved by consolidating all of its billing and collections onto onepharmacy system, establishing consistent billing and collection policies and procedures, and centralizing its collection efforts for national accounts. Additionally,improvements in the financial strength of the nursing home industry had a favorable impact on PharMerica’s bad debt expense.

In 2001, the Company developed an integration plan to consolidate its distribution network and eliminate duplicative administrative functions. As ofSeptember 30, 2004, this plan resulted in synergies of approximately $150 million on an annual basis. The Company’s plan, as revised, is to have a distributionfacility network numbering in the mid-20’s within the next two years. The plan includes building six new facilities and closing facilities. During fiscal 2004 and2003, the Company closed four and six distribution facilities, respectively.

During the fiscal year ended September 30, 2003, the Company closed six distribution facilities and eliminated certain administrative and operationalfunctions (“the fiscal 2003 initiatives”). During the fiscal years ended September 30, 2004 and 2003, the Company recorded $0.9 million and $10.3 million,respectively, of employee severance costs relating to the fiscal 2003 initiatives. Through September 30, 2004, approximately 780 employees received terminationnotices as a result of the fiscal 2003 initiatives, of which substantially all have been terminated. During the fiscal year ended September 30, 2003, severanceaccruals of $1.8 million recorded in September 2001 were reversed into income because certain employees who were expected to be severed either voluntarilyleft the Company or were retained in other positions within the Company.

During the fiscal year ended September 30, 2004, the Company closed four distribution facilities and eliminated duplicative administrative functions (“thefiscal 2004 initiatives”). During the fiscal year ended September 30, 2004, the Company recorded $5.4 million of employee severance costs in connection withthe termination of 230 employees relating to the fiscal 2004 initiatives. As of September 30, 2004, approximately 190 employees had been terminated and theremainder were terminated in fiscal 2005.

The Company paid a total of $9.5 million and $13.8 million for employee severance and lease and contract cancellation costs in the fiscal years endedSeptember 30, 2004 and 2003, respectively, related to the aforementioned integration plan. Remaining unpaid amounts of $3.1 million for employee severanceand lease cancellation costs are included in accrued expenses and other in the accompanying consolidated balance sheet at September 30, 2004. Most employeesreceive their severance benefits over a period of time, generally not to exceed 12 months, while others may receive a lump-sum payment.

Operating income of $901.0 million for the fiscal year ended September 30, 2004 increased slightly compared to $886.1 million in the prior fiscal year.The gain on litigation settlement less costs of facility consolidations and employee severance increased the Company’s operating income by $30.5 million in thefiscal year ended September 30, 2004 and costs of facility consolidations and employee severance reduced the Company’s operating income by $8.9 million inthe prior fiscal year. The Company’s operating income as a percentage of operating revenue was 1.85% in the fiscal year ended September 30, 2004 compared to1.95% in the prior fiscal year. The gain on litigation settlement contributed approximately 8 basis points to the Company’s operating income as a percentage ofoperating revenue for the fiscal year ended September 30, 2004. The contribution provided by the litigation settlement was offset by a decrease in gross margin inexcess of the aforementioned DSAD&A expense percentage reduction.

During the fiscal year ended September 30, 2004, a technology company in which the Company had an equity investment sold substantially all of its assetsand paid a liquidating dividend. As a result, the Company recorded a gain of $8.4 million in other income during the fiscal year ended September 30, 2004.During the fiscal year ended September 30, 2003, the Company recorded losses of $8.0 million, which primarily consisted of a $5.5 million charge related to thedecline in fair value of its equity investment in the technology company because the decline was judged to be other-than-temporary.

30


Table of ContentsInterest expense, net, decreased 22% in the fiscal year ended September 30, 2004 to $112.7 million from $144.7 million in the prior fiscal year. Average

borrowings, net of cash, under the Company’s debt facilities during the fiscal year ended September 30, 2004 were $1.1 billion as compared to averageborrowings, net of cash, of $2.3 billion in the prior fiscal year. The reduction in average borrowings, net of cash, was achieved due to lower inventory levels inthe fiscal year ended September 30, 2004 due to the impact of inventory management agreements, reductions in buy-side purchasing opportunities and thereduced number of distribution facilities as a result of the Company’s integration activities.

During the fiscal years ended September 30, 2004 and 2003, the Company recorded $23.6 million and $4.2 million, respectively, in losses resulting fromthe early retirement of debt.

Income tax expense of $296.0 million in the fiscal year ended September 30, 2004 reflects an effective income tax rate of 38.4%, versus 39.2% in the priorfiscal year. The Company was able to lower its effective income tax rate during fiscal 2004 by implementing tax-planning strategies.

Income from continuing operations of $474.9 million for the fiscal year ended September 30, 2004 reflects an increase of 7% from $443.1 million in theprior fiscal year. Diluted earnings per share from continuing operations of $4.12 for the fiscal year ended September 30, 2004 reflects an increase of 5% from$3.91 per share in the prior fiscal year. The gain on litigation settlement less costs of facility consolidations, employee severance and other, and the loss on earlyretirement of debt increased income from continuing operations by $4.2 million and increased diluted earnings per share from continuing operations by $0.04 forthe fiscal year ended September 30, 2004. Costs of facility consolidations and employee severance and the loss on early retirement of debt had the effect ofdecreasing income from continuing operations by $8.0 million and reducing diluted earnings per share from continuing operations by $0.07 for the fiscal yearended September 30, 2003.

During fiscal 2005, the Company decided to discontinue the operations of its patient safety software and cosmetics distribution businesses as a result oftheir divestiture. Loss from discontinued operations, net of tax, was $6.5 million and $1.8 million for the fiscal years ended September 30, 2004 and 2003,respectively.

Net income of $468.4 million for the fiscal year ended September 30, 2004 reflects an increase of 6% from $441.2 million in the prior fiscal year. Dilutedearnings per share of $4.06 in the fiscal year ended September 30, 2004 reflects a 4% increase as compared to $3.89 per share in the prior fiscal year. The growthin earnings per share was less than the growth in net income for the fiscal year ended September 30, 2004 due to the effect of the issuance of Company commonstock in connection with acquisitions and in connection with the exercise of stock options.

Segment Information Pharmaceutical Distribution Segment Pharmaceutical Distribution operating revenue of $48.1 billion for the fiscal year ended September 30, 2004 reflects an increase of 8% from $44.7 billionin the prior fiscal year. The Company’s change in accounting for customer sales returns had the effect of reducing operating revenue growth by 1% for the fiscalyear ended September 30, 2004. During the fiscal year ended September 30, 2004, 59% of operating revenue was from sales to institutional customers and 41%was from sales to retail customers; this compares to a customer mix in the prior fiscal year of 57% institutional and 43% retail.

In comparison with prior-year results, sales to institutional customers increased 12% in fiscal 2004 primarily due to the above market rate growth of thespecialty pharmaceutical business and higher revenues from customers engaged in the mail order sale of pharmaceuticals, which was offset in part by thediscontinuance of servicing the VA during the fiscal year ended September 30, 2004 as a result of losing a competitive bid process. The VA contract wasterminated in May 2004 and contributed 4.8% and 7.8% of the segment’s operating revenue in the fiscal years ended September 30, 2004 and 2003, respectively.In March 2004, Caremark Rx, Inc. acquired Advance PCS, one of the Company’s largest customers. As a result, the Company’s contract with Advance PCS wasterminated in August 2004. Advance PCS accounted for approximately 4.4% and 4.8% of the segment’s operating revenue in the fiscal years endedSeptember 30, 2004 and 2003, respectively.

Sales to retail customers increased 2% over the prior fiscal year. The independent retail sector experienced strong double-digit sales growth while sales inthe chain retail sector decreased by 6% due to sales declines experienced by certain large regional retail chain customers. Additionally, retail sales in the first-halfof fiscal 2004 were adversely impacted by the prior fiscal year loss of a large customer.

This segment’s growth largely reflects U.S. pharmaceutical industry conditions, including increases in prescription drug utilization and higherpharmaceutical prices offset, in part, by the increased use of lower-priced generics. The segment’s growth

31


Table of Contentshas also been impacted by industry competition and changes in customer mix. The Company’s Specialty Group has been growing at rates in excess of overallpharmaceutical market growth. The majority of this Group’s revenue is generated from the distribution of pharmaceuticals to physicians who specialize in avariety of disease states, such as oncology, nephrology, and rheumatology. Additionally, the Specialty Group distributes vaccines and blood plasma. TheSpecialty Group’s oncology business has continued to outperform the market and continues to be the Specialty Group’s most significant contributor to revenuegrowth.

Pharmaceutical Distribution gross profit of $1,648.7 million in the fiscal year ended September 30, 2004 reflects a decrease of 3% from $1,700.0 millionin the prior fiscal year. As a percentage of operating revenue, gross profit in the fiscal year ended September 30, 2004 was 3.43%, as compared to 3.81% in theprior fiscal year. The decline in gross profit as a percentage of operating revenue was the result of: a reduction in profits related to pharmaceutical manufacturerprice increases; the VA contract loss; the continuing competitive environment, which has led to a number of contract renewals with reduced profitability; and thenegative impact of a change in customer mix to a higher percentage of large institutional, mail order and chain accounts. The Company’s cost of goods soldincludes a last-in, first-out (“LIFO”) provision that is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may beimpacted by market and other external influences.

Pharmaceutical Distribution operating expenses of $900.1 million in the fiscal year ended September 30, 2004 reflect a decrease of 1% from $908.7million in the prior fiscal year. As a percentage of operating revenue, operating expenses in the fiscal year ended September 30, 2004 were 1.87%, as comparedto 2.03% in the prior fiscal year, an improvement of 16 basis points. The decrease in the operating expense percentage reflects the changing customer mixdescribed above, efficiencies of scale, the elimination of redundant costs through the integration processes, continued emphasis on productivity throughout theCompany’s distribution network, and a significant reduction in bad debt expense of $33.9 million (including a $17.5 million reduction of a previously recordedallowance for doubtful account as a result of a settlement with a former customer), as previously discussed.

Pharmaceutical Distribution operating income of $748.6 million in the fiscal year ended September 30, 2004 reflects a decrease of 5% from $791.2 millionin the prior fiscal year. As a percentage of operating revenue, operating income in the fiscal year ended September 30, 2004 was 1.56%, as compared to 1.77% inthe prior fiscal year. The decline over the prior-year percentage was due to a reduction in gross margin in excess of the decline in the operating expense ratio. PharMerica Segment PharMerica operating revenue of $1,575.3 million for the fiscal year ended September 30, 2004 reflects a decrease of 2% from $1,608.2 million in theprior fiscal year. PharMerica’s decline in operating revenue was primarily due to the loss of two significant customers in the Workers’ Compensation business,the discontinuance of the sale of healthcare products within the Long-Term Care business and the loss of a Long-Term Care business customer because it wasacquired by a customer of a competitor.

PharMerica gross profit of $479.7 million for the fiscal year ended September 30, 2004 reflects a decrease of 9% from $525.6 million in the prior fiscalyear. As a percentage of operating revenue, gross profit in the fiscal year ended September 30, 2004 was 30.45%, as compared to 32.69% in the prior fiscal year.The decline in gross profit is primarily due to industry competitive pressures, and a reduction in the rates of reimbursement for the services provided byPharMerica, which continue to adversely affect gross profit margins in both the Workers’ Compensation business and the Long-Term Care business.

PharMerica operating expenses of $357.9 million for the fiscal year ended September 30, 2004 reflect a decrease of 15% from $421.8 million in the priorfiscal year. As a percentage of operating revenue, operating expenses were reduced to 22.72% in the fiscal year ended September 30, 2004 from 26.23% in theprior fiscal year. The percentage reduction was primarily due to aggressive cost reductions in response to the decline in operating revenue, a significant reductionin bad debt expense of $22.4 million (including a $9.1 million recovery from a customer) due to continued improvements made in credit and collection practices,a $12.1 million reduction in sales and use tax liability due to favorable audit experience and other settlements, and continued improvements in operating practicesof both the Workers’ Compensation and the Long-Term Care businesses.

PharMerica operating income of $121.8 million for the fiscal year ended September 30, 2004 increased by 17% from $103.8 million in the prior fiscalyear. As a percentage of operating revenue, operating income in the fiscal year ended September 30, 2004 was 7.74%, as compared to 6.46% in the prior fiscalyear. The improvement was due to the aforementioned reduction in the operating expense ratio, which was greater than the reduction in gross profit margin.

32


Table of ContentsIntersegment Eliminations

These amounts represent the elimination of the Pharmaceutical Distribution segment’s sales to PharMerica. ABDC is the principal supplier ofpharmaceuticals to PharMerica.

Critical Accounting Policies and Estimates Critical accounting estimates are those accounting estimates and assumptions that can have a material impact on the Company’s financial position andresults of operations and require the use of complex and subjective estimates based upon past experience and management’s judgment. Because of theuncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing the Company’s financialstatements that management believes are the most dependent on the application of estimates and assumptions. For accounting policies, see Note 1 of “Notes toConsolidated Financial Statements.” Allowance for Doubtful Accounts Trade receivables are primarily comprised of amounts owed to the Company for its pharmaceutical distribution and services activities and are presentednet of an allowance for doubtful accounts and a reserve for customer sales returns. In determining the appropriate allowance for doubtful accounts, the Companyconsiders a combination of factors, such as the aging of trade receivables, industry trends, its customers’ financial strength and credit standing, and payment anddefault history. Changes in the aforementioned factors, among others, may lead to adjustments in the Company’s allowance for doubtful accounts. Thecalculation of the required allowance requires judgment by Company management as to the impact of these and other factors on the ultimate realization of itstrade receivables. Each of the Company’s business units performs ongoing credit evaluations of its customers’ financial condition and maintains reserves forprobable bad debt losses based on historical experience and for specific credit problems when they arise. The Company writes off balances against the reserveswhen collectibility is deemed remote. Each business unit performs formal documented reviews of the allowance at least quarterly and the Company’s largestbusiness units perform such reviews monthly. There were no significant changes to this process during the fiscal years ended September 30, 2005, 2004 and 2003and bad debt expense was computed in a consistent manner during these periods. The bad debt expense for any period presented is equal to the changes in theperiod end allowance for doubtful accounts, net of write-offs and recoveries. Schedule II of this Form 10-K sets forth a rollforward of the allowance for doubtfulaccounts.

Bad debt expense for the fiscal years ended September 30, 2005, 2004 and 2003 was $33.4 million, ($10.3) million and $46.0 million, respectively. Duringthe fiscal year ended September 30, 2005, bad debt expense was significantly impacted due to a $15.5 million increase in bad debt relating to one of the operatingcompanies within the Specialty Group. During the fiscal year ended September 30, 2004, debt expense was favorably impacted by a $17.5 million recovery froma former customer in the Pharmaceutical Distribution segment, a $9.1 million recovery from a customer in the PharMerica segment, and the continuedimprovements made in the credit and collection practices in both segments. An increase or decrease of 0.1% in the 2005 allowance as a percentage of tradereceivables would result in an increase or decrease in the provision on accounts receivable of approximately $3.1 million. Supplier Reserves The Company establishes reserves against amounts due from its suppliers relating to various price and rebate incentives, including deductions or billingstaken against payments otherwise due them from the Company. These reserve estimates are established based on the judgment of Company management aftercarefully considering the status of current outstanding claims, historical experience with the suppliers, the specific incentive programs and any other pertinentinformation available to the Company. The Company evaluates the amounts due from its suppliers on a continual basis and adjusts the reserve estimates whenappropriate based on changes in factual circumstances. An increase or decrease of 0.1% in the 2005 supplier reserve balances as a percentage of trade payableswould result in an increase or decrease in cost of goods sold by approximately $5.3 million. The ultimate outcome of any outstanding claim may be different thanthe Company’s estimate. Loss Contingencies The Company accrues for loss contingencies related to litigation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5,“Accounting for Contingencies.” An estimated loss contingency is accrued in the Company’s consolidated financial statements if it is probable that a liability hasbeen incurred and the amount of the loss can be reasonably estimated. Assessing contingencies is highly subjective and requires judgments about future events.The Company regularly

33


Table of Contentsreviews loss contingencies to determine the adequacy of the accruals and related disclosures. The amount of the actual loss may differ significantly from theseestimates. Merchandise Inventories Inventories are stated at the lower of cost or market. Cost for approximately 87% and 92% of the Company’s inventories at September 30, 2005 and 2004,respectively, are determined using the last-in, first-out (“LIFO”) method. If the Company had used the first-in, first-out (“FIFO”) method of inventory valuation,which approximates current replacement cost, inventories would have been approximately $159.8 million and $166.1 million higher than the amounts reported atSeptember 30, 2005 and 2004, respectively. During the fiscal years ended September 30, 2005 and 2004, inventory balances declined, which resulted inliquidation of LIFO layers carried at lower costs prevailing in prior years. The effect of the liquidation in fiscal 2005 was to decrease cost of goods sold by $30.6million and increase diluted earnings per share by $0.17. The effect of the liquidation in fiscal 2004 was to decrease cost of goods sold by $10.3 million andincrease diluted earnings per share by $0.05. Goodwill and Intangible Assets The Company accounts for purchased goodwill and intangible assets in accordance with Financial Accounting Standards Board (“FASB”) SFAS No. 142“Goodwill and Other Intangible Assets.” Under SFAS No. 142, purchased goodwill and intangible assets with indefinite lives are not amortized; rather, they aretested for impairment on at least an annual basis. Intangible assets with finite lives, primarily customer relationships, non-compete agreements, patents andsoftware technology, will continue to be amortized over their useful lives.

In order to test goodwill and intangible assets with indefinite lives under SFAS No. 142, a determination of the fair value of the Company’s reporting unitsand intangible assets with indefinite lives is required and is based, among other things, on estimates of future operating performance of the reporting unit and/orthe component of the entity being valued. The Company is required to complete an impairment test for goodwill and intangible assets with indefinite lives andrecord any resulting impairment losses at least on an annual basis. The Company uses an income approach to determine the fair value of its reporting units andintangible assets with indefinite lives. Changes in market conditions, among other factors, may have an impact on these fair values. The Company completed itsrequired annual impairment tests in the fourth quarters of fiscal 2005 and 2004 and determined that there was no impairment.

During the second quarter of fiscal 2005, the Company performed an impairment test on certain intangible assets within the technology operations ofABDC due to the existence of impairment indicators. As a result, the Company recorded an impairment charge of $5.3 million relating to certain of thoseintangible assets. The charge has been reflected in the Company’s results of operations for the fiscal year ended September 30, 2005. Stock Options The Company may elect to account for stock options using either Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued toEmployees,” (“APB 25”) or SFAS No. 123, “Accounting for Stock-Based Compensation.” The Company has elected to use the accounting method under APB25 and the related interpretations to account for its stock options. Under APB 25, generally, when the exercise price of the Company’s stock options equals themarket price of the underlying stock on the date of grant, no compensation expense is recognized. Had the Company elected to use SFAS No. 123 to account forits stock options under the fair value method, it would have been required to record compensation expense and as a result, diluted earnings per share for the fiscalyears ended September 30, 2005, 2004 and 2003 would have been lower by $0.04, $0.74 and $0.16, respectively. Effective September 1, 2004, the Companyvested all employee options then outstanding with an exercise price in excess of $54.10 (the closing stock price on August 31, 2004). The accelerated vesting wasapproved by the Compensation and Succession Planning Committee of the Company’s board of directors for employee retention purposes and in anticipation ofthe requirements of SFAS No. 123R. As a result of the accelerated vesting, the pro-forma compensation expense and the corresponding reduction in dilutedearnings per share in fiscal 2004 was significantly greater than the pro-forma compensation expense and the corresponding reduction in diluted earnings pershare in fiscal 2005 and 2003.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which requires companies to measure compensation cost for allshare-based payments (including employee stock options) at fair value for interim or annual periods beginning after June 15, 2005. In April 2005, the U.S.Securities and Exchange Commission issued a new rule allowing public companies to delay the adoption of SFAS No. 123R to annual periods beginning afterJune 15, 2005. As a result, the Company will adopt SFAS No. 123R, using the modified-prospective transition method beginning on October 1, 2005, andtherefore, will begin to expense the fair value of all outstanding options over their remaining service periods to the extent the options are not fully vested as of theadoption date and will expense the fair value of all future options granted subsequent to September 30, 2005

34


Table of Contentsover their service periods. The Company estimates it will record pre-tax share-based compensation expense of approximately $14 million in fiscal 2006. Thisestimate may be impacted by potential changes to the structure of the Company’s share-based compensation plans which could impact the number of stockoptions granted in fiscal 2006, changes in valuation assumptions, the market price of the Company’s common stock, among other things and, as a result, theactual pre-tax share-based compensation expense in fiscal 2006 may differ from the Company’s current estimate.

Liquidity and Capital Resources The following table illustrates the Company’s debt structure at September 30, 2005, including availability under revolving credit facilities and thereceivables securitization facility (in thousands):

OutstandingBalance

AdditionalAvailability

Fixed-Rate Debt: $400,000, 5 5/8% senior

notes due 2012 $ 398,010 $ — $500,000, 5 7/8% senior

notes due 2015 497,508 — Other 2,193 —

Total fixed-rate debt 897,711 — Variable-Rate Debt: Blanco revolving credit

facility due 2006 55,000 — Revolving credit facility

due 2009 — 687,985Receivables securitization

facility due 2007 — 1,050,000

Total variable-ratedebt 55,000 1,737,985

Total debt,

includingcurrent portion $ 952,711 $ 1,737,985

The Company’s $1.7 billion of aggregate availability under its revolving credit facility and its receivables securitization facility provide sufficient sourcesof capital to fund the Company’s working capital requirements. The Company’s aggregate availability was reduced to $1.4 billion as of October 31, 2005,because it elected to terminate the 364-day tranche under its receivables securitization facility (defined below).

In an effort to reduce its interest expense, extend maturities of its long-term debt and ease its debt covenant restrictions, the Company refinanced itslong-term debt in September 2005. The Company issued $400 million of 5.625% senior notes due September 15, 2012 (the “2012 Notes”) and $500 million of5.875% senior notes due September 15, 2015 (the “2015 Notes”). The 2012 Notes and 2015 Notes each were sold at 99.5% of principal amount and have aneffective yield of 5.71% and 5.94%, respectively. Interest on the 2012 Notes and the 2015 Notes is payable semiannually in arrears, commencing on March 15,2006. Both the 2012 Notes and the 2015 Notes are redeemable at the Company’s option at a price equal to the greater of 100% of the principal amount thereof, orthe sum of the discounted value of the remaining scheduled payments, as defined. In addition, at any time before September 15, 2008, the Company may redeemup to an aggregate of 35% of the principal amount of the 2012 Notes or the 2015 Notes at redemption prices equal to 105.625% and 105.875%, respectively, ofthe principal amounts thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption, with the cash proceeds of one or moreequity issuances. In connection with the issuance of the 2012 Notes and the 2015 Notes, the Company incurred approximately $6.3 million and $7.9 million ofcosts, respectively, which were deferred and are being amortized over the terms of the notes.

The gross proceeds from the sale of the 2012 Notes and the 2015 Notes were used to finance the early retirement of the $500 million of 8 1/8% senior notesdue 2008 (the “8 1/8% Notes”) and $300 million of 7 1/4% senior notes due 2012 (the “7 1/4% Notes”) in September 2005, including the payment of $102.3million of premiums and other costs. Additionally, the Company expensed $8.5 million of deferred financing costs related to the retirement of the 7 1/4% Notesand the 8 1/8% Notes.

In November 2005, Standard & Poor’s Ratings Services (“S&P”) announced that it raised its corporate credit and senior unsecured debt ratings on theCompany to ‘BBB-’ from ‘BB+’. As a result of the upgrade, the Company is entitled to substantially relaxed covenants under the indenture governing its 5.625%senior notes due 2012 and 5.875% senior notes due 2015, and to a lesser extent under its $700 million senior credit facility.

In July 2003, the Company entered into a $1.05 billion receivables securitization facility (“Receivables Securitization Facility”). In connection with theReceivables Securitization Facility, ABDC sells on a revolving basis certain accounts

35


Table of Contentsreceivable to Amerisource Receivables Financial Corporation, a wholly owned special purpose entity, which in turn sells a percentage ownership interest in thereceivables to commercial paper conduits sponsored by financial institutions. ABDC is the servicer of the accounts receivable under the ReceivablesSecuritization Facility. After the maximum limit of receivables sold has been reached and as sold receivables are collected, additional receivables may be sold upto the maximum amount available under the facility. In December 2004, the Company amended its Receivables Securitization Facility and under the terms of theamendment, the $550 million (three-year tranche) originally scheduled to expire in July 2006 was increased to $700 million and the expiration date was extendedto November 2007. Additionally, the $500 million (364-day tranche) scheduled to expire in July 2005 was reduced to $350 million and was set to expire inDecember 2005. In September 2005, the Company elected to terminate the 364-day tranche, effective October 31, 2005. Interest rates are based on prevailingmarket rates for short-term commercial paper plus a program fee, and will vary based on the Company’s debt ratings. In April 2005, the Company’s debt ratingwas raised by one of the rating agencies and in accordance with the terms of the Receivables Securitization Facility, the program fees were lowered. The programfee was 60 basis points for the three-year tranche and 35 basis points for the 364-day tranche as of September 30, 2005. Additionally, the commitment fee on anyunused credit was reduced to 20 basis points for the three-year tranche and to 17.5 basis points for the 364-day tranche. At September 30, 2005, there were noborrowings under the Receivables Securitization Facility. In connection with entering into the Receivables Securitization Facility and the amendments thereto,the Company incurred approximately $2.8 million of costs, which were deferred and are being amortized over the life of the facility. The facility is a financingvehicle utilized by the Company because it offers an attractive interest rate relative to other financing sources. The Company securitizes its trade accounts, whichare generally non-interest bearing, in transactions that are accounted for as borrowings under Statement of Financial Accounting Standards (“SFAS”) No. 140,“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”

In December 2004, the Company entered into a $700 million five-year senior unsecured revolving credit facility (the “Senior Revolving Credit Facility”)with a syndicate of lenders. The Senior Revolving Credit Facility replaced the Senior Credit Agreement (defined below). There were no borrowings outstandingunder the Senior Revolving Credit Facility at September 30, 2005. Interest on borrowings under the Senior Revolving Credit Facility accrues at specific ratesbased on the Company’s debt rating. In April 2005, the Company’s debt rating was raised by one of the rating agencies and in accordance with the terms of theSenior Revolving Credit Facility, interest on borrowings accrue at either 80 basis points over LIBOR or the prime rate at September 30, 2005. Availability underthe Senior Revolving Credit Facility is reduced by the amount of outstanding letters of credit ($12.0 million at September 30, 2005). The Company paysquarterly facility fees to maintain the availability under the Senior Revolving Credit Facility at specific rates based on the Company’s debt rating. In April 2005,the rate payable to maintain the availability of the $700 million commitment was reduced to 20 basis points per annum resulting from the Company’s improveddebt rating. In connection with entering into the Senior Revolving Credit Facility, the Company incurred approximately $2.5 million of costs, which weredeferred and are being amortized over the life of the facility. The Company may choose to repay or reduce its commitments under the Senior Revolving CreditFacility at any time. The Senior Revolving Credit Facility contains covenants that impose limitations on, among other things, additional indebtedness,distributions and dividends to stockholders, and investments. These covenants are less restrictive than those under the Senior Credit Agreement, therebyproviding the Company with greater financial flexibility. Additional covenants require compliance with financial tests, including leverage and minimum earningsto fixed charges ratios.

The Senior Credit Agreement consisted of a $1.0 billion revolving credit facility (the “Revolving Facility”) and a $300 million term loan facility (the“Term Facility”), both of which had been scheduled to mature in August 2006. The Term Facility had scheduled quarterly maturities, which began in December2002, totaling $60 million in each of fiscal 2003 and 2004, and $80 million and $100 million in fiscal 2005 and 2006, respectively. The scheduled term loanpayments were made in fiscal 2004 and 2003. In December 2004, in connection with entering into the new Senior Revolving Credit Facility, as defined above,the Company repaid the remaining $180 million outstanding under the Term Facility and there were no borrowings outstanding under the Revolving Facility. Inconnection with the early repayment of the Term Facility, the Company incurred a loss of $1.0 million relating to the write-off of deferred financing costs.

On October 3, 2005, the Company entered into a C$135 million senior unsecured revolving credit facility (the “Canadian Credit Facility”) due December2009 with a syndicate of lenders in connection with the Company’s acquisition of Trent Drugs (Wholesale) Ltd and borrowed approximately C$92 million tocomplete the transaction. Interest on borrowings under the Canadian Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% overLIBOR or Bankers’ Acceptance Stamping Fee Spread at October 3, 2005). The Company will pay quarterly facility fees to maintain the availability under theCanadian Credit Facility at specific rates based on the Company’s debt rating (0.20% at October 3, 2005). The Company may choose to repay or reduce itscommitments under the Canadian Credit Facility at any time. The Canadian Credit Facility contains restrictions on, among other things, additional indebtedness,distributions and dividends to stockholders, investments and capital expenditures. Additional covenants require compliance with financial tests, includingleverage and minimum earnings to fixed charges ratios.

36


Table of ContentsDuring the fiscal year ended September 30, 2005, the Company paid $100 million to redeem the Bergen 7 1/4% Senior Notes due June 1, 2005, upon their

maturity.

In December 2000, the Company issued $300.0 million of 5% convertible subordinated notes due December 1, 2007. The notes had an annual interest rateof 5%, payable semiannually, and were convertible into common stock of the Company at $52.97 per share at any time before their maturity or their priorredemption or repurchase by the Company. In December 2004, the Company announced that it would redeem its 5% convertible subordinated notes at aredemption price of 102.143% of the principal amount of the notes plus accrued interest through the redemption date of January 3, 2005. The noteholders weregiven the option to accept cash or convert the notes to common stock of the Company. The notes were convertible into 5,663,730 shares of common stock, whichtranslated to a conversion ratio of 18.8791 shares of common stock for each $1,000 principal amount of notes. Through January 3, 2005, the redemption date, theCompany issued 5,663,144 shares of common stock from treasury to noteholders to redeem substantially all of the notes and paid $31,000 to redeem theremaining notes. During fiscal 2005, the Company subsequently repurchased 5.7 million shares of common stock, substantially equivalent to the number ofcommon stock shares issued in connection with the conversion of the 5% notes.

The Company’s operating results have generated cash flow, which, together with availability under its debt agreements and credit terms from suppliers,has provided sufficient capital resources to finance working capital and cash operating requirements, and to fund capital expenditures, acquisitions, repayment ofdebt, the payment of interest on outstanding debt and repurchases of shares of the Company’s common stock. Cash flow from operations for the fiscal year endedSeptember 30, 2005 was $1.53 billion primarily due to the significant decline in merchandise inventories and an increase in accounts payable during the fiscalyear ended September 30, 2005. The significant decline in merchandise inventories during the fiscal year ended September 30, 2005 reflected the impact of thebusiness model transition, including increasing compliance under current inventory management and fee-for-service agreements. We do not anticipate theCompany will experience similar amounts of working capital reduction in future years as the Company has signed fee-for-service agreements with a substantialmajority of manufacturers as of September 30, 2005. The Company expects cash flow from operations in fiscal 2006 to be between $500 million and $600million.

The Company’s primary ongoing cash requirements will be to finance working capital, fund the payment of interest on debt, finance merger integrationinitiatives and fund capital expenditures and routine growth and expansion through new business opportunities. Significant cash flows from operations primarilyresulting from the business model transition, as discussed above, has resulted in a near record low debt-to-capital ratio of 18.2% and a net debt to total capitalratio of less than zero. The Company has been and continues to actively evaluate its alternatives to deploy its excess capital. For example, the Company plans torepurchase $750 million of its common stock and recently announced that it will double its quarterly cash dividend. Additionally, on October 5, 2005, theCompany acquired Trent Drugs (Wholesale) Ltd (“Trent”), one of the largest national pharmaceutical distributors in Canada, for a purchase price of $81.7million, which included the assumption of debt of $41.3 million. The acquisition of Trent provides the Company a solid foundation to expand its pharmaceuticaldistribution capability into the Canadian marketplace. The Company expects to pursue further strategic acquisitions. Future cash flows from operations andborrowings are expected to be sufficient to fund the Company’s ongoing cash requirements.

Following is a summary of the Company’s contractual obligations for future principal and interest payments on its debt, minimum rental payments on itsnoncancelable operating leases and minimum payments on its other commitments at September 30, 2005 (in thousands):

Payments Due by Period

Total

Within 1year

1-3years

4-5years

After 5years

Debt, includinginterestpayments $ 1,410,053 $ 109,621 $ 104,807 $ 103,750 $ 1,091,875

Operating Leases 239,803 64,259 86,839 49,012 39,693Other

Commitments 1,272,067 47,268 218,284 262,558 743,957

Total $ 2,921,923 $ 221,148 $ 409,930 $ 415,320 $ 1,875,525

The $55 million Blanco revolving credit facility, which expires in April 2006, is included in the “Within 1 year” column in the above repayment table.However, this borrowing is not classified in the current portion of long-term debt on the consolidated balance sheet at September 30, 2005 because the Companyhas the ability and intent to refinance it on a long-term basis.

37


Table of ContentsIn December 2004, the Company entered into a distribution agreement with a Canadian influenza vaccine manufacturer to distribute product through

March 31, 2015. The agreement includes a commitment to purchase at least 12 million doses per year of the influenza vaccine provided the vaccine is approvedand available for distribution in the United States by the Food and Drug Administration (“FDA”). The Company will be required to purchase the annual doses atmarket prices, as adjusted for inflation and other factors. We expect the Canadian manufacturer will receive FDA approval by the 2006/2007 influenza season;however, FDA approval may be received earlier. If the initial year of the purchase commitment begins in fiscal 2007, then the Company anticipates its purchasecommitment for that year will approximate $66 million. The Company anticipates its total purchase commitment (assuming the commitment commences in fiscal2007) will be approximately $1.1 billion. The influenza vaccine commitment is included in Other Commitments in the above table.

As of September 30, 2005, the Company has $7.1 million of remaining commitments relating to the construction of one of its new distribution facilities.This facility commitment is included in Other Commitments in the above table.

During the fiscal year ended September 30, 2005, the Company decided to outsource a significant portion of its corporate and ABDC informationtechnology activities and entered into a ten-year commitment, effective July 1, 2005, with IBM Global Services, which will assume responsibility for performingthe outsourced information technology activities following the completion of certain transition matters. The Company estimates that it will incur approximately$20 million to $25 million of transition costs in connection with this plan. These transition costs will include employee severance and other contract expenses.The Company incurred approximately one-half of these costs in the fourth quarter of fiscal 2005. The minimum commitment under the outsourcing arrangementis approximately $200 million (excluding the above-mentioned transition costs) over a ten-year period; however, the Company believes it will likely spendbetween $300 million and $400 million under the outsourcing arrangement to maintain and improve its information technology infrastructure during that period.The Company has included the minimum contractual commitment of $200 million in Other Commitments in the above table.

During the fiscal year ended September 30, 2005, the Company’s operating activities provided $1.53 billion of cash as compared to cash provided of$825.1 million in the prior-year period. Cash provided by operations during the fiscal year ended September 30, 2005 was principally the result of a $1.1 billiondecrease in merchandise inventories, a $311.4 million increase in accounts payable, accrued expenses and income taxes, non-cash items of $282.3 million, andnet income of $264.6 million, partially offset by an increase in accounts receivable of $392.8 million. The inventory turnover rate for the PharmaceuticalDistribution segment improved to 10.2 times in the fiscal year ended September 30, 2005 from 8.2 times in the prior fiscal year. The improvement was derivedfrom lower average inventory levels due to an increase in the number of fee-for-service agreements, inventory management and other vendor agreements, areduction in buy-side profit opportunities, and a reduction in the number of distribution facilities. The increase in accounts payable, accrued expenses and incometaxes is primarily due to an increase in sales volume, the timing of purchases of merchandise inventories and cash payments to our vendors. The increase inaccounts receivable was largely driven by the continued strong revenue growth of ABSG, which has a significantly higher average days sales outstanding thanABDC and the timing of cash receipts from our customers. Average days sales outstanding for the PharMerica segment were 40.2 days in the fiscal year endedSeptember 30, 2005 compared to 38.4 days in the prior-year period. Non-cash items of $282.3 million included a $111.9 million loss on early retirement of debtand $90.9 million of depreciation and amortization. Operating cash uses during the fiscal year ended September 30, 2005 included $94.2 million in interestpayments and $132.6 million of income tax payments, net of refunds.

During the fiscal year ended September 30, 2004, the Company’s operating activities provided $825.1 million of cash. Cash provided by operations infiscal 2004 was principally the result of a decrease in merchandise inventories of $916.3 million, net income of $468.4 million and non-cash items of $151.5million, offset in part, by a $432.0 million decrease in accounts payable, accrued expenses and income taxes. The Company’s change in accounting for customersales returns had the effect of increasing merchandise inventories and reducing accounts receivable by $316.8 million at September 30, 2004. Merchandiseinventories have continued to decline due to an increase in the number of inventory management agreements, a reduction in buy-side profit opportunities, and areduction in the number of distribution facilities. The turnover of merchandise inventories for the Pharmaceutical Distribution segment has improved to 8.2 timesin the fiscal year ended September 30, 2004 from 6.7 times in the prior fiscal year. The $446.7 million decrease in accounts payable was primarily due to thedecline of merchandise inventories. Average days sales outstanding for the Pharmaceutical Distribution segment increased slightly to 17.1 days in the fiscal yearended September 30, 2004 from 16.9 days in the prior fiscal year primarily due to the strong revenue growth of ABSG, which has a significantly higher averagedays sales outstanding than ABDC. Average days sales outstanding for the PharMerica segment improved to 38.4 days in the fiscal year ended September 30,2004 from 39.3 days in the prior fiscal year as a result of the continued emphasis on receivables management. Non-cash items of $151.5 million included $87.1million of depreciation and amortization and $48.9 million of deferred income taxes. Deferred income taxes of $48.9 million in fiscal 2004 were significantlylower than the $127.2 million in fiscal 2003 primarily due to the decline in income tax deductions associated with

38


Table of Contentsmerchandise inventories. Operating cash uses during the fiscal year ended September 30, 2004 included $111.0 million in interest payments and $200.1 millionof income tax payments, net of refunds.

During the year ended September 30, 2003, the Company’s operating activities provided $354.8 million in cash. Cash provided by operations in fiscal2003 was principally the result of net income of $441.2 million and non-cash items of $271.2 million, offset in part, by a $278.4 million increase in merchandiseinventories and a $58.0 million increase in accounts receivable. The increase in merchandise inventories reflected inventory required to support the revenueincrease. Accounts receivable increased only 1%, excluding changes in the allowance for doubtful accounts and customer additions due to acquired companies,in comparison to the 13% increase in operating revenues. Average days sales outstanding for the Pharmaceutical Distribution segment increased slightly to 16.9days in the fiscal year ended September 30, 2003 from 16.4 days in the prior fiscal year primarily due to the strong revenue growth of AmerisourceBergenSpecialty Group, which generally has a higher receivable investment than the core distribution business. Average days sales outstanding for the PharMericasegment improved to 39.3 days in fiscal 2002 from 43.5 days in the prior year as a result of the continued improvements in centralized billing and collectionpractices. Non-cash items of $271.2 million included $127.2 million of deferred income taxes. The tax planning strategies implemented by the Company enabledthe Company to lower its current tax payments and liability while increasing its deferred taxes during the fiscal year ended September 30, 2003. Operating cashuses during the fiscal year ended September 30, 2003 included $134.2 million in interest payments and $118.4 million of income tax payments, net of refunds.

Capital expenditures for the fiscal years ended September 30, 2005, 2004 and 2003 were $203.4 million, $189.3 million and $90.6 million, respectively,and related principally to the construction of the new distribution facilities, investments in warehouse expansions and improvements, information technology andwarehouse automation. The Company estimates that it will spend approximately $125 million to $150 million for capital expenditures during fiscal 2006.

During the fiscal year ended September 30, 2004, the Company paid $39.0 million for the remaining 40% equity interest in International PhysicianNetworks (“IPN”), a physician education and management consulting company, that it did not previously own. Additionally, the Company paid approximately$13.7 million in cash for MedSelect, Inc., a provider of automated medication and supply dispensing cabinets, and $16.6 million in cash for Imedex, Inc., anaccredited provider of continuing medical education for physicians.

During fiscal 2003, the Company acquired Anderson Packaging Inc. (“Anderson”), a leading provider of physician and retail contracted packagingservices to pharmaceutical manufacturers. The purchase price was approximately $100.1 million, which included the repayment of Anderson debt of $13.8million and $0.8 million of transaction costs associated with the acquisition. The Company paid part of the purchase price by issuing 814,145 shares of itscommon stock with an aggregate market value of $55.6 million. The Company paid the remaining purchase price, which was approximately $44.5 million, incash.

During fiscal 2003, the Company acquired an additional 40% equity interest in IPN and satisfied the residual contingent obligation for its initial 20%equity interest for an aggregate $24.7 million in cash.

During fiscal 2003, the Company acquired US Bioservices Corporation (“US Bio”), a national pharmaceutical products and services provider focused onthe management of high-cost complex therapies and reimbursement support for a total base purchase price of $160.2 million, which included the repayment ofUS Bio debt of $14.8 million and $1.5 million of transaction costs associated with this acquisition. The Company paid part of the base purchase price by issuing2,399,091 shares of its common stock with an aggregate market value of $131.0 million. The Company paid the remaining $29.2 million of the base purchaseprice in cash. In July 2003, a contingent payment of $2.5 million was paid in cash by the Company.

During fiscal 2003, the Company acquired Bridge Medical, Inc., a leading provider of barcode-enabled point-of-care software designed to reducemedication errors, to enhance the Company’s offerings in the pharmaceutical supply channel, for a total base purchase price of $28.4 million, which included$0.7 million of transaction costs associated with this acquisition. The Company paid part of the base purchase price by issuing 401,780 shares of its commonstock with an aggregate market value of $22.9 million and the remaining base purchase price was paid with $5.5 million of cash.

During fiscal 2003, the Company also used cash of $3.0 million to purchase three smaller companies related to the Pharmaceutical Distribution segmentand paid $9.8 million to eliminate the right of the former stockholders of AutoMed Technologies, Inc. (“AutoMed”) to receive up to $55.0 million in contingentpayments based on AutoMed achieving defined earnings targets through the end of calendar 2004.

Cash provided by investing activities for the fiscal year ended September 30, 2005 included $36.7 million from sale-leaseback transactions entered into bythe Company with a financial institution. Additionally, cash provided by investing

39


Table of Contentsactivities included $14.6 million from the sale of substantially all of the assets of Bridge Medical, Inc. and the sale of Rita Ann Distributors.

In September 2005, the Company issued its 2012 Notes and its 2015 Notes for total proceeds of $895.5 million. These proceeds were used to finance theearly retirement of the 7 1/4% Notes and the 8 1/8% Notes, including the payment of premiums and other costs, for a total of $902.3 million. Additionally, duringthe fiscal year ended September 30, 2005, the Company paid $100 million to redeem the Bergen 7 1/4% Senior Notes and repaid the remaining $180.0 millionoutstanding under the Term Loan Facility.

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of common stock, subjectto market conditions and to compliance with the stock repurchase restrictions contained in the indentures governing the Company’s senior notes and in the creditagreement for the Company’s senior credit facility. Through June 30, 2005, the Company had purchased $94.2 million of its common stock under this programfor a weighted average price of $65.50. In August 2005, the Company’s board of directors authorized an increase to the amount available under this program byapproximately $394 million, bringing total remaining availability to $750 million, and the total repurchase program to approximately $844 million. The increasein repurchase authority was subject to the completion of the tender and repurchase of the Company’s $500 million principal amount 8.125% senior notes due2008 and $300 million principal amount 7.25% senior notes due 2012 and the offering and sale of $400 million principal amount 5.625% senior notes due 2012and $500 million principal amount 5.875% senior notes due 2015 (collectively, the “Refinancing”). The Refinancing was completed in September 2005. As ofSeptember 30, 2005, the Company has $750 million of remaining authorization to repurchase its common stock under this program.

In February 2005, the Company’s board of directors authorized the Company to purchase up to 5.7 million shares (substantially equivalent to the numberof common stock shares issued in connection with the conversion of the 5% notes) of its outstanding common stock, subject to market conditions. In February2005, the Company acquired 0.4 million shares in the open market for a total of $25.9 million. In addition, on March 30, 2005, the Company entered into anAccelerated Share Repurchase (“ASR”) transaction with a financial institution to purchase the remaining 5.3 million shares immediately from the financialinstitution at a cost of $293.8 million. The financial institution subsequently purchased an equivalent number of shares in the open market through April 21,2005. The ASR transaction was completed on April 21, 2005; as a result, the Company paid the financial institution a cash settlement of $16.6 million. TheCompany had acquired all the shares authorized under this program for a total of $336.3 million, which includes the above cash settlement of $16.6 million. Thecash settlement was recorded as an adjustment to additional paid-in capital.

In August 2004, the Company’s board of directors authorized the Company to purchase up to $500 million of its outstanding shares of common stock,subject to market conditions. During the fiscal year ended September 30, 2004, the Company had acquired 2.8 million shares of its Common Stock for $144.7million. During the fiscal year ended September 30, 2005, the Company acquired 6.5 million shares of its common stock under this program for $355.3 million.As of September 30, 2005, the Company had acquired 9.3 million shares of its common stock to complete the $500 million repurchase program.

As previously described, the Company used $300 million to redeem the Subordinated Notes and $8.4 million to redeem the 6 7/8% Notes during the fiscalyear ended September 30, 2004. Additionally, the Company repaid $60 million of the Term Facility in fiscal 2004.

During the fiscal year ended September 30, 2003, the Company issued the aforementioned $300 million of 7 1/4% Notes. The Company used the netproceeds of the 7 1/4% Notes to repay $15 million of the Term Facility, to repay $150 million in aggregate principal of the Bergen 7 3/8% senior notes andredeem the PharMerica 8 3/8% senior subordinated notes due 2008 at a redemption price equal to 104.19% of the $123.5 million principal amount. The Companyalso repaid an additional $45 million of the Term Facility, as scheduled.

The Company has paid quarterly cash dividends of $0.025 per share on its common stock since the first quarter of fiscal 2002. On November 15, 2005, theCompany’s board of directors increased the quarterly dividend by 100% and declared a dividend of $0.05 per share, which will be paid on December 12, 2005 tostockholders of record as of close of business on November 25, 2005. The Company anticipates that it will continue to pay quarterly cash dividends in the future.However, the payment and amount of future dividends remain within the discretion of the Company’s board of directors and will depend upon the Company’sfuture earnings, financial condition, capital requirements and other factors.

40


Table of ContentsMarket Risk

The Company’s most significant market risk is the effect of changing interest rates. The Company manages this risk by using a combination of fixed-rateand variable-rate debt. At September 30, 2005, the Company had $897.7 million of fixed-rate debt with a weighted average interest rate of 5.8% and $55.0million of variable-rate debt with a weighted average interest rate of 4.5%. The amount of variable-rate debt fluctuates during the year based on the Company’sworking capital requirements. The Company periodically evaluates various financial instruments that could mitigate a portion of its exposure to variable interestrates. However, there are no assurances that such instruments will be available on terms acceptable to the Company. There were no such financial instruments ineffect at September 30, 2005. For every $100 million of unhedged variable-rate debt outstanding, a 45 basis-point increase in interest rates (one-tenth of theaverage variable rate at September 30, 2005) would increase the Company’s annual interest expense by $0.45 million.

Recently Issued Financial Accounting Standards In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which requires companies to measure compensation cost for allshare-based payments (including employee stock options) at fair value for interim or annual periods beginning after June 15, 2005. In April 2005, the U.S.Securities and Exchange Commission issued a new rule allowing public companies to delay the adoption of SFAS No. 123R to annual periods beginning afterJune 15, 2005. As a result, the Company will adopt SFAS No. 123R, using the modified-prospective transition method beginning on October 1, 2005, andtherefore, will begin to expense the fair value of all outstanding options over their remaining vesting periods to the extent the options are not fully vested as of theadoption date and will expense the fair value of all future options granted subsequent to September 30, 2005 over their service periods. SFAS No. 123R alsorequires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than an operating cash flowas currently required. The Company estimates it will record pre-tax share-based compensation expense of approximately $14 million in fiscal 2006. This estimatemay be impacted by potential changes to the structure of the Company’s share-based compensation plans which could impact the number of stock optionsgranted in fiscal 2006, changes in valuation assumptions, the market price of the Company’s common stock, among other things and, as a result, the actualpre-tax share-based compensation expense in fiscal 2006 may differ from the Company’s current estimate.

Forward-Looking Statements Certain of the statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) andelsewhere in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actualresults may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements herein include statementsaddressing management’s views with respect to future financial and operating results and the benefits, efficiencies and savings to be derived from the Company’sintegration plan to consolidate its distribution network. Various factors, including competitive pressures, success of the Pharmaceutical Distribution segment’sability to transition its business model to fee-for-service, success of integration, restructuring or systems initiatives, market interest rates, changes in customermix, changes in pharmaceutical manufacturers’ pricing and distribution policies or practices, regulatory changes, changes in U.S. Government policies (includingreimbursement changes arising from the Medicare Modernization Act), customer defaults or insolvencies, supplier defaults or insolvencies. Adverse resolution ofany contract or other disputes with customers (including departments and agencies of the U.S. Government) or suppliers, operational or control issues arisingfrom AmerisourceBergen’s outsourcing of information technology activities, fluctuations in the U.S. dollar – Canadian dollar exchange rate, economic, business,competitive and/or regulatory developments in Canada, acquisition of businesses that do not perform as we expect or that are difficult for us to integrate orcontrol, or the loss of one or more key customer or supplier relationships, could cause actual outcomes and results to differ materially from those described inforward-looking statements. Certain additional factors that management believes could cause actual outcomes and results to differ materially from thosedescribed in forward-looking statements are set forth in this MD&A, in Item 1 (Business) under the heading “Certain Risk Factors”, elsewhere in Item 1(Business) and elsewhere in this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company’s most significant market risk is the effect of changing interest rates. See discussion above.

41


Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of AmerisourceBergen Corporation We have audited the accompanying consolidated balance sheets of AmerisourceBergen Corporation and subsidiaries as of September 30, 2005 and 2004, and therelated consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2005.Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmerisourceBergenCorporation and subsidiaries at September 30, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years inthe period ended September 30, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statementschedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, AmerisourceBergen Corporation changed its method of recognizing cash discounts effective atthe beginning of fiscal year 2005. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness ofAmerisourceBergen Corporation’s internal control over financial reporting as of September 30, 2005, based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 8, 2005 expressed an unqualifiedopinion thereon.

/s/ Ernst & Young LLP Philadelphia, PennsylvaniaDecember 8, 2005

42


Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per sharedata)

September 30,

2005

2004

ASSETS Current assets:

Cash and cash equivalents $ 1,315,683 $ 871,343Accounts receivable, less

allowances for returns anddoubtful accounts:2005 - $420,538; 2004 -$464,354 2,640,646 2,260,973

Merchandise inventories 4,003,690 5,135,830Prepaid expenses and other 27,673 27,243

Total current assets 7,987,692 8,295,389

Property and equipment, at cost:

Land 43,676 42,959Buildings and improvements 267,847 233,397Machinery, equipment and

other 484,671 433,555

Total property andequipment 796,194 709,911

Less accumulated depreciation 281,436 244,647

Property and equipment,net 514,758 465,264

Other assets:

Goodwill 2,431,568 2,448,275Intangibles, deferred charges

and other 447,156 445,075

Total other assets 2,878,724 2,893,350

TOTAL ASSETS $ 11,381,174 $ 11,654,003

See notes to consolidated financial statements.

43


Table of Contents


CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per sharedata)

September 30,

2005

2004

LIABILITIES AND

STOCKHOLDERS’ EQUITY Current liabilities:

Accounts payable $ 5,292,253 $ 4,947,037 Accrued expenses and other 335,650 419,381 Current portion of long-term

debt 1,232 281,360 Accrued income taxes 52,093 94,349 Deferred income taxes 370,868 361,781

Total current liabilities 6,052,096 6,103,908

Long-term debt, net of current

portion 951,479 1,157,111 Other liabilities 97,242 53,939

Stockholders’ equity: Common stock, $.01 par value

- authorized: 300,000,000shares; issued andoutstanding: 2005:115,643,326 and104,876,420 shares,respectively; issued andoutstanding: 2004:112,454,005 shares and109,692,505 shares,respectively 1,156 1,125

Additional paid-in capital 3,315,216 3,146,207 Retained earnings 1,604,093 1,350,046 Accumulated other

comprehensive loss (24,814) (13,577)Treasury stock, at cost: 2005:

10,769,906 shares; 2004:2,761,500 shares (615,294) (144,756)

Total stockholders’

equity 4,280,357 4,339,045

TOTAL LIABILITIESANDSTOCKHOLDERS’EQUITY $ 11,381,174 $ 11,654,003


44


Table of Contents


CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except pershare data)

Fiscal year endedSeptember 30,

2005

2004

2003

Operating revenue $ 50,012,598 $ 48,812,452 $ 45,463,400 Bulk deliveries to

customer warehouses 4,564,723 4,308,339 4,120,639 Total revenue 54,577,321 53,120,791 49,584,039 Cost of goods sold 52,597,137 50,954,361 47,358,426 Gross profit 1,980,184 2,166,430 2,225,613 Operating expenses:

Distribution, sellingandadministrative 1,234,057 1,184,529 1,261,357

Depreciation 70,947 63,464 62,165 Amortization 10,252 9,961 7,032 Facility

consolidations,employeeseverance andother 22,723 7,517 8,930

Impairment charge 5,259 — — Operating income 636,946 900,959 886,129 Other (income) loss (990) (6,236) 8,015 Interest expense, net 57,223 112,704 144,748 Loss on early retirement

of debt 111,888 23,592 4,220 Income from continuing

operations beforeincome taxes andcumulative effect ofchange in accounting 468,825 770,899 729,146

Income taxes 176,903 296,025 286,081 Income from continuing

operations beforecumulative effect ofchange in accounting 291,922 474,874 443,065

Loss from discontinuedoperations, net of tax(Note 3) 17,105 6,484 1,836

Cumulative effect ofchange in accounting,net of tax of $6,341(Note 1) 10,172 — —

Net income $ 264,645 $ 468,390 $ 441,229

Earnings per share:

Basic earnings pershare:

Continuingoperations $ 2.76 $ 4.25 $ 4.05

Discontinuedoperations (0.16) (0.06) (0.02)

Cumulativeeffect ofchange inaccounting (0.10) — —

Rounding — 0.01 —

Netincome $ 2.50 $ 4.20 $ 4.03


Diluted earningsper share:



Cumulativeeffect ofchange inaccounting (0.09) — —

Net

income $ 2.48 $ 4.06 $ 3.89 Weighted average

common sharesoutstanding:

Basic 105,667 111,617 109,513 Diluted 107,770 117,779 115,954


45


Table of Contents


CONSOLIDATED STATEMENTS OF CHANGESIN STOCKHOLDERS’ EQUITY

(in thousands, exceptper share data)

CommonStock

AdditionalPaid-inCapital

RetainedEarnings

AccumulatedOther

ComprehensiveLoss

TreasuryStock

Total

September 30,

2002 $ 1,066 $ 2,858,596 $ 462,619 $ (5,943) $ — $ 3,316,338 Net income 441,229 441,229 Increase in

minimumpensionliability,net of taxof $5,246 (8,274) (8,274)

Total

comprehensiveincome 432,955

Cash

dividendsdeclared,$0.10 pershare (10,995) (10,995)

Exercise ofstockoptions 14 42,550 42,564

Tax benefitfromexercise ofstockoptions 14,389 14,389

Stock issuedforacquisitions 40 209,409 209,449

Restrictedsharesearned bydirectors 345 345

Net sharespurchasedpursuantto stockpurchaseplan (1,608) (1,608)

Acceleratedvesting ofstockoptions 1,057 1,057

Amortizationofunearnedcompensationfrom stockoptions 823 823

September 30,

2003 1,120 3,125,561 892,853 (14,217) — 4,005,317 Net income 468,390 468,390 Reduction in

minimumpensionliability,net of taxof $399 640 640

Total



Cashdividendsdeclared,$0.10 pershare (11,197) (11,197)



Restrictedsharesearned 649 649

Net sharespurchasedpursuantto stockpurchaseplan (935) (935)

Acceleratedvesting ofstockoptions 1,028 1,028

Amortizationofunearnedcompensationfrom stockoptions 747 747

Purchases ofcommonstock (144,756) (144,756)

September 30,

2004 1,125 3,146,207 1,350,046 (13,577) (144,756 ) 4,339,045 Net income 264,645 264,645 Increase in

minimumpensionliability,net of taxof $7,101 (11,014) (11,014)

Other, net oftax (223) (223)

Total


Cash

dividendsdeclared,$0.10 pershare (10,598) (10,598)



Restrictedsharesearned 488 488

Net sharespurchasedpursuantto stockpurchaseplan (1,565) (1,565)

Acceleratedvesting ofstockoptions 276 276

Write-off of (3,881) (3,881)


deferredfinancingcostsrelated toconversionofsubordinatednotes

Treasurysharesissued fordebtconversion 944 299,025 299,969

Settlement ofacceleratedstockrepurchaseagreement (16,629) (16,629)

Purchases ofcommonstock (769,563) (769,563)

September 30,

2005 $ 1,156 $ 3,315,216 $ 1,604,093 $ (24,814) $ (615,294) $ 4,280,357


46


Table of Contents


CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


2005

2004

2003

OPERATING

ACTIVITIES Net income $ 264,645 $ 468,390 $ 441,229 Adjustments to

reconcile netincome to net cashprovided byoperatingactivities:

Depreciation,includingamountscharged tocost of goodssold 76,546 68,071 65,005

Amortization,includingamountscharged tointerestexpense 14,336 19,017 15,438

Provision(benefit) onaccountsreceivable 33,379 (10,279) 46,012

Other loss(income) 4,269 (1,314) 8,015

Provision fordeferredincome taxes 17,026 48,884 127,157

Employee stockcompensation 520 2,059 1,880

Loss on disposalof propertyandequipment 1,891 1,430 3,465

Loss on earlyretirement ofdebt 111,888 23,592 4,220

Loss on sales ofdiscontinuedoperations 12,262 — —

Cumulativeeffect ofchange inaccounting,net of tax 10,172 — —

Changes inoperatingassets andliabilities,excluding theeffects ofacquisitionsanddispositions:

Accountsreceivable (392,769) (267,387) (57,971)

Merchandiseinventories 1,072,577 916,301 (278,388)

Prepaidexpensesandotherassets (11,052) (10,768) (23,294)

Accountspayable,

311,422 (432,020) (1,214)


accruedexpenses,andincometaxes

Other (474) (895) 3,261 NET CASH PROVIDED

BY OPERATINGACTIVITIES 1,526,638 825,081 354,815

INVESTINGACTIVITIES

Capital expenditures (203,376) (189,278) (90,554)Cost of acquired

companies, net ofcash acquired (4,404) (68,882) (111,981)

Proceeds fromsale-leasebacktransactions 36,696 15,602 —

Proceeds from salesof discontinuedoperations 14,560 — —

Proceeds from salesof property andequipment 4,219 336 726

NET CASH USED IN

INVESTINGACTIVITIES (152,305) (242,222) (201,809)

FINANCINGACTIVITIES

Long-term debtborrowings 895,500 — 300,000

Long-term debtrepayments (1,182,339) (368,425) (338,989)

Purchases of commonstock (786,192) (144,756) —

Deferred financingcosts and other (18,859) (1,390) (7,282)

Exercise of stockoptions 174,060 15,151 42,564

Cash dividends oncommon stock (10,598) (11,197) (10,995)

Common stockpurchases foremployee stockpurchase plan (1,565) (935) (1,608)

NET CASH USED IN

FINANCINGACTIVITIES (929,993) (511,552) (16,310)

INCREASE IN CASH

AND CASHEQUIVALENTS 444,340 71,307 136,696

Cash and cash equivalentsat beginning of year 871,343 800,036 663,340

CASH AND CASH

EQUIVALENTS ATEND OF YEAR $ 1,315,683 $ 871,343 $ 800,036


47


Table of Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2005

Note 1. Summary of Significant Accounting Policies AmerisourceBergen Corporation (the “Company”) is a national pharmaceutical services company providing drug distribution and related healthcareservices and solutions to its customers. The Company also provides pharmaceuticals to long-term care and workers’ compensation patients. For furtherinformation on the Company’s operating segments, see Note 14.

Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as of the dates and for thefiscal years indicated. All material intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ from these estimatedamounts.

Certain reclassifications have been made to prior-year amounts in order to conform to the current-year presentation, principally related to the discontinuedoperations (see Note 3).

Business Combinations Business combinations accounted for under the purchase method of accounting include the results of operations of the acquired businesses from the datesof acquisition. Net assets of the companies acquired are recorded at their fair value to the Company at the date of acquisition (see Note 2).

Cash Equivalents The Company classifies highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents.

Change in Accounting Method Effective October 1, 2004, the Company changed its method of recognizing cash discounts and other related manufacturer incentives. The Companypreviously recognized cash discounts as a reduction of cost of goods sold when earned, which was primarily upon payment of vendor invoices. The Companynow records cash discounts as a component of inventory cost and recognizes such discounts as a reduction to cost of goods sold upon the sale of the inventory. Inconnection with the Company’s transition to a fee-for-service model, the Company believes the change in accounting method provides a more objectivelydeterminable method of recognizing cash discounts and a better matching of inventory cost to revenue, as inventory turnover rates are expected to continue toimprove.

The Company recorded a $10.2 million charge for the cumulative effect of change in accounting (net of tax of $6.3 million) in the consolidated statementof operations for the fiscal year ended September 30, 2005. The accounting change is incorporated in the Company’s results of operations for the fiscal yearended September 30, 2005.

48


Table of ContentsThe pro forma effect of this accounting change on prior periods is as follows:


(in thousands, except per share data)

2004

2003

Income from continuing operations before cumulative effectof change in accounting:

As reported $ 474,874 $ 443,065Pro forma $ 472,653 $ 433,431

Net Income: As reported $ 468,390 $ 441,229Pro forma $ 466,169 $ 431,595

Basic earnings per share from continuing operations: As reported $ 4.25 $ 4.05Pro forma $ 4.23 $ 3.96

Diluted earnings per share from continuing operations: As reported $ 4.12 $ 3.91Pro forma $ 4.10 $ 3.83

Concentrations of Credit Risk and Allowance for Doubtful Accounts

The Company sells its merchandise inventories to a large number of customers in the healthcare industry, including independent retail pharmacies, chaindrugstores, mail order facilities, health systems and other acute-care facilities, and alternate site facilities such as clinics, nursing homes, physicians, and othernon-acute care facilities. The financial condition of the Company’s customers, especially those in the health systems and nursing home sectors, can be affectedby changes in government reimbursement policies as well as by other economic pressures in the healthcare industry.

The Company’s trade accounts receivable are exposed to credit risk, but the risk is moderated because the customer base is diverse and geographicallywidespread. The Company generally does not require collateral for trade receivables. The Company performs ongoing credit evaluations of its customers’financial condition and maintains an allowance for doubtful accounts. In determining the appropriate allowance for doubtful accounts, the Company considers acombination of factors, such as the aging of trade receivables, industry trends, its customers’ financial strength and credit standing, and payment and defaulthistory. Changes in these factors, among others, may lead to adjustments in the Company’s allowance for doubtful accounts. The calculation of the requiredallowance requires judgment by Company management as to the impact of those and other factors on the ultimate realization of its trade receivables. Each of theCompany’s business units performs ongoing credit evaluations of its customers’ financial condition and maintains reserves for probable bad debt losses based onhistorical experience and for specific credit problems when they arise. The Company writes off balances against the reserves when collectibility is deemedremote. Each business unit performs formal documented reviews of the allowance at least quarterly and the Company’s largest business units perform suchreviews monthly. There were no significant changes to this process during the fiscal years ended September 30, 2005, 2004 and 2003 and bad debt expense wascomputed in a consistent manner during these periods. The bad debt expense for any period presented is equal to the changes in the period end allowance fordoubtful accounts, net of write-offs and recoveries. Schedule II of this Form 10-K sets forth a rollforward of the allowance for doubtful accounts. AtSeptember 30, 2005, the largest trade receivable due from a single customer represented approximately 13% of accounts receivable, net. Sales to the Company’slargest non-bulk customer represented 7.5% of operating revenue in fiscal 2005. Sales to Medco Health Solutions, Inc. (“Medco”) represented 6% of operatingrevenue and represented 93% of bulk deliveries in fiscal 2005. No other single customer accounted for more than 5% of the Company’s operating revenue.

The Company maintains cash balances and cash equivalents with several large creditworthy banks and money-market funds located in the United States.The Company does not believe there is significant credit risk related to its cash and cash equivalents.

49


Table of ContentsGoodwill and Intangible Assets

The Company accounts for purchased goodwill and intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Statement ofFinancial Accounting Standards (“SFAS”) No. 142 “Goodwill and Other Intangible Assets.” Under SFAS No. 142, purchased goodwill and intangible assetswith indefinite lives are not amortized; rather, they are tested for impairment on at least an annual basis. Intangible assets with finite lives, primarily customerrelationships, non-compete agreements, patents and software technology, are amortized over their useful lives.

In order to test goodwill and intangible assets with indefinite lives under SFAS No. 142, a determination of the fair value of the Company’s reporting unitsand intangible assets with indefinite lives is required and is based, among other things, on estimates of future operating performance of the reporting unit and/orthe component of the entity being valued. The Company is required to complete an impairment test for goodwill and intangible assets with indefinite lives andrecord any resulting impairment losses at least on an annual basis. The Company uses an income approach to determine the fair value of its reporting units andintangible assets with indefinite lives. Changes in market conditions, among other factors, may have an impact on these fair values. The Company completed itsrequired annual impairment tests in the fourth quarters of fiscal 2005 and 2004 and determined that there was no impairment.

During the second quarter of fiscal 2005, the Company performed an impairment test on certain intangible assets within its technology operations due tothe existence of impairment indicators. As a result, the Company recorded an impairment charge of $5.3 million relating to certain of those intangible assets. Thecharge has been reflected in the Company’s results of operations for the fiscal year ended September 30, 2005.

Income Taxes In accordance with provisions of SFAS No. 109, “Accounting for Income Taxes,” the Company accounts for income taxes using the asset and liabilitymethod. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differencesthat currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities.

Investments The Company uses the equity method of accounting for its investments in entities in which it has significant influence; generally, this represents anownership interest of between 20% and 50%. The Company’s investments in marketable equity securities in which the Company does not have significantinfluence are classified as “available for sale” and are carried at fair value, with unrealized gains and losses excluded from earnings and reported in theaccumulated other comprehensive loss component of stockholders’ equity.

Loss Contingencies The Company accrues for loss contingencies related to litigation in accordance SFAS No. 5, “Accounting for Contingencies.” An estimated losscontingency is accrued in the Company’s consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can bereasonably estimated. Assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews losscontingencies to determine the adequacy of the accruals and related disclosures. The amount of the actual loss may differ significantly from these estimates.

Manufacturer Incentives The Company generally accounts for fees and other incentives received from its suppliers, relating to the purchase or distribution of inventory, as areduction to cost of goods sold, in accordance with Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by a Customer for Certain ConsiderationReceived from a Vendor.” The Company considers these fees to represent product discounts, and as a result, the fees are capitalized as a product cost andrelieved through cost of goods sold upon the sale of the related inventory.

Merchandise Inventories Inventories are stated at the lower of cost or market. Cost for approximately 87% and 92% of the Company’s inventories at September 30, 2005 and 2004,respectively, were determined using the last-in, first-out (LIFO) method. If the Company had used the first-in, first-out (FIFO) method of inventory valuation,which approximates current replacement cost, consolidated

50


Table of Contentsinventories would have been approximately $159.8 million and $166.1 million higher than the amounts reported at September 30, 2005 and 2004, respectively.During the fiscal years ended September 30, 2005 and 2004, inventory balances declined, which resulted in liquidation of LIFO layers carried at lower costsprevailing in prior years. The effect of the liquidation in fiscal 2005 was to decrease cost of goods sold by $30.6 million and increase diluted earnings per shareby $0.17. The effect of the liquidation in fiscal 2004 was to decrease cost of goods sold by $10.3 million and increase diluted earnings per share by $0.05.

Property and Equipment Property and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives of the assets, which range from 3 to40 years for buildings and improvements and from 3 to 10 years for machinery, equipment and other. The costs of repairs and maintenance are charged toexpense as incurred.

Revenue Recognition The Company recognizes revenue when products are delivered to customers. Service revenues are recognized as services are performed. Revenues asreflected in the accompanying consolidated statement of operations are net of sales returns and allowances.

The Company’s customer sales return policy generally allows customers to return products only if the products can be resold at full value or returned tosuppliers for full credit. During the fiscal year ended September 30, 2004, the Company changed its accounting policy for customer sales returns to reflect anaccrual for estimated customer returns at the time of sale to the customer. Previously, the Company accounted for customer sales returns as a reduction of salesand cost of goods sold at the time of the return. As a result of this accounting policy change, operating revenue and cost of goods sold were each reduced by$316.8 million for the fiscal year ended September 30, 2004. Additionally, merchandise inventories were increased and accounts receivable were reduced by$316.8 million. At September 30, 2005 and 2004, the Company’s accrual for customer sales returns was $280.4 million and $316.8 million, respectively.

The Company reports the gross dollar amount of bulk deliveries to customer warehouses in revenue and the related costs in cost of goods sold. Bulkdelivery transactions are arranged by the Company at the express direction of the customer, and involve either shipments from the supplier directly to customers’warehouse sites or shipments from the supplier to the Company for immediate shipment to the customers’ warehouse sites. The Company is a principal to thesetransactions because it is the primary obligor and has general inventory risk, physical loss inventory risk, and customer credit risk. As a result, and in accordancewith the EITF No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” the Company records bulk deliveries to customer warehouses asgross revenues. Gross profit earned by the Company on bulk deliveries was not material in any year presented.

Shipping and Handling Costs Shipping and handling costs include all costs to warehouse, pick, pack and deliver inventory to customers. These costs, which were $380.1 million, $383.1million and $381.8 million for the fiscal years ended September 30, 2005, 2004 and 2003, respectively, are included in distribution, selling and administrativeexpenses.

Supplier Reserves The Company establishes reserves against amounts due from its suppliers relating to various price and rebate incentives, including deductions or billingstaken against payments otherwise due them from the Company. These reserve estimates are established based on the judgment of Company management aftercarefully considering the status of current outstanding claims, historical experience with the suppliers, the specific incentive programs and any other pertinentinformation available to the Company. The Company evaluates the amounts due from its suppliers on a continual basis and adjusts the reserve estimates whenappropriate based on changes in factual circumstances. The ultimate outcome of any outstanding claim may be different than the Company’s estimate.

Recently Issued Financial Accounting Standards In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which requires companies to measure compensation cost for allshare-based payments (including employee stock options) at fair value for interim or annual periods beginning after June 15, 2005. In April 2005, the U.S.Securities and Exchange Commission issued a new rule allowing public companies to delay the adoption of SFAS No. 123R to annual periods beginning afterJune 15, 2005. As a result, the Company will adopt SFAS No. 123R, using the modified-prospective transition method beginning on October 1, 2005, andtherefore, will

51


Table of Contentsbegin to expense the fair value of all outstanding options over their remaining vesting periods to the extent the options are not fully vested as of the adoption dateand will expense the fair value of all future options granted subsequent to September 30, 2005 over their service periods. SFAS No. 123R also requires thebenefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than an operating cash flow as currentlyrequired. The Company estimates it will record pre-tax share-based compensation expense of approximately $14 million in fiscal 2006. This estimate may beimpacted by potential changes to the structure of the Company’s share-based compensation plans which could impact the number of stock options granted infiscal 2006, changes in valuation assumptions, the market price of the Company’s common stock, among other things and, as a result, the actual pre-taxshare-based compensation expense in fiscal 2006 may differ from the Company’s current estimate.

Stock Related Compensation The Company has a number of stock-related compensation plans, including stock option, stock purchase and restricted stock plans, which are described inNote 9. Through September 30, 2005, the Company accounted for its stock option and stock purchase plans using the intrinsic value method set forth inAccounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB No. 25”) and related interpretations for these plans. UnderAPB No. 25, generally, when the exercise price of the Company’s stock options equals the market price of the underlying stock on the date of the grant, nocompensation expense is recognized. As previously noted, the Company will begin expensing stock options beginning on October 1, 2005 in accordance withSFAS No. 123R.

The fair values relating to primarily all of the 2005 option grants were estimated using a binomial option pricing model. The fair values relating to the2004 and 2003 option grants were estimated using a Black-Scholes option pricing model. The following assumptions were used to estimate the fair values:


2005

2004

2003

Weighted average risk-free

interest rate 4.10% 2.74% 2.52%Expected dividend yield 0.17% 0.14% 0.14%Weighted average volatility

factor of the expected marketprice of the Company’scommon stock 28.0% 35.7% 37.5%

Weighted average expected lifeof the options 4.5 years 5 years 5 years

Expected forfeiture rate 5% — —

The weighted average fair value of the options granted during the fiscal years ended September 30, 2005, 2004 and 2003 was $16.65, $20.28, and $20.36,respectively. Changes to the above valuation assumptions could have a significant impact on share-based compensation expense.

For purposes of pro forma disclosures, the estimated fair value of the options and shares under the employee stock purchase plan are amortized to expenseover their assumed vesting periods. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair valuerecognition provisions of SFAS No. 123, to all stock-related compensation.


(in thousands, except pershare data)

2005

2004

2003

Net income, as reported $ 264,645 $ 468,390 $ 441,229 Add: Stock-related

compensationexpense included inreported net income,net of income taxes 461 880 770

Deduct: Stock-relatedcompensationexpense determinedunder the fair valuemethod, net ofincome taxes (5,021) (87,339) (19,728)

Pro forma net income $ 260,085 $ 381,931 $ 422,271 Earnings per share:

Basic, as reported $ 2.50 $ 4.20 $ 4.03

Basic, pro forma $ 2.46 $ 3.41 $ 3.86

Diluted, asreported $ 2.48 $ 4.06 $ 3.89

Diluted, pro forma $ 2.44 $ 3.32 $ 3.73

52


Table of ContentsThe SFAS No. 123 stock-related compensation expense in the above table decreased in the fiscal year ended September 30, 2005 compared to the prior

years. This decline was primarily due to the Company, effective September 1, 2004, vesting all employee options then outstanding with an exercise price inexcess of $54.10 (the closing stock price on August 31, 2004). The accelerated vesting was approved by the Compensation and Succession Planning Committeeof the Company’s board of directors for employee retention purposes and in anticipation of the requirements of SFAS No. 123R. As a result of the acceleratedvesting, the pro-forma compensation expense and the corresponding reduction in diluted earnings per share in fiscal 2004 was significantly greater than thepro-forma compensation expense and the corresponding reduction in diluted earnings per share in fiscal 2005 and 2003.

The diluted earnings per share calculations consider the 5% convertible subordinated notes as if converted and, therefore, the after-tax effect of interestexpense related to these notes is added back to net income in determining income available to common stockholders.

Note 2. Acquisitions In May 2004, the Company acquired Imedex, Inc. (“Imedex”), an accredited provider of continuing medical education for physicians, for approximately$16.6 million in cash. The acquisition of Imedex continued the Company’s efforts to add incremental services that support manufacturers and healthcareproviders along the pharmaceutical supply channel. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upontheir estimated fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible and identified intangible assets acquired by$12.5 million, which has been allocated to goodwill.

In February 2004, the Company acquired MedSelect, Inc. (“MedSelect”), a provider of automated medication and supply dispensing cabinets, forapproximately $13.7 million in cash, including transaction costs. The acquisition of MedSelect enhances the Company’s ability to offer fully scalable andflexible technology solutions to its customers. The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon theirestimated fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible and identified intangible assets acquired by $9.8million, which has been allocated to goodwill.

In fiscal 2002, the Company acquired a 20% equity interest in International Physician Networks (“IPN”), a physician education and managementconsulting company, for $5 million in cash, which was subject to adjustment contingent on the entity achieving defined earnings targets in calendar 2002. Infiscal 2003, the Company satisfied the residual contingent obligation for the initial 20% equity interest and acquired an additional 40% equity interest for anaggregate $24.7 million in cash. In fiscal 2004, the Company paid $39.0 million for the remaining 40% equity interest. The results of operations of IPN, lessminority interest, have been included in the Company’s consolidated financial statements of operations for the fiscal years ended September 30, 2005, 2004 and2003.

In June 2003, the Company acquired Anderson Packaging Inc. (“Anderson”), a leading provider of physician and retail contracted packaging services topharmaceutical manufacturers, to expand the Company’s packaging capabilities. The purchase price was $100.1 million, which included the repayment ofAnderson debt of $13.8 million and $0.8 million of transaction costs associated with the acquisition. The Company paid part of the purchase price by issuing814,145 shares of its common stock, as set forth in the acquisition agreement, with an aggregate market value of $55.6 million, which was calculated based onthe Company’s closing stock price on the transaction measurement date. The Company paid the remaining purchase price, which was approximately $44.5million, in cash. In fiscal 2004, the Company paid a final post-closing working capital adjustment of $0.3 million.

In January 2003, the Company acquired US Bioservices Corporation (“US Bio”), a national pharmaceutical products and services provider focused on themanagement of high-cost complex therapies and reimbursement support, to expand the Company’s manufacturer service offerings within the specialtypharmaceutical business. The total base purchase price was $160.2 million, which included the repayment of US Bio debt of $14.8 million and $1.5 million oftransaction costs associated with the acquisition. The Company paid part of the base purchase price by issuing 2,399,091 shares of its common stock, as set forthin the acquisition agreement, with an aggregate market value of $131.0 million, which was calculated based on an average of the Company’s closing stock priceon the two days before and the two days after the transaction measurement date. The Company paid the remaining $29.2 million of the base purchase price incash. In fiscal 2003, a contingent payment of $2.5 million was paid in cash by the Company.

53


Table of ContentsIn January 2003, the Company acquired Bridge Medical, Inc. (“Bridge”), a leading provider of barcode-enabled point-of-care software designed to reduce

medication errors, to enhance the Company’s offerings in the pharmaceutical supply channel. The total base purchase price was $28.4 million, which included$0.7 million of transaction costs associated with the acquisition. The Company paid part of the base purchase price by issuing 401,780 shares of its commonstock with an aggregate market value of $22.9 million, which was calculated based on a 30-day average of the Company’s closing stock price for the periodending three days prior to the transaction closing date, as set forth in the acquisition agreement. The remaining base purchase price was paid with $5.5 million ofcash. In June 2005, the Company agreed to sell substantially all of the assets of Bridge (see Note 3).

The following table summarizes the allocation of the purchase price, including transaction costs, based on the fair values of the Imedex, MedSelect, IPN,Anderson, US Bio, and Bridge assets and liabilities at the effective dates of the respective acquisitions (in thousands):

Cash $ 8,907 Accounts receivable 65,398 Inventory 18,952 Property and equipment 24,263 Goodwill 229,843 Intangible assets 81,612 Deferred tax assets 17,670 Other assets 3,850 Current and other liabilities (59,772)

Fair value of net assetsacquired $ 390,723

Intangible assets of $81.6 million consist of $31.2 million of trade names, which have indefinite lives and are not subject to amortization, $32.1 million ofcustomer relationships, which have a weighted average life of 12 years, $11.2 million of non-compete agreements, which have a weighted average life of 4 years,$4.8 million of software, which has a weighted average life of 3 years, and $2.3 million of patents, which has a weighted average seven-year life. Deferred taxassets principally relate to net operating losses and research and development costs incurred by Bridge prior to the acquisition. In connection with the sale ofsubstantially all of the assets of Bridge (see Note 3), $9.4 million of previously acquired goodwill was written-off from the Company’s consolidated balancesheet.

All of the goodwill associated with the aforementioned acquisitions was assigned to the Pharmaceutical Distribution segment. The goodwill associatedwith the US Bio and Bridge acquisitions of $109.2 million is not deductible for income tax purposes.

In June 2003, the Company amended the 2002 agreement under which it acquired AutoMed Technologies, Inc (“AutoMed”). Pursuant to the amendment,the former stockholders of AutoMed agreed to eliminate their right to receive up to $55 million in contingent payments based on AutoMed achieving definedearnings targets through the end of calendar 2004. In consideration thereof, the Company paid $9.8 million in July 2003 to the former stockholders of Automedunder the amendment. This amount was recorded as additional purchase price and goodwill.

Had the aforementioned acquisitions been consummated at the beginning of the respective fiscal years, the Company’s consolidated total revenue, netincome and diluted earnings per share for the fiscal years ended September 30, 2004 and 2003 would not have been materially different from the reportedamounts.

Note 3. Discontinued Operations In June 2005, the Company agreed to sell substantially all of the assets of Bridge, a component of the Company’s Pharmaceutical Distribution reportablesegment, for $11.0 million. The Bridge sale closed in July 2005 and is subject to a working capital adjustment. The Company recorded an estimated loss on saleof the business of $4.6 million, net of tax.

In December 2004, the Company sold Rita Ann Distributors (“Rita Ann”), its cosmetics distribution business, which was a component of itsPharmaceutical Distribution reportable segment, for $3.6 million, subject to a working capital adjustment. The Company recorded an estimated loss on sale ofRita Ann of $6.5 million, net of tax.

Operating revenue of Bridge and Rita Ann was $12.3 million, $58.2 million, and $73.3 million during the fiscal years ended September 30, 2005, 2004 and2003, respectively, and loss (income) before income taxes was $7.8 million, $10.5 million, and ($3.0) million during the fiscal years ended September 30, 2005,2004, and 2003, respectively.

54


Table of Contents

Note 4. Income Taxes The income tax provision is as follows (in thousands):


2005

2004

2003

Current provision: Federal $ 138,699 $ 224,320 $ 139,765State and local 21,178 24,369 19,458

159,877 248,689 159,223 Deferred provision:

Federal 19,076 37,243 111,421State and local (2,050) 10,093 15,437

17,026 47,336 126,858 Provision for income

taxes $ 176,903 $ 296,025 $ 286,081

A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:


2005

2004

2003

Statutory federal

income tax rate 35.0% 35.0% 35.0%State and local income

tax rate, net offederal tax benefit 3.1 3.2 3.2

Other (0.4) 0.2 1.0 Effective income tax

rate 37.7% 38.4% 39.2%

Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reportingamounts. Significant components of the Company’s deferred tax liabilities (assets) are as follows (in thousands):

September 30,

2005

2004

Inventory $ 486,791 $ 481,813 Property and equipment 19,114 12,517 Goodwill 63,904 47,470 Other 936 6,708

Gross deferred taxliabilities 570,745 548,508

Net operating loss and

tax creditcarryforwards (51,075) (44,977)

Capital losscarryforwards (3,924) (1,723)

Allowance for doubtfulaccounts (68,892) (60,160)

Accrued expenses (13,800) (31,834)Employee and retiree

benefits (30,052) (28,339)Other (27,292) (48,502)

(195,035) (215,535)


Gross deferred taxassets

Valuation allowance fordeferred tax assets 33,490 34,115

Deferred tax

assets, afterallowance (161,545) (181,420)

Net deferred tax

liability $ 409,200 $ 367,088

In fiscal 2005, 2004 and 2003, tax benefits of $15.3 million, $4.0 million and $14.4 million, respectively, related to the exercise of employee stock options

were recorded as additional paid-in capital.

As of September 30, 2005, the Company had $31.2 million of potential tax benefits from federal net operating loss carryforwards expiring in 16 to 17years, and $17.8 million of potential tax benefits from state operating loss carryforwards

55


Table of Contentsexpiring in 1 to 20 years. As of September 30, 2005, the Company had $2.1 million of federal and state alternative minimum tax credit carryforwards, and $3.9million of potential tax benefits from capital loss carryforwards expiring in 1 to 4 years.

In fiscal year 2005, the Company decreased the valuation allowance on deferred tax assets by $0.6 million primarily due to the use of certain state netoperating loss carryforwards. In fiscal year 2004, the Company decreased the valuation allowance on deferred tax assets by $7.7 million due to the expiration ofcapital loss carryforwards. At September 30, 2005, $31.1 million of the remaining valuation allowance has been recorded as a component of goodwill, downfrom $33.7 million at September 30, 2004 due to the use of state net operating loss carryforwards. Under current accounting rules, any future reduction of thisvaluation allowance, due to the realization of the related deferred tax assets, will reduce goodwill.

Income tax payments, net of refunds, were $132.6 million, $200.1 million and $118.4 million in the fiscal years ended September 30, 2005, 2004 and2003, respectively.

Note 5. Goodwill and Other Intangible Assets Following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the fiscal years ended September 30, 2005 and 2004(in thousands):

PharmaceuticalDistribution

PharMerica

Total

Goodwill at

September 30,2003 $ 2,121,757 $ 268,956 $ 2,390,713

Goodwill recognizedin connection withthe acquisition ofImedex,MedSelect, andIPN 56,410 — 56,410

Goodwill recognizedin connection withthe acquisition ofother businesses 1,152 — 1,152

Goodwill at

September 30,2004 2,179,319 268,956 2,448,275

Goodwill recognizedin connection withan acquisition of abusiness 2,357 — 2,357

Adjustment togoodwill due topurchase priceadjustments 733 — 733

Sale of Bridge (9,357) — (9,357)Adjustment to

goodwill relatingto deferred taxassets (5,130) (5,310) (10,440)

Goodwill at

September 30,2005 $ 2,167,922 $ 263,646 $ 2,431,568

During the fiscal year ended September 30, 2005, in connection with the sale of substantially all of the assets of Bridge, $9.4 million of previouslyacquired goodwill was removed from the Company’s consolidated balance sheet. Additionally, the Company reduced goodwill at September 30, 2005 to recordacquired deferred tax assets at their estimated net realizable value.

Following is a summary of other intangible assets (in thousands):

September 30, 2005

September 30, 2004

GrossCarryingAmount

AccumulatedAmortization

NetCarryingAmount

GrossCarryingAmount

AccumulatedAmortization

NetCarryingAmount

Unamortizedintangibles-tradenames $ 254,782 $ — $ 254,782 $ 257,652 $ — $ 257,652

Amortizedintangibles-customer

75,504 (29,188) 46,316 89,852 (26,701) 63,151


lists andother

Total other

intangibleassets $ 330,286 $ (29,188) $ 301,098 $ 347,504 $ (26,701) $ 320,803

56


Table of ContentsDuring the fiscal year September 30, 2005, the Company recorded an impairment charge of $5.3 million relating to certain intangible assets within its

technology operations.

Amortization expense for other intangible assets was $10.3 million, $10.0 million and $7.0 million in the fiscal years ended September 30, 2005, 2004 and2003, respectively. Amortization expense for other intangible assets is estimated to be $10.1 million in fiscal 2006, $8.8 million in fiscal 2007, $5.0 million infiscal 2008, $3.3 million in fiscal 2009, $3.2 million in fiscal 2010, and $15.9 million thereafter.

Note 6. Debt Debt consisted of the following:

September 30,

Dollars in thousands

2005

2004

Blanco revolving credit facility at 4.53%and 3.34%, respectively, due 2006 $ 55,000 $ 55,000

AmerisourceBergen securitizationfinancing due 2007 — —

Revolving credit facility due 2009 — — $400,000, 5 5/8% senior notes due 2012 398,010 — $500,000, 5 7/8% senior notes due 2015 497,508 — Term loan facility at 3.02% — 180,000Bergen 7 1/4% senior notes due 2005 — 99,9398 1/8% senior notes due 2008 — 500,0007 1/4% senior notes due 2012 — 300,000AmeriSource 5% convertible

subordinated notes due 2007 — 300,000Other 2,193 3,532

Total debt 952,711 1,438,471Less current portion 1,232 281,360

Total, net of current portion $ 951,479 $ 1,157,111

Long-Term Debt In September 2005, the Company issued $400 million of 5.625% senior notes due September 15, 2012 (the “2012 Notes”) and $500 million of 5.875%senior notes due September 15, 2015 (the “2015 Notes”). The 2012 Notes and 2015 Notes each were sold at 99.5% of principal amount and have an effectiveinterest yield of 5.71% and 5.94%, respectively. Interest on the 2012 Notes and the 2015 Notes is payable semiannually in arrears, commencing on March 15,2006. Both the 2012 Notes and the 2015 Notes are redeemable at the Company’s option at a price equal to the greater of 100% of the principal amount thereof, orthe sum of the discounted value of the remaining scheduled payments, as defined. In addition, at any time before September 15, 2008, the Company may redeemup to an aggregate of 35% of the principal amount of the 2012 Notes or the 2015 Notes at redemption prices equal to 105.625% and 105.875%, respectively, ofthe principal amounts thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of redemption, with the cash proceeds of one or moreequity issuances. In connection with the issuance of the 2012 Notes and the 2015 Notes, the Company incurred approximately $6.3 million and $7.9 million ofcosts, respectively, which were deferred and are being amortized over the terms of the notes.

The gross proceeds from the sale of the 2012 Notes and the 2015 Notes were used to finance the early retirement of the $500 million of 8 1/8% senior notesdue 2008 and $300 million of 7 1/4% senior notes due 2012 in September 2005, including the payment of $102.3 million of premiums and other costs.Additionally, the Company expensed $8.5 million of deferred financing costs related to the retirement of the 7 1/4% Notes and the 8 1/8% Notes.

In December 2004, the Company entered into a $700 million five-year senior unsecured revolving credit facility (the “Senior Revolving Credit Facility”)with a syndicate of lenders. The Senior Revolving Credit Facility replaced the Senior Credit Agreement, as defined below. There were no borrowings outstandingunder the Senior Revolving Credit Facility at September 30, 2005. Interest on borrowings under the Senior Revolving Credit Facility accrues at specific ratesbased on the Company’s debt rating. In April 2005, the Company’s debt rating was raised by one of the rating agencies and in accordance with the terms of theSenior Revolving Credit Facility, interest on borrowings accrue at either 80 basis points over LIBOR or the prime rate at September 30, 2005. Availability underthe Senior Revolving Credit Facility is reduced by the amount of outstanding letters of

57


Table of Contentscredit ($12.0 million at September 30, 2005). The Company pays quarterly facility fees to maintain the availability under the Senior Revolving Credit Facility atspecific rates based on the Company’s debt rating. In April 2005, the rate payable to maintain the availability of the $700 million commitment was reduced to 20basis points per annum resulting from the Company’s improved debt rating. In connection with entering into the Senior Revolving Credit Facility, the Companyincurred approximately $2.5 million of costs, which were deferred and are being amortized over the life of the facility. The Company may choose to repay orreduce its commitments under the Senior Revolving Credit Facility at any time. The Senior Revolving Credit Facility contains covenants that impose limitationson, among other things, additional indebtedness, distributions and dividends to stockholders, and investments. Additional covenants require compliance withfinancial tests, including leverage and minimum earnings to fixed charges ratios.

In August 2001, the Company had entered into a senior secured credit agreement (the “Senior Credit Agreement”) with a syndicate of lenders. The SeniorCredit Agreement consisted of a $1.0 billion revolving credit facility (the “Revolving Facility”) and a $300 million term loan facility (the “Term Facility”), bothof which had been scheduled to mature in August 2006. The Term Facility had scheduled quarterly maturities, which began in December 2002, totaling $60million in each of fiscal 2003 and 2004, $80 million in fiscal 2005 and $100 million in fiscal 2006. The company previously paid the scheduled quarterlymaturities of $60 million in fiscal 2004 and 2003. In December 2004, in connection with entering into the Senior Revolving Credit Facility, as defined above, theCompany repaid the remaining $180 million outstanding under the Term Facility and there were no borrowings under the Revolving Facility. In connection withthe early repayment of the Term Facility, the Company incurred a loss of $1.0 million relating to the write-off of deferred financing costs.

In April 2005, the Company entered into a new $55 million Blanco revolving credit facility, which replaced the previously existing facility. The Blancofacility is not classified in the current portion of long-term debt in the accompanying consolidated balance sheet at September 30, 2005 because the Company hasthe ability and intent to refinance it on a long-term basis. Borrowings under the new Blanco revolving credit facility are guaranteed by the Company, whereasborrowings on the previous facility were secured by the Senior Revolving Credit Facility (defined above). The new facility expires in April 2006 and borrowingsunder the new facility will bear interest at LIBOR plus 90 basis points.

During the fiscal year ended September 30, 2005, the Company paid $100 million to redeem the Bergen 7 1/4% Senior Notes due June 1, 2005, upon theirmaturity.

In November 2002, the Company issued $300 million of 7 1/4% senior notes due November 15, 2012 (the “7 1/4% Notes”). The 7 1/4% Notes wereredeemable at the Company’s option at any time before maturity at a redemption price equal to 101% of the principal amount thereof plus accrued and unpaidinterest and liquidated damages, if any, to the date of redemption and, under some circumstances, a redemption premium. The Company used the net proceeds ofthe 7 1/4% Notes to repay $15.0 million of the Term Facility in December 2002, to repay $150.0 million in aggregate principal of the Bergen 7 3/8% senior notesin January 2003 and redeem the PharMerica 8 3/8% senior subordinated notes due 2008 (the “8 3/8% Notes”) at a redemption price equal to 104.19% of the$123.5 million principal amount in April 2003. The cost of the redemption premium of $5.2 million, less $1.0 million representing the unamortized premium onthe 8 3/8% Notes, was reflected in the Company’s consolidated statement of operations for the fiscal year ended September 30, 2003 as a loss on the earlyretirement of debt. In connection with the issuance of the 7 1/4% Notes, the Company incurred approximately $5.7 million of costs which were deferred and werebeing amortized over the ten-year term of the notes. As previously mentioned, the 7 1/4% Notes were repaid in September 2005.

In August 2001, the Company issued $500 million of 8 1/8% senior notes due September 1, 2008 (the “8 1/8% Notes”). The 8 1/8% Notes were redeemableat the Company’s option at any time before maturity at a redemption price equal to 101% of the principal amount thereof plus accrued and unpaid interest andliquidated damages, if any, to the date of redemption and, under some circumstances, a redemption premium. As previously mentioned, the 8 1/8% Notes wererepaid in September 2005.

In December 2004, the Company announced that it would redeem its 5% convertible subordinated notes at a redemption price of 102.143% of the principalamount of the notes plus accrued interest through the redemption date of January 3, 2005. The noteholders were given the option to accept cash or convert thenotes to common stock of the Company. The notes were convertible into 5,663,730 shares of common stock, which translated to a conversion ratio of 18.8791shares of common stock for each $1,000 principal amount of notes. In connection with the redemption, the Company issued 5,663,144 shares of common stockfrom treasury to noteholders to redeem substantially all of the notes and paid $31,000 to redeem the remaining notes.

The indentures governing the 2012 Notes, the 2015 Notes, and the Senior Revolving Credit Facility contain restrictions and covenants which includelimitations on additional indebtedness; distributions and dividends to stockholders; the repurchase of stock and the making of other restricted payments; issuanceof preferred stock; creation of certain liens; capital expenditures; transactions with subsidiaries and other affiliates; and certain corporate acts such as mergers,consolidations, and the sale of

58


Table of Contentssubstantially all assets. Additional covenants require compliance with financial tests, including leverage and fixed charge coverage ratios, and maintenance ofminimum tangible net worth.

Receivables Securitization Financing In fiscal 2003, the Company entered into a new $1.05 billion receivables securitization facility (“Securitization Facility”) and terminated the AmeriSourceand Bergen securitization facilities. In connection with the Securitization Facility, AmerisourceBergen Drug Corporation (“ABDC”) sells on a revolving basiscertain accounts receivable to AmeriSource Receivables Financial Corporation, a wholly-owned special purpose entity, which in turn sells a percentageownership interest in the receivables commercial paper conduits sponsored by financial institutions. ABDC is the servicer of the accounts receivable under theSecuritization Facility. After the maximum limit of receivables sold has been reached and as sold receivables are collected, additional receivables may be sold upto the maximum amount available under the facility. In December 2004, the Company amended the Securitization Facility and under the terms of the amendmentthe $550 million (three-year tranche) originally scheduled to expire in July 2006 was increased to $700 million and the expiration date was extended toNovember 2007. Additionally, the $500 million (364-day tranche) scheduled to expire in July 2005 was reduced to $350 million and the expiration date wasextended to December 2005. In September 2005, the Company elected to terminate the 364-day tranche, effective October 31, 2005. Interest rates are based onprevailing market rates for short-term commercial paper plus a program fee, and will vary based on the Company’s debt ratings. The program fee is 60 basispoints for the three-year tranche and 35 basis points for the 364-day tranche at September 30, 2005. Additionally, the commitment fee on any unused credit wasreduced to 20 basis points for the three-year tranche and to 17.5 basis points for the 364-day tranche at September 30, 2005. At September 30, 2005, there wereno borrowings outstanding under the Securitization Facility. In connection with entering into the Securitization Facility and the amendments thereto, theCompany incurred approximately $2.8 million of costs, which were deferred and are being amortized over the life of the facility. The Company securitizes itstrade accounts, which are generally non-interest bearing, in transactions that are accounted for as borrowings under SFAS No. 140, “Accounting for Transfersand Servicing of Financial Assets and Extinguishments of Liabilities.”

The agreement governing the Securitization Facility contains restrictions and covenants which include limitations on the incurrence of additionalindebtedness, making of certain restricted payments, issuance of preferred stock, creation of certain liens, and certain corporate acts such as mergers,consolidations and sale of substantially all assets.

The Company previously utilized the receivables securitization facilities initiated by AmeriSource (the “ARFC Securitization Facility”) and Bergen (the“Blue Hill Securitization Program”).

The ARFC Securitization Facility previously provided a total borrowing capacity of $400 million. In connection with the ARFC Securitization Facility,ABDC sold on a revolving basis certain accounts receivable to ARFC, which in turn sold a percentage ownership interest in the receivables to a commercialpaper conduit sponsored by a financial institution. ABDC was the servicer of the accounts receivable under the ARFC Securitization Facility. The ARFCSecuritization Facility had an expiration date of May 2004, prior to its termination.

The Blue Hill Securitization Program previously provided a total borrowing capacity of $450 million. In connection with the Blue Hill SecuritizationProgram, ABDC sold on a revolving basis certain accounts receivable to a 100%-owned special purpose entity (“Blue Hill”), which in turn sold a percentageownership interest in the receivables to a commercial paper conduit sponsored by a financial institution. ABDC was the servicer of the accounts receivable underthe Blue Hill Securitization Program. The Blue Hill Securitization Program had an expiration date of December 2005, prior to its termination.

Transactions under the ARFC Securitization Facility and the Blue Hill Securitization Program were accounted for as borrowings in accordance with SFASNo. 140.

Other Information Scheduled future principal payments of long-term debt are $56.2 million in fiscal 2006, $0.5 million in fiscal 2007, $0.5 million in fiscal 2008, $400.0million in fiscal 2012 and $500.0 million in fiscal 2015.

Interest paid on the above indebtedness during the fiscal years ended September 30, 2005, 2004 and 2003 was $94.2 million, $111.0 million and $134.2million, respectively.

Total amortization of financing fees and expenses, as well as the premiums and discounts related to the adjustment of the carrying values of certain debt tofair value in connection with the merger and original issue discounts for the fiscal years ended September 30, 2005, 2004 and 2003 was $4.1 million, $7.4million, and $7.4 million, respectively. These amounts are included in interest expense in the accompanying consolidated statements of operations.

59


Table of Contents

Note 7. Stockholders’ Equity and Earnings per Share The authorized capital stock of the Company consists of 300,000,000 shares of common stock, par value $0.01 per share (the “Common Stock”), and10,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”).

The board of directors are authorized to provide for the issuance of shares of Preferred Stock in one or more series with various designations, preferencesand relative, participating, optional or other special rights and qualifications, limitations or restrictions. Except as required by law, or as otherwise provided bythe board of directors of the Company, the holders of Preferred Stock will have no voting rights and will not be entitled to notice of meetings of stockholders.Holders of Preferred Stock will be entitled to receive, when declared by the board of directors, out of legally available funds, dividends at the rates fixed by theboard of directors for the respective series of Preferred Stock, and no more, before any dividends will be declared and paid, or set apart for payment, on CommonStock with respect to the same dividend period. No shares of Preferred Stock have been issued as of September 30, 2005.

The holders of the Company’s Common Stock are entitled to one vote per share and have the exclusive right to vote for the board of directors and for allother purposes as provided by law. Subject to the rights of holders of the Company’s Preferred Stock, holders of Common Stock are entitled to receive ratably ona per share basis such dividends and other distributions in cash, stock or property of the Company as may be declared by the board of directors from time to timeout of the legally available assets or funds of the Company. The Company has paid quarterly dividends of $0.025 per share on Common Stock since the firstquarter of fiscal 2002.

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of Common Stock,subject to market conditions and to compliance with the stock repurchase restrictions contained in the indentures governing the Company’s senior notes and inthe credit agreement for the Company’s senior credit facility. In August 2005, the Company’s board of directors authorized an increase to the amount availableunder this program by approximately $394 million, bringing the total remaining availability to $750 million, and the total repurchase program to approximately$844 million. During fiscal 2005, the Company purchased approximately $94 million of its Common Stock under this program for a weighted average price of$65.50. As of September 30, 2005, the Company has $750 million of remaining authorization to repurchase its Common Stock under this program.

In February 2005, the Company’s board of directors authorized the repurchase up to an aggregate amount of 5.7 million shares of the Company’s CommonStock, subject to market conditions. In February 2005, the Company acquired 0.4 million shares in the open market for a total of $25.9 million. In addition, onMarch 30, 2005, the Company entered into an Accelerated Share Repurchase (“ASR”) transaction with a financial institution to purchase the remaining5.3 million shares immediately from the financial institution at a cost of $293.8 million. The financial institution subsequently purchased an equivalent number ofshares in the open market through April 21, 2005. The ASR transaction was completed on April 21, 2005; as a result, the Company paid the financial institution acash settlement of $16.6 million. As of September 30, 2005, the Company had acquired all the shares authorized under this program for a total of $336.3 million,which includes the above cash settlement of $16.6 million. The cash settlement was recorded as an adjustment to additional paid-in capital.

In August 2004, the Company’s board of directors authorized the repurchase of Common Stock up to an aggregate amount of $500 million, subject tomarket conditions. During the fiscal year ended September 30, 2004, the Company had acquired 2.8 million shares of its Common Stock for $144.7 million.During the fiscal year ended September 30, 2005, the Company acquired 6.5 million shares of its Common Stock for $355.3 million to complete this program.

Basic earnings per share is computed on the basis of the weighted average number of shares of Common Stock outstanding during the periods presented.Diluted earnings per share is computed on the basis of the weighted average number of shares of Common Stock outstanding during the periods plus the dilutiveeffect of stock options. Additionally, the diluted calculations consider the 5% convertible subordinated notes (see Note 6) as if converted during the periods thatthe notes were outstanding and, therefore, the after-tax effect of interest expense related to these notes is added back to income from continuing operations indetermining income from continuing operations available to common stockholders for the periods that the notes were outstanding. On January 3, 2005, theCompany completed the redemption of the 5% convertible subordinated notes. Subsequent to the redemption, a number of shares substantially equal to the sharesof Common Stock issued in connection with the 5% note redemption were repurchased by the Company under the 5.7 million share repurchase programdescribed above. The following table (in thousands) is a reconciliation of the numerator and denominator of the computation of basic and diluted earnings pershare.

60


Table of Contents


2005

2004

2003

Income from continuingoperations, beforecumulative effect ofchange in accounting $ 291,922 $ 474,874 $ 443,065

Interest expense -convertiblesubordinated notes,net of income taxes 2,539 10,141 9,997

Income from

continuingoperationsavailable tocommonstockholders $ 294,461 $ 485,015 $ 453,062

Weighted average

common sharesoutstanding - basic 105,667 111,617 109,513

Effect of dilutivesecurities:

Options to purchaseCommon Stock 658 498 777

Convertiblesubordinatednotes 1,445 5,664 5,664

Weighted

averagecommonsharesoutstanding- diluted 107,770 117,779 115,954

Note 8. Pension and Other Benefit Plans The Company sponsors various retirement benefit plans, including defined benefit pension plans, defined contribution plans, postretirement medical plansand a deferred compensation plan covering eligible employees. The expense of these plans was $17.4 million in fiscal year 2005, $21.6 million in fiscal year2004, and $26.9 million in fiscal year 2003. The Company uses a June 30 measurement date for its pension and other postretirement benefit plans.

Defined Benefit Plans The Company provides a benefit for the majority of its former AmeriSource employees under three different noncontributory defined benefit pension plansconsisting of a salaried plan, a union plan and a supplemental executive retirement plan. For each employee, the benefits are based on years of service andaverage compensation. Pension costs, which are computed using the projected unit credit cost method, are funded to at least the minimum level required bygovernment regulations. During fiscal 2002, the salaried and the supplemental executive retirement plans were closed to new participants and benefits that can beearned by active participants in the plan were limited.

The Company has an unfunded supplemental executive retirement plan for its former Bergen officers and key employees. This plan is a “target” benefitplan, with the annual lifetime benefit based upon a percentage of salary during the five final years of pay at age 62, offset by several other sources of incomeincluding benefits payable under a prior supplemental retirement plan. During fiscal 2002, the plan was closed to new participants and benefits that can be earnedby active participants were limited.

61


Table of ContentsThe following table sets forth (in thousands) a reconciliation of the changes in the Company-sponsored defined benefit pension plans:


2005

2004

Change in Projected

Benefit Obligations: Benefit obligation at

beginning of year $ 98,986 $ 99,011 Service cost 2,954 3,834 Interest cost 5,885 5,866 Actuarial (gains) losses 16,104 (2,786)Benefit payments (6,937) (6,939)

Benefit obligationat end of year $ 116,992 $ 98,986

Change in Plan Assets: Fair value of plan assets

at beginning of year $ 64,210 $ 56,605 Actual return on plan

assets 5,121 6,115 Employer contributions 12,039 9,230 Expenses (1,223) (801)Benefit payments (6,937) (6,939)

Fair value of planassets at end ofyear $ 73,210 $ 64,210

Funded Status and

AmountsRecognized:

Funded status $ (43,782) $ (34,776)Unrecognized net

actuarial loss 41,816 25,562 Unrecognized prior

service cost 77 199

Net amountrecognized $ (1,889) $ (9,015)

Amounts recognized in

the balance sheetsconsist of:

Accrued benefitliability $ (42,305) $ (31,322)

Intangible asset 77 199 Accumulated other

comprehensiveloss 40,339 22,108

Net amount

recognized $ (1,889) $ (9,015)

Weighted average assumptions used (as of the end of the fiscal year) in computing the benefit obligation were as follows:

2005

2004

Discount rate 5.25% 6.25%Rate of increase in compensation levels 4.00% 4.00%Expected long-term rate of return on assets 8.00% 8.00%

The expected rate of return for the plans represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit

obligation are to be paid.

62


Table of ContentsThe following table provides components of net periodic benefit cost for the Company-sponsored defined benefit pension plans together with contributions

charged to expense for multi-employer union-administered defined benefit pension plans that the Company participates in (in thousands):


2005

2004

2003

Components of Net

Periodic BenefitCost:

Service cost $ 3,178 $ 4,029 $ 4,735 Interest cost on

projected benefitobligation 5,885 5,866 5,644

Expected return on planassets (5,754) (5,102) (5,082)

Amortization of priorservice cost 137 132 150

Recognized net actuarialloss 1,329 1,738 722

Loss due to curtailmentsand settlements 137 696 —

Net periodic pension

cost of definedbenefit pension plans 4,912 7,359 6,169

Net pension cost ofmulti-employer plans 1,752 1,824 1,673

Total pension

expense $ 6,664 $ 9,183 $ 7,842

Weighted average assumptions used (as of the beginning of the fiscal year) in computing the net periodic benefit cost were as follows:

2005

2004

2003

Discount rate 6.25% 6.00% 7.00%Rate of increase in compensation levels 4.00% 4.00% 5.50%Expected long-term rate of return on

assets 8.00% 8.00% 8.75%

To determine the expected long-term rate of return on assets, the Company considered the current and expected asset allocations, as well as historical andexpected returns on various categories of plan assets.

The board of directors of the Company has a Compensation and Succession Planning Committee (the “Committee”). The Committee is responsible forestablishing the investment policy of any retirement plan, including the selection of acceptable asset classes, allowable ranges of holdings, the definition ofacceptable securities within each class, and investment performance expectations. Additionally, the Committee has established rules for the rebalancing of assetsbetween asset classes and among individual investment managers.

The investment portfolio contains a diversified portfolio of investment categories, including equities, fixed income securities and cash. Securities are alsodiversified in terms of domestic and international securities and large cap and small cap stocks. The actual and target asset allocations expressed as a percentageof the plans’ assets at the measurement date are as follows:

Pension BenefitsAllocation

Target Allocation

2005

2004

2005

2004

Asset Category: Equity securities 48% 51% 50% 50%Debt securities 50 49 50 50 Other 2 — — — Total 100% 100% 100% 100%

Subsequent to the June 30 measurement date, the Committee approved a change in the target allocation for 2006, such that 70% of the plans’ assets will beallocated to equity securities and 30% will be allocated to debt securities.

63


Table of ContentsThe investment goals are to achieve the optimal return possible within the specific risk parameters and, at a minimum, produce results which achieve the

plans’ assumed interest rate for funding the plans over a full market cycle. High levels of risk and volatility are avoided by maintaining diversified portfolios.Allowable investments include government-backed fixed income securities, equity, and cash equivalents. Prohibited investments include unregistered orrestricted stock, commodities, margin trading, options and futures, short-selling, venture capital, private placements, real estate and other high risk investments.

As of September 30, 2005 and 2004, all of the Company-sponsored defined benefit pension plans had projected and accumulated benefit obligations inexcess of plan assets that consist of the following (in thousands):

2005

2004

Accumulated benefit obligation $ 115,515 $ 95,624Projected benefit obligation 116,992 98,986Plan assets at fair value 73,210 64,210

Contributions to the pension plans during fiscal 2006 are expected to be the minimum required of $7.5 million. Expected benefit payments over the next

ten years, which reflect expected future service, are anticipated to be paid as follows (in thousands):

Pension Benefits

Fiscal Year: 2006 $ 6,5922007 4,4852008 4,4512009 4,6822010 4,2702011-2015 29,344 Total $ 53,824

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

The Company owns life insurance covering substantially all of the participants in the Bergen supplemental retirement plans. At September 30, 2005, the

policies have an aggregate cash surrender value of approximately $37.9 million (which is included in other assets in the accompanying consolidated balancesheet) and an aggregate death benefit of approximately $58.2 million.

Postretirement Benefit Plans The Company provides medical benefits to certain retirees, principally former employees of Bergen. Employees became eligible for such postretirementbenefits after meeting certain age and years of service criteria. During fiscal 2002, the plans were closed to new participants and benefits that can be earned byactive participants were limited. As a result of special termination benefit packages previously offered, the Company also provides dental and life insurancebenefits to a limited number of retirees and their dependents. These benefit plans are unfunded.

64


Table of ContentsThe following table sets forth (in thousands) a reconciliation of the changes in the Company-sponsored postretirement benefit plans:


2005

2004

Change in

AccumulatedBenefit Obligations:

Benefit obligation atbeginning of year $ 16,055 $ 20,561

Interest cost 1,142 1,213 Actuarial losses (gains) 4,298 (4,194)Benefit payments (2,079) (1,525)

Benefit obligationat end of year $ 19,416 $ 16,055

Change in Plan Assets: Fair value of plan assets

at beginning of year $ — $ — Employer contributions 2,079 1,525 Benefit payments (2,079) (1,525)

Fair value of planassets at end ofyear $ — $ —

Funded Status and

AmountsRecognized:

Funded status $ (19,416) $ (16,055)Unrecognized net

actuarial loss (gain) 3,972 (479)

Net amountrecognized $ (15,444) $ (16,534)

Amounts recognized in

the balance sheetsconsist of:

Accrued benefitliability $ (15,444) $ (16,534)

Weighted average assumptions used (as of the end of the fiscal year) in computing the funded status of the plans were as follows:

2005

2004

Discount rate 5.25% 6.25%Health care trend rate assumed for next

year 11.0% 12.0%Rate to which the cost trend rate is

assumed to decline 5% 5%Year that the rate reaches the ultimate

trend rate 2014 2014

Assumed health care trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumedhealth care cost trend rates would have the following effects (in thousands):

One Percentage Point

Increase

Decrease

Effect on total service

and interest costcomponents $ 95 $ (79)

Effect on benefitobligation 1,805 (1,504)


The following table provides components of net periodic benefit cost for the Company-sponsored postretirement benefit plans (in thousands):


2005

2004

2003

Components of Net

Periodic BenefitCost:

Interest cost onprojected benefitobligation $ 1,142 $ 1,213 $ 1,374

Amortization of priorservice cost — — 133

Recognized net actuarial(gain) loss (153) 139 (28)

Total

postretirementbenefit expense $ 989 $ 1,352 $ 1,479

65


Table of ContentsWeighted average assumptions used (as of the beginning of the fiscal year) in computing the net periodic benefit cost were as follows:

2005

2004

2003

Discount rate 6.25% 6% 7%Health care trend rate assumed for

next year 12% 13% 11%Rate to which the cost trend rate is

assumed to decline 5% 5% 5%Year that the rate reaches the

ultimate trend rate 2014 2014 2015

Expected postretirement benefit payments over the next ten years are anticipated to be paid as follows (in thousands):

PostretirementBenefits

Fiscal Year: 2006 $ 1,9242007 2,2912008 2,1332009 1,9372010 1,8352011-2015 6,586 Total $ 16,706

Defined Contribution Plans

The Company sponsors the AmerisourceBergen Employee Investment Plan, as amended and restated July 1, 2002, which is a defined contribution 401(k)plan covering salaried and certain hourly employees. Eligible participants may contribute to the plan from 2% to 18% of their regular compensation before taxes.The Company contributes $1.00 for each $1.00 invested by the participant up to the participant’s investment of 3% of salary, and $0.50 for each additional $1.00invested by the participant up to the participant’s investment of an additional 2% of salary. An additional discretionary contribution, in an amount not to exceedthe limits established by the Internal Revenue Code, may also be made depending upon the Company’s performance. All contributions are invested at thedirection of the employee in one or more funds. All contributions vest immediately except for the discretionary contributions made by the Company that vest infull after five years of credited service.

PharMerica sponsors the PharMerica, Inc. 401(k) Profit Sharing Plan, which is a defined contribution 401(k) plan, that is generally available to itsemployees with 90 days of service and excludes those employees covered under a collective bargaining agreement. Eligible participants may contribute 1% to50% of their pretax compensation (1% to 15% prior to January 1, 2004). PharMerica contributes $1.00 for each $1.00 invested by the participant up to the first3% of the participant’s contribution and $0.50 for each additional $1.00 invested by the participant of an additional 2% of salary. The employee and employercontributions, collectively, may not exceed limits established by the Internal Revenue Code. All contributions are invested at the direction of the employee in oneor more investment funds. All contributions vest immediately.

Costs of the defined contribution plans charged to expense for the fiscal years ended September 30, 2005, 2004 and 2003 were $9.2 million, $10.3 millionand $15.9 million, respectively.

Deferred Compensation Plan The Company also sponsors the AmerisourceBergen Corporation 2001 Deferred Compensation Plan, as amended and restated November 1, 2002. Thisunfunded plan, under which 740,000 shares of Common Stock are authorized for issuance, allows eligible officers, directors and key management employees todefer a portion of their annual compensation. The amount deferred may be allocated by the employee to cash, mutual funds or stock credits. Stock credits,including dividend equivalents, are equal to the full and fractional number of shares of Common Stock that could be purchased with the participant’scompensation allocated to stock credits based on the average of closing prices of Common Stock during each month, plus, at the discretion of the board ofdirectors, up to one-half of a share of Common Stock for each full share credited. Stock credit distributions are made in shares of Common Stock. No shares ofCommon Stock have been issued under the deferred compensation plan through September 30, 2005.

66


Table of Contents

Note 9. Stock Compensation Plans Stock Option Plans In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company elected to account for stock-based compensation underAPB No. 25 and its related interpretations for these plans until its adoption of SFAS No. 123R. Under APB 25, generally, when the exercise price of theCompany’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

The Company currently has seven employee stock option plans that provide for the granting of incentive and nonqualified stock options to acquire sharesof Common Stock to employees at a price not less than the fair market value of the Common Stock on the date the option is granted. Option terms and vestingperiods are determined at the date of grant by a committee of the board of directors. Options generally vest over four years and expire in ten years. The Companyalso has six non-employee director stock option plans that provide for the granting of nonqualified stock options to acquire shares of Common Stock tonon-employee directors at the fair market value of the Common Stock on the date of the grant. Vesting periods for the non-employee director plans range fromimmediate vesting to three years and options expire in ten years.

At September 30, 2005, there were outstanding options to purchase 8.1 million shares of Common Stock under the aforementioned plans. Options for anadditional 0.9 million shares may be granted under one of the employee stock option plans and options for an additional 0.2 million shares may be granted underone of the non-employee director stock option plans.

All outstanding stock options granted prior to February 15, 2001 under the above plans became fully vested in August 2001, and generally becameexercisable in August 2002. As a result of the accelerated vesting of stock options, the Company recorded a charge of $0.3 million, $1.0 million and $1.1 millionin fiscal 2005, 2004, and 2003, respectively. These charges were recorded within distribution, selling and administrative expenses in the accompanyingconsolidated statements of operations.

Effective September 1, 2004, the Company vested all employee options then outstanding with an exercise price in excess of $54.10 (the closing stock priceon August 31, 2004). The accelerated vesting was approved by the Compensation and Succession Planning Committee of the Company’s board of directors foremployee retention purposes and in anticipation of the requirements of SFAS No. 123R. In accordance with APB No. 25, the Company did not incur a chargerelated to this accelerated vesting because the exercise price of all the accelerated options was greater than $54.10.

A summary of the Company’s stock option activity and related information for its option plans for the fiscal years ended September 30, 2005, 2004 and2003 were as follows:

2005

2004

2003

Options(000’s)

WeightedAverageExercise

Price

Options(000’s)


Price

Options(000’s)


Price

Outstanding atbeginning ofyear 9,402 $ 57 8,255 $ 56 7,801 $ 53

Granted 2,134 62 2,405 58 2,430 56Exercised (3,187) 55 (433) 35 (1,385) 33Forfeited (287) 66 (825) 62 (591) 67

Outstanding at

end of year 8,062 $ 59 9,402 $ 57 8,255 $ 56 Exercisable at

end of year 5,962 $ 57 9,249 $ 57 3,616 $ 49

67


Table of ContentsA summary of the status of options outstanding at September 30, 2005 follows:

Outstanding Options

Exercisable Options

Exercise PriceRange

Number(000’s)

WeightedAverage

RemainingContractual

Life


Price

Number(000’s)


Price

$12 - $ 50 998 4 years $ 33 998 $ 33$51 - $ 60 2,564 8 years 56 2,492 56$61 - $ 65 2,888 8 years 63 860 64$66 - $ 70 1,512 6 years 70 1,512 70$71 - $ 103 100 5 years 81 100 81

Total 8,062 7 years $ 59 5,962 $ 57

Employee Stock Purchase Plan In February 2002, the stockholders approved the adoption of the AmerisourceBergen 2002 Employee Stock Purchase Plan, under which up to an aggregateof 4,000,000 shares of Common Stock may be sold to eligible employees (generally defined as employees with at least 30 days of service with the Company).Under this plan, the participants may elect to have the Company withhold up to 25% of base salary to purchase shares of the Company’s Common Stock at aprice equal to 85% of the fair market value of the stock on the first or last business day of each six-month purchase period, whichever is lower. Each participantis limited to $25,000 of purchases during each calendar year. During the fiscal years ended September 30, 2005 and 2004, the Company acquired 104,309 sharesand 115,281 shares, respectively, from the open market for issuance to participants in this plan. As of September 30, 2005, the Company has withheld $1.3million from eligible employees for the purchase of additional shares of Common Stock.

Note 10. Leases and Other Commitments At September 30, 2005, future minimum payments totaling $239.8 million under noncancelable operating leases with remaining terms of more than onefiscal year were due as follows: 2006 - $64.3 million; 2007 - $48.4 million; 2008 - $38.4 million; 2009 - $28.6 million; 2010 - $20.4 million; and thereafter -$39.7 million. In the normal course of business, operating leases are generally renewed or replaced by other leases. Certain operating leases include escalationclauses. Total rental expense was $63.4 million in fiscal 2005, $63.2 million in fiscal 2004 and $61.2 million in fiscal 2003.

During the fiscal year ended September 30, 2005, the Company entered into three sale-leaseback agreements with a financial institution relating to certainequipment located at two of the Company’s new distribution facilities and certain equipment located at one of the Company’s existing distribution facilities thatwas significantly expanded. The net book value of all of the equipment under the three leases totaled $35.3 million and was sold for $36.7 million. During fiscal2004, the Company entered into a sale-leaseback agreement with a financial institution relating to certain equipment located at one of the Company’s newdistribution facilities. The net book value of the equipment, totaling $15.1 million was sold for $15.6 million. The Company deferred the gains associated withthese sale-leaseback agreements, which are being amortized as a reduction of lease expense over the respective operating lease terms.

In December 2004, the Company entered into a distribution agreement with a Canadian influenza vaccine manufacturer to distribute product throughMarch 31, 2015. The agreement includes a commitment to purchase at least 12 million doses per year of the influenza vaccine provided the vaccine is approvedand available for distribution in the United States by the Food and Drug Administration (“FDA”). The Company will be required to purchase the annual doses atmarket prices, as adjusted for inflation and other factors. We expect the Canadian manufacturer will receive FDA approval by the 2006/2007 influenza season;however, FDA approval may be received earlier. If the initial year of the purchase commitment begins in fiscal 2007, then the Company anticipates its purchasecommitment for that year will approximate $66 million. The Company anticipates its total purchase commitment (assuming the commitment commences in fiscal2007) will be approximately $1.1 billion.

During the fiscal year ended September 30, 2005, the Company decided to outsource a significant portion of its information technology activities andentered into a ten-year commitment, effective July 1, 2005, with IBM Global Services, which will assume responsibility for performing the outsourcedinformation technology activities following the completion of certain transition matters. The minimum commitment under the outsourcing arrangement isapproximately $200 million

68


Table of Contents(excluding the above-mentioned transition costs) over a ten-year period; however, the Company believes it will likely spend between $300 million and $400million under the outsourcing arrangement to maintain and improve its information technology infrastructure during that period.

Note 11. Facility Consolidations, Employee Severance and Other In 2001, the Company developed an integration plan to consolidate its distribution network and eliminate duplicative administrative functions. During thefiscal year ended September 30, 2005, the Company decided to outsource a significant portion of its information technology activities as part of the integrationplan. The Company’s plan, as revised, is to have a distribution facility network numbering in the mid-20’s within the next two years and to have successfullycompleted the outsourcing of such information technology activities by the end of fiscal 2006. The plan includes building six new facilities (four of which wereoperational as of September 30, 2005) and closing facilities (twenty-three of which have been closed through September 30, 2005). The fifth facility opened inOctober 2005 and the sixth facility is scheduled to open during fiscal 2006, thereby reducing the Company’s total number of distribution facilities to 28 by theend of fiscal 2006. During fiscal 2005 and 2004, the Company closed six and four distribution facilities, respectively. The Company anticipates closing sixadditional facilities in fiscal 2006.

In September 2001, the Company announced plans to close seven distribution facilities in fiscal 2002, consisting of six former AmeriSource facilities andone former Bergen facility. A charge of $10.9 million was recognized in the fourth quarter of fiscal 2001 related to the AmeriSource facilities, and included $6.2million of severance for approximately 260 warehouse and administrative personnel to be terminated, $2.3 million in lease and contract cancellations, and $2.4million for the write-down of assets related to the facilities to be closed. During the fiscal year ended September 30, 2003, severance accruals of $1.8 millionrecorded in September 2001 were reversed into income because certain employees who were expected to be severed either voluntarily left the Company or wereretained in other positions within the Company.

During the fiscal year ended September 30, 2002, the Company announced further integration initiatives relating to the closure of Bergen’s repackagingfacility and the elimination of certain Bergen administrative functions, including the closure of a related office facility. The cost of these initiatives ofapproximately $19.2 million, which included $15.8 million of severance for approximately 310 employees to be terminated, $1.6 million for lease cancellationcosts, and $1.8 million for the write-down of assets related to the facilities to be closed, resulted in additional goodwill being recorded during fiscal 2002. AtSeptember 30, 2003, all of the employees had been terminated.

During the fiscal year ended September 30, 2003, the Company closed six distribution facilities and eliminated certain administrative and operationalfunctions (“the fiscal 2003 initiatives”). During the fiscal years ended September 30, 2004 and 2003, the Company recorded $0.9 million and $10.3 million,respectively, of employee severance costs relating to the fiscal 2003 initiatives. Approximately 780 employees received termination notices as a result of thefiscal 2003 initiatives, of which substantially all have been terminated.

During the fiscal year ended September 30, 2004, the Company closed four distribution facilities and eliminated duplicative administrative functions (“thefiscal 2004 initiatives”). During the fiscal year ended September 30, 2004, the Company recorded $5.4 million of employee severance costs in connection withthe fiscal 2004 initiatives.

During the fiscal year ended September 30, 2005, the Company announced plans to continue to consolidate and eliminate certain administrative functions,and to outsource a significant portion of the Company’s information technology activities (the “fiscal 2005 initiatives”). The Company plans to have successfullycompleted the outsourcing of such information technology activities by the end of fiscal 2006. During the fiscal year ended September 30, 2005, the Companyrecorded $13.3 million of employee severance and lease cancellation costs primarily related to the 2005 initiatives and $9.4 million of transition costs associatedwith the outsourcing of information technology activities.

As of September 30, 2005, approximately 700 employees had received termination notices as a result of the 2004 and 2005 initiatives, of whichapproximately 630 have been terminated. Additional amounts for integration initiatives will be recognized in subsequent periods as facilities to be consolidatedare identified and specific plans are approved and announced.

Most employees receive their severance benefits over a period of time, generally not to exceed 12 months, while others may receive a lump-sum payment.

69


Table of ContentsThe following table displays the activity in accrued expenses and other from September 30, 2003 to September 30, 2005 related to the integration plan

discussed above (in thousands):

EmployeeSeverance

Lease CancellationCosts and Other

Total

Balance as of

September 30,2003 $ 4,935 $ 81 $ 5,016

Expenserecordedduring theperiod 6,324 1,193 7,517

Payments madeduring theperiod (8,275) (1,206) (9,481)

Balance as of

September 30,2004 2,984 68 3,052

Expenserecordedduring theperiod 10,580 12,143 22,723

Payments madeduring theperiod (8,328) (5,128) (13,456)

Balance as of

September 30,2005 $ 5,236 $ 7,083 $ 12,319

Note 12. Legal Matters and Contingencies In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, includingantitrust, environmental, product liability, regulatory and other matters. Significant damages or penalties may be sought from the Company in some matters, andsome matters may require years for the Company to resolve. The Company establishes reserves based on its periodic assessment of estimates of probable losses.There can be no assurance that an adverse resolution of one or more matters during any subsequent reporting period will not have a material adverse effect on theCompany’s results of operations for that period. However, on the basis of information furnished by counsel and others and taking into consideration the reservesestablished for pending matters, the Company does not believe that the resolution of currently pending matters (including those matters specifically describedbelow), individually or in the aggregate, will have a material adverse effect on the Company’s financial condition.

Stockholder Derivative Lawsuit The Company has been named as a nominal defendant in a stockholder derivative action on behalf of the Company under Delaware law that was filed inMarch 2004 in the U.S. District Court for the Eastern District of Pennsylvania. Also named as defendants in the action are all of the individuals who were servingas directors of the Company prior to the date of filing of the action and certain current and former officers of the Company and its predecessors. The derivativeaction alleged, among other things, breach of fiduciary duty, abuse of control and gross mismanagement against all the individual defendants. It further alleged,among other things, waste of corporate assets, unjust enrichment and usurpation of corporate opportunity against certain of the individual defendants. Thederivative action sought compensatory and punitive damages in favor of the Company, attorneys’ fees and costs, and further relief as may be determined by thecourt. The defendants believe that this derivative action is wholly without merit. In May 2004, the defendants filed a motion to dismiss the action on bothprocedural and substantive grounds. In February 2005, the District Court granted the defendants’ motion to dismiss the entire action. Following the dismissal ofthe action, the derivative plaintiff made demand upon the Company to inspect the Company’s books and records. The Company believes that the demand isimproper under Delaware law and has refused to allow the inspection. The derivative plaintiff obtained the right from the District Court to file an amendedcomplaint within 30 days after resolution of the inspection demand and, thereafter, filed a complaint in the Delaware Chancery Court seeking to compelinspection of certain of the Company’s books and records. On November 30, 2005, the Delaware Chancery Court denied the plaintiff’s request to inspect theCompany’s books and records.

New York Attorney General Subpoena In April 2005, the Company received a subpoena from the Office of the Attorney General of the State of New York (the “NYAG”) requesting documentsand responses to interrogatories concerning the manner and degree to which the Company purchases pharmaceuticals from other wholesalers, often referred to asthe alternate source market, rather than directly from manufacturers. Similar subpoenas have been issued by the NYAG to other pharmaceutical distributors. TheCompany has not been advised of any allegations of misconduct by the Company. The Company has engaged in discussions with the NYAG, initially to clarifythe scope of the subpoena and subsequently to provide background information requested by the NYAG. The Company continues to produce responsiveinformation and documents and to cooperate with the NYAG. The Company believes that it has not engaged in any wrongdoing, but cannot predict the outcomeof this matter.

70


Table of Contents

Note 13. Antitrust Litigation Settlements During the fiscal years ended September 30, 2005 and 2004, the Company recognized gains of $40.1 million and $38.0 million, respectively, from antitrustlitigation settlements with pharmaceutical manufacturers. These gains, which are net of attorney fees and estimated payments due to other parties, were recordedas reductions to cost of goods sold in the Company’s consolidated statements of operations for the fiscal year ended September 30, 2005 and 2004, respectively.

Note 14. Business Segment Information The Company is organized based upon the products and services it provides to its customers, and substantially all of its operations are located in theUnited States. The Company’s operations are comprised of two reportable segments: Pharmaceutical Distribution and PharMerica.

The Pharmaceutical Distribution reportable segment includes the operations of ABDC and AmerisourceBergen Specialty and Packaging groups. Theoperations of the former AmerisourceBergen Technology Group became a part of the overall ABDC operations in fiscal 2005. The Pharmaceutical Distributionreportable segment is comprised of two operating segments: ABDC and the AmerisourceBergen Specialty Group (“ABSG”). The ABDC operating segmentincludes the operations of the AmerisourceBergen Packaging Group.

The PharMerica reportable segment includes the operations of the PharMerica long-term care business (“Long-Term Care”) and a workers’compensation-related business (“Workers’ Compensation”). The PharMerica reportable segment encompasses only the PharMerica operating segment.

In accordance with FAS 131, we have aggregated the operating segment of ABDC and the operating segment of ABSG into one reportable segment, thePharmaceutical Distribution segment. Our decision to aggregate these two operating segments into one reportable segment was based on

• the objective and basic principles of FAS 131,

• the Aggregation Criteria as noted in paragraph 17 of FAS 131 and

• the fact that ABDC and ABSG have similar economic characteristics.

The chief operating decision maker for the Pharmaceutical Distribution segment is the President and Chief Operating Officer of the Company whosefunction is to allocate resources to, and assess the performance of, the ABDC and ABSG operating segments. The President of ABDC and the President ofABSG each function as operating segment managers whose roles include reporting directly to the President and Chief Operating Officer of the Company on theirrespective operating segment’s business activities, financial results and operating plans.

The businesses of the Pharmaceutical Distribution operating segments are similar. These segments service both pharmaceutical manufacturers andhealthcare providers in the pharmaceutical supply channel. The warehousing and distribution of pharmaceutical drugs, which are purchased from the samesuppliers, is the primary business activity of both operating segments. The distribution of pharmaceutical drugs represented approximately 98.0%, 98.3%, and98.8% of the Pharmaceutical Distribution segment’s total operating revenue for the fiscal years ended September 30, 2005, 2004 and 2003, respectively. ABDCand ABSG both operate in a high volume and low margin environment and, as a result, their economic characteristics are similar. Both operating segmentswarehouse and distribute products in a similar manner. Additionally, both operating segments are subject to the same extensive regulatory environment underwhich the pharmaceutical distribution industry operates.

ABDC distributes a comprehensive offering of brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcaresupplies and equipment to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies,mail order facilities, physicians, clinics and other alternate site facilities, and skilled nursing and assisted living centers.

ABSG, through a number of individual operating businesses, provides distribution and other services, including group purchasing services, to physiciansand alternate care providers who specialize in a variety of disease states, including oncology, nephrology, and rheumatology. ABSG also distributes vaccines,other injectables and plasma. In addition, through its manufacturer services and physician and patient services businesses, ABSG provides a number ofcommercialization and other services for biotech and other pharmaceutical manufacturers, third party logistics, reimbursement consulting, practice management,and physician education.

71


Table of ContentsABDC also provides scalable automated pharmacy dispensing equipment, medication and supply dispensing cabinets and supply management software to

a variety of retail and institutional healthcare providers.

The AmerisourceBergen Packaging Group consists of American Health Packaging and Anderson Packaging (“Anderson”). American Health Packagingdelivers unit dose, punch card, unit-of-use and other packaging solutions to institutional and retail healthcare providers. Anderson is a leading provider ofcontracted packaging services for pharmaceutical manufacturers.

Long-Term Care is a leading national provider of pharmacy products and services to patients in long-term care and alternate site settings, including skillednursing facilities, assisted living facilities and residential living communities. Long-Term Care’s institutional pharmacy business involves the purchase of bulkquantities of prescription and nonprescription pharmaceuticals, principally from our Pharmaceutical Distribution segment, and the distribution of those productsto residents in long-term care and alternate site facilities. Unlike hospitals, most long-term and alternate care facilities do not have onsite pharmacies to dispenseprescription drugs, but depend instead on institutional pharmacies, such as Long-Term Care, to provide the necessary pharmacy products and services and to playan integral role in monitoring patient medication. Long-Term Care pharmacies dispense pharmaceuticals in patient-specific packaging in accordance withphysician orders. In addition, Long-Term Care provides infusion therapy services and Medicare Part B products, as well as formulary management and otherpharmacy consulting services.

Workers’ Compensation provides mail order and on-line pharmacy services to chronically and catastrophically ill patients under workers’ compensationprograms, and provides pharmaceutical claims administration services for payors. Workers’ Compensation services include home delivery of prescription drugs,medical supplies and equipment and an array of computer software solutions to reduce the payor’s administrative costs.

The following tables present reportable segment information for the periods indicated (dollars in thousands):

Revenue


2005

2004

2003

Pharmaceutical

Distribution $ 49,319,371 $ 48,113,015 $ 44,657,911 PharMerica 1,571,369 1,575,255 1,608,203 Intersegment

eliminations (878,142) (875,818) (802,714)

Operating revenue 50,012,598 48,812,452 45,463,400 Bulk deliveries to

customer warehouses 4,564,723 4,308,339 4,120,639

Total revenue $ 54,577,321 $ 53,120,791 $ 49,584,039

Management evaluates segment performance based on revenues excluding bulk deliveries to customer warehouses. For further information regarding thenature of bulk deliveries, which only occur in the Pharmaceutical Distribution segment, see Note 1. Intersegment eliminations represent the elimination of thePharmaceutical Distribution segment’s sales to PharMerica. ABDC is the principal supplier of pharmaceuticals to PharMerica.

72


Table of Contents

Operating Income


2005

2004

2003

Pharmaceutical

Distribution $ 532,887 $ 748,625 $ 791,216 PharMerica 91,947 121,846 103,843 Facility consolidations,

employee severanceand other (22,723) (7,517) (8,930)

Gain on litigationsettlements 40,094 38,005 —

Impairment charge (5,259) — —

Operating income 636,946 900,959 886,129 Other (income) loss (990) (6,236) 8,015 Interest expense, net 57,223 112,704 144,748 Loss on early retirement

of debt 111,888 23,592 4,220

Income fromcontinuingoperations beforetaxes andcumulative effectof change inaccounting $ 468,825 $ 770,899 $ 729,146

Segment operating income is evaluated before other (income) loss; interest expense, net; loss on early retirement of debt; facility consolidations, employeeseverance and other; gain on litigation settlements; and impairment charge. All corporate office expenses are allocated to the two reportable segments.

Assets

At September 30,

2005

2004

Pharmaceutical Distribution $ 10,803,578 $ 11,093,798PharMerica 577,596 560,205

Total assets $ 11,381,174 $ 11,654,003

Depreciation & Amortization


2005

2004

2003

Pharmaceutical Distribution $ 64,404 $ 58,358 $ 51,604PharMerica 16,795 15,067 17,593

Total depreciation andamortization $ 81,199 $ 73,425 $ 69,197

Depreciation and amortization includes depreciation and amortization of property and equipment and intangible assets, but excludes amortization ofdeferred financing costs and other debt-related items, which is included in interest expense.

Capital Expenditures


2005

2004

2003

Pharmaceutical Distribution $ 182,347 $ 174,004 $ 70,207PharMerica 21,029 15,274 20,347

Total capitalexpenditures $ 203,376 $ 189,278 $ 90,554


Note 15. Disclosure About Fair Value of Financial Instruments The recorded amounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable at September 30, 2005 and 2004approximate fair value. The fair values of the Company’s debt instruments are estimated based on market prices. The recorded amount of debt (see Note 6) andthe corresponding fair value as of September 30, 2005 were $952,711 and $941,568 respectively. The recorded amount of debt (see Note 6) and thecorresponding fair value as of September 30, 2004 were $1,438,471 and $1,539,846, respectively.

73


Table of Contents

Note 16. Quarterly Financial Information (Unaudited)

Fiscal year ended September 30, 2005

(in thousands, exceptper share amounts)

FirstQuarter (a)(b)

SecondQuarter(c)

ThirdQuarter

FourthQuarter

FiscalYear

Operating revenue $ 12,202,109 $ 12,241,739 $ 12,603,893 $ 12,964,857 $ 50,012,598Bulk deliveries to

customerwarehouses 1,434,727 948,428 1,228,073 953,496 4,564,723

Total revenue 13,636,836 13,190,167 13,831,966 13,918,353 54,577,321Gross profit (d) 454,592 501,750 502,069 521,774 1,980,184Distribution, selling

and administrativeexpenses,depreciation andamortization 315,374 315,398 329,714 354,770 1,315,256

Facilityconsolidations,employeeseverance andother (see Note11) 5,133 1,837 3,747 12,006 22,723

Impairment charge — 5,259 — — 5,259 Operating income $ 134,085 $ 179,256 $ 168,608 $ 154,998 $ 636,946Loss on early

retirement of debt $ 1,015 $ — $ — $ 110,873 $ 111,888Income from

continuingoperations, beforecumulative effectof change inaccounting $ 69,023 $ 101,713 $ 99,844 $ 21,342 $ 291,922

Loss fromdiscontinuedoperations, net oftax

$ 7,905

$ 2,291

$ 5,067

$ 1,842

$ 17,105

Net income $ 50,946 $ 99,422 $ 94,777 $ 19,500 $ 264,645Earnings per share

from continuingoperations:

Basic $ 0.65 $ 0.93 $ 0.96 $ 0.21 $ 2.76Diluted $ 0.64 $ 0.92 $ 0.96 $ 0.19 $ 2.73

Earnings per share: Basic $ 0.48 $ 0.91 $ 0.91 $ 0.20 $ 2.50Diluted $ 0.48 $ 0.90 $ 0.91 $ 0.19 $ 2.48

(a) During fiscal 2005, the Company changed its method of recognizing cash discounts and other related manufacturer incentives, effective October 1, 2004.As a result, the Company restated its first quarter operating results to include the $10.2 million cumulative effect of change in accounting charge (net of taxbenefit) and recorded a $3.3 million charge (net of tax benefit) to incorporate the effect of the change in accounting on the first quarter. This $10.2 millioncumulative effect charge reduced diluted earnings per share by $0.09 for the fiscal year ended September 30, 2005.

(b) Income from continuing operations, before cumulative effect of change in accounting reported on Form 10-Q for the first quarter was higher by $1.8million than the amount presented above as the amounts presented above have been restated to reflect the change in accounting discussed in footnote (a)and the reporting of Bridge as discontinued operations. The change in accounting had the effect of reducing income from continuing operations by $3.3million, while the reclassification of the operations of Bridge as discontinued operations had the effect of increasing income from continuing operations by$1.5 million.

(c) Income from continuing operations, before cumulative effect of change in accounting reported on Form 10-Q for the second quarter was lower by $1.7million than the amount presented above as the amounts presented above have been restated to reflect the reporting of Bridge as discontinued operations.

(d) The first and third quarters of fiscal 2005 include $18.8 million and $21.3 million gains, respectively, from antitrust litigation settlements.

74


Table of Contents


(in thousands, except pershare amounts)

FirstQuarter(a)

SecondQuarter(b)

ThirdQuarter

FourthQuarter

FiscalYear

Operating revenue(c) $ 12,251,758 $ 12,330,036 $ 12,099,815 $ 12,130,843 $ 48,812,452

Bulk deliveries tocustomerwarehouses 1,089,434 1,018,919 956,598 1,243,388 4,308,339

Total revenue 13,341,192 13,348,955 13,056,413 13,374,231 53,120,791Gross profit (d) 524,996 578,671 572,068 490,695 2,166,430Distribution, selling

and administrativeexpenses,depreciation andamortization 309,788 316,106 318,202 313,858 1,257,954

Facilityconsolidations,employeeseverance andother (see Note11) 1,553 2,216 1,550 2,198 7,517

Operating income $ 213,655 $ 260,349 $ 252,316 $ 174,639 $ 900,959Loss on early

retirement of debt $ — $ — $ 23,592 $ — $ 23,592Income from

continuingoperations $ 110,429 $ 143,383 $ 127,175 $ 93,887 $ 474,874

Loss fromdiscontinuedoperations, net oftax $ 1,955 $ 1,231 $ 1,400 $ 1,898 $ 6,484

Net income $ 108,474 $ 142,152 $ 125,775 $ 91,989 $ 468,390Earnings per share

from continuingoperations:

Basic $ 0.99 $ 1.28 $ 1.13 $ 0.85 $ 4.25Diluted $ 0.96 $ 1.24 $ 1.10 $ 0.82 $ 4.12

Earnings per share: Basic $ 0.97 $ 1.27 $ 1.12 $ 0.83 $ 4.20Diluted $ 0.94 $ 1.23 $ 1.09 $ 0.81 $ 4.06

(a) Income from continuing operations reported on Form 10-Q for the first quarter was lower by $1.4 million than the amount presented above as the amountspresented above have been restated to reflect the reporting of Bridge as discontinued operations.

(b) Income from continuing operations reported on Form 10-Q for the second quarter was lower by $0.7 million than the amount presented above as theamounts presented above have been restated to reflect the reporting of Bridge as discontinued operations.

(c) During the third quarter of fiscal 2004, the Company changed its accounting policy for customer sales returns, and, as a result, operating revenue and costof goods sold were reduced by $320.4 million.

(d) The third quarter of fiscal 2004 includes a $38.0 million gain from an antitrust litigation settlement.

75


Table of Contents

Note 17. Subsequent Events In October 2005, the Company acquired Trent Drugs (Wholesale) Ltd (“Trent”), one of the largest national pharmaceutical distributors in Canada for apurchase price of $81.7 million, which included the assumption of debt of $41.3 million. The purchase price is subject to a working capital adjustment. Theacquisition of Trent provides the Company a solid foundation to expand its pharmaceutical distribution capability into the Canadian marketplace. The purchaseprice has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of the acquisition. The purchase priceexceeded the fair market value of the net tangible and intangible assets acquired by $29.1 million, which will be allocated to goodwill.

In October 2005, the Company entered into a C$135 million senior unsecured revolving credit facility (the “Canadian Credit Facility”) due December2009 with a syndicate of lenders in connection with the Company’s acquisition of Trent Drugs (Wholesale) Ltd and borrowed approximately C$92 million tocomplete the transaction. Interest on borrowings under the Canadian Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% overLIBOR or Bankers’ Acceptance Stamping Fee Spread at October 3, 2005). The Company will pay quarterly facility fees to maintain the availability under theCanadian Credit Facility at specific rates based on the Company’s debt rating (0.20% at October 3, 2005). The Company may choose to repay or reduce itscommitments under the Canadian Credit Facility at any time. The Canadian Credit Facility contains restrictions on, among other things, additional indebtedness,distributions and dividends to stockholders, investments and capital expenditures. Additional covenants require compliance with financial tests, includingleverage and minimum earnings to fixed charges ratios.

In November 2005, Standard & Poor’s Ratings Services (“S&P”) announced that it raised its corporate credit and senior unsecured debt ratings on theCompany to ‘BBB-’ from ‘BB+’. As a result of the upgrade, the Company is entitled to substantially relaxed covenants under the indenture governing its 5.625%senior notes due 2012 and 5.875% senior notes due 2015, and to a lesser extent, under its $700 million senior credit facility.

On November 15, 2005, the Company’s board of directors declared a 100% increase in the quarterly dividend rate to $0.05 per common share from $0.025per common share and will be paid on December 12, 2005 to stockholders of record as of close of business on November 25, 2005. Additionally, the Companydeclared a two-for-one stock split of the Company’s outstanding shares of Common Stock. The stock split will occur in the form of a stock dividend, where eachstockholder receives one additional share for each share owned. The stock dividend is payable on December 28, 2005 to stockholders of record at the close ofbusiness on December 13, 2005. Subsequent quarterly cash dividends will be adjusted to reflect the two-for-one stock split.

The Company’s historical earnings per share for the fiscal years ended September 30, 2005, 2004 and 2003 on a pro forma basis, assuming the stockdividend had occurred as of October 1, 2002, would be as follows (unaudited):


2005

2004

2003

Earnings per share:

Basic earningsper share:



Cumulativeeffect ofchangeinaccounting (0.05) — —

Net

income $ 1.25 $ 2.10 $ 2.01

Diluted earningsper share:



Cumulativeeffect ofchangeinaccounting (0.05) — —

Rounding — — 0.01

Netincome $ 1.24 $ 2.03 $ 1.95

76


Table of Contents

Note 18. Selected Consolidating Financial Statements of Parent, Guarantors and Non-Guarantors The Company’s 2012 Notes and 2015 Notes each are fully and unconditionally guaranteed on a joint and several basis by certain of the Company’ssubsidiaries (the subsidiaries of the Company that are guarantors of either the 2012 Notes and the 2015 Notes being referred to collectively as the “GuarantorSubsidiaries”). The total assets, stockholders’ equity, revenues, earnings and cash flows from operating activities of the Guarantor Subsidiaries exceeded amajority of the consolidated total of such items as of or for the periods reported. The only consolidated subsidiaries of the Company that are not guarantors ofeither the 2012 Notes and/or the 2015 Notes (the “Non-Guarantor Subsidiaries”) are: (a) the receivables securitization special purpose entity described in Note 6and (b) certain operating subsidiaries, all of which, collectively, are minor. The following tables present condensed consolidating financial statements includingAmerisourceBergen Corporation (the “Parent”), the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries. Such financial statements include balancesheets as of September 30, 2005 and 2004 and the related statements of operations and cash flows for each of the three years in the period ended September 30,2005. SUMMARY CONSOLIDATING BALANCE SHEETS:

September 30, 2005

(in thousands)

Parent

GuarantorSubsidiaries

Non-GuarantorSubsidiaries

Eliminations

ConsolidatedTotal

Current assets: Cash and

cashequivalents $ 1,215,497 $ 67,438 $ 32,748 $ — $ 1,315,683

Accountsreceivable,net 1,460 595,401 2,043,785 — 2,640,646

Merchandiseinventories — 3,968,355 35,335 — 4,003,690

Prepaidexpensesand other 15 26,585 1,073 — 27,673

Total

currentassets 1,216,972 4,657,779 2,112,941 — 7,987,692

Property andequipment, net — 514,072 686 — 514,758

Goodwill — 2,428,431 3,137 — 2,431,568Intangibles,

deferredcharges andother 18,989 426,080 2,087 — 447,156

Intercompanyinvestmentsand advance 3,685,627 2,830,284 (1,814,316) (4,701,595) —

Total

assets $ 4,921,588 $ 10,856,646 $ 304,535 $ (4,701,595) $ 11,381,174 Current liabilities:

Accountspayable $ — $ 5,256,887 $ 35,366 $ — $ 5,292,253

Accruedexpensesand other (254,287) 636,522 5,508 — 387,743

Currentportion oflong-termdebt — 1,232 — — 1,232

Deferredincometaxes — 372,144 (1,276) — 370,868

Total

currentliabilities (254,287) 6,266,785 39,598 — 6,052,096

Long-term debt,net of currentportion 895,518 961 55,000 — 951,479

Other liabilities — 97,242 — — 97,242Stockholders’

equity 4,280,357 4,491,658 209,937 (4,701,595) 4,280,357

Total $ 4,921,588 $ 10,856,646 $ 304,535 $ (4,701,595) $ 11,381,174


liabilitiesandstockholders’equity

77


Table of Contents

September 30, 2004

(in thousands)

Parent



Eliminations

ConsolidatedTotal

Current assets: Cash and

cashequivalents $ 754,745 $ 82,174 $ 34,424 $ — $ 871,343

Accountsreceivable,net 672 347,159 1,913,142 — 2,260,973

Merchandiseinventories — 5,095,322 40,508 — 5,135,830

Prepaidexpensesand other 223 26,177 843 — 27,243

Total

currentassets 755,640 5,550,832 1,988,917 — 8,295,389

Property andequipment, net — 464,608 656 — 465,264

Goodwill — 2,445,138 3,137 — 2,448,275Intangibles,

deferredcharges andother 19,334 422,933 2,808 — 445,075

Intercompanyinvestmentsand advance 4,675,462 1,443,187 (1,742,577) (4,376,072) —

Total

assets $ 5,460,436 $ 10,326,698 $ 252,941 $ (4,376,072) $ 11,654,003

Current liabilities: Accounts

payable $ — $ 4,922,021 $ 25,016 $ — $ 4,947,037Accrued

expensesand other (168,609) 677,066 5,273 — 513,730

Currentportion oflong-termdebt 279,939 1,421 — — 281,360

Deferredincometaxes — 363,057 (1,276) — 361,781

Total

currentliabilities 111,330 5,963,565 29,013 — 6,103,908

Long-term debt,net of currentportion 1,000,061 102,050 55,000 — 1,157,111

Other liabilities — 53,939 — — 53,939

Stockholders’equity 4,339,045 4,207,144 168,928 (4,376,072) 4,339,045

Total

liabilitiesandstockholders’equity $ 5,450,436 $ 10,326,698 $ 252,941 $ (4,376,072) $ 11,654,003

78


Table of ContentsSUMMARY CONSOLIDATING STATEMENTS OF OPERATIONS:


(in thousands)

Parent



Eliminations

ConsolidatedTotal

Operating revenue $ — $ 49,658,018 $ 354,580 $ — $ 50,012,598 Bulk deliveries to

customerwarehouses — 4,564,687 36 — 4,564,723

Total revenue — 54,222,705 354,616 — 54,577,321 Cost of goods sold — 52,265,151 331,986 — 52,597,137 Gross profit — 1,957,554 22,630 — 1,980,184 Operating

expenses: Distribution,

selling andadministrative — 1,308,876 (74,819) — 1,234,057

Depreciation — 70,734 213 — 70,947 Amortization — 10,181 71 — 10,252 Facility

consolidations,employeeseveranceand other — 22,723 — — 22,723

Impairmentcharge — 5,259 — — 5,259

Operating income — 539,781 97,165 — 636,946 Other income — (990) — — (990)Interest (income)

expense (19,878) 16,599 60,502 — 57,223 Loss on early

retirement ofdebt 111,888 — — — 111,888

Income from

continuingoperationsbefore taxes,equity inearnings ofsubsidiaries, andcumulativeeffect of changein accounting (92,010) 524,172 36,663 — 468,825

Income taxes (32,833) 195,658 14,078 — 176,903 Equity in earnings

of subsidiaries 323,822 — — (323,822) —

Income fromcontinuingoperationsbeforecumulativeeffect ofchange inaccounting 264,645 328,514 22,585 (323,822) 291,922

Loss fromdiscontinuedoperations — 17,105 — — 17,105

Cumulativeeffect ofchange inaccounting — 10,094 78 — 10,172

Net income $ 264,645 $ 301,315 $ 22,507 $ (323,822) $ 264,645



(in thousands)

Parent



Eliminations

ConsolidatedTotal

Operating revenue $ — $ 48,464,915 $ 347,537 $ — $ 48,812,452 Bulk deliveries to


Total revenue — 52,773,220 347,571 — 53,120,791 Cost of goods sold — 50,637,528 316,833 — 50,954,361 Gross profit — 2,135,692 30,738 — 2,166,430 Operating



Depreciation — 63,095 369 — 63,464 Amortization — 9,425 536 — 9,961 Facility


Operating income — 777,100 123,859 — 900,959 Other income — (6,236) — — (6,236)Interest (income)

expense (39,560) 119,173 33,091 — 112,704 Loss on early

retirement ofdebt — 23,592 — — 23,592

Income from

continuingoperationsbefore taxes andequity inearnings ofsubsidiaries 39,560 640,571 90,768 — 770,899

Income taxes 15,190 245,980 34,855 — 296,025 Equity in earnings

of subsidiaries 444,020 — — (444,020) —

Income fromcontinuingoperations 468,390 394,591 55,913 (444,020) 474,874


Net income $ 468,390 $ 388,107 $ 55,913 $ (444,020) $ 468,390

79


Table of Contents


(in thousands)

Parent



Eliminations

ConsolidatedTotal

Operating revenue $ — $ 45,195,128 $ 268,272 $ — $ 45,463,400Bulk deliveries to


Total revenue — 49,315,733 268,306 — 49,584,039Cost of goods sold — 47,116,582 241,844 — 47,358,426 Gross profit — 2,199,151 26,462 — 2,225,613Operating



Depreciation — 61,807 358 — 62,165Amortization — 6,185 847 — 7,032Facility


Operating income — 804,405 81,724 — 886,129Other loss — 6,542 1,473 — 8,015Interest (income)

expense (125,772) 239,386 31,134 — 144,748Loss on early

retirement ofdebt — 4,220 — — 4,220

Income from

continuingoperations beforetaxes and equityin earnings ofsubsidiaries 125,772 554,257 49,117 — 729,146

Income taxes 49,342 217,563 19,176 — 286,081Equity in earnings

of subsidiaries 364,799 — — (364,799) —

Income fromcontinuingoperations 441,229 336,694 29,941 (364,799) 443,065


Net income $ 441,229 $ 334,858 $ 29,941 $ (364,799) $ 441,229

SUMMARY CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:


(in thousands)

Parent



Eliminations

ConsolidatedTotal

Net income $ 264,645 $ 301,315 $ 22,507 $ (323,822) $ 264,645 Adjustments to

reconcile netincome to netcash (used in)provided byoperatingactivities (393,050) 1,445,536 (114,315) 323,822 1,261,993

(128,405) 1,746,851 (91,808) — 1,526,638


Net cash (used in)provided byoperatingactivities

Capital

expenditures — (203,028) (348) — (203,376)Cost of acquired

companies, netof cashacquired — (4,404) — — (4,404)

Proceeds fromsale-leasebacktransactions — 36,696 — — 36,696

Proceeds fromsale ofdiscontinuedoperations — 14,560 — — 14,560

Other — 4,219 — — 4,219 Net cash used in

investingactivities — (151,957) (348) — (152,305)

Long-term debt

borrowings 895,500 — — — 895,500 Long-term debt

repayments (1,180,000) (2,339) — — (1,182,339)Purchase of

Common Stock (786,192) — — — (786,192)Deferred

financing costsand other (16,685) (1,334) (840) — (18,859)

Exercise of stockoptions 174,060 — — — 174,060

Cash dividends onCommon Stock (10,598) — — — (10,598)

Common Stockpurchases foremployee stockpurchase plan (1,565) — — — (1,565)

Intercompanyfinancing andadvances 1,514,637 (1,605,957) 91,320 — —

Net cash provided

by (used in)financingactivities 589,157 (1,609,630) 90,480 — (929,993)

Increase

(decrease) incash and cashequivalents 460,752 (14,736) (1,676) — 444,340

Cash and cashequivalents atbeginning ofyear 754,745 82,174 34,424 — 871,343

Cash and cash

equivalents atend of year $ 1,215,497 $ 67,438 $ 32,748 $ — $ 1,315,683

80


Table of Contents


(in thousands)

Parent



Eliminations

ConsolidatedTotal


reconcile netincome to netcash providedby operatingactivities (438,948) 164,257 187,362 444,020 356,691

Net cash

provided byoperatingactivities 29,442 552,364 243,275 — 825,081

Capital

expenditures — (189,278) — — (189,278)Cost of acquired

companies, netof cashacquired — (68,882) — — (68,882)

Other — 15,938 — — 15,938 Net cash used in

investingactivities — (242,222) — — (242,222)

Long-term debt

repayments (60,000) (308,425) — — (368,425)Purchase of

CommonStock (144,756) — — (144,756)

Deferredfinancing costsand other — (1,376) (14) — (1,390)


Cash dividendson CommonStock (11,197) — — — (11,197)

Common Stockpurchases foremployeestock purchaseplan (935) — — — (935)

Intercompanyfinancing andadvances 354,132 (87,490) (266,642) — —

Net cash

provided by(used in)financingactivities 152,395 (397,291) (266,656) — (511,552)

Increase



Cash and cash

equivalents atend of year $ 754,745 $ 82,174 $ 34,424 $ — $ 871,343



(in thousands)

Parent



Eliminations

ConsolidatedTotal


reconcile netincome to netcash providedby (used in)operatingactivities (420,085) 81,318 (112,446) 364,799 (86,414)

Net cash

provided by(used in)operatingactivities 21,144 416,176 (82,505) — 354,815

Capital

expenditures — (90,362) (192) — (90,554)Cost of acquired

companies, netof cashacquired — (91,690) (20,291) — (111,981)

Other — 726 — — 726 Net cash used in

investingactivities — (181,326) (20,483) — (201,809)

Long-term debt

borrowings 300,000 — — — 300,000 Long-term debt

repayments (60,000) (278,989) — — (338,989)Deferred

financing costsand other (5,658) 807 (2,431) — (7,282)


Cash dividendson CommonStock (10,995) — — — (10,995)

Common Stockpurchases foremployeestock purchaseplan (1,608) — — — (1,608)

Intercompanyfinancing andadvances (128,541) 40,597 87,944 — —

Net cash

provided by(used in)financingactivities 135,762 (237,585) 85,513 — (16,310)

Increase



Cash and cash

equivalents atend of year $ 572,908 $ 169,323 $ 57,805 $ — $ 800,036

81


Table of Contents

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures that are intended to ensure that information required to be disclosed in the Company’s reportssubmitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC. These controls and procedures also are intended to ensure that information required to be disclosed in suchreports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

The Company’s Chief Executive Officer and Chief Financial Officer, with the participation of other members of the Company’s management, haveevaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a – 15(e) and 15d – 15(e) under theExchange Act) and have concluded that the Company’s disclosure controls and procedures were effective for their intended purposes as of the end of the periodcovered by this report.

Changes in Internal Control over Financial Reporting There were no changes during the fiscal quarter ended September 30, 2005 in the Company’s internal control over financial reporting that materiallyaffected, or are reasonably likely to materially affect, those controls. During the fiscal quarter ended September 30, 2005, the Company outsourced a significantportion of its corporate and ABDC information technology activities to IBM Global Services. The outsourced services primarily include management ofapplications and hardware as well as systems design and development. The Company retains responsibility and authority for application selection, hardwareselection, technology strategy and standards for technology use. Management implemented, and oversaw the implementation by IBM Global Services of,controls over the outsourced activities that management believes were adequate to ensure that the outsourcing did not materially affect internal control overfinancial reporting during the fiscal quarter ended September 30, 2005.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of AmerisourceBergen Corporation (“AmerisourceBergen” or the “Company”) is responsible for establishing and maintaining adequateinternal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.AmerisourceBergen’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control overfinancial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of managementand directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets thatcould have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.

AmerisourceBergen’s management assessed the effectiveness of AmerisourceBergen’s internal control over financial reporting as of September 30, 2005.In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework. Based on management’s assessment and those criteria, management has concluded that AmerisourceBergen’s internalcontrol over financial reporting was effective as of September 30, 2005. AmerisourceBergen’s independent registered public accounting firm, Ernst & YoungLLP, has issued an audit report on management’s assessment and the effectiveness of AmerisourceBergen’s internal control over financial reporting. This reportis set forth on the next page.

82


Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholders of AmerisourceBergen Corporation

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, thatAmerisourceBergen Corporation and subsidiaries maintained effective internal control over financial reporting as of September 30, 2005, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).AmerisourceBergen Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on theeffectiveness of the company’s internal control over financial reporting based on our audit.

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

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

In our opinion, management’s assessment that AmerisourceBergen Corporation and subsidiaries maintained effective internal control over financialreporting as of September 30, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, AmerisourceBergen Corporationand subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 30, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of AmerisourceBergen Corporation and subsidiaries as of September 30, 2005 and 2004, and the related consolidated statements of operations, changes instockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2005 of AmerisourceBergen Corporation and subsidiaries andour report dated December 8, 2005 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP Philadelphia, PennsylvaniaDecember 8, 2005

83


Table of Contents

ITEM 9B. OTHER INFORMATION None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information appearing in the Company’s Notice of Annual Meeting of Stockholders and Proxy Statement for the 2006 annual meeting of stockholders (the“2006 Proxy Statement”) including information under “Election of Directors,” “Codes of Ethics,” “Audit Matters,” and “Compliance with Section 16(a) of theSecurities Exchange Act of 1934,” is incorporated herein by reference. The Company will file the 2006 Proxy Statement with the Commission pursuant toRegulation 14A within 120 days after the close of the fiscal year.

Information with respect to Executive Officers of the Company appears in Part I of this report.

The Company has adopted a Code of Ethics for Designated Senior Officers that applies to the Company’s Chief Executive Officer, Chief Financial Officerand Corporate Controller. A copy of this Code of Ethics is filed as an exhibit to this report and is posted on the Company’s Internet website, which iswww.amerisourcebergen.com. Any amendment to, or waiver from, any provision of this Code of Ethics will be posted as well on the Company’s Internetwebsite.

ITEM 11. EXECUTIVE COMPENSATION Information contained in the 2006 Proxy Statement, including information appearing under “Compensation Matters,” and “Stock Performance Graph” inthe 2006 Proxy Statement, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

Information contained in the 2006 Proxy Statement, including information appearing under “Beneficial Ownership of Common Stock” and “EquityCompensation Plan Information” in the 2006 Proxy Statement, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information contained in the 2006 Proxy Statement, including information appearing under “Agreements with Employees” and “Certain Transactions” inthe 2006 Proxy Statement, is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information contained in the 2006 Proxy Statement, including information appearing under “Audit Matters” in the 2006 Proxy Statement, is incorporatedherein by reference.

84


Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) and (2) List of Financial Statements and Schedules.

Financial Statements: The following consolidated financial statements are submitted in response to Item 15(a)(1):

Page

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm 42Consolidated Balance Sheets as of September 30, 2005 and 2004 43Consolidated Statements of Operations for the fiscal years ended September 30,

2005, 2004 and 2003 45Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years

ended September 30, 2005, 2004 and 2003 46Consolidated Statements of Cash Flows for the fiscal years ended September 30,

2005, 2004 and 2003 47Notes to Consolidated Financial Statements 48

Financial Statement Schedule: The following financial statement schedule is submitted in response to Item 15(a)(2):

Schedule II - Valuation and Qualifying Accounts S-1

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not requiredunder the related instructions or are inapplicable and, therefore, have been omitted.

85


Table of Contents(a) (3) List of Exhibits.*

ExhibitNumber

Description

2

Agreement and Plan of Merger dated as of March 16, 2001 by and among AABBCorporation, AmeriSource Health Corporation, Bergen Brunswig Corporation,A-Sub Acquisition Corp. and B-Sub Acquisition Corp. (incorporated by referenceto Exhibit 2.1 to the Registrant’s Registration Statement No. 333-71942 on FormS-4, dated October 19, 2001).

3.1

Amended and Restated Certificate of Incorporation, as amended, ofAmerisourceBergen Corporation (incorporated by reference to Annex J to thejoint proxy statement-prospectus forming a part of the Registrant’s RegistrationStatement on Form S-4/A, Registration No. 333-61440, filed July 5, 2001).

3.2

Amended and Restated Bylaws of AmerisourceBergen Corporation (incorporatedby reference to Annex K to the joint proxy statement-prospectus forming a part ofthe Registrant’s Registration Statement on Form S-4/A (Registration No.333-61440) filed July 5, 2001).

4.1

Rights Agreement, dated as of August 27, 2001, between AmerisourceBergenCorporation and Mellon Investor Service LLC (incorporated by reference toExhibit 1 to the Registration Statement on Form 8-A, filed August 29, 2001).

4.2

Grant of Registration Rights by the Registrant to US Bioservices Corporationstockholders, dated December 13, 2002 (incorporated by reference to Exhibit 4.4to the Registrant’s Registration Statement on Form S-3, Registration No.333-102090, filed December 20, 2002).

4.3

Registration Rights Agreement, dated as of May 21, 2003, by and among theRegistrant, the stockholders of Anderson Packaging, Inc. and John R. Anderson(incorporated by reference to Exhibit 4.4 to the Registrant’s RegistrationStatement on Form S-3, Registration No. 333-105743, filed May 30, 2003).

4.4

Purchase Agreement, dated September 8, 2005, by and among the Registrant, theSubsidiary Guarantors named therein, Lehman Brothers Inc., Banc of AmericaSecurities LLC, J.P. Morgan Securities Inc., Scotia Capital (USA) Inc., WachoviaSecurities, Inc. and Wells Fargo Securities, LLC.

4.5

Indenture, dated as of September 14, 2005, among the Registrant, certain of theRegistrant’s subsidiaries as guarantors thereto and J.P. Morgan Trust Company,National Association, as trustee, related to the Registrant’s 5 5/8% Senior Notesdue 2012 and 5 7/8% Senior Notes due 2015.

4.6 Form of 5 5/8% Senior Notes due 2012.

4.7 Form of 5 7/8% Senior Notes due 2015.

4.8

Exchange and Registration Rights Agreement, dated September 14, 2005, by andamong the Registrant, the Subsidiary Guarantors named therein, and LehmanBrothers Inc. on behalf of the Initial Purchasers under the Purchase Agreementdated September 8, 2005.

A 10.1

AmeriSource Master Pension Plan (incorporated by reference to Exhibit 10.9 toRegistration Statement on Form S-1 of AmeriSource Health Corporation,Registration No. 33-27835, filed March 29, 1989).

A 10.2

AmeriSource 1988 Supplemental Retirement Plan (incorporated by reference toExhibit 10.10 to the Registration Statement on Form S-1 of AmeriSource HealthCorporation, Registration No. 33-27835, filed March 29, 1989).

A 10.3

AmeriSource Health Corporation 1996 Stock Option Plan (incorporated byreference to Appendix C to Proxy Statement of AmeriSource Health Corporationdated January 15, 1997 for the Annual Meeting of Stockholders held on February11, 1997).

86


Table of Contents

ExhibitNumber

Description

A 10.4

AmeriSource Health Corporation 1996 Non-Employee Directors Stock OptionPlan (incorporated by reference to Appendix D to Proxy Statement ofAmeriSource Health Corporation dated January 15, 1997 for the Annual Meetingof Stockholders held on February 11, 1997).

A 10.5

AmeriSource Health Corporation 1999 Non-Employee Directors Stock OptionPlan (incorporated by reference to Appendix C to Proxy Statement ofAmeriSource Health Corporation dated February 5, 1999 for the Annual Meetingof Stockholders held on March 3, 1999).

A 10.6

AmeriSource Health Corporation 1999 Stock Option Plan (incorporated byreference to Appendix B to Proxy Statement of AmeriSource Health Corporationdated February 5, 1999 for the Annual Meeting of Stockholders held on March 3,1999).

A 10.7

AmeriSource Health Corporation 2001 Stock Option Plan (incorporated byreference to Exhibit 99.1 to the Registration Statement on Form S-8 ofAmeriSource Health Corporation, filed May 4, 2001).

A 10.8

AmeriSource Health Corporation 2001 Non-Employee Directors Stock OptionPlan (incorporated by reference to Exhibit 99.2 to the Registration Statement onForm S-8 of AmeriSource Health Corporation, filed May 4, 2001).

A 10.9

Bergen Brunswig Corporation Fourth Amended and Restated SupplementalExecutive Retirement Plan, as of February 13, 2001 (incorporated by reference toExhibit 10(a) to the Quarterly Report on Form 10-Q of Bergen BrunswigCorporation for the fiscal quarter ended March 31, 2001).

A 10.10

Bergen Brunswig Corporation 1999 Management Stock Incentive Plan(incorporated by reference to Annex F to Registration Statement No. 333-7445 ofForm S-4 of Bergen Brunswig Corporation dated March 16, 1999).

A 10.11

Bergen Brunswig Corporation 1999 Deferred Compensation Plan (incorporated byreference to Annex G to Registration Statement No. 333-7445 of Form S-4 ofBergen Brunswig Corporation dated March 16, 1999).

A 10.12

Form of the Bergen Brunswig Amended and Restated Capital Accumulation Plan(incorporated by reference to Exhibit 10.2 to Registration Statement No. 333-631on Form S-3 of Bergen Brunswig Corporation and Amendment No. 1 theretorelating to a shelf offering of $400 million in securities filed February 1, 1996 andMarch 19, 1996, respectively).

A 10.13

Amendment No. 1 to the Bergen Brunswig Amended and Restated CapitalAccumulation Plan (incorporated by reference to Exhibit 10(m) to Annual Reporton Form 10-K of Bergen Brunswig Corporation for the fiscal year endedSeptember 30, 1996).

A 10.14

Form of Bergen Brunswig Corporation Officers’ Employment Agreement andSchedule (incorporated by reference to Exhibit 10(q) to Annual Report on Form10-K for Bergen Brunswig Corporation for the fiscal year ended September 30,1994).

A 10.15

Form of Bergen Brunswig Corporation Officers’ Severance Agreement andSchedule (incorporated by reference to Exhibit 10(r) to Annual Report on Form10-K for Bergen Brunswig Corporation for the fiscal year ended September 30,1994).

A 10.16

Bergen Brunswig Corporation 1999 Non-Employee Directors’ Stock Plan(incorporated by reference to Annex E to Joint Proxy Statement/Prospectus datedMarch 16, 1999 of Bergen Brunswig Corporation).

A 10.17

Registrant’s 2001 Non-Employee Directors’ Stock Option Plan, as amended andrestated November 9, 2005.

A 10.18

Registrant’s 2001 Restricted Stock Plan dated as of September 11, 2001, asamended and restated effective July 30, 2003 (incorporated by reference toExhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the fiscal yearended September 30, 2003).

87


Table of Contents

ExhibitNumber

Description

A 10.19

AmerisourceBergen Corporation 2001 Deferred Compensation Plan as amendedand restated as of November 1, 2002 (incorporated by reference to Exhibit 4.1 tothe Registrant’s Registration Statement on Form S-8, Registration No.333-101042, filed November 6, 2002).

10.20

Registrant’s 2002 Employee Stock Purchase Plan dated as of January 18, 2002(incorporated by reference to Appendix B to Registrant’s Proxy Statement datedJanuary 22, 2002 for the Annual Meeting of Stockholders held on February 27,2002).

A 10.21

Registrant’s 2002 Management Stock Incentive Plan dated as of April 24, 2002,as amended and restated effective August 10, 2004 (incorporated by reference toExhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the fiscal yearended September 30, 2004).

A 10.22

Employment Agreement, effective October 1, 2003, between AmerisourceBergenCorporation and R. David Yost (incorporated by reference to Exhibit 10.28 to theRegistrant’s Annual Report on Form 10-K for the fiscal year ended September 30,2003.

A 10.23

Employment Agreement, effective October 1, 2003, between AmerisourceBergenCorporation and Kurt J. Hilzinger (incorporated by reference to Exhibit 10.29 tothe Registrant’s Annual Report on Form 10-K for the fiscal year ended September30, 2003).

A 10.24

Employment Agreement, effective October 1, 2003, between AmerisourceBergenCorporation and Michael D. DiCandilo (incorporated by reference to Exhibit10.30 to the Registrant’s Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2003).

A 10.25

Employment Agreement, effective October 1, 2003, between AmerisourceBergenCorporation and Terrance P. Haas (incorporated by reference to Exhibit 10.31 tothe Registrant’s Annual Report on Form 10-K for the fiscal year ended September30, 2003).

A 10.26

Letter Agreement dated July 27, 2001 among AmerisourceBergen Corporation,Bergen Brunswig Corporation and Steven H. Collis, amending form of BergenBrunswig Corporation Officers’ Employment Agreement and SeveranceAgreement (incorporated by reference to Exhibit 10.32 to the Registrant’s AnnualReport on Form 10-K for the fiscal year ended September 30, 2003).

A 10.27

Employment Agreement, effective February 19, 2004, betweenAmerisourceBergen Corporation and Steven H. Collis (incorporated by referenceto Exhibit 10.1 to Fiscal yearly Report on Form 10-Q of the Company for thefiscal year ended March 31, 2004).

10.28

Receivables Sale Agreement between AmerisourceBergen Drug Corporation, asOriginator, and AmeriSource Receivables Financial Corporation, as Buyer, datedas of July 10, 2003 (incorporated by reference to Exhibit 4.22 to the Registrant’sAnnual Report on Form 10-K for the fiscal year ended September 30, 2003).

10.29

Receivables Purchase Agreement among AmeriSource Receivables FinancialCorporation, as Seller, AmerisourceBergen Drug Corporation, as Initial Servicer,Wachovia Bank, National Association, as Administrator and various purchasegroups, dated as of July 10, 2003 (incorporated by reference to Exhibit 4.23 to theRegistrant’s Annual Report on Form 10-K for the fiscal year ended September 30,2003).

10.30

Performance Undertaking, dated July 10, 2003, executed by AmerisourceBergenCorporation, as Performance Guarantor, in favor of Amerisource ReceivablesFinancial Corporation, as Recipient (incorporated by reference to Exhibit 4.24 tothe Registrant’s Annual Report on Form 10-K for the fiscal year ended September30, 2003).

10.31

Intercreditor Agreement, dated July 10, 2003, executed by Wachovia Bank,National Association, as administrator under the Receivables Purchase Agreementand JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank), as administrativeagent under the Credit Agreement (incorporated by reference to Exhibit 4.25 tothe Registrant’s Annual Report on Form 10-K for the fiscal year ended September30, 2003).

88


Table of Contents

ExhibitNumber

Description

10.32

First Amendment dated as of December 12, 2003 to the Receivables PurchaseAgreement among AmeriSource Receivables Financial Corporation, as Seller,AmerisourceBergen Drug Corporation, as Initial Servicer, Wachovia Bank,National Association, as Administrator and various purchase groups, dated as ofJuly 10, 2003 (incorporated by reference to Exhibit 4.29 to the Registrant’sAnnual Report on Form 10-K for the fiscal year ended September 30, 2004).

10.33

Second Amendment dated as of July 8, 2004 to the Receivables PurchaseAgreement among AmeriSource Receivables Financial Corporation, as Seller,AmerisourceBergen Drug Corporation, as Initial Servicer, Wachovia Bank,National Association, as Administrator and various purchase groups, dated as ofJuly 10, 2003 (incorporated by reference to Exhibit 4.29 to the Registrant’sAnnual Report on Form 10-K for the fiscal year ended September 30, 2004).

10.34

Credit Agreement dated as of December 2, 2004 among the Registrant andJPMorgan Chase Bank, N.A. and various other financial institutions.

10.35

Credit Agreement dated as of April 21, 2005 between J.M. Blanco, Inc. and TheBank of Nova Scotia (incorporated by reference to Exhibit 10.1 to theRegistrant’s Quarterly Report on Form 10-Q for the quarterly period endedMarch 31, 2005).

10.36

First Amendment dated as of September 29, 2005 to the Credit Agreement datedas of December 2, 2004 among the Registrant and JPMorgan Chase Bank, N.A.and various other financial institutions.

10.37

Third Amendment dated as of December 2, 2004 to the Receivables PurchaseAgreement among AmeriSource Receivables Financial Corporation, as Seller,AmerisourceBergen Drug Corporation, as Initial Servicer, Wachovia Bank,National Association, as Administrator and various purchase groups, dated as ofJuly 10, 2003

10.38

Credit Agreement dated as of October 3, 2005 among Project Snow, Inc. (nowTrent Drugs (Wholesale) Ltd.,) the Registrant, The Bank of Nova Scotia andvarious other financial institutions.

10.39

Fourth Amendment dated as of October 31, 2005 to the Receivables PurchaseAgreement among AmeriSource Receivables Financial Corporation, as Seller,AmerisourceBergen Drug Corporation, as Initial Servicer, Wachovia Bank,National Association, as Administrator and various purchase groups, dated as ofJuly 10, 2003

14

AmerisourceBergen Corporation Code of Ethics for Designated Senior Officers(incorporated by reference to Exhibit 14 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended September 30, 2003).

21 Subsidiaries of the Registrant.

23

Consent of Ernst & Young LLP, Independent Registered Public AccountingFirm.

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1 Section 1350 Certification of Chief Executive Officer.

32.2 Section 1350 Certification of Chief Financial Officer.

* Copies of the exhibits will be furnished to any security holder of the Registrant upon payment of the reasonable cost of reproduction.

A Each marked exhibit is a management contract or a compensatory plan, contract or arrangement in which a director or executive officer of the Registrantparticipates or has participated.

89


Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

AMERISOURCEBERGEN CORPORATION

Date: December 9, 2005 By: /s/ R. DAVID YOST R. David Yost Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of December 9, 2005 by the followingpersons on behalf of the Registrant and in the capacities indicated.

Signature

Title

/s/ R. DAVID YOST

R. David Yost

Chief Executive Officer and Director(Principal Executive Officer)

/s/ MICHAEL D. DICANDILO

Michael D. DiCandilo

Executive Vice President and Chief Financial Officer (Principal Financialand Accounting Officer)

/s/ KURT J. HILZINGER

Kurt J. Hilzinger

President, Chief Operating Officer and Director

/s/ TIM G. GUTTMAN

Tim G. Guttman

Vice President, Corporate Controller

/s/ JAMES R. MELLOR

James R. Mellor

Director and Chairman

/s/ RODNEY H. BRADY

Rodney H. Brady

Director

/s/ CHARLES H. COTROS

Charles H. Cotros

Director

/s/ RICHARD C. GOZON

Richard C. Gozon

Director

/s/ EDWARD E. HAGENLOCKER

Edward E. Hagenlocker

Director

/s/ JANE E. HENNEY, M.D.

Jane E. Henney, M.D.

Director

/s/ HENRY W. MCGEE

Henry W. McGee

Director

/s/ J. LAWRENCE WILSON

J. Lawrence Wilson

Director

90


Table of ContentsAMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Balance atBeginningof Period

Additions

Deductions-Describe (3)

Balance at

End ofPeriodDescription

Charged toCosts and

Expenses (1)

Chargedto OtherAccounts

Year Ended

September 30,2005

Allowance fordoubtful accounts $ 147,564 $ 33,379 $ — $ (40,807) $ 140,136

Year Ended

September 30,2004

Allowance fordoubtful accounts $ 191,744 $ (10,279) $ 50(2) $ (33,951) $ 147,564

Year Ended

September 30,2003

Allowance fordoubtful accounts $ 181,432 $ 46,012 $ 5,193(2) $ (40,893) $ 191,744

(1) Represents the provision for doubtful receivables.

(2) Represents the aggregate allowances of acquired entities at the respective acquisition dates.

(3) Represents accounts written off during year, net of recoveries.

S-1


Exhibit 4.4

EXECUTION COPY


$400,000,000 5 5/8% Senior Notes due 2012

$500,000,000 5 7/8% Senior Notes due 2015

PURCHASE AGREEMENT

September 8, 2005 Lehman Brothers Inc.Banc of America Securities LLCJ.P. Morgan Securities Inc.Scotia Capital (USA) Inc.Wachovia Securities, Inc.Wells Fargo Securities, LLC c/o Lehman Brothers Inc.745 Seventh Avenue, 19th FloorNew York, New York 10019 Ladies and Gentlemen:

AmerisourceBergen Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to the several Initial Purchasers named in Schedule 1hereto (the “Initial Purchasers”) $400,000,000 in aggregate principal amount of its 5 5/8% Senior Notes due 2012 (the “2012 Notes”) and $500,000,000 inaggregate principal amount of its 5 7/8% Senior Notes due 2015 (the “2015 Notes” and, together with the 2012 Notes, the “Notes”) guaranteed (the“Guarantees”) by certain of the Company’s direct and indirect U.S. subsidiaries named in Schedule 2 hereto (collectively, the “Guarantors”), pursuant to theterms of an indenture (the “Indenture”), to be dated as of the Closing Date (as defined below), between the Company, the Guarantors and J.P. Morgan TrustCompany, National Association, as trustee (the “Trustee”).

The Notes will be offered and sold to you pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended (the“Securities Act”). The Company and the Guarantors have prepared a preliminary offering memorandum, dated September 7, 2005 (as amended or supplementedand including any and all information incorporated by reference therein, the “Preliminary Offering Memorandum”), and will prepare a final offeringmemorandum, to be dated September 9, 2005 (as amended or supplemented and including any and all information incorporated by reference therein, the“Offering Memorandum”), relating to the Company, the Guarantors, the Notes and the Guarantees. Unless stated to the contrary, any references herein to“amend,” “amendment” or “supplement” with respect to the Offering Memorandum shall be deemed to include any information filed under the Exchange Act of1934, as amended (the “Exchange Act”), which is incorporated by reference therein.


Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Notes(and all securities issued in exchange therefor or in substitution therefor) shall bear substantially the following legend: THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE

“SECURITIES ACT”), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BEREOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCHREGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS NOTIFIED THAT THE SELLER MAY BE RELYING ONTHE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THEHOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER”(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN“OFFSHORE TRANSACTION” PURSUANT TO 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOTPRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THESECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OROF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WASTHE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BYAPPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THESECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON ITREASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THATPURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVENTHAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS ANDSALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THESECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICESUBSTANTIALLY TO THE EFFECT OF THIS LEGEND;

2


PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALEOR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONAND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRETHAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED ANDDELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDERAFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITEDSTATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

You have advised the Company that you will make offers and sales (the “Exempt Resales”) of the Notes purchased hereunder on the terms set forth in the

Offering Memorandum solely to (i) persons whom you reasonably believe to be “qualified institutional buyers” as defined in Rule 144A under the Securities Act(“QIBs”) and (ii) outside the United States to persons other than U.S. persons in offshore transactions meeting the requirements of Regulation S under theSecurities Act (“Regulation S”) (such persons specified in clauses (i) and (ii) being referred to herein as the “Eligible Purchasers”). As used herein, the terms“offshore transaction,” “United States” and “U.S. person” have the respective meanings given to them in Regulation S. You will offer the Notes to EligiblePurchasers initially at a price equal to 99.5% of the principal amount thereof. Thereafter, the offering price may be changed at any time without notice.

The net proceeds from the sale of the Notes will be used to purchase the Company’s 8.125% Senior Notes due 2008 and its 7.25% Senior Notes due 2012(collectively, the “Existing Notes”) prior to maturity pursuant to a cash tender offer, and, to the extent that all of the Existing Notes are not tendered in the tenderoffer, any remaining net proceeds from the sale of the Notes will be used to repay such Existing Notes at maturity or, at the discretion of the Company, to redeemsuch Existing Notes under the terms of the indentures governing the Existing Notes; furthermore, any remaining net proceeds will be used for general corporatepurposes, all as provided in the “Use of Proceeds” section of the Offering Memorandum. The offering of the Notes and the application of the proceeds of theoffering of the Notes as provided in the “Use of Proceeds” section of the Offering Memorandum are collectively referred to herein as the “Transactions.”

Holders (including subsequent transferees) of the Notes will have the registration rights set forth in the registration rights agreement (the “RegistrationRights Agreement”), to be dated as of the Closing Date, between the Company, the Guarantors and the Initial Purchasers, in the form of Exhibit A hereto, for solong as such Notes constitute “Transfer Restricted Securities” (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement,the Company and the Guarantors will agree to file with the Securities and Exchange Commission (the “Commission”), under the circumstances set forth therein,(i) a registration statement under the Securities Act (the “Exchange Offer Registration Statement”)

3


relating to the Company’s 5 5/8% Senior Notes due 2012 with substantially identical to the 2012 Notes and its 5 7/8% Senior Notes due 2015 with substantiallyidentical terms to the 2015 Notes (in each case except for transfer restrictions) (collectively, the “Exchange Notes”) to be offered in exchange for the Notes (suchoffer to exchange being referred to as the “Registered Exchange Offer”) and (ii) if required by the terms of the Registration Rights Agreement, a shelfregistration statement pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement” and, together with the Exchange Offer RegistrationStatement, the “Registration Statements”) relating to the resale by certain holders of the Notes, and to use their commercially reasonable efforts to cause suchRegistration Statements to be declared effective. This Agreement, the Notes, the Exchange Notes, the Guarantees, the Exchange Note Guarantees (as definedbelow), the Indenture and the Registration Rights Agreement are hereinafter referred to collectively as the “Operative Documents.” This is to confirm theagreements concerning the purchase of the Notes from the Company by the Initial Purchasers. SECTION 1. Representations, Warranties and Agreements of the Company and the Guarantors. The Company and each of the Guarantors, jointly

and severally, represents, warrants and agrees that: (a) The Preliminary Offering Memorandum and the Offering Memorandum have been or will be prepared by the Company and the Guarantors for

use by the Initial Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the Preliminary Offering Memorandum orthe Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of theSecurities Act has been issued, and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company and eachGuarantor, is contemplated.

(b) The Preliminary Offering Memorandum and the Offering Memorandum as of their respective dates did not, and the Offering Memorandum as ofthe Closing Date will not, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements madetherein, in the light of the circumstances under which they were made, not misleading, except that this representation and warranty does not apply tostatements in or omissions from the Preliminary Offering Memorandum and the Offering Memorandum made in reliance upon and in conformity withinformation relating to the Initial Purchasers furnished to the Company in writing by or on behalf of the Initial Purchasers expressly for use therein, asspecifically identified in Section 8(e) hereof. The portions of the Company’s public filings incorporated by reference in the Preliminary OfferingMemorandum and the Offering Memorandum (the “Exchange Act Reports”) do not include any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each Exchange ActReport, when it was filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulationsof the Commission thereunder.

(c) The Company and the Guarantors and each of their respective subsidiaries (as defined in Section 15) have been duly organized, are validlyexisting and are in good

4


standing under the laws of their respective jurisdictions of organization and are duly qualified to do business and are in good standing in each jurisdictionin which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification (except such failures toqualify as would not reasonably be expected to result in a Material Adverse Effect (as defined in Section 1(o) hereof)). The Company, the Guarantors andeach of their respective subsidiaries have all corporate or limited liability company power and authority necessary to own or hold their respectiveproperties and to conduct the businesses in which they are engaged.

(d) Each of the Company and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under thisAgreement and each of the other Operative Documents to which it is a party.

(e) This Agreement has been duly and validly authorized, executed and delivered by the Company and the Guarantors. (f) The Registration Rights Agreement has been duly and validly authorized by the Company and the Guarantors and, when duly executed and

delivered by the proper officers of the Company and the Guarantors (assuming due and valid authorization, execution and delivery by the InitialPurchasers), will constitute a legal, valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantorsin accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar lawsrelating to or affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles ofcommercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity), and except thatrights to indemnification and contribution thereunder may be limited by federal or state securities laws or public policy relating thereto.

(g) The Indenture has been duly and validly authorized by the Company and the Guarantors and, when duly executed and delivered by the properofficers of the Company and the Guarantors (assuming due and valid authorization, execution and delivery by the Trustee), will constitute a legal, validand binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, subject toapplicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights andremedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fairdealing (regardless of whether enforcement is sought in a proceeding at law or in equity), and except that rights to indemnification and contributionthereunder may be limited by Federal or state securities laws or public policy relating thereto. No qualification of the Indenture under the Trust IndentureAct of 1939, as amended (the “Trust Indenture Act”), is required in connection with the offer and sale of the Notes contemplated hereby or in connectionwith the Exempt Resales. The Indenture conforms to the requirements of the Trust Indenture Act and the rules and regulations thereunder applicable to anindenture that is qualified thereunder.

5


(h) The Notes have been duly and validly authorized by the Company and, when duly executed by the proper officers of the Company in accordancewith the terms of the Indenture (assuming due authentication of the Notes by the Trustee in accordance with the terms of the Indenture) and delivered tothe Initial Purchasers against payment therefor in accordance with the terms hereof, will have been validly issued and delivered and will constitute thelegal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with theirterms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affectingcreditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercialreasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

(i) The Guarantees have been duly and validly authorized by the Guarantors and, when duly executed, delivered and endorsed on the Notes by theproper officers of the Guarantors in accordance with the terms of the Indenture (assuming due authentication of the Notes by the Trustee in accordancewith the terms of the Indenture) and when the Notes are delivered to the Initial Purchasers against payment therefor in accordance with the terms hereof,will have been validly issued and delivered and will constitute the legal, valid and binding obligations of the Guarantors, entitled to the benefits of theIndenture and enforceable against the Guarantors in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,reorganization, moratorium and other similar laws relating to or affecting creditors’ rights and remedies generally, and subject, as to enforceability, togeneral principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought ina proceeding at law or in equity).

(j) The Exchange Notes have been duly and validly authorized by the Company and, if and when duly executed by the proper officers of theCompany in accordance with the terms of the Indenture (assuming due authentication of the Exchange Notes by the Trustee in accordance with the termsof the Indenture) and delivered in accordance with the terms of the Registered Exchange Offer contemplated by the Registration Rights Agreement, willhave been validly issued and delivered and will constitute the legal, valid and binding obligations of the Company, entitled to the benefits of the Indentureand enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium and other similar laws relating to or affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles ofequity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at lawor in equity).

(k) The guarantees of the Exchange Notes (the “Exchange Note Guarantees”) have been duly and validly authorized by the Guarantors and, if andwhen duly endorsed on the Exchange Notes by the proper officers of the Guarantors in accordance with the terms of the Indenture (assuming dueauthentication of the Exchange Notes by the Trustee in accordance with the terms of the Indenture) and if and when the Exchange Notes are delivered inaccordance with the terms of the Registered Exchange

6


Offer contemplated by the Registration Rights Agreement, will have been validly issued and delivered and will constitute the legal, valid and bindingobligations of the Guarantors, entitled to the benefits of the Indenture and enforceable against the Guarantors in accordance with their terms, subject toapplicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights andremedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fairdealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

(l) The Indenture, the Notes, the Guarantees, the Registration Rights Agreement will conform in all material respects to the descriptions thereof inthe Offering Memorandum.

(m) The execution, delivery and performance of this Agreement and the other Operative Documents by the Company and the Guarantors and theconsummation of the Transactions (i) will not conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, chargeor encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or constitute a default under, any indenture, mortgage,deed of trust, loan agreement, lease or other agreement, license or instrument to which the Company, the Guarantors or any of their respective subsidiariesis a party or by which the Company, the Guarantors or any of their respective subsidiaries is bound or to which any of the property or assets of theCompany, the Guarantors or any of their respective subsidiaries is subject, (ii) will not result in any violation of the provisions of the certificate ofincorporation or by-laws of the Company, the Guarantors or any of their respective subsidiaries or (iii) will not violate any statute or any order, rule orregulation of any court or governmental agency or body having jurisdiction over the Company, the Guarantors or any of their respective subsidiaries orany of their properties or assets, except in the case of clauses (i) and (iii), for such conflicts, breaches or violations which would not reasonably beexpected to result in a Material Adverse Effect (as defined in Section 1(o) hereof); and except as may be required in connection with (1) the registration ofthe Notes, the Exchange Notes, the Guarantees and the Exchange Note Guarantees under the Securities Act in accordance with the Registration RightsAgreement, (2) the qualification of the Indenture under the Trust Indenture Act, (3) compliance with the securities or Blue Sky laws of variousjurisdictions and (4) such consents, approvals, authorizations, orders, filings or registrations which if not obtained would not reasonably be expected toresult in a Material Adverse Effect (as defined in Section 1(o)), no consent, approval, authorization or order of, or filing or registration with, any such courtor governmental agency or body is required for the execution, delivery and performance of this Agreement and the other Operative Documents by theCompany and the Guarantors and the consummation of the Transactions.

(n) The consolidated financial statements (including the related notes and supporting schedules) included in the Offering Memorandum comply as toform in all material respects with the requirements of Regulation S-X under the Securities Act and present fairly the financial condition, results ofoperations and cash flows of the entities purported to be shown thereby, as of the dates and for the periods indicated, and have

7


been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as notedtherein).

(o) Except as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or any of itssubsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that, if determined adversely to theCompany or any of its subsidiaries, would reasonably be expected to have a material adverse effect on the consolidated financial position, stockholders’equity, results of operations or business of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”), and to the Company’s andeach Guarantors’ knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.

(p) Except as set forth in the Offering Memorandum, there are no contracts, agreements or understandings between the Company or any Guarantorand any person granting such person the right other than rights that have been waived or satisfied to require the Company or any Guarantor to file aregistration statement under the Securities Act with respect to any securities of the Company or any Guarantor owned or to be owned by such person (otherthan the Registration Rights Agreement) or to require the Company or any Guarantor to include such securities in the securities to be registered pursuant toany Registration Statement or in any securities registered or to be registered pursuant to any other registration statement filed by or required to be filed bythe Company or any Guarantor under the Securities Act.

(q) Except as set forth in the Offering Memorandum, since the date of the Preliminary Offering Memorandum, none of the Company, the Guarantorsor any of their respective subsidiaries has (i) incurred any liability or obligation, direct or contingent, or entered into any transaction, in each case not in theordinary course of business, that is material to the Company or any of its subsidiaries, taken as a whole, (ii) declared or paid any dividend or distribution ofany kind on any class of its capital stock, (iii) issued any securities (other than the Notes and the Guarantees offered thereby or pursuant to an issuance bythe Company of options to purchase its capital stock); and there has not occurred (x) any material change in stockholders’ equity or material increase inshort-term or long-term debt of the Company, the Guarantors or any of their respective subsidiaries or (y) to the knowledge of the Company and eachGuarantor, any development or event involving a Material Adverse Effect.

(r) The Company is subject to and in compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act. All reports filed by theCompany with the Commission pursuant to Section 13 or 15(d) of the Exchange Act comply as to form in all material respects with the Exchange Act andthe rules and regulations of the Commission thereunder and when filed did not include any untrue statement of a material fact or omit to state any materialfact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

8


(s) Each of the Company and the Guarantors (i) makes and keeps books and records which are accurate in all material respects and (ii) maintains asystem of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’sauthorization, (B) transactions are recorded as necessary to permit preparation of its financial statements in conformity with generally accepted accountingprinciples and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management’s authorization, and(D) the recorded accountability for its assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to anydifferences.

(t) (i) Each of the Company and the Guarantors has established and maintains disclosure controls and procedures (as such term is defined inRule 13a-14 under the Exchange Act); such disclosure controls and procedures are designed to ensure that information required to be disclosed by theCompany and the Guarantors in the reports they file or submit under the Exchange Act is accumulated and communicated to the Company’s and theGuarantors’ management, including their respective principal executive officers and principal financial officers, as appropriate, to allow timely decisionsregarding required disclosure; and such disclosure controls and procedures are effective in all material respects to perform the functions for which theywere established.

(u) Based solely on the evaluation of its disclosure controls and procedures by the Company’s disclosure committee pursuant to its regularprocedures, the Company and the Guarantors are not aware of (i) any significant deficiencies in the design or operation of internal controls which couldadversely affect the Company’s and the Guarantors’ ability to record, process, summarize and report financial data or any material weaknesses in internalcontrols or (ii) any material fraud that involves management or other employees who have a significant role in the Company’s and the Guarantors’ internalcontrols.

(v) Except as specified in Exchange Act Reports, since the date of the most recent evaluation of such disclosure controls and procedures, there havebeen no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions withregard to significant deficiencies and material weaknesses.

(w) Ernst & Young LLP, who have certified certain financial statements of the Company and its consolidated subsidiaries, whose report is includedin the Offering Memorandum and who have delivered the initial letter referred to in Section 7(j) hereof, are independent public accountants as required bythe Securities Act and the rules and regulations promulgated thereunder.

(x) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources that the Company and theGuarantors believe to be reliable and accurate.

(y) Each of the Company and its subsidiaries has such permits, licenses, patents, franchises, certificates of need and other approvals or authorizationsof

9


governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own its properties and to conduct its businesses in the mannerdescribed in the Offering Memorandum, except as disclosed in or specifically contemplated by the Offering Memorandum; each of the Company and itssubsidiaries has fulfilled and performed all of its obligations with respect to the Permits, and no event has occurred which allows, or after notice or lapse oftime or both would allow, revocation or termination thereof of results in any other impairment of the rights of the holder of any such Permits, except asdisclosed in, or specifically contemplated by, the Offering Memorandum; and, except as disclosed in, or specifically contemplated by, the OfferingMemorandum, none of the Permits contains any restriction that is burdensome (other than such burdens as are common or customary to such Permits) tothe Company or any of its subsidiaries; in each case except for such failures to hold or fulfill and perform obligations under Permits, or restrictionscontained in Permits, that would not reasonably be expected to result in a Material Adverse Effect.

(z) The Company, the Guarantors and each of their respective subsidiaries carry, or are covered by, insurance from insurers of recognized financialresponsibility in such amounts and covering such risks as the Company believes is appropriate for the conduct of their respective businesses and the valueof their respective properties and as is customary for companies engaged in similar businesses in similar industries.

(aa) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any otherdistribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or fromtransferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except for restrictions imposed onReceivables Subsidiaries (as defined in the Offering Memorandum under the caption “Description of the Notes”) under Qualified ReceivablesTransactions (as defined in the Offering Memorandum under the caption “Description of the Notes”).

(bb) The Company, the Guarantors and each of their respective subsidiaries own or possess adequate rights to use all material patents, patentapplications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conductof their respective businesses, except for such items that, if not available for use in the business of the Company, the Guarantors or their respectivesubsidiaries, would not reasonable be expected to have a Material Adverse Effect, and have not received any notice of any claim of conflict with, any suchrights of others, and the Company and the Guarantors are not aware of any pending or threatened claim to the contrary or any pending or threatenedchallenge by any other person to the rights of the Company and its subsidiaries with respect to the foregoing which, if determined adversely to theCompany or any of its subsidiaries, would reasonable be expected to have a Material Adverse Effect.

(cc) No relationship, direct or indirect, exists between or among the Company, any Guarantor or any other subsidiary of the Company, on the onehand, and the directors, officers, stockholders, customers or suppliers of the Company, any Guarantor

10


or any other subsidiary of the Company, on the other hand, that would be required to be described in a prospectus included in a registration statementpursuant to Item 404 of Regulation S-K under the Securities Act that has not been described in the Offering Memorandum.

(dd) No labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company and eachGuarantor, is imminent that could be expected to have a Material Adverse Effect.

(ee) Each of the Company, the Guarantors and their respective subsidiaries is in compliance in all material respects with all presently applicableprovisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and those published interpretations thereunderhaving the force of law (“ERISA”), except such failures to comply as would not reasonably be expected to result in a Material Adverse Effect; no“reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company, the Guarantorsor their respective subsidiaries would have any liability, except such events as would not reasonably be expected to result in a Material Adverse Effect; theCompany, the Guarantors and their respective subsidiaries have not incurred and do not expect to incur liability under (i) Title IV of ERISA with respect totermination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including theregulations and published interpretations thereunder having the force of law (the “Code”) or Section 4201 of ERISA, except such liabilities that would notreasonably be expected to result in a Material Adverse Effect; each “pension plan” for which the Company, the Guarantors or their respective subsidiarieswould have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects, and nothing has occurred,whether by action or by failure to act, which would cause the loss of such qualification, except such losses as would not reasonable be expected to result ina Material Adverse Effect; and the Company and its subsidiaries have not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (otherthan for payment of premiums in the ordinary course of business), except such liabilities as would not reasonably be expected to result in a MaterialAdverse Effect.

(ff) The Company, the Guarantors and their respective subsidiaries have filed all foreign, federal, state and local income and franchise tax returnsrequired to be filed through the date hereof and paid all taxes shown to be due thereon, and no material tax deficiency has been determined adversely to theCompany, the Guarantors or any of their respective subsidiaries, nor does the Company or any Guarantor have any knowledge of any tax deficiency that, ifdetermined adversely to the Company, the Guarantors or any of their respective subsidiaries, might have a Material Adverse Effect, except as contested ingood faith.

(gg) Neither the Company, the Guarantors nor any of their respective subsidiaries (i) is in violation of its certificate of incorporation or by-laws,(ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observanceof any term, covenant,

11


condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party orby which it is bound or to which any of its properties or assets is subject or (iii) is in violation of any law, ordinance, governmental rule, regulation or courtdecree to which it or its property or assets may be subject or has failed to obtain any license, permit, certificate, franchise or other governmentalauthorization or permit necessary to the ownership of its property or to the conduct of its business, except in the case of clauses (ii) and (iii) for suchdefaults or violations that would not reasonably be expected to have a Material Adverse Effect.

(hh) Neither the Company, the Guarantors nor any of their respective subsidiaries, nor any director, officer, agent, employee or other personassociated with or acting on behalf of the Company, the Guarantors or any of their respective subsidiaries, has (i) used any corporate funds for anyunlawful contribution, gift, entertainment or other unlawful expense relating to political activity, made any direct or indirect unlawful payment to anyforeign or domestic government official or employee from corporate funds or made any bribe, rebate, payoff, influence payment, kickback or otherunlawful payment, except for such actions that would not reasonably be expected to result in a Material Adverse Effect or (ii) to the knowledge of theCompany, made any bribe, rebate, payoff, influence payment, kickback or other payment in violation of any provision of the Foreign Corrupt Practices Actof 1977.

(ii) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws, regulations, ordinances,rules, orders, judgments, decrees, permits or other legal requirements relating to the protection of human health and safety, the environment, naturalresources or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), which compliance includes obtaining,maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their respective businesses and(ii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxicsubstances or wastes, pollutants or contaminants, except where such non-compliance with or liability under Environmental Laws would not, individuallyor in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has been named as a “potentially responsibleparty” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

(jj) The Company, the Guarantors and each of their respective subsidiaries have good and marketable title in fee simple to all real property and goodand marketable title to all personal property owned by them, in each case, free and clear of all liens, encumbrances and defects, except such as aredescribed in the Offering Memorandum or such as do not materially affect the value of such property and do not materially interfere with the use made andproposed to be made of such property by the Company, the Guarantors and their respective subsidiaries; and all assets held under lease by the Company,the Guarantors and their respective subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as are not materialand do not materially interfere with the use made and proposed to be made of such assets by the Company, the Guarantors and their respectivesubsidiaries.

12


(kk) None of the Company, the Guarantors or any of their respective subsidiaries is, or, as of the Closing Date after giving effect to the Transactionsand the application of the proceeds as described in the Offering Memorandum under the caption “Use of Proceeds,” will be, an “investment company” or acompany “controlled” by an “investment company,” within the meaning of such terms under the Investment Company Act of 1940, as amended (the“Investment Company Act”).

(ll) None of the Company, the Guarantors, any of their respective subsidiaries or any other affiliate (as defined in Rule 501(b) of Regulation D underthe Securities Act (“Regulation D”)) of the Company has directly or through any agent (provided that no representation is made as to the Initial Purchasersor any person acting on their behalf) (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in theSecurities Act) which is or could be integrated with the offering and sale of the Notes and the Guarantees in a manner that would require the registration ofthe Notes and the Guarantees under the Securities Act, (ii) engaged in any form of general solicitation or general advertising (within the meaning ofRegulation D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similarmedium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or generaladvertising) in connection with the offering of the Notes and the Guarantees or (iii) offered, sold or issued any securities, or securities that are convertibleinto other securities, with terms that are substantially similar to the Notes and the Guarantees during the six-month period preceding the date of theOffering Memorandum.

(mm) Each of the Preliminary Offering Memorandum and the Offering Memorandum and each amendment or supplement thereto, as of its date,contains the information specified in, and meets the requirements of, Rule 144A(d)(4) under the Securities Act.

(nn) Neither the Company nor any Guarantor has distributed and, prior to the later to occur of the Closing Date and the completion of thedistribution of the Notes and the Guarantees, will distribute any written offering material in connection with the offering and sale of the Notes and theGuarantees other than the Preliminary Offering Memorandum and the Offering Memorandum.

(oo) When issued and delivered pursuant to this Agreement, the Notes and the Guarantees will not be of the same class (within the meaning of Rule144A(d)(3) under the Securities Act) as securities of the Company or the Guarantors that are listed on a national securities exchange registered underSection 6 of the Exchange Act or that are quoted in a U.S. automated inter-dealer quotation system.

(pp) Assuming that (i) your representations and warranties in Section 2 of this Agreement are true and (ii) you comply with the covenants set forthherein, it is not necessary in connection with the purchase of the Notes and the Guarantees and the offer and initial resale of the Notes and the Guaranteesby you in the manner contemplated by this Agreement and the Offering Memorandum, to register the Notes and the Guarantees under the Securities Act orto qualify the Indenture under the Trust Indenture Act.

13


(qq) None of the Company, the Guarantors or any of their affiliates or any person acting on their behalf has engaged or will engage in any directedselling efforts within the meaning of Rule 902(b) of Regulation S with respect to the Notes, and the Company, the Guarantors and their affiliates and allpersons acting on their behalf have complied with and will comply with the offering restrictions requirements of Regulation S in connection with theoffering of the Notes outside of the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule902(h). The sales of the Notes pursuant to Regulation S are not part of a plan or scheme to evade the registration provisions of the Securities Act.

(rr) The Notes sold by the Company in reliance on Regulation S will be represented upon issuance by a temporary global security that may not beexchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the Securities Act and only uponcertification of beneficial ownership of such Notes by non-U.S. persons or U.S. persons who purchased such Notes in transactions that were exempt fromthe registration requirements of the Securities Act.

(ss) None of the Company, the Guarantors or any of their respective subsidiaries has taken or will take, directly or indirectly, any action designed tocause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Notesand the Guarantees to facilitate the sale or resale of the Notes and the Guarantees.

(tt) No “nationally recognized statistical rating organization” as such term is defined for purposes of Rule 436(g)(2) under the Securities Act (i) hasimposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company’s retaining any ratingassigned as of the date hereof to the Company or any of its securities or (ii) has indicated to the Company that it is considering (A) the downgrading,suspension or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or(B) any negative change in the outlook for any rating of the Company.

(uu) The Company has not taken, and will not take, any action that might cause this Agreement or the issuance or sale of the Notes and theGuarantees to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board ofGovernors of the Federal Reserve System.

Each of the Company and the Guarantors understands that the Initial Purchasers and, for purposes of the opinions to be delivered to the Initial Purchasers

pursuant to Section 7 hereof, counsel to the Company and counsel to the Initial Purchasers will rely upon the accuracy and truth of the foregoing representationsand warranties and hereby consents to such reliance.

14


SECTION 2. Representations, Warranties and Agreements of the Initial Purchasers. Each of the Initial Purchasers, severally and not jointly,represents and warrants to, and agrees with, the Company and the Guarantors, that:

(a) Such Initial Purchaser (i) is a QIB with such knowledge and experience in financial and business matters as are necessary in order to evaluate themerits and risks of an investment in the Notes and the Guarantees; (ii) in connection with the Exempt Resales, will solicit offers to buy the Notes and theGuarantees only from, and will offer to sell the Notes and the Guarantees only to, Eligible Purchasers in accordance with this Agreement and on the termscontemplated by the Offering Memorandum; and (iii) will not offer or sell the Notes and the Guarantees, nor has it offered or sold the Notes and theGuarantees by, or otherwise engaged in, any form of general solicitation in connection with the offering of the Notes and the Guarantees.

(b) The Notes and the Guarantees may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except inaccordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act.

(c) Such Initial Purchaser represents that it has not offered, sold or delivered the Notes and the Guarantees, and will not offer, sell or deliver theNotes and the Guarantees (i) as part of its distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering of theNotes and the Guarantees and the Closing Date (such period, the “Distribution Compliance Period”) within the United States or to, or for the account orbenefit of U.S. persons, except in accordance with Rule 144A under the Securities Act. Accordingly, such Initial Purchaser represents and agrees thatneither it, its affiliates nor any person acting on its behalf has engaged or will engage in any directed selling efforts within the meaning of Rule 902(c)under the Securities Act with respect to the Notes and the Guarantees, and its affiliates and all persons acting on its behalf have complied and will complywith the offering restrictions requirements of Regulation S.

(d) Such Initial Purchaser agrees that, at or prior to confirmation of a sale of Notes and Guarantees (other than a sale pursuant to Rule 144A), it willhave sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes and Guarantees from it duringthe Distribution Compliance Period a confirmation or notice (which confirmation or notice may be contained in the Offering Memorandum) substantiallyto the following effect:

“The Notes covered hereby have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offeredand sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until40 days after the later of the commencement of the offering or the closing date, except in either case in accordance with Regulation S (or Rule 144Aif available) under the Securities Act, and in connection with any subsequent sale by you of the Notes covered hereby in reliance on Regulation Sduring the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver anotice substantially to the foregoing effect. Terms used above have the meanings assigned to them in Regulation S.”

15


(e) Such Initial Purchaser (i) has not offered or sold, and, prior to six months after the date of the issue of the Notes, will not offer or sell, any Notesto persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments(as principal or agent) for purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public inthe United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) has complied with and will comply with all applicableprovisions of the Financial Services and Markets Act 2000 (the “FSMA”) with respect to anything done by it in relation to the Notes in, from or otherwiseinvolving the United Kingdom and (iii) has only communicated or caused to be communicated and will only communicate and cause to be communicatedany invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issueor sale of any Notes in circumstances in which Section 21(1) of the FSMA would not apply to the Company.

Such Initial Purchaser understands that the Company and, for purposes of the opinions to be delivered to you pursuant to Section 7 hereof, counsel to the

Company and counsel to you will rely upon the accuracy and truth of the foregoing representations and warranties and hereby consents to such reliance.

The terms used in this Section 2 that have meanings assigned to them in Regulation S are used herein as so defined. SECTION 3. Purchase of the Notes and the Guarantees by the Initial Purchasers. On the basis of the representations and warranties contained in,

and subject to the terms and conditions of, this Agreement, the Company and the Guarantors agree to issue and sell the Notes and the Guarantees to theseveral Initial Purchasers, and each of the Initial Purchasers, severally and not jointly, agrees to purchase the amount of Notes set opposite that InitialPurchaser’s name in Schedule 1 hereto at a purchase price equal to 98.0% of the principal amount thereof (the “Purchase Price”).

The Company and the Guarantors shall not be obligated to deliver any of the Notes or the Guarantees to be delivered on the Closing Date, except upon

payment for all the Notes and the Guarantees to be purchased on the Closing Date as provided herein. SECTION 4. Delivery of and Payment for the Notes and the Guarantees. (a) Delivery of and payment for the Notes and the Guarantees shall be made at the office of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New

York, New York 10153, at 9:00 A.M., New York City time, on the fourth full business day following the date of this Agreement or at such other date orplace as shall be determined by agreement between Lehman Brothers and the Company. This date and time are sometimes referred to as the “ClosingDate.” The place of closing for the Notes and the Closing Date may be varied by agreement between the Initial Purchasers and the Company.

(b) On the Closing Date, one or more Notes in definitive form, registered in the name of Cede & Co., as nominee of The Depository Trust Company(“DTC”), having

16


an aggregate principal amount corresponding to the aggregate principal amount of Notes sold pursuant to Eligible Resales (collectively, the “GlobalNotes”), shall be delivered by the Company to the Initial Purchasers, or the Trustee as custodian for DTC (and will cause DTC to credit the Notes to theaccounts of the Initial Purchasers at DTC), against payment by the Initial Purchasers of the purchase price thereof by wire transfer of immediatelyavailable funds as the Company may direct by written notice delivered to you no later than two business days prior to the Closing Date. The Global Notesin definitive form shall be made available to the Initial Purchasers for inspection not later than 2:00 P.M., New York City time, on the business day prior tothe Closing Date.

SECTION 5. Further Agreements of the Company and the Guarantors. The Company and the Guarantors, jointly and severally, agree with theInitial Purchasers:

(a) To advise you promptly and, if requested by you, to confirm such advice in writing, of the issuance by the Commission or any state securitiescommission of any stop order suspending the qualification or exemption from qualification of the Notes and the Guarantees for offering or sale in anyjurisdiction, or the initiation or threatening of any proceeding for such purpose by the Commission or any state securities commission or other regulatoryauthority. The Company shall use all reasonable efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of theNotes and the Guarantees under any state securities or Blue Sky laws and, if at any time any state securities commission shall issue any stop ordersuspending the qualification or exemption of the Notes and the Guarantees under any state securities or Blue Sky laws, the Company shall use allreasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time.

(b) To furnish to you without charge as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and anyamendments or supplements thereto, as you may reasonably request. The Company and the Guarantors consent to the use of the Preliminary OfferingMemorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant to this Agreement, by you in connectionwith the Exempt Resales that are in compliance with this Agreement.

(c) Not to amend or supplement the Offering Memorandum prior to the Closing Date or during the period referred to in (d) below, other than byfiling documents under the Exchange Act that are incorporated by reference therein, unless you shall previously have been advised of, and shall not havereasonably objected to, such amendment or supplement within a reasonable time, but in any event not longer than three days after being furnished a copyof such amendment or supplement; provided, however, that prior to the completion of the distribution of the Notes by the Initial Purchasers (as determinedby the Initial Purchasers), the Company will not file any document under the Exchange Act that is incorporated by reference in the Offering Memorandumunless, prior to such proposed filing, the Company has furnished the Initial Purchasers with a copy of such document for their review and the InitialPurchasers have not reasonably objected to the filing of such document within a reasonable time. The Company shall promptly prepare, upon anyreasonable request by you, any amendment or

17


supplement to the Offering Memorandum that may be necessary or advisable in connection with Exempt Resales. The Company shall promptly advise youwhen any document filed under the Exchange Act that is incorporated by reference in the Offering Memorandum shall have been filed with theCommission.

(d) If, at any time prior to the completion of the distribution of the Notes pursuant to Exempt Resales after the date of this Agreement and prior tothe consummation of the Registered Exchange Offer, any event shall occur or information becomes known that, in the judgment of the Company or in thereasonable opinion of counsel to you (which opinion may be expressed orally), makes any statement of a material fact in the Offering Memorandum untrueor that requires the making of any additions to or changes in the Offering Memorandum in order to make the statements in the Offering Memorandum, inthe light of the circumstances at the time that the Offering Memorandum is delivered to prospective Eligible Purchasers, not misleading, or if it isnecessary to amend or supplement the Offering Memorandum to comply with applicable law, the Company will promptly notify you of such event andprepare an appropriate amendment or supplement to the Offering Memorandum so that, at the time that the Offering Memorandum, is delivered toprospective Eligible Purchasers, (i) the statements in the Offering Memorandum, as amended or supplemented, in the light of the circumstances underwhich they were made, will not be misleading and (ii) the Offering Memorandum will comply with applicable law.

(e) Promptly from time to time to take such action as you may reasonably request to qualify the Notes and the Guarantees for offering and sale underthe state securities or Blue Sky laws of such jurisdictions as you may reasonably request and to comply with such laws so as to permit the continuance ofsales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Notes and the Guarantees (provided,however, that the Company and the Guarantors shall not be obligated to qualify to do business in any jurisdiction in which they are not now so qualified orto take any action that would subject them to service of process in any jurisdiction in which they are not now so subject or subject to taxation, other thansuits arising out of the offering or sale of the Notes and the Guarantees).

(f) To use all best efforts to do and perform all things required or necessary to be done and performed under this Agreement by them prior to or afterthe Closing Date and to satisfy all conditions precedent to the Initial Purchasers’ obligations hereunder to purchase the Notes and the Guarantees.

(g) Except as contemplated in the Registration Rights Agreement, not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect ofany security (as defined in the Securities Act) that would be integrated with the sale of the Notes and the Guarantees in a manner that would require theregistration under the Securities Act of the sale to you or the Eligible Purchasers of the Notes and the Guarantees.

(h) During the period of two years after the Closing Date, not to, and to not permit any of their affiliates to, resell any of the Notes that constitute“restricted

18


securities” under Rule 144 under the Securities Act that have been acquired by any of them. (i) Not to, and to not permit any of its affiliates or any person acting on its or their behalf to, engage in any form of general solicitation or general

advertising (within the meaning of Regulation D) in connection with the offering of the Notes and the Guarantees. (j) Not to, and to not permit any of its affiliates or any person acting on its or their behalf to, engage in any directed selling efforts within the

meaning of Rule 902(b) of Regulation S with respect to the Notes, and to, and require its affiliates or any person acting on its or their behalf to, complywith the offering restrictions requirements of Regulation S in connection with the offering of the Notes and the Guarantees outside of the United States.

(k) Not to, and to not permit any of their respective subsidiaries or affiliates to take, directly or indirectly, any action designed to cause or result in,or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Notes and the Guaranteesto facilitate the sale or resale of the Notes and the Guarantees.

(l) For so long as any Notes remain outstanding and during any period in which the Company or the Guarantors are not subject to Section 13 or15(d) of the Exchange Act, to make available to any registered holder or beneficial owner of the Notes in connection with any sale thereof pursuant to Rule144A and any prospective purchaser of the Notes from such registered holder or beneficial owner the information required by Rule 144A(d)(4) under theSecurities Act.

(m) To use all commercially reasonable efforts to cause the Notes to be eligible for trading in The PORTAL SM Market (“PORTAL”), a subsidiary ofThe Nasdaq Stock Market, Inc., and to permit the Notes to be eligible for clearance and settlement through DTC.

(n) To apply the net proceeds from the sale of the Notes substantially as set forth in the Offering Memorandum under the section entitled “Use ofProceeds.”

(o) To take such steps as shall be necessary to ensure that neither the Company nor any subsidiary of the Company shall become an “investmentcompany” or a company “controlled” by an “investment company,” within the meaning of such terms under the Investment Company Act.

(p) For a period of 180 days from the date of the Offering Memorandum, not to, directly or indirectly, sell, offer to sell, contract to sell, grant anyoption to purchase, issue any instrument convertible into or exchangeable for, or otherwise transfer or dispose of (or enter into any transaction or devicethat is designed to, or could be expected to, result in the disposition in the future of), any debt securities of the Company, the Guarantors or any of theirrespective subsidiaries in a public or private offering for cash having a maturity of more than one year from the date of issue of such securities,

19


except (i) for the Exchange Notes and the Exchange Note Guarantees in connection with the Exchange Offer, (ii) for promissory notes issued to lenderspursuant to the Credit Agreement (as defined in the Offering Memorandum under the caption “Description of the Notes”) as amended, extended ormodified, or replaced with another bank credit facility, (iii) obligations of a Receivables Subsidiary (as defined in the Offering Memorandum under thecaption “Description of the Notes”) under a Qualified Receivables Transaction (as defined in the Offering Memorandum under the caption “Description ofthe Notes”), (iv) promissory notes issued to lenders under bank credit facilities entered into outside the United States in an aggregate principal amount notto exceed $300.0 million (whether U.S. dollar denominated or not) or (v) with the prior consent of Lehman Brothers, which consent shall not beunreasonably withheld. For the avoidance of doubt, reimbursement obligations in respect of letters of credit shall not be deemed to constitute debtsecurities.

(q) For a period of five years following the Closing Date, at any time that the Company is not subject to Section 13 or 15(d) of the Exchange Act, tofurnish or make available to you annual copies of all materials furnished by the Company to its stockholders and holders of Notes and all reports andfinancial statements furnished by the Company to the principal national securities exchange upon which the Company’s common stock or the Notes maybe listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of theCommission thereunder.

SECTION 6. Expenses. The Company and the Guarantors, jointly and severally, agree, whether or not the transactions contemplated by thisAgreement are consummated or this Agreement becomes effective or is terminated, to pay all costs, expenses, fees and taxes incident to and in connectionwith: (i) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, withoutlimitation, financial statements) and all amendments and supplements thereto (including fees and expenses of the Company’s accountants and counsel, butnot, however, legal fees and expenses of your counsel incurred in connection therewith), (ii) the preparation, printing (including, without limitation, wordprocessing and duplication costs) and delivery of this Agreement, the Indenture, the Registration Rights Agreement, all Blue Sky Memoranda and all otheragreements, memoranda, correspondence and other documents printed and delivered in connection herewith and with the Exempt Resales (but not,however, legal fees and expenses of your counsel incurred in connection with any of the foregoing other than fees of such counsel plus reasonableexpenses incurred in connection with the preparation, printing and delivery of any Blue Sky Memoranda), (iii) the issuance and delivery by the Companyand the Guarantors of the Notes and the Guarantees and any taxes payable in connection therewith, (iv) the qualification of the Notes for offer and saleunder the securities or Blue Sky laws of the several states (including, without limitation, the reasonable fees and expenses of your counsel relating to suchregistration or qualification), (v) the furnishing of such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and allamendments and supplements thereto, as may be reasonably requested for use in connection with the Exempt Resales, (vi) the preparation of certificatesfor the Notes (including, without limitation, printing and engraving thereof), (vii) the fees,

20


disbursements and expenses of the Company’s counsel and accountants and the Trustee, (viii) the expenses and listing fees in connection with theapplication for quotation of the Notes in PORTAL, (ix) the costs and expenses of the Company relating to investor presentations on any road showundertaken in connection with the offering of the Notes, including, without limitation, expenses associated with the production of road show slides andgraphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel andlodging expenses of the representatives and officers of the Company and any such consultants, (x) the fees charged by any rating agency and other relatedexpenses, if any, (xi) the fees and expenses (including fees and expenses of counsel) in connection with approval of the Notes by DTC for “book-entry”transfer and (xii) the performance by the Company and the Guarantors of their other obligations under this Agreement.

SECTION 7. Conditions to Initial Purchasers’ Obligations. The respective obligations of the Initial Purchasers hereunder are subject to theaccuracy, when made and on and as of the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to theperformance by the Company and the Guarantors of their respective obligations hereunder, and to each of the following additional terms and conditions.

(a) The Offering Memorandum shall have been printed and copies distributed to you not later than 4:00 P.M., New York City time, on September 9,2005, or at such later date and time as you may approve in writing, and no stop order suspending the qualification or exemption from qualification of theNotes in any jurisdiction shall have been issued, and no proceeding for that purpose shall have been commenced or shall be pending or threatened.

(b) No Initial Purchaser shall have discovered and disclosed to the Company on or prior to such Closing Date that the Offering Memorandum or anyamendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Weil, Gotshal & Manges LLP, counsel for the InitialPurchasers, is material or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to makethe statements therein, in the light of circumstances under which they were made, not misleading.

(c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the other OperativeDocuments, the Transaction Documents, the Offering Memorandum and all other legal matters relating to this Agreement and the Transactions shall bereasonably satisfactory in all material respects to counsel for the Initial Purchasers, and the Company and the Guarantors shall have furnished to suchcounsel all documents and information that they may reasonably request to enable them to pass upon such matters.

(d) Dechert LLP shall have furnished to the Initial Purchasers its written opinion and letter, as counsel to the Company and the Guarantors, in eachcase addressed to the Initial Purchasers and dated the Closing Date, substantially in the form attached hereto as Exhibit B-1 and Exhibit B-2, respectively.The Initial Purchasers shall have

21


been furnished such written opinions of local counsel reasonably requested by the Initial Purchasers. (e) John G. Chou, shall furnish to the Initial Purchasers his written opinion, as Vice President, Deputy General Counsel and Secretary of the

Company and the Guarantors, addressed to the Initial Purchasers and dated the Closing Date, substantially in the form attached hereto as Exhibit C. (f) The Initial Purchasers shall have received from Weil, Gotshal & Manges LLP, counsel for the Initial Purchasers, such opinion or opinions, dated

the Closing Date, with respect to the issuance and sale of the Notes and the Guarantees, the Offering Memorandum and other related matters as the InitialPurchasers may reasonably require, and the Company and the Guarantors shall have furnished to such counsel such documents as they reasonably requestfor the purpose of enabling them to pass upon such matters.

(g) Each of the Company, the Guarantors and the Trustee shall have entered into the Indenture, and the Initial Purchasers shall have received anoriginal executed copy thereof.

(h) Each of the Company and the Guarantors shall have entered into the Registration Rights Agreement, and the Initial Purchasers shall havereceived an original executed copy thereof.

(i) The Notes shall have been designated for trading in PORTAL and shall be eligible for clearance and settlement through DTC. (j) At the time of execution of this Agreement, the Initial Purchasers shall have received from Ernst & Young LLP, a letter, in form and substance

satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (i) confirming that they are independent publicaccountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountantsunder Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developmentssince the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior tothe date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’“comfort letters” to initial purchasers.

(k) With respect to the letter of Ernst & Young LLP referred to in the preceding paragraph and delivered to the Initial Purchasers concurrently withthe execution of this Agreement (the “initial letter”), the Initial Purchasers shall have received a letter (the “bring-down letter”) of such accountants,addressed to the Initial Purchasers and dated the Closing Date (i) confirming that they are independent public accountants within the meaning of theSecurities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of

22


Regulation S-X of the Commission, (ii) stating, as of the Closing Date (or, with respect to matters involving changes or developments since the respectivedates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date of thebring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and(iii) confirming in all material respects the conclusions and findings set forth in the initial letter.

(l) The Initial Purchasers shall have received (i) a certificate from the Company, dated as of the Closing Date, signed by a Vice President, and (ii) acertificate from each Guarantor, dated as of the Closing Date, signed by a Vice President, stating that (in the case of (A), (B) and (D), to their knowledge):

(A) The representations and warranties of the Company and the Guarantors contained herein are true and correct as if made on and as of theClosing Date (other than to the extent any such representation or warranty is made expressly to a certain date), and the Company and the Guarantorshave performed all covenants and agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to theClosing Date;

(B) As of the Closing Date, since the date hereof or since the date of the most recent financial statements in the Offering Memorandum, exceptas described in the Offering Memorandum, no event or events have occurred, nor has any information become known that, individually or in theaggregate, would have a material adverse effect on the consolidated financial position, results of operations or business of the Company and itssubsidiaries taken as a whole;

(C) They have carefully examined the Preliminary Offering Memorandum and the Offering Memorandum, and, in their opinion, thePreliminary Offering Memorandum and the Offering Memorandum, as of their respective dates, did not, and the Offering Memorandum, as of theClosing Date, does not, include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary tomake the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the OfferingMemorandum, no event has occurred which should have been set forth in a supplement or amendment to Offering Memorandum; and

(D) The issuance and sale of the Notes and Guarantees by the Company and the Guarantors hereunder have not been enjoined (temporarily orpermanently) by any court or governmental body or agency.

(m) (i) None of the Company, the Guarantors or any of their respective subsidiaries shall have sustained, since the date of the latest audited financialstatements

23


included in the Offering Memorandum (exclusive of any amendment or supplement thereto after the date hereof), any material loss or interference with itsbusiness from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action,order or decree, otherwise than as set forth or contemplated in the Offering Memorandum, and (ii) since such date there shall not have been any change inthe stockholders’ equity or long-term debt of the Company, any Guarantor or any of their respective subsidiaries or any change, or any developmentinvolving a prospective change, in or affecting the consolidated financial position, results of operations or business of the Company and its subsidiariestaken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or(ii), is, in the judgment of Lehman Brothers, so material and adverse as to make it impracticable or inadvisable to proceed with the offering, sale or thedelivery of the Notes and the Guarantees being delivered on such Closing Date on the terms and in the manner contemplated herein and in the OfferingMemorandum.

(n) Subsequent to the execution and delivery of this Agreement, (i) no downgrading shall have occurred in the rating accorded the Company’s debtsecurities by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) of theSecurities Act, and (ii) no such organization shall have publicly announced or privately informed the Company that it has under surveillance or review,with possible negative implications, its rating of any of the Company’s debt securities.

(o) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: (i) trading in securities generallyon the New York Stock Exchange, the Nasdaq National Market or the American Stock Exchange or in the over-the-counter market, or trading in anysecurities of the Company on any exchange or in the over-the-counter market, shall have been suspended, minimum prices shall have been established onany such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, orthe settlement, payment or clearance of such trading shall have been materially disrupted, (ii) a banking moratorium shall have been declared by Federal orstate authorities of the United States, (iii) there shall have occurred any attack on, outbreak or escalation of hostilities involving the United States, anydeclaration of war by Congress or any other national or international calamity, crisis or emergency if, in the judgment of Lehman Brothers, the effect ofany such attack, outbreak, escalation, act, declaration, calamity, crisis or emergency makes it impractical or inadvisable to proceed with the completion ofthe offering or sale of and payment for the Notes and the Guarantees, or (iv) there shall have occurred such a material adverse change in general economic,political or financial conditions, including, without limitation, as a result of terrorist activities after the date hereof (or the effect of international conditionson the financial markets in the United States shall be such), as to make it, in the judgment of Lehman Brothers, impracticable or inadvisable to proceedwith the offering, sale or delivery of the Notes and the Guarantees being delivered on the Closing Date or that, in the judgment of Lehman Brothers, wouldmaterially and adversely affect the financial markets or the markets for the Notes and the Guarantees and other debt securities.

24


All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisionshereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. SECTION 8. Indemnification and Contribution. (a) The Company and the Guarantors shall jointly and severally indemnify and hold harmless each Initial Purchaser, its affiliates, directors, officers

and employees and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act, from and against any loss, claim,damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating topurchases and sales of the Notes and the Guarantees), to which that Initial Purchaser, director, officer, employee or controlling person may becomesubject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untruestatement or alleged untrue statement of a material fact contained in (A) any Preliminary Offering Memorandum, the Offering Memorandum or anyamendment or supplement thereto or (B) any Blue Sky application or other document prepared or executed by the Company or any of the Guarantors (orbased upon any written information furnished by the Company or any of the Guarantors) specifically for the purpose of qualifying any or all of the Notesunder the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a “Blue SkyApplication”), (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum, the Offering Memorandum or in any amendmentor supplement thereto, or in any Blue Sky Application, any material fact required to be stated therein or necessary to make the statements therein, in thelight of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser and each such director, officer,employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser or such director,officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liabilityor action as such expenses are incurred, provided, however that the Company and the Guarantors shall not be liable in any such case to the extent that anysuch loss, claim, damage, liability or action arises out of or is based upon any such untrue statement or alleged untrue statement or omission or allegedomission made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company in writing by or on behalfof the Initial Purchasers expressly for inclusion therein, as specifically identified in Section 8(e) hereof. The foregoing indemnity agreement is in additionto any liability which the Company and the Guarantors may otherwise have to any Initial Purchaser or to any director, officer, employee or controllingperson of that Initial Purchaser.

(b) Each Initial Purchaser shall, severally and not jointly, indemnify and hold harmless the Company, the Guarantors, each of their directors, officersand employees, and each person, if any, who controls the Company or any of the Guarantors within the meaning of the Securities Act, from and againstany loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Guarantors or any such director, officer orcontrolling person may become subject, under the Securities Act

25


or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of amaterial fact contained in any Preliminary Offering Memorandum, the Offering Memorandum or in any amendment or supplement thereto, or in any BlueSky Application or (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum, the Offering Memorandum or in anyamendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statementstherein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement oralleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such InitialPurchaser furnished to the Company through Lehman Brothers by or on behalf of that Initial Purchaser specifically for inclusion therein, and shallreimburse the Company, the Guarantors and any such director, officer or controlling person for any legal or other expenses reasonably incurred by theCompany, the Guarantors or any such director, officer or controlling person in connection with investigating or defending or preparing to defend againstany such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which anyInitial Purchaser may otherwise have to the Company, the Guarantors or any such director, officer or controlling person.

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnifiedparty shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of theclaim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability whichit may have under this Section 8 except to the extent it has been materially prejudiced by such failure; and provided further, however, that the failure tonotify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If anysuch claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall beentitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereofwith counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assumethe defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expensessubsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, thatLehman Brothers shall have the right to employ counsel to represent jointly Lehman Brothers and those other Initial Purchaser and their respectivedirectors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be soughtby the Initial Purchasers against the Company and the Guarantors under this Section 8 if, in the reasonable judgment of Lehman Brothers, it is advisablefor Lehman Brothers and those Initial Purchasers, directors, officers, employees and controlling persons to be jointly represented by separate counsel, andin that event the fees and expenses of such separate counsel shall be paid by the Company. No indemnifying party

26


shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent tothe entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contributionmay be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromiseor consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does notinclude any findings of fact or admissions of fault or culpability as to the indemnified party or (ii) be liable for any settlement of any such action effectedwithout its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be afinal judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and againstany loss or liability by reason of such settlement or judgment.

(d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified partyunder Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifyingparty shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss,claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by theCompany and the Guarantors, on the one hand, and the Initial Purchasers, on the other, from the offering of the Notes and the Guarantees or (ii) if theallocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefitsreferred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, withrespect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevantequitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, withrespect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes and the Guarantees purchasedunder this Agreement (before deducting expenses) received by the Company, on the one hand, and the total discounts and commissions received by theInitial Purchasers with respect to the Notes and the Guarantees purchased under this Agreement, on the other, bear to the total gross proceeds from theoffering of the Notes and the Guarantees under this Agreement. The relative fault shall be determined by reference to whether the untrue or alleged untruestatement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors orthe Initial Purchasers, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement oromission. The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to thisSection 8(d) were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other methodof allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as aresult of the loss, claim, damage or liability,

27


or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expensesreasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim.Notwithstanding the provisions of this Section 8(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which thetotal price at which the Notes purchased by it was resold to Eligible Purchaser exceeds the amount of any damages which such Initial Purchaser hasotherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of suchfraudulent misrepresentation. The Initial Purchasers’ obligations to contribute as provided in this Section 8(d) are several in proportion to their respectivePurchase obligations and not joint.

(e) The Initial Purchasers severally confirm and the Company and the Guarantors acknowledge that the names of the Initial Purchasers on the coverpage of the Offering Memorandum and under the caption “Plan of Distribution,” and the first sentence of the sixth paragraph, the seventh paragraph andthe first and second sentences of the tenth paragraph under the section entitled “Plan of Distribution” in the Offering Memorandum constitute the onlyinformation concerning the Initial Purchasers furnished in writing to the Company by or on behalf of the Initial Purchasers specifically for inclusion in theOffering Memorandum.

SECTION 9. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the remaining non-defaulting

Initial Purchasers shall be obligated to purchase the Notes that the defaulting Initial Purchaser agreed but failed to purchase on such Closing Date in therespective proportions which the amount of the Notes set forth opposite the name of each remaining non-defaulting Initial Purchaser in Schedule 1 heretobears to the total amount of Notes set forth opposite the names of all the remaining non-defaulting Initial Purchasers in Schedule 1 hereto; provided,however, that the remaining non-defaulting Initial Purchasers shall not be obligated to purchase any of the Notes on such Closing Date if the total amountof the Notes which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on such date exceeds 10% of the total amount ofNotes to be purchased on such Closing Date, and any remaining non-defaulting Initial Purchaser shall not be obligated to purchase more than 110% of theamount of Notes which it agreed to purchase on such Closing Date pursuant to the terms of Section 2. If the foregoing maximums are exceeded, theremaining non-defaulting Initial Purchasers, or those other Initial Purchasers satisfactory to Lehman Brothers who so agree, shall have the right, but shallnot be obligated, to purchase, in such proportion as may be agreed upon among them, all of the Notes to be purchased on such Closing Date. If theremaining Initial Purchasers or other Initial Purchasers satisfactory to Lehman Brothers do not elect to purchase the Notes which the defaulting InitialPurchaser or Initial Purchasers agreed but failed to purchase on such Closing Date, this Agreement shall terminate without liability on the part of anynon-defaulting Initial Purchaser or the Company, except that the Company

28


will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this Agreement, the term “Initial Purchaser”includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 9,purchases the Notes which a defaulting Initial Purchaser agreed but failed to purchase.

(b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company and the Guarantors for damagescaused by its default. If other Initial Purchasers are obligated or agree to purchase the Notes of a defaulting or withdrawing Initial Purchaser, eitherLehman Brothers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion ofcounsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement.

SECTION 10. Termination. The obligations of the Initial Purchasers hereunder may be terminated by Lehman Brothers by notice given to andreceived by the Company prior to delivery of and payment for the Notes if, prior to that time, any of the events described in Sections 7(m), 7(n) and 7(o)shall have occurred or if the Initial Purchasers shall decline to purchase the Notes for any reason permitted under this Agreement.

SECTION 11. Reimbursement of Initial Purchasers’ Expenses. If the Company and the Guarantors shall fail to deliver the Notes and the Guaranteesto the Initial Purchasers by reason of any failure, refusal or inability on the part of the Company and the Guarantors to perform any agreement on their partto be performed, or because any other condition of the Initial Purchasers’ obligations hereunder required to be fulfilled by the Company and theGuarantors is not fulfilled, the Company and the Guarantors will reimburse the Initial Purchasers (other than any Initial Purchaser that defaults in theperformance of its obligations under this Agreement) for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred bythe Initial Purchasers in connection with this Agreement and the proposed purchase of the Notes and the Guarantees, and upon demand the Company andthe Guarantors shall pay the full amount thereof to Lehman Brothers.

SECTION 12. Research Independence. The Company and the Guarantors acknowledge that the Initial Purchasers’ research analysts and researchdepartments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies,and that such Initial Purchasers’ research analysts may hold and make statements or investment recommendations and/or publish research reports withrespect to the Company and/or the Transactions that differ from the views of its investment bankers. The Company and the Guarantors hereby waive andrelease, to the fullest extent permitted by law, any claims that the Company or the Guarantors may have against the Initial Purchasers with respect to anyconflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be differentfrom or inconsistent with the views or advice communicated to the Company or the Guarantors by such Initial Purchasers’ investment banking divisions.The Company and the Guarantors

29


acknowledge that each of the Initial Purchasers is a full service securities firm and as such from time to time, subject to applicable securities laws, mayeffect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the companies whichmay be the subject of the Transactions contemplated herein.

SECTION 13. No fiduciary duty. The Company and the Guarantors acknowledge and agree that in connection with this offering, sale of the Notes or

any other services the Initial Purchasers may be deemed to be providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise,between the parties or any oral representations or assurances previously or subsequently made by the Initial Purchasers: (i) no fiduciary or agencyrelationship between the Company, the Guarantors and any other person, on the one hand, and the Initial Purchasers, on the other, exists; (ii) the InitialPurchasers are not acting as advisors, expert or otherwise, to either the Company or the Guarantors, including, without limitation, with respect to thedetermination of the pricing of the Notes, and such relationship between the Company and the Guarantors, on the one hand, and the Initial Purchasers, onthe other, is entirely and solely commercial, based on arms-length negotiations; (iii) any duties and obligations that the Initial Purchasers may have to theCompany or the Guarantors shall be limited to those duties and obligations specifically stated herein; and (iv) the Initial Purchasers and their respectiveaffiliates may have interests that differ from those of the Company and the Guarantors. The Company and the Guarantors hereby waive any claims that theCompany or the Guarantors may have against the Initial Purchasers with respect to any breach of fiduciary duty in connection with the Transactions.

SECTION 14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail, telex or facsimile transmission to the care of Lehman Brothers Inc., 745 Seventh

Avenue, 19th Floor, New York, New York 10019, Attention: Syndicate Department (Fax: (646) 497-4815), with a copy to Weil, Gotshal & Manges LLP,767 Fifth Avenue, New York, New York 10153, Attention: Todd R. Chandler, Esq. (Fax: (212) 310-8007) and, in the case of any notice pursuant toSection 8(d), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 399 Park Avenue, New York, New York 10022 (Fax:(212) 526-2648);

(b) if to the Company and the Guarantors, shall be delivered or sent by mail, telex or facsimile transmission to the Company, 1300 Morris Drive,Suite 100, Chesterbrook, PA 19087, Attention: Treasurer (Fax: (610) 727-3639), with a copy to Dechert LLP, 1717 Arch Street, Suite 400, Philadelphia,PA 19103, Attention: Craig Godshall, Esq. (Fax: 215-994-2222);

provided, however, that any notice to an Initial Purchaser pursuant to Section 8(d) shall be delivered or sent by mail, telex or facsimile transmission to such InitialPurchaser at its address set forth in its acceptance telex to Lehman Brothers, which address will be supplied to any other party hereto by Lehman Brothers uponrequest. The Company shall be entitled to act and rely

30


upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Lehman Brothers. Notice shall be deemed given two businessdays after being deposited in the mail, if mailed, on the next business day if delivered via overnight air courier guaranteeing overnight delivery and when faxedwith confirmation of transmission having being received. SECTION 15. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the

Company, the Guarantors and their respective personal representatives and successors. Except as permitted by Section 2 this Agreement and the terms andprovisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Companyand the Guarantors contained in this Agreement shall also be deemed to be for the benefit of the affiliates, directors, officers and employees of the InitialPurchasers and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Securities Act, and (b) the indemnityagreement of the Initial Purchasers contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of the directors, officers and anyperson controlling the Company and the Guarantors within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shallbe construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect ofthis Agreement or any provision contained herein.

SECTION 16. Survival. The respective indemnities, representations, warranties and agreements of the Company, the Guarantors and the InitialPurchasers contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of andpayment for the Notes and the Guarantees and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them orany person controlling any of them.

SECTION 17. Definition of the Terms “Business Day” and “Subsidiary.” For purposes of this Agreement, (a) “business day” means each Monday,Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in the City of New York are generally authorized or obligatedby law or executive order to close, and (b) “subsidiary” has the meaning set forth in Rule 405 of the Securities Act.

SECTION 18. Jurisdiction. Each of the parties hereto irrevocably consents to the jurisdiction of the courts of the State of New York and the courtsof the United States of America, in each case, located in the Borough of Manhattan, City and State of New York, over any suit, action or proceeding withrespect to this Agreement or the transactions contemplated hereby. Each of the parties hereto waives any objection that it may have to the venue of anysuit, action or proceeding with respect to this Agreement or the transactions contemplated hereby in the courts of the State of New York or the courts ofthe United States of America, in each case, located in the Borough of Manhattan, City and State of New York or that such suit, action or proceedingbrought in the courts of the State of New York or United States of America, in each case, located in the Borough of Manhattan, City and State of NewYork was brought in an inconvenient court and agrees not to plead or claim the same.

31


SECTION 19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York. SECTION 20. Counterparts. This Agreement may be executed in multiple counterparts and, if executed in counterparts, the executed counterparts

shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. SECTION 21. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the

meaning or interpretation of, this Agreement.

32


If the foregoing correctly sets forth the agreement between the Company, the Guarantors and the Initial Purchasers, please indicate your acceptance in thespace provided for that purpose below.

Very truly yours,


By:

Name: Title:

AMBULATORY PHARMACEUTICAL SERVICES, INC.AMERISOURCEBERGEN DRUG CORPORATIONAMERISOURCEBERGEN HOLDING CORPORATIONAMERISOURCEBERGEN SERVICES CORPORATIONAMERISOURCE HEALTH SERVICES CORPORATIONANDERSON PACKAGING, INC.APS ENTERPRISES HOLDING COMPANYASD SPECIALTY HEALTHCARE, INC.AUTOMED TECHNOLOGIES, INC.BROWNSTONE PHARMACY, INC.CAPSTONE PHARMACY OF DELAWARE, INC.CLINICARE CONCEPTS, INC.COMPUSCRIPT, INC.COMPUTRAN SYSTEMS, INC.DUNNINGTON RX SERVICES OF RHODE ISLAND, INC.EXPRESS PHARMACY SERVICES, INC.FAMILY CENTER PHARMACY, INC.GOOT NURSING HOME PHARMACY, INC.HEALTH SERVICES CAPITAL CORPORATIONIHS ACQUISITION XXX, INC.IMEDEX, INC.INSTA-CARE PHARMACY SERVICES CORPORATIONINTEGRATED COMMERCIALIZATION SOLUTIONS, INC.

SIGNATURE PAGE TO PURCHASE AGREEMENT


INTERNATIONAL PHYSICIAN NETWORKS, L.L.C.MEDICAL INITIATIVES, INC.PHARM PLUS ACQUISITION, INC.PHARMACY CORPORATION OF AMERICAPHARMACY CORPORATION OF

AMERICA-MASSACHUSETTS, INC.PHARMACY HEALTHCARE SOLUTIONS, LTD.PHARMERICA DRUG SYSTEMS, INC.PHARMERICA, INC.PMSI, INC.REIMBURSEMENT EDUCATION NETWORK, LLCRXFIRST, INC.SPECIALTY PHARMACY, INC.SPECIALTY PHARMACY OF CALIFORNIA, INC.TELEPHARMACY SOLUTIONS, INC.THE LASH GROUP, INC.TMESYS(TM), INC.US BIOSERVICES CORPORATIONVALUE APOTHECARIES, INC.

By:

Name: Title:

AMERISOURCE HERITAGE CORPORATION

By:

Name: Title:



AMERISOURCE SALES CORPORATIONCAPSTONE MED, INC.DUNNINGTON RX SERVICESOF MASSACHUSETTS, INC.PREMIER PHARMACY, INC.ROMBRO’S DRUG CENTER, INC.SOLANA BEACH, INC.SOUTHWEST PHARMACIES, INC.TAYLOR & MANNO ASSET RECOVERY, INC.

By:

Name: Title:

PHARMACY HEALTHCARE SOLUTIONS, LTD.

By:

VALUE APOTHECARIES, INC.,AS GENERAL PARTNER

By:

Name: Title:

REIMBURSEMENT EDUCATION NETWORK, LLC

By:

THE LASH GROUP, INC.,ITS SOLE MEMBER

By:

Name: Title:



Accepted:

LEHMAN BROTHERS INC.

By: Name: Title: For itself and as representativeof the several Initial Purchasers namedin Schedule 1 hereto



SCHEDULE 1

Initial Purchasers

Principal Amount of2012 Notes to be Purchased

Principal Amount of2015 Notes to be Purchased

Lehman Brothers Inc. $ 160,001,000 $ 200,002,000Banc of America

Securities LLC 100,000,000 125,000,000J.P. Morgan

Securities Inc. 100,000,000 125,000,000Scotia Capital (USA)

Inc. 13,333,000 16,666,000Wachovia Securities,

Inc. 13,333,000 16,666,000Wells Fargo

Securities, LLC 13,333,000 16,666,000Total $ 400,000,000 $ 500,000,000


SCHEDULE 2

Ambulatory Pharmaceutical Services, Inc.AmerisourceBergen Drug CorporationAmerisourceBergen Holding CorporationAmerisourceBergen Services CorporationAmeriSource Health Services CorporationAmeriSource Heritage CorporationAmeriSource Sales CorporationAnderson Packaging, Inc.APS Enterprises Holding CompanyASD Specialty Healthcare, Inc.AutoMed Technologies, Inc.Brownstone Pharmacy, Inc.Capstone Med, Inc.Capstone Pharmacy of Delaware, Inc.CliniCare Concepts, Inc.Compuscript, Inc.Computran Systems, Inc.Dunnington Rx Services of Massachusetts, Inc.Dunnington Rx Services of Rhode Island, Inc.Express Pharmacy Services, Inc.Family Center Pharmacy, Inc.Goot Nursing Home Pharmacy, Inc.Health Services Capital CorporationIHS Acquisition XXX, Inc.Imedex, Inc.Insta-Care Pharmacy Services CorporationIntegrated Commercialization Solutions, Inc.International Physician Networks, L.L.C.Medical Initiatives, Inc.Pharm Plus Acquisition, Inc.Pharmacy Corporation of AmericaPharmacy Corporation of America-Massachusetts, Inc.Pharmacy Healthcare Solutions, Ltd.PharMerica Drug Systems, Inc.PharMerica, Inc.PMSI, Inc.Premier Pharmacy, Inc.Reimbursement Education Network, LLCRombro’s Drug Center, Inc.RxFirst, Inc.Solana Beach, Inc.Southwest Pharmacies, Inc.Specialty Pharmacy, Inc.Specialty Pharmacy of California, Inc.Taylor & Manno Asset Recovery, Inc.Telepharmacy Solutions, Inc.The Lash Group, Inc.Tmesys(TM), Inc.US Bioservices CorporationValue Apothecaries, Inc.


EXHIBIT A

Form of Registration Rights Agreement


EXHIBIT B-1(to come)

B-1


EXHIBIT B-2(to come)

B-2


EXHIBIT C

AMERISOURCEBERGEN LETTERHEAD September 14, 2005 Lehman Brothers Inc.Banc of America Securities LLCJ.P. Morgan Securities Inc.Scotia Capital (USA) Inc.Wachovia Securities, Inc.Wells Fargo Securities, LLC

c/o Lehman Brothers Inc.745 Seventh AvenueNew York, New York 10019

Ladies and Gentlemen:

I am Vice President, Deputy General Counsel and Secretary of AmerisourceBergen Corporation, a Delaware corporation (the “Company”). This opinion isdelivered to you pursuant to Section 7(e) of the Purchase Agreement, dated as of September 8, 2005 (the “Purchase Agreement”), by and among the Company,by and among the Company, Lehman Brothers, Inc. (“Lehman”), Banc of America Securities LLC (“BAS”), J.P. Morgan Securities Inc. (“JPMorgan”), ScotiaCapital (USA) Inc. (“Scotia”), Wachovia Securities, Inc. (“Wachovia”) and Wells Fargo Securities, LLC (“WFS” and, together with Lehman, BAS, JPMorgan,Scotia, Wachovia and WFS, the “Initial Purchasers”) relating in connection with the issuance and sale to you of $400,000,000 principal amount of its 5 5/8%Senior Notes due 2012 (the “2012 Notes”) and $500,000,000 principal amount of its 5 7/8% Senior Notes due 2015 (the “2015 Notes” and, together with the 2012Notes, the “Notes”), and the guarantees of the Notes on a senior, unsecured basis by the Company’s subsidiaries named in Schedule A hereto (collectively, the“Guarantors”). The Notes are to be issued pursuant to the terms of an indenture, to be dated as of the date hereof, between the Company, the Guarantors and J.P.Morgan Trust Company, National Association, as trustee (the “Trustee”). Capitalized terms used herein and not otherwise defined have the meanings specified inthe Purchase Agreement.

I have examined originals or copies of corporate documents and records of the Company and it subsidiaries, other certificates of public officials and ofofficers of the Company and its subsidiaries and such other agreements, instruments and documents, and have conducted such discussions with the Company’soutside counsel, as I have deemed necessary for the opinions and statements hereinafter set forth.

B-3


Based upon the foregoing and subject to the assumptions and qualifications set forth above and hereinafter, I am of the opinion that: To my knowledge, except as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending or threatened in writing to which theCompany or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determinedadversely to the Company or any of its subsidiaries, would be reasonably likely to have a Material Adverse Effect. To my knowledge, there are no legal or governmental proceedings involving or affecting the Company or its subsidiaries or any of their respective properties orassets which would be required to be described in a prospectus pursuant to the Securities Act that are not described in the Offering Memorandum, nor are thereany material contracts or other documents which would be required to be described in a prospectus pursuant to the Securities Act that are not described in theOffering Memorandum.

The opinions expressed herein are limited to matters governed by the federal law of the United States of America and the law of the Commonwealth ofPennsylvania.

With respect to the opinions or statements set forth above which are qualified to my “knowledge”, such phrase means that in the course of myrepresentation of the Company and its subsidiaries no information has come to my attention that any such opinion or statement is not accurate. Except to theextent expressly set forth in this letter, I have not undertaken any independent investigation to determine the existence or absence of those facts, and no inferenceas to the knowledge of the existence or absence of those facts should be drawn from my representation of the Company or its subsidiaries.

This opinion speaks only as of the date hereof. I assume no obligation to advise the addressees (or any third party) of any changes in the law,documentation or facts that may occur after the date of this opinion.

The opinions expressed herein are solely for the benefit of the Initial Purchasers and, without my express written consent, neither our opinion nor thisopinion letter may be assigned or provided to or relied upon by any other person other than being furnished in connection with defending litigation relating to thetransactions contemplated by the Purchase Agreement; provided, that the Trustee is entitled to rely on this letter as if this letter were addressed directly to it.

Very truly yours,

John G. Chou, Esq.

Vice President, Deputy General Counsel and Secretary

B-4


Exhibit 4.5


and each of the Guarantors named herein

$400,000,000 5 5/8% SENIOR NOTES DUE 2012$500,000,000 5 7/8% SENIOR NOTES DUE 2015

INDENTURE

Dated as of September 14, 2005

J.P. MORGAN TRUST COMPANY,NATIONAL ASSOCIATION

Trustee


CROSS-REFERENCE TABLE*

Trust IndentureAct Section

Indenture Section

310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 7.10 (b) 7.10 (c) N.A.311(a) 7.11 (b) 7.11 (c) N.A.312(a) 2.05 (b) 12.03 (c) 12.03313(a) 7.06 (b)(2) 7.07 (c) 7.06; 12.02 (d) 7.06314(a) 4.03; 12.02 (c)(1) 12.04 (c)(2) 12.04 (c)(3) N.A. (e) 12.05 (f) N.A.315(a) 7.01 (b) 7.05;12.02 (c) 7.01 (d) 7.01 (e) 6.11316(a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 (c) 2.12317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04318(a) 12.01 (b) N.A. (c) 12.01

N.A. means not applicable.

* This Cross Reference Table is not part of the Indenture.

i


TABLE OF CONTENTS

Page

ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE 1

Section 1.01. Definitions 1Section 1.02. Other Definitions 21Section 1.03. Incorporation by Reference of Trust Indenture Act 21Section 1.04. Rules of Construction 22

ARTICLE 2. THE NOTES 22

Section 2.01. Form and Dating 22Section 2.02. Execution and Authentication 23Section 2.03. Registrar and Paying Agent 23Section 2.04. Paying Agent to Hold Money in Trust 23Section 2.05. Holder Lists 24Section 2.06. Transfer and Exchange 24Section 2.07. Replacement Notes 34Section 2.08. Outstanding Notes 35Section 2.09. Treasury Notes 35Section 2.10. Temporary Notes 35Section 2.11. Cancellation 35Section 2.12. Defaulted Interest 36

ARTICLE 3. REDEMPTION AND PREPAYMENT 36

Section 3.01. Notices to Trustee 36Section 3.02. Selection of Notes to Be Redeemed 36Section 3.03. Notice of Redemption 36Section 3.04. Effect of Notice of Redemption 37Section 3.05. Deposit of Redemption Price 37Section 3.06. Notes Redeemed in Part 38Section 3.07. Optional Redemption 38Section 3.08. Mandatory Redemption 38Section 3.09. Offer to Purchase by Application of Excess Proceeds 39

ARTICLE 4. COVENANTS 40

Section 4.01. Payment of Notes 40Section 4.02. Maintenance of Office or Agency 40Section 4.03. Reports 41Section 4.04. Compliance Certificate 41Section 4.05. Taxes 42Section 4.06. Stay, Extension and Usury Laws 42Section 4.07. Restricted Payments 42Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries 44Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock 45Section 4.10. Asset Sales 47Section 4.11. Transactions with Affiliates 49Section 4.12. Liens 50Section 4.13. Offer to Repurchase Upon Change of Control 50Section 4.14. No Senior Subordinated Debt 51Section 4.15. [Section Intentionally Omitted] 51

ii


TABLE OF CONTENTS(continued)

Page

Section 4.16. Limitation on Sale and Leaseback Transactions 51Section 4.17. [Section Intentionally Omitted] 51Section 4.18. Additional Note Guarantees 51Section 4.19. Changes in Covenants when Notes Rated Investment Grade 52Section 4.20. Designation of Restricted and Unrestricted Subsidiaries 52

ARTICLE 5. SUCCESSORS 52

Section 5.01. Merger, Consolidation, or Sale of Assets 52Section 5.02. Successor Corporation Substituted 53

ARTICLE 6. DEFAULTS AND REMEDIES 53

Section 6.01. Events of Default 53Section 6.02. Acceleration 55Section 6.03. Other Remedies 55Section 6.04. Waiver of Past Defaults 55Section 6.05. Control by Majority 56Section 6.06. Limitation on Suits 56Section 6.07. Rights of Holders of Notes to Receive Payment 56Section 6.08. Collection Suit by Trustee 56Section 6.09. Trustee May File Proofs of Claim 56Section 6.10. Priorities 57Section 6.11. Undertaking for Costs 57

ARTICLE 7. TRUSTEE 58

Section 7.01. Duties of Trustee 58Section 7.02. Rights of Trustee 59Section 7.03. Individual Rights of Trustee 59Section 7.04. Trustee’s Disclaimer 59Section 7.05. Notice of Defaults 60Section 7.06. Reports by Trustee to Holders of the Notes 60Section 7.07. Compensation and Indemnity 60Section 7.08. Replacement of Trustee 61Section 7.09. Successor Trustee by Merger, etc. 62Section 7.10. Eligibility; Disqualification 62Section 7.11. Preferential Collection of Claims Against Company 62

ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE 62

Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 62Section 8.02. Legal Defeasance and Discharge 62Section 8.03. Covenant Defeasance 63Section 8.04. Conditions to Legal or Covenant Defeasance 63Section 8.05.

Deposited Money and Government Securities to be Held in Trust;

Other Miscellaneous Provisions 64Section 8.06. Repayment to Company 65Section 8.07. Reinstatement 65

ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER 65

Section 9.01. Without Consent of Holders of Notes 65Section 9.02. With Consent of Holders of Notes 66

iii



Page

Section 9.03. Compliance with Trust Indenture Act 67Section 9.04. Revocation and Effect of Consents 67Section 9.05. Notation on or Exchange of Notes 68Section 9.06. Trustee to Sign Amendments, etc. 68

ARTICLE 10. NOTE GUARANTEES 68

Section 10.01. Guarantee 68Section 10.02. Limitation on Guarantor Liability 69Section 10.03. Execution and Delivery of Note Guarantee 69Section 10.04. Guarantors May Consolidate, etc., on Certain Terms 70Section 10.05. Releases 70

ARTICLE 11. SATISFACTION AND DISCHARGE 71

Section 11.01. Satisfaction and Discharge 71Section 11.02. Application of Trust Money 72

ARTICLE 12. MISCELLANEOUS 72

Section 12.01. Trust Indenture Act Controls 72Section 12.02. Notices 72Section 12.03.

Communication by Holders of Notes with Other Holders of

Notes 73Section 12.04. Certificate and Opinion as to Conditions Precedent 73Section 12.05. Statements Required in Certificate or Opinion 74Section 12.06. Rules by Trustee and Agents 74Section 12.07.

No Personal Liability of Directors, Officers, Employees and

Stockholders 74Section 12.08. Governing Law 74Section 12.09. No Adverse Interpretation of Other Agreements 74Section 12.10. Successors 74Section 12.11. Severability 75Section 12.12. Counterpart Originals 75Section 12.13. Table of Contents, Headings, etc. 75

EXHIBITS

Exhibit A-1 FORM OF 2012 NOTEExhibit A-2 FORM OF 2015 NOTEExhibit B FORM OF CERTIFICATE OF TRANSFERExhibit C FORM OF CERTIFICATE OF EXCHANGEExhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTORExhibit E FORM OF NOTE GUARANTEEExhibit F FORM OF SUPPLEMENTAL INDENTURE

iv


INDENTURE dated as of September 14, 2005 among AmerisourceBergen Corporation, a Delaware corporation (the “Company”), the Guarantors (asdefined) and J.P. Morgan Trust Company, National Association, as trustee (the “Trustee”).

The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the5 5/8% Senior Notes due 2012 (the “2012 Notes”) and the 5 7/8% Senior Notes due 2015 (the “2015 Notes” and, together with the 2012 Notes, the “Notes”):

ARTICLE 1.DEFINITIONS AND INCORPORATION

BY REFERENCE

Section 1.01. Definitions. “144A Global Notes” means the global notes substantially in the form of Exhibit A-1 or A-2 hereto bearing the Global Note Legend and the PrivatePlacement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal tothe outstanding principal amount of each series of Notes sold in reliance on Rule 144A.

“Acquired Debt” means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with orinto or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Personmerging with or into, or becoming a Subsidiary of, such specified Person, provided that Indebtedness of such other Person that is redeemed, defeased, retired orotherwise repaid immediately upon consummation of the transaction by which such other Person is merged with or into or became a Restricted Subsidiary ofsuch Person shall not be Acquired Debt and (ii) Indebtedness secured by a Lien encumbering any assets acquired by such specified Person.

“Additional Notes” means any Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part ofthe same series as the Initial Notes.

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of theComparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the ComparableTreasury Price for such redemption date (or, in the case of either Legal Defeasance or Covenant Defeasance to a redemption date, for the applicable date ofdeposit with the Trustee of funds to pay the redemption price), plus 50 basis points.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common controlwith such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “undercommon control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of themanagement or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficialownership of 10% or more of the voting securities of a Person shall be deemed to be control. No Person (other than the Company or any Subsidiary of theCompany) in whom a Receivables Subsidiary makes an Investment in connection with a Qualified Receivables Transaction will be deemed to be an Affiliate ofthe Company or any of its Subsidiaries solely by reason of such Investment.

“Agent” means any Registrar, Paying Agent or co-registrar.

1


“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of theDepositary, Euroclear and Cedel that apply to such transfer or exchange.

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee fornet rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has beenextended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in suchtransaction, determined in accordance with GAAP.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficialownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownershipof all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or isexercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Blanco” means J.M. Blanco, Inc.

“Board of Directors” means (i) with respect to a corporation, the Board of Directors of the corporation or any authorized committee of the Board ofDirectors, (ii) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (iii) with respect to any other Person, the board orcommittee of such Person serving a similar function.

“Borrowing Base” means, as of any date, an amount equal to 15% of the book value of the consolidated inventory of the Company and its RestrictedSubsidiaries as of the date of the most recently ended fiscal month prior to such date, determined in accordance with GAAP.

“Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.

“Business Day” means any day other than a Legal Holiday.

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would atsuch time be required to be capitalized on a balance sheet in accordance with GAAP.

“Capital Stock” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests,participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership ormembership interests (whether general or limited), and (iv) any other interest or participation that confers on a Person the right to receive a share of the profitsand losses of, or distributions of assets of, the issuing Person, other than earnouts.

“Cash Equivalents” means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government orany agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of notmore than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date ofacquisition, bankers’

2


acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus inexcess of $500,000,000, (iv) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (ii) and(iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v), obligations issued or fully guaranteed by anystate of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisitionthereof and at the time of acquisition, having one of the two highest ratings obtainable from either Moody’s or S&P, (vi) commercial paper having the highestrating obtainable from either Moody’s or S&P and, in each case, maturing within one year after the date of acquisition and (vii) money market funds at least 90%of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (vi) of this definition.

“Cedel” means Cedel Bank, SA.

“Change of Control” means, the occurrence of any of the following:

(a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of relatedtransactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any “person” (as that term isused in Section 13(d) (3) of the Exchange Act) other than the Company or one of its Restricted Subsidiaries;

(b) the adoption of a plan relating to the liquidation or dissolution of the Company (other than in a transaction that complies with Section 5.01 hereof);

(c) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as definedabove), becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather thannumber of shares; or

(d) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Decline.

“Company” means AmerisourceBergen Corporation, and any and all successors thereto.

“Comparable Treasury Issue” means the United States Treasury Security selected by an Independent Investment Banker as having a maturity comparableto the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues ofcorporate debt securities of comparable maturity to the remaining term of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue(expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statisticalrelease (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. GovernmentSecurities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of theReference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (B) ifthe Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations.

3


“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

(a) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an AssetSale, to the extent such losses were deducted in computing such Consolidated Net Income; plus

(b) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxeswas deducted in computing such Consolidated Net Income; plus

(c) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized(including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferredpayment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt,commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all paymentsmade or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

(d) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that werepaid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cashexpenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for suchperiod to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

(e) all nonrecurring and unusual charges (including, without limitation, restructuring, shutdown, severance and facility consolidation costs) taken by theCompany related to the Consolidation Program; minus

(f) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and itsSubsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

(a) the Net Income or loss of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting will be included only to theextent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

(b) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by thatRestricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or,directly or indirectly, by operation of the terms of its charter or other governing instrument or any judgment, decree, order, statute, rule or governmentalregulation applicable to that Restricted Subsidiary or its stockholders;

(c) the cumulative effect of a change in accounting principles will be excluded;

4


(d) to the extent deducted in the calculation of Net Income, any non-recurring charges associated with any premium or penalty paid, write-offs of deferredfinancing costs or other financial recapitalization charges in connection with redeeming or retiring any indebtedness prior to its Stated Maturity will be addedback to arrive at Consolidated Net Income; and

(e) the Net Income (but not loss) of any Unrestricted Subsidiary will be excluded (except to the extent distributed to the Company or one of its RestrictedSubsidiaries).

“Consolidated Net Worth” means, with respect to any Person, the total of the amounts shown on such Person’s and its consolidated Subsidiaries’ balancesheet, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter for which internal financial statements areavailable prior to the taking of any action for purpose of which the determination is being made, as the sum of (i) the par or stated value of all such Person’sCapital Stock, plus (ii) paid-in-capital or capital surplus relating to such Capital Stock, plus (iii) any retained earnings or earned surplus, minus (iv) anyaccumulated deficit, minus (v) any amounts attributable to Disqualified Capital Stock.

“Consolidation Program” means the Company’s ongoing integration plans and the Company’s Optimiz™ program, in each case as described in theCompany’s annual report for the fiscal year ended September 30, 2004 filed on Form 10-K with the SEC.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of suchBoard of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of theContinuing Directors who were members of such Board at the time of such nomination or election.

“Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which theTrustee may give notice to the Company.

“Credit Agreement” means the Credit Agreement, dated as of December 2, 2004, among the Company, the lenders party thereto and JPMorgan ChaseBank N.A., as administrative agent.

“Credit Facilities” means, one or more debt facilities, commercial paper facilities, or capital markets financings, in each case with banks, investmentbanks, other institutional lenders or investors or trustees providing for revolving credit loans, term loans, receivables financing (including through the sale ofreceivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit, or capital marketsfinancings, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially inthe form of Exhibit A-1 or A-2 hereto except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests inthe Global Note” attached thereto.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as theDepositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicableprovision of this Indenture.

5


“Designated Non-Guarantors” means those certain Domestic Subsidiaries that have been designated by the Company in an Officers’ Certificate deliveredto the Trustee as being Designated Non-Guarantors; provided that (i) in no event may the Designated Non-Guarantors taken as a whole hold more than 5% of theconsolidated assets, or account for more than 7.5% of the consolidated revenues or Consolidated Cash Flow, of the Company and its Restricted Subsidiaries,calculated at the end of each fiscal quarter in accordance with GAAP on a trailing four-quarter basis and (ii) in no event may any Restricted Subsidiary bedesignated as a Designated Non-Guarantor at a time when a default has occurred and is continuing under any indenture or Credit Facility of the Company or anyof its Restricted Subsidiaries. In the event that following any fiscal quarter end, the Restricted Subsidiaries that have been previously designated as DesignatedNon-Guarantors, when taken as a whole, account for more than 5% of such consolidated assets of such fiscal quarter end or more than 7.5% of such consolidatedrevenues or Consolidated Cash Flow during such fiscal quarter, calculated in accordance with GAAP on a trailing four-quarter basis, then the Company willcause any one or more of such Restricted Subsidiaries to become Guarantors within 45 days of such fiscal quarter end so that the Designated Non-Guarantorswill not, when taken as a whole, account for more than the applicable percentage of any such measures. Notwithstanding the foregoing, all ReceivablesSubsidiaries will be permitted to be Designated Non-Guarantors, and their assets, revenues and Consolidated Cash Flow will be disregarded for purposes of thefinancial tests required by this definition.

“Disqualified Stock” means, on any date, any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it isexchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuantto a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after thelatest date on which the Notes of any series outstanding on such date mature. Notwithstanding the preceding sentence, any Capital Stock that would constituteDisqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence ofa change of control or an asset sale will not constitute Disqualified Stock if the terms of such repurchase or redemption rights are not more favorable to theholders of such Capital Stock than Section 4.07 hereof.

“Domestic Subsidiary” means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the UnitedStates or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company; provided that a RestrictedSubsidiary with assets having an aggregate fair market value of less than $100,000 will not be deemed to be a Domestic Subsidiary unless and until it acquiresassets having an aggregate fair market value in excess of that amount.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertibleinto, or exchangeable for, Capital Stock) and beneficial interests and trusts created by a Receivables Subsidiary.

“Equity Offering” means any public or private sale or issuance of Capital Stock (other than Disqualified Stock) of the Company made for cash on aprimary basis by the Company after the date hereof, other than sales or issuances to subsidiaries of the Company.

“Euroclear” means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Notes” means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof.

6


“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

(a) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, including, without limitation, amortization of debtissuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of allpayments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and chargesincurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations;plus

(b) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

(c) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien onassets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

(d) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries,other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a RestrictedSubsidiary of the Company, in each case, on a consolidated basis and in accordance with GAAP.

“Fixed Charge Coverage Ratio” means with respect to any specified Person and its Restricted Subsidiaries for any period, the ratio of the ConsolidatedCash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its RestrictedSubsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues,repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on orprior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed ChargeCoverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, orsuch issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicablefour-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(a) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations andincluding any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the CalculationDate will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period (and Consolidated Cash Flow for such referenceperiod will be calculated on such a pro forma basis for such purpose), including to give pro forma effect to expense and cost reductions and other operatingimprovements that have occurred or are reasonably expected to occur as a result of such acquisition in the reasonable good faith judgment of the specifiedPerson’s chief financial officer or, if none, such Person’s senior financial officer (regardless of whether those cost savings or

7


operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X under the Securities Act (or any otherregulation or policy of the SEC related thereof));

(b) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed ofprior to the Calculation Date, will be excluded; and

(c) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior tothe Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Personor any of its Subsidiaries following the Calculation Date.

“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of theAmerican Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statementsby such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form ofExhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.

“Global Note Legend” means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture.

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the UnitedStates pledges its full faith and credit.

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, inany manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or anypart of any Indebtedness.

“Guarantor” means each of:

(a) the guarantors listed on the signature pages hereto; and

(b) any other Subsidiary that executes a Note Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under (i) interest rate swap agreements, interest rate capagreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates,foreign currency translation and commodity prices.

“Holder” means a Person in whose name a Note is registered.

“IAI Global Note” means the global Note substantially in the form of Exhibit A-1 or A-2 hereto bearing the Global Note Legend and the Private PlacementLegend and deposited with or on behalf of and

8


registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold toInstitutional Accredited Investors.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

(a) in respect of borrowed money;

(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(c) in respect of banker’s acceptances;

(d) representing Capital Lease Obligations;

(e) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or tradepayable; or

(f) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of thespecified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset ofthe specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by thespecified Person of any indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date will be:

(a) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and

(b) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any otherIndebtedness.

Indebtedness shall not include the obligations of any Person resulting from post-closing payment adjustments to which the seller may become entitled inconnection with the purchase by the Company or any of its Restricted Subsidiaries of any business, to the extent such payment is determined by a final closingfinancial statement or such payment depends on the performance of such business after the closing; provided that at the time of closing, the amount of any suchpayment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 60 days thereafter.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Independent Investment Banker” means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

9


“Initial Notes” means the first $400,000,000 aggregate principal amount of the 2012 Notes and the first $500,000,000 aggregate principal amount of the2015 Notes issued under this Indenture on the date hereof.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the SecuritiesAct, who are not also QIBs.

“Investment Grade Rating” means a rating equal to or higher than (i) Baa3 (or the equivalent) by Moody’s or (ii) BBB- (or the equivalent) by S&P, or, inthe case of either Moody’s or S&P, if such entity ceases to rate the notes for reasons outside of the Company’s control, the equivalent investment grade creditrating from any other Rating Agency.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms ofloans (including Guarantees or other obligations), advances or capital contributions (excluding commissions, travel, moving and similar advances to officers andemployees and loans and advances to customers and suppliers made in the ordinary course of business), purchases or other acquisitions for consideration ofIndebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordancewith GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of theCompany such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed tohave made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposedof in an amount determined as provided in the final paragraph of Section 4.07. The acquisition by the Company or any Subsidiary of the Company of a Personthat holds an Investment in a third Person will be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to thefair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.07.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized bylaw, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the nextsucceeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

“Leverage Ratio” means, with respect to any Person as of any date of determination, the ratio of (x) the total consolidated Indebtedness of such Person andits Restricted Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements are available, which would be reflected as aliability on a consolidated balance sheet of such Person and its Restricted Subsidiaries prepared as of such date in accordance with GAAP, to (y) the aggregateamount of Consolidated Cash Flow of such Person for the then most recent four fiscal quarters for which internal financial statements are available, in each casewith such pro forma adjustments to the amounts of consolidated Indebtedness and Consolidated Cash Flow as are appropriate and consistent with the pro formaadjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Letter of Transmittal” means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders inconnection with the Exchange Offer.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whetheror not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the naturethereof, any agreement to give a security interest in and, except in connection with any Qualified

10


Receivables Transaction, any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of anyjurisdiction.

“Liquidated Damages” means all liquidated damages then owing pursuant to Section 6 of the Registration Rights Agreement.

“Moody’s” means Moody’s Investors Service, Inc.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before anyreduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (butnot loss), realized in connection with (a) any Asset Sale or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or theextinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together with any relatedprovision for taxes on such extraordinary gain (but not loss).

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including,without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relatingto such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred asa result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and anytax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, and any reserve for adjustment in respect of the sale price ofsuch asset or assets or indemnification obligations related to the sale of such asset or assets established in accordance with GAAP.

“Non-Recourse Debt” means Indebtedness:

(a) as to which neither the Company nor any of its Restricted Subsidiaries (i) provides credit support of any kind (including any undertaking, agreement orinstrument that would constitute Indebtedness), (ii) is directly or indirectly liable as a guarantor or otherwise or (iii) constitutes the lender;

(b) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an UnrestrictedSubsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declarea default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and

(c) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its RestrictedSubsidiaries.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Note Guarantee” means the Guarantee by each Guarantor of the Company’s payment obligations under this Indenture and on the Notes, executedpursuant to the provisions of this Indenture.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class forpurposes of certain matters specified in this Indenture. However, the 2012 Notes and the 2015 Notes and any Additional Notes of each such series shall be treatedas separate series of Notes under this Indenture and will be treated as separate classes of Notes for certain matters specified in this Indenture.

11


“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under thedocumentation governing any Indebtedness.

“Offering” means the offering of the Notes by the Company.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the ChiefFinancial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

“Officers’ Certificate” means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executiveofficer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof.

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee.

“Participant” means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,respectively (and, with respect to DTC, shall include Euroclear and Cedel).

“Permitted Acquisition Indebtedness” means Indebtedness or Disqualified Stock of the Company or any of its Restricted Subsidiaries to the extent suchIndebtedness or Disqualified Stock was Indebtedness or Disqualified Stock of (i) a Subsidiary prior to the date on which such Subsidiary became a RestrictedSubsidiary or (ii) a Person that was merged or amalgamated into the Company or a Restricted Subsidiary; provided that on the date such Subsidiary became aRestricted Subsidiary or the date such Person was merged and amalgamated into the Company or such Restricted Subsidiary, as applicable, the Company(a) would, on the date of such transaction after giving pro forma effect thereto and to any related financing transactions as if the same had occurred at thebeginning of the applicable four quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio testset forth in the first paragraph of Section 4.09, (b) would, on the date of such transaction after giving pro forma effect thereto and to any related financingtransactions as if the same had occurred at the beginning of the most recently ended four fiscal quarter period for which internal financial statements areavailable, have a Fixed Charge Coverage Ratio that is not less than the Fixed Charge Coverage Ratio for such period without giving pro forma effect to suchtransaction and any related financing transactions, or (c) has Consolidated Net Worth immediately after the transaction equal to or greater than its ConsolidatedNet Worth immediately prior to such transaction.

“Permitted Business” means any business that derives a majority of its revenues from the business engaged in by the Company and its RestrictedSubsidiaries on the date hereof and/or activities that are reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, thebusinesses in which the Company and its Restricted Subsidiaries are engaged on the date hereof.

“Permitted Investments” means:

(a) any Investment in the Company or in a Restricted Subsidiary of the Company;

(b) any Investment in Cash Equivalents;

(c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (i) such Person becomes a Restricted Subsidiary of the Company; or

12


(ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, theCompany or a Restricted Subsidiary of the Company;

(d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Sections

3.09 and 4.10 hereof;

(e) any acquisition of assets to the extent acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;

(f) any Investments received in compromise of, or in respect of, obligations of such persons incurred in the ordinary course of trade creditors or customersthat were incurred in the ordinary course of business, including, but not limited to, pursuant to any plan of reorganization or similar arrangement upon thebankruptcy or insolvency of any trade creditor or customer;

(g) Hedging Obligations;

(h) the acquisition by a Receivables Subsidiary in connection with a Qualified Receivables Transaction of Equity Interests of a trust or other Personestablished by such Receivables Subsidiary to effect such Qualified Receivables Transaction; and any other Investment by the Company or a Subsidiary of theCompany in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified ReceivablesTransaction, provided that such other Investment is in the form of a note or other instrument that the Receivables Subsidiary or other Person is required to repayas soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that arenot Affiliates of the Company entered into as part of a Qualified Receivables Transaction;

(i) Investments existing on the date hereof;

(j) loans and advances to officers, directors, members and employees for business-related travel expenses, moving expenses and other similar expenses, ineach case, incurred in the ordinary course of business not to exceed $10.0 million at any one time outstanding;

(k) loans and advances to officers, directors, members and employees in connection with the award of convertible bonds or stock under a stock incentiveplan, stock option plan or other equity-based compensation plan arrangement not to exceed $10.0 million in any one year;

(l) guarantees for the benefit of, customers or suppliers that do not in the aggregate exceed $50.0 million at any one time outstanding;

(m) Investments in Permitted Joint Ventures having an aggregate fair market value (measured on the date each such Investment was made and withoutgiving effect to subsequent changes in value), when taken together with all other Investments in Permitted Joint Ventures made pursuant to this clause (m) thatare at the time outstanding, not to exceed to greater of (i) $250.0 million and (ii) 6% of the Company’s Consolidated Net Worth; and

(n) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effectto subsequent changes in value), when taken together with all other Investments made pursuant to this clause (n) that are at the time outstanding, not to exceedthe greater of (x) 50.0 million and (y) 1.0% of the Company’s Consolidated Net Worth.

13


“Permitted Joint Venture” means any Person that owns, operates or develops a Permitted Business.

“Permitted Liens” means any of the following:

(a) Liens securing Indebtedness under Credit Facilities or any Hedging Obligations related thereto; provided that, on and after the first date on which thecovenants listed in Section 4.19 are no longer applicable to the Notes following the assignment of an Investment Grade Rating to all then outstanding series ofNotes, the foregoing Liens shall constitute Permitted Liens only to the extent that such Liens secure Indebtedness in an aggregate principal amount outstandingnot to exceed, at the time of determination, 10% of the Company’s Consolidated Net Worth (once the limitation in this proviso to clause (a) is effected, thelimitation shall continue to apply whether or not the Notes continue to be assigned an Investment Grade Rating);

(b) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with or acquired by the Company or anyRestricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation or acquisition anddo not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;

(c) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that suchLiens were in existence prior to the contemplation of such acquisition;

(d) Liens to secure the performance of statutory obligations, surety or appeal bonds, bid bonds, payment bonds, performance bonds or other obligations ofa like nature incurred in the ordinary course of business;

(e) Liens existing on the date hereof;

(f) Liens in favor of the Company or the Restricted Subsidiaries;

(g) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriateproceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP hasbeen made therefor;

(h) Liens on assets of the Company or a Receivables Subsidiary incurred in connection with a Qualified Receivables Transaction;

(i) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries;

(j) Liens to secure Indebtedness of a Restricted Subsidiary to the Company or another of its Restricted Subsidiaries;

(k) Liens on any property or asset acquired by the Company or any of its Restricted Subsidiaries in favor of the seller of such property or asset andconstruction mortgages on real property, in each case, created within six months after the date of acquisition, construction or improvement of such property orasset by the Company or such Restricted Subsidiary to secure the purchase price or other obligation of the Company or such Restricted Subsidiary to the seller ofsuch property or asset or the construction or improvement cost of such property in an amount up to the total cost of the acquisition,

14


construction or improvement of such property or asset; provided that in each case, such Lien does not extend to any other property or asset of the Company andits Restricted Subsidiaries;

(l) Liens incurred or pledges and deposits made in connection with workers’ compensation, unemployment insurance and other social security benefits;

(m) Liens imposed by law, such as mechanics’, carriers’, warehousemen’s, materialmen’s, and vendors’ Liens, incurred in good faith in the ordinarycourse of business with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings if a reserve or other appropriateprovisions, if any, as shall be required by GAAP shall have been made therefor;

(n) financing statements granted with respect to personal property leased by the Company and its Restricted Subsidiaries pursuant to leases consideredoperating leases in accordance with GAAP, provided that such financing statements are granted solely in connection with such leases; and Liens to secure CapitalLease Obligations permitted by clause (o) of the third paragraph of Section 4.09 covering only the assets acquired with such Indebtedness;

(o) judgment Liens to the extent that such judgments do not cause or constitute a Default or an Event of Default;

(p) Liens securing Permitted Refinancing Indebtedness incurred to refinance Indebtedness that was secured by a Lien permitted under this Indenture;provided that any such Lien shall not extend to or cover any assets or property not securing the Indebtedness so refinanced and that such refinancing does not,directly or indirectly, result in an increase in the aggregate amount of secured Indebtedness of the Company and its Restricted Subsidiaries (except to the extentas a result of the financing of accrued interest on the Indebtedness refinanced and the amount of all expenses and premiums incurred in connection with suchrefinancing);

(q) any extension or renewal, or successive extensions or renewals, in whole or in part, of Liens permitted pursuant to the foregoing clauses (a) through(p) provided that no such extension or renewal Lien shall (A) secure more than the amount of Indebtedness or other obligations secured by the Lien being soextended or renewed or (B) extend to any property or assets not subject to the Lien being so extended or renewed; and

(r) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations outstandingat any one time that do not exceed the greater of (i) $50.0 million and (ii) 1.0% of the Company’s Consolidated Net Worth.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the netproceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (otherthan intercompany Indebtedness); provided that:

(a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accretedvalue, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and theamount of all expenses and premiums incurred in connection therewith) (the “Original Principal Amount”); provided, however, if the Indebtedness exceeds theOriginal Principal Amount, the Permitted Refinancing Indebtedness shall be limited to the Original Principal Amount;

(b) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturityequal to or greater than the Weighted

15


Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

(c) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, suchPermitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on termsat least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced,defeased or refunded; and

(d) such Indebtedness is incurred either by the Company or (x) in the case of Indebtedness of a Restricted Subsidiary that is not a Guarantor, by theRestricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and/or any other RestrictedSubsidiaries that are not Guarantors, and (y) in the case of Indebtedness of a Guarantor, by the Guarantor who is the obligor on the Indebtedness being extended,refinanced, renewed, replaced, defeased or refunded and/or any other Guarantors.

Notwithstanding the foregoing, the refinancing of any Indebtedness incurred under Credit Facilities pursuant to the refinancing provision of the definitionof Credit Facilities and clause (c) of the second paragraph of the covenant described in Section 4.09 shall not be subject to clauses (b), (c) and (d) of thisdefinition of Permitted Refinancing Indebtedness.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limitedliability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwisepermitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Qualified Distribution” means any distribution or dividend to holders of the Company’s Equity Interests of Capital Stock of one or more RestrictedSubsidiaries, the fair market value of which Capital Stock, when aggregated with the fair market value of all other Capital Stock of Restricted Subsidiariesdistributed or dividended to holders of the Company’s Equity Interests in reliance on this definition, does not exceed 7.5% of Total Assets immediately prior togiving effect to such distribution or dividend, provided that (i) the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quartersfor which internal financial statements are available immediately preceding the date of such distribution or dividend would have been at least 2.50 to 1,determined on a pro forma basis, as if the distribution or dividend occurred (and any reduction of Indebtedness directly related to such dividend or distributionhad been made) at the beginning of such four-quarter period and (ii) no Default or Event of Default shall have occurred and be continuing or would occur as aconsequence of such distribution or dividend.

“Qualified Receivables Transaction” means any transaction or series of transactions entered into by the Company or any of its Subsidiaries pursuant towhich the Company or any of its Subsidiaries sells, conveys or otherwise transfers to (i) a Receivables Subsidiary (in the case of a transfer by the Company orany of its Subsidiaries) and (ii) any other Person (in the case of a transfer by a Receivables Subsidiary), or grants a security interest in, any accounts receivable(whether now existing or arising in the future) or inventory of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation,all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable or inventory, proceedsof such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection withasset securitization transactions involving accounts receivable or inventory.

16


“Rating Agency” means each of S&P and Moody’s, or if S&P or Moody’s or both shall not make a rating on the Notes publicly available, a nationallyrecognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors of theCompany) which shall be substituted for S&P or Moody’s, or both, as the case may be.

”Rating Category” means (i) with respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successorcategories) (ii) with respect to Moody’s any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, and C (or equivalent successor categories) and (iii) theequivalent of any such category of S&P and Moody’s used by another Rating Agency. In determining whether the rating of the Notes has decreased by one ormore gradations, gradations within Rating Categories (+ and – for S&P; 1, 2 and 3 for Moody’s; or the equivalent gradations for another Rating Agency) shall betaken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well from BB- to B, will constitute a decrease of one gradation).

“Rating Decline” mean (i) a decrease of two or more gradations (including gradations within Rating Categories as well as between Rating Categories) inthe rating of the notes by either Rating Agency or (ii) a withdrawal of the rating of the notes by either Rating Agency, provided, however, that such decrease orwithdrawal occurs, on, or within 60 days following, the date of public notice of the occurrence of a Change of Control or of the intention by the Company toeffect a Change of Control, which period shall be extended so long as the rating of the notes is under publicly announced consideration for downgrade by eitherRating Agency.

“Receivables Subsidiary” means a Subsidiary of the Company which engages in no activities other than in connection with the financing of accountsreceivable or inventory and which is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary (a) no portion of theIndebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excludingguarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities enteredinto in the ordinary course of business in connection with a Qualified Receivables Transaction), (ii) is recourse to or obligates the Company or any Subsidiary ofthe Company in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business inconnection with a Qualified Receivables Transaction or (iii) subjects any property or asset of the Company or any Subsidiary of the Company (other thanaccounts receivable or inventory and related assets as provided in the definition of “Qualified Receivables Transaction”), directly or indirectly, contingently orotherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of businessin connection with a Qualified Receivables Transaction, (b) with which neither the Company nor any Subsidiary of the Company has any material contract,agreement, arrangement or understanding other than on terms customary for securitization of receivables or inventory and (c) with which neither the Companynor any Subsidiary of the Company has any obligation to maintain or preserve such Subsidiary’s financial condition or cause such Subsidiary to achieve certainlevels of operating results. Any such designation by the Board of Directors of the Company will be evidenced to the Trustee by filing with the Trustee a certifiedcopy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers’ Certificate certifying that such designationcomplied with the foregoing conditions.

“Reference Treasury Dealer” means Lehman Brothers Inc. and its successors; provided, however, that if Lehman Brothers Inc. shall cease to be a primaryU.S. Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined bythe Trustee, of the bid and asked prices of the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in

17


writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date (or, in the case of either LegalDefeasance or Covenant Defeasance to a redemption date, for the applicable date of deposit with the trustee of funds to pay the redemption price).

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of September 14, 2005, by and among the Company, the Guarantorsand the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect toany Additional Notes, one or more registration rights agreements between the Company, the Guarantors and the other parties thereto, as such agreement§ may beamended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such AdditionalNotes under the Securities Act.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Notes” means the global notes bearing the Private Placement Legend and deposited with or on behalf of the Depositary andregistered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of each series of Notes initially soldin reliance on Rule 903 of Regulation S.

“Remaining Scheduled Payments” means, with respect to each note to be redeemed, the remaining scheduled payments of the principal thereof and interestthereon that would be due after the related redemption date but for such redemption; provided, however, that, if such redemption date is not an interest paymentdate with respect to such note, the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon tosuch redemption date.

“Responsible Officer,” when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or anysuccessor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designatedofficers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of andfamiliarity with the particular subject.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Investment” means any Investment other than a Permitted Investment.

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated the Securities Act.

“S&P” means Standard & Poor’s Ratings Group.

“SEC” means the Securities and Exchange Commission.

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

18


“Shelf Registration Statement” means the Shelf Registration Statement as defined in the Registration Rights Agreement.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X,promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture.

“Specified Indebtedness” means (i) any Indebtedness under the Credit Agreement and any Indebtedness incurred under Credit Facilities that refinancessuch Indebtedness or (ii) any Trigger Indebtedness.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest orprincipal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeemor repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subsidiary” means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting powerof shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at thetime owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof) and (ii) anypartnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners ofwhich are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Subsidiary Guarantee” means the guarantee by any Guarantor of the Company’s payment obligations on the Notes, executed pursuant the provisions ofthis Indenture.

“Supplemental Indenture” means a supplemental indenture substantially in the form attached as Exhibit F hereto or otherwise in form and substancereasonably satisfactory to the Trustee.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

“Total Assets” means the Company’s and its Restricted Subsidiaries’ total consolidated assets, as shown on the Company’s and its Restricted Subsidiaries’most recently available consolidated balance sheet.

“Total Tangible Assets” means the consolidated total assets of the Company and its Restricted Subsidiaries, less consolidated goodwill and intangiblesassets of the Company and its Restricted Subsidiaries, determined in accordance with GAAP, as shown on the Company’s and its Restricted Subsidiaries’ mostrecently available consolidated balance sheet.

”Trigger Indebtedness” means any Indebtedness other than (i) Capital Lease Obligations and (ii) Indebtedness (other than Capital Lease Obligations) in anaggregate principal amount for all Domestic Subsidiaries of the Company (other than Blanco) that are not Guarantors at any time outstanding not to exceed$25 million (the “Original Definition”), provided, however, that for so long as the Domestic Subsidiaries of the Company (other than Blanco) that are notGuarantors have as a group in excess of $25 million in aggregate principal amount of Indebtedness (other than Capital Lease Obligations) outstanding, the termTrigger Indebtedness shall mean any Indebtedness; provided further, that from and after any subsequent date that the Domestic Subsidiaries of the Company(other than Blanco) that are not Guarantors do not have as a group in excess of $25 million in aggregate principal amount of Indebtedness

19


(other than Capital Lease Obligations) outstanding, the term Trigger Indebtedness shall mean the Original Definition.

“Trustee” means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereaftermeans the successor serving hereunder.

“Unrestricted Global Note” means a permanent global Note substantially in the form of Exhibit A-1 or A-2 attached hereto that bears the Global NoteLegend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, and that is deposited with or on behalf of and registered in thename of the Depositary, representing a series of Notes that do not bear the Private Placement Legend.

“Unrestricted Definitive Note” means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.

“Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the Board of Directors of the Company as an UnrestrictedSubsidiary pursuant to a board resolution, but only to the extent that such Subsidiary:

(a) has no Indebtedness other than Non-Recourse Debt;

(b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the termsof any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might beobtained at the time from Persons who are not Affiliates of the Company;

(c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe foradditional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operatingresults;

(d) is not guaranteeing or otherwise providing credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and

(e) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and hasat least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of theboard resolution giving effect to such designation and an officers’ certificate certifying that such designation complied with the preceding conditions and waspermitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it willthereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by aRestricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, theCompany will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a RestrictedSubsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstandingIndebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.09 hereofcalculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period and (2) no Default or Event of Defaultwould be in existence following such designation. Notwithstanding the foregoing, all Receivables Subsidiaries will be permitted to be Unrestricted Subsidiaries.

20


“U.S. Person” means a U.S. person as defined in Rule 902(o) under the Securities Act.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote or readily convertible into CapitalStock of such Person that is entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of theproducts obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal,including payment at final maturity, in respect of the Indebtedness, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse betweensuch date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness.

Section 1.02. Other Definitions.

Term

Defined inSection

“Affiliate Transaction” 4.11“Asset Sale” 4.10“Asset Sale Offer” 3.09“Authentication Order” 2.02“Change of Control Offer” 4.13“Change of Control Payment” 4.13“Change of Control Payment Date” 4.13“Covenant Defeasance” 8.03“DTC” 2.03“Event of Default” 6.01“Excess Proceeds” 4.10“incur” 4.09“Legal Defeasance” 8.02“Offer Amount” 3.09“Offer Period” 3.09“Paying Agent” 2.03“Payment Default” 6.01“Permitted Debt” 4.09“Purchase Date” 3.09“Rating Event Date” 4.20“Registrar” 2.03“Restricted Payments” 4.07

Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Notes;

“indenture security Holder” means a Holder of a Note;

“indenture to be qualified” means this Indenture;

21


“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and theNote Guarantees, respectively.

All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA havethe meanings so assigned to them.

Section 1.04. Rules of Construction. Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “or” is not exclusive;

(d) words in the singular include the plural, and in the plural include the singular;

(e) provisions apply to successive events and transactions; and

(f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted bythe SEC from time to time.

ARTICLE 2.THE NOTES

Section 2.01. Form and Dating. (a) General. The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A-1 or A-2 hereto. The Notes may havenotations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be indenominations of $1,000 and integral multiples thereof.

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantorsand the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extentany provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A-1 or A-2 attached hereto (including the Global Note Legendthereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form shall be substantially in the form ofExhibit A-1 or A-2 attached hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note”attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent theaggregate principal amount of outstanding Notes of the applicable series from time to time endorsed thereon and that the aggregate principal amount ofoutstanding Notes of the applicable series represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges andredemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes of theapplicable series represented thereby shall be

22


made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06hereof.

(c) Euroclear and Cedel Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and ConditionsGoverning Use of Euroclear” and the “General Terms and Conditions of Cedel Bank” and “Customer Handbook” of Cedel Bank shall be applicable to transfersof beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank.

Section 2.02. Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. The Company’s seal may but need not be reproduced on the Notes andmay be in facsimile form.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has beenauthenticated under this Indenture.

The Trustee shall, upon a written order of the Company signed by an Officer (an “Authentication Order”), authenticate Notes for original issue.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Noteswhenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agenthas the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office oragency where Notes may be presented for payment (“Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange. TheCompany may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “PayingAgent” includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notifythe Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registraror Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.

The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.

Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holdersor the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notifythe Trustee of any default by the Company in making any such payment. While any such

23


default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent topay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no furtherliability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders allmoney held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for theNotes.

Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders andshall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before eachinterest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably requireof the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA § 312(a).

Section 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, bya nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or anominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trusteenotice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the ExchangeAct and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) theCompany in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written noticeto such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as theDepositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. EveryNote authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided inthis Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall beeffected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted GlobalNotes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interestsin the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other followingsubparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who

take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in thePrivate Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation SGlobal Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in anyUnrestricted Global Note may be transferred to

24


Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required tobe delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).

(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial intereststhat are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from aParticipant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to becredited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions givenin accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) awritten order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary tocause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by theDepositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer orexchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirementsof this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittaldelivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange ofbeneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust theprincipal amount of the relevant Global Note§ pursuant to Section 2.06(h) hereof.

(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to aPerson who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements ofSection 2.06(b)(ii) above and the Registrar receives the following:

(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificatein the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver acertificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificatein the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficialinterest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to aPerson who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with therequirements of Section 2.06(b)(ii) above and:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holderof the beneficial

25


interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that itis not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration

Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial

interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item(1)(a) thereof; or

(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person whoshall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form ofExhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion ofCounsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and thatthe restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with theSecurities Act.

If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the

Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or moreUnrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph(B) or (D) above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficialinterest in a Restricted Global Note.

(c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note

proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereofin the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a RestrictedDefinitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

26


(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect setforth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non- U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act inaccordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item(3)(a) thereof;

(E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registrationrequirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit Bhereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit Bhereto, including the certifications in item (3)(b) thereof; or

(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to theeffect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and theCompany shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriateprincipal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall beregistered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct theRegistrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to thePersons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuantto this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note mayexchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in theform of an Unrestricted Definitive Note only if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holderof such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal thatit is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule144) of the Company;

27



Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive

Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including thecertifications in item (1)(b) thereof; or

(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person whoshall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder inthe form of Exhibit B hereto, including the certifications in item (4) thereof;


(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted GlobalNote proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in theform of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principalamount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shallauthenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued inexchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination ordenominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or IndirectParticipant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued inexchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchangesuch Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in theform of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, acertificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

28


(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to theeffect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act inaccordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item(3)(a) thereof;

(E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from theregistration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth inExhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth inExhibit B hereto, including the certifications in item (3)(b) thereof; or

(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificateto the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, theappropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and inall other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such

Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the formof a beneficial interest in an Unrestricted Global Note only if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and theHolder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) abroker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of theCompany;


Rights Agreement; or

29


(D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a

certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a

beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certificationsin item (4) thereof;


Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increaseor cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchangesuch Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of abeneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel theapplicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at atime when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance withSection 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amountof Definitive Notes so transferred.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the

provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, therequesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in formsatisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide anyadditional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of

Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of

Exhibit B hereto, including the certifications in item (1) thereof;

30


(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto,including the certifications in item (2) thereof; and

(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferormust deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item(3) thereof, if applicable.

(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for anUnrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and theHolder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) abroker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of theCompany;

(B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the

Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate

from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the

form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item(4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to theCompany to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained hereinand in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Personwho takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall registerthe Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

31


(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, uponreceipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes for each series ofNotes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes for such series tendered foracceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of theExchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) DefinitiveNotes for each series of Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes for such series accepted forexchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicableRestricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by theHolders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount.

(g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically statedotherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or

substitution thereof) shall bear the legend in substantially the following form. “THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE“SECURITIES ACT”), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BERE-OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCHREGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYINGON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THEHOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (ASDEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN “OFFSHORETRANSACTION” PURSUANT TO 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THEDATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANYSUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THISNOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANYPREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE “RESALERESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANTTO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THENOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIEDINSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FORTHE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCEON RULE 144A INSIDE THE UNITED STATES,

32


(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OFREGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERREDA NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRARSHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THEDELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) INEACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OFTHE NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THEREQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORETRANSACTION,” UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIESACT.” (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),

(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the PrivatePlacement Legend.

(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: “THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE INCUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANYCIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TOSECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIORWRITTEN CONSENT OF THE COMPANY.”

(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for DefinitiveNotes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retainedand canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note isexchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, theprincipal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trusteeor by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person whowill take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsementshall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive

Notes upon the Company’s order or at the Registrar’s request.

33


(ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration oftransfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable inconnection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06,3.09, 4.10, 4.13 and 9.05 hereof).

(iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except theunredeemed portion of any Note being redeemed in part.

(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be thevalid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notessurrendered upon such registration of transfer or exchange.

(v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening ofbusiness 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day ofselection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Notebeing redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Personin whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notesand for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a

registration of transfer or exchange may be submitted by facsimile.

Section 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft ofany Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note of the same series if theTrustee’s requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgmentof the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Noteis replaced. The Company may charge for its expenses in replacing a Note.

34


Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionatelywith all other Notes of such series duly issued hereunder.

Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, thosereductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as notoutstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds theNote.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note isheld by a bona fide purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient topay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes of any series have concurred in any direction, waiver or consent, Notesowned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shallbe considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction,waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded.

Section 2.10. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shallauthenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considersappropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trusteeshall authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes shall be entitled to all of the benefits of this Indenture.

Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notessurrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer,exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act) unless theCompany directs the Trustee to deliver cancelled Notes to the Company. Certification of the destruction of all canceled Notes shall be delivered to the Company.The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

35


Section 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interestpayable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and inSection 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of theproposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall beless than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the writtenrequest of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the specialrecord date, the related payment date and the amount of such interest to be paid.

ARTICLE 3.REDEMPTION AND PREPAYMENT

Section 3.01. Notices to Trustee. If the Company elects to redeem any series of Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,at least 30 days but not more than 60 days before a redemption date, an Officers’ Certificate setting forth (i) the clause of this Indenture pursuant to which theredemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price.

Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes of any series are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes of suchseries to be redeemed or purchased among the Holders of the Notes of such series in compliance with the requirements of the principal national securitiesexchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trusteeconsiders fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein,not less than 30 nor more than 60 days prior to the redemption date by the Trustee by any method the Trustee deems fair and appropriate from the outstandingNotes not previously called for redemption.

The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partialredemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shallbe redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notescalled for redemption.

Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, in the case of any redemption other than one under Section 3.08 hereof, at least 30 days but not more than60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to beredeemed at its registered address.

36


The notice shall identify the Notes to be redeemed and shall state:

(a) the redemption date;

(b) the redemption price;

(c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date uponsurrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note;

(d) the name and address of the Paying Agent;

(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after theredemption date;

(g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense.

Section 3.04. Effect of Notice of Redemption. Any redemption and notice thereof may, in the Company’s discretion, be made subject to the satisfaction of one or more conditions precedent.

Section 3.05. Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay theredemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company anymoney deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued intereston, all Notes to be redeemed.

If the Company complies with the provisions of the preceding paragraph and if all applicable conditions precedent (if any) are satisfied, on and after theredemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest recorddate but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registeredat the close of business on such record date. Subject to any conditions precedent that may be applicable, if any Note called for redemption shall not be so paidupon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, fromthe redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in theNotes and in Section 4.01 hereof.

37


Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company’s written request, the Trustee shall authenticate for theHolder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

Section 3.07. Optional Redemption. (a) Except pursuant to this clause (a) or clause (b) below, the Company shall not have the option to redeem the Notes. The Company shall have the optionto redeem each series of the Notes, upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to the registered address of each Holder ofnotes of such series, in whole or in part, at the greater of the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued andunpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date: (i) 100% of the principal amount thereof; or (ii) as determined by an Independent Investment Banker, the sum of the present values of the Remaining Scheduled Payments discounted to the

redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate. Any redemption pursuant to the foregoing provision and notice thereof may, in the Company’s discretion, be made subject to the satisfaction of one or moreconditions precedent. Subject to any conditions precedent that may be applicable, unless the Company defaults in payment of the redemption price, on and afterthe redemption date, interest will cease to accrue on the Notes or portion thereof called for redemption.

(b) In addition, at any time before September 15, 2008, the Company may on any one or more occasions redeem up to an aggregate of 35% of the principalamount of any series of Notes (including any Additional Notes of such series) outstanding at a redemption price of 105.625% of the principal amount thereof inthe case of 2012 Notes and 105.875% of the principal amount thereof in the case of 2015 Notes, plus in each case accrued and unpaid interest, if any, andLiquidated Damages, if any, thereon, to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of theaggregate principal amount of Notes of such series outstanding on the date of the indenture remain outstanding immediately after each occurrence of suchredemption; and provided, further, that each such redemption shall occur within 90 days of the date of the closing of such Equity Offering.

Notice of any redemption upon an Equity Offering may be given prior to the completion of the related Equity Offering, and any such redemption or noticemay, at the Company’s discretion, be subject to one or more conditions precedent, including, but not limited to completion of the related Equity Offering.

(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof.

Section 3.08. Mandatory Redemption. Except as set forth below in Sections 4.10 and 4.13 hereof, the Company shall not be required to make mandatory redemption payments with respect to theNotes.

38


Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an “Asset SaleOffer”), it shall follow the procedures specified below.

The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longerperiod is required by applicable law (the “Offer Period”). No later than five Business Days after the termination of the Offer Period (the “Purchase Date”), theCompany shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the “Offer Amount”) or, if less than the OfferAmount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner asinterest payments are made.

If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid tothe Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tenderNotes pursuant to the Asset Sale Offer.

Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copyto the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. TheAsset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remainopen;

(b) the Offer Amount, the purchase price and the Purchase Date;

(c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest;

(d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete oraccrue interest after the Purchase Date;

(e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only;

(f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Optionof Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by theCompany, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

(g) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later thanthe expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note theHolder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchasedon a pro rata basis (with such adjustments as

39


may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and

(i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notessurrendered (or transferred by book-entry transfer).

On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amountof Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver tothe Trustee an Officers’ Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of thisSection 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the PurchaseDate) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company forpurchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver suchnew Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed ordelivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date.

Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections3.01 through 3.06 hereof.

ARTICLE 4.COVENANTS

Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in theNotes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof,holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay allprincipal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts setforth in the Registration Rights Agreement.

The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in anyproceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the samerate to the extent lawful.

Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office or agency of the Trustee oran affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demandsto or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location,and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail tofurnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of theTrustee.

40


The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or allsuch purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve theCompany of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall giveprompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03.

Section 4.03. Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders ofNotes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Companywere required to file such forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to theannual information only, a report on the annual financial statements by the Company’s certified independent accountants and (ii) all current reports that would berequired to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case, within the time periods specified in the SEC’srules and regulations. In addition, following consummation of the Exchange Offer, whether or not required by the rules and regulations of the SEC, the Companyshall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC’s rules and regulations(unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Companyshall at all times comply with TIA § 314(a).

(b) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospectiveinvestors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Section 4.04. Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 120 days after theend of each fiscal year, an Officers’ Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year hasbeen made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled itsobligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company haskept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of theterms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default ofwhich he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledgeno event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or ifsuch event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financialstatements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company’s independent public accountants (who shallbe a firm of established national reputation) substantially to the effect that in making the examination necessary for certification of such financial statements,nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5

41


hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liabledirectly or indirectly to any Person for any failure to obtain knowledge of any such violation.

(c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default orEvent of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respectthereto.

Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental leviesexcept such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to theHolders of the Notes.

Section 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors, if any, covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or inany manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, thatmay affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) herebyexpressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of anypower herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07. Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any otherpayment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (other than in connection with any merger orconsolidation involving the Company) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacityas such (other than (x) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or any RestrictedSubsidiary of the Company or (y) Qualified Distributions); (ii) purchase, redeem or otherwise acquire or retire for value (other than in connection with anymerger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company (other than EquityInterests owned by the Company or any Restricted Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease orotherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or any Guarantee of the Notes (other than Indebtedness between or amongthe Company and its Restricted Subsidiaries), except a payment of interest or principal at Stated Maturity thereof; or (iv) make any Restricted Investment (allsuch payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as “Restricted Payments”), unless, at the time of and aftergiving effect to such Restricted Payment:

(a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and

(b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made atthe beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge CoverageRatio test set forth in the first paragraph of Section 4.09; and

42


(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiariessince the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv) and (x) of the next succeeding paragraph), is less than the sum,without duplication, of: (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from July 1, 2005 to the end ofthe Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if suchConsolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net proceeds (including cash and the fair marketvalue of property other than cash as determined in good faith by the Board of Directors of the Company) received by the Company since the date of thisIndenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock), in each caseincluding in connection with an acquisition, or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debtsecurities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debtsecurities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold forcash or otherwise liquidated or repaid for cash, the cash received with respect to such Restricted Investment (less the cost of disposition, if any), provided thatany Consolidated Net Income of the Company resulting from such cash received (less the cost of disposition, if any) will be excluded from clause (c)(i), plus(iv) if any Unrestricted Subsidiary (A) is redesignated as a Restricted Subsidiary, the fair market value of such redesignated Subsidiary (as determined in goodfaith by the Board of Directors of the Company) as of the date of its redesignation or (B) pays any cash dividends or cash distributions to the Company or any ofits Restricted Subsidiaries, the amount of any such dividends or distributions made after the date of this Indenture.

The foregoing provisions shall not prohibit any of the following: (i) the payment of any dividend or distribution or the consummation of any redemption ofIndebtedness that is subordinated to the Notes within 60 days after the date of declaration of the dividend or distribution or the giving of notice of redemption, asthe case may be, if at the said date of declaration or notice of such dividend, distribution or redemption payment would have complied with the provisions of thisIndenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any RestrictedSubsidiary (including the payment of any related prepayment penalty or premium) or of any Equity Interests of the Company in exchange for, or out of the netcash proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than anyDisqualified Stock) or from the net cash proceeds of an equity capital contribution to the Company; provided that the amount of any such net cash proceeds thatare utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;(iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Restricted Subsidiary with the net cashproceeds from an incurrence of Permitted Refinancing Indebtedness, so long as no Default has occurred and is continuing or would be caused thereby; (iv) thepayment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (v) the repurchase, redemption orother acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of theCompany’s (or any of its Restricted Subsidiaries’) management pursuant to any management equity subscription agreement, stock option agreement or similaragreement so long as no Default has occurred and is continuing or would be caused thereby; provided that the aggregate price paid for all such repurchased,redeemed, acquired or retired Equity Interests shall not exceed $10.0 million in any twelve-month period; (vi) the declaration or payment of dividends oradvances to the Company for expenses incurred by the Company in its capacity as a holding company that are attributable to the operations of the Company andits Restricted Subsidiaries; (vii) the declaration or payment of dividends by the Company to holders of its Equity Interests in an amount not to exceed $50.0million in any fiscal year; (viii) the repurchase of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion ofthe exercise price of such options; (ix) the defeasance, redemption, repurchase or other acquisition of any Indebtedness subordinated or pari passu in

43


right of payment to the Notes at a purchase price not greater than 101% of the principal amount of such Indebtedness, plus any accrued and unpaid interestthereon, in the event of a Change of Control Triggering Event; provided that prior to or contemporaneously with such repurchase, the Company has made theChange of Control Offer with respect to the Notes required by this Indenture, if any, and has repurchased all Notes validly tendered for payment and notwithdrawn in connection with such Change of Control Offer; (x) the repurchase of Equity Interests on any date that each series of notes then outstanding is ratedBa3 or better by Moody’s and BB or better by S&P (or in either case, if such entity ceases to rate such notes for reasons outside of the control of the Company,the equivalent credit rating from any other Rating Agency), provided that on the date of such repurchase after giving pro forma effect thereto and to any relatedfinancing transactions as if the same had occurred at the beginning of the Company’s most recently ended four full fiscal quarters for which internal financialstatements are available, the Company’s Leverage Ratio would have been equal to or less than 2.5 to 1; or (xi) other Restricted Payments in an aggregate amountnot to exceed $100.0 million.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securitiesproposed to be transferred or issued to or by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair marketvalue of any assets or securities that are required to be valued by this Section shall be determined by the Board of Directors of the Company, whosedetermination will be conclusive. For purposes of determining compliance with this Section, in the event that a Restricted Payment meets the criteria of morethan one of the exceptions described in clauses (i) through (xi) above in this Section 4.07 or is entitled to be made pursuant to the first paragraph of this Section,the Company shall, in its sole discretion, classify such Restricted Payment, or later classify, reclassify or re-divide all or a portion of such Restricted Payment, inany manner that complies with this Section 4.07.

Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective anyconsensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a)(i) pay dividends or make any other distributions on its Capital Stock tothe Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits or (ii) pay any indebtednessowed to the Company or any of its Restricted Subsidiaries, (b) make loans or advances to the Company or any of its Restricted Subsidiaries or (c) transfer any ofits properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reasons of:(i) agreements governing Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases,supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements,refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions thanthose contained in those agreements on the date of this Indenture, (ii) agreements governing Indebtedness incurred under Credit Facilities by Foreign Subsidiariesif (x) the Board of Directors of the Company determines at the time that any agreement governing such Indebtedness is entered into (and at the time of anymodification of any such encumbrance or restriction) that any such encumbrance or restriction will not materially affect the Company’s ability to make principalor interest payments on the Notes and (y) the encumbrance or restriction is not materially more disadvantageous to the holders of Notes than is customary incomparable financings or agreements (as determined by the Company’s Board of Directors), (iii) this Indenture, the Notes and the Subsidiary Guarantees as ineffect on the date of this Indenture, (iv) applicable law and any applicable rule, regulation or order, (v) any instrument governing Indebtedness or Capital Stockof a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition, which encumbrance or restriction is notapplicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that in thecase of Indebtedness, such Indebtedness was permitted by the terms hereof,

44


(vi) customary non-assignment provisions in leases or other similar agreements entered into in the ordinary course of business and consistent with past practices,(vii) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above onthe property so acquired, (viii) any agreement for the sale or other disposition of a Restricted Subsidiary or all or substantially all the assets of such RestrictedSubsidiary that restricts distributions by that Restricted Subsidiary pending such sale or other disposition; (ix) Permitted Refinancing Indebtedness, provided thatthe restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than thosecontained in the agreements governing the Indebtedness being refinanced; (x) Liens securing Indebtedness otherwise permitted to be incurred under theprovisions of Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens; (xi) provisions with respect to the disposition ordistribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in theordinary course of business; (xii) Indebtedness or other contractual requirements of a Receivables Subsidiary in connection with a Qualified ReceivablesTransaction, provided that such restrictions apply only to such Receivables Subsidiary or the receivables or inventory which are subject to the QualifiedReceivables Transaction; (xiii) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course ofbusiness; (xiv) contractual encumbrances and restrictions in effect on the date of this Indenture; (xv) mortgage or construction financing that imposes restrictionson transfer of the property acquired or improved; (xvi) protective liens filed in connection with sale-leaseback transactions permitted under Section 4.16 and(xvii) Indebtedness permitted to be incurred pursuant to clauses (f), (l), (m) and (n) of the second paragraph of Section 4.09.

Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwisebecome directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt) and theCompany shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however,that the Company or any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock and the Company’sRestricted Subsidiaries may issue preferred stock, if the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for whichinternal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock orpreferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), asif the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of suchfour-quarter period.

The provisions of the first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness (collectively,“Permitted Debt”):

(a) the incurrence by the Company and its Restricted Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities in an aggregateprincipal amount at any one time outstanding under this clause (a) (with letters of credit being deemed to have a principal amount equal to the maximumpotential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed the greater of: (i) $700 million and (ii) the Borrowing Base;

45


(b) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on thedate of this Indenture and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement;

(c) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds ofwhich are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under thefirst paragraph of this Section 4.09 or clauses (b), (c) or (o) of this paragraph;

(d) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of itsRestricted Subsidiaries; provided, however, that: (i) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in

full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor, and (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company

or a Restricted Subsidiary of the Company and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or aRestricted Subsidiary of the Company, in the case of each of clause (A) and (B) will be deemed to constitute an incurrence of such Indebtedness by theCompany or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (d);

(e) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging

interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or Hedging Obligations withrespect to foreign currency translations;

(f) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permittedto be incurred by another provision of this covenant;

(g) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to the Company or to anyRestricted Subsidiary of the Company or their assets (other than such Receivables Subsidiary and its assets and, as to the Company or any Subsidiary of theCompany, other than pursuant to representations, warranties, covenants, performance undertakings and indemnities customary for such transactions) and is notguaranteed by any such Person other than by performance undertakings customary for such transactions;

(h) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additionalIndebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stockwill not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09;

(i) Indebtedness of the Company or a Restricted Subsidiary owed to (including obligations in respect of letters of credit for the benefit of) any Person inconnection with worker’s compensation, health, disability or other employee benefits or property, casualty or liability insurance provided by such Person to theCompany or such Restricted Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course ofbusiness;

46


(j) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similarobligations, in each case, incurred or assume in connection with the disposition of any business, asset or Equity Interests; provided that the maximum aggregateliability of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection withsuch disposition;

(k) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in theordinary course of business;

(l) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds inthe ordinary course of business, provided, however, that such Indebtedness is extinguished within five Business Days of its incurrence;

(m) Permitted Acquisition Indebtedness;

(n) the incurrence by the Company or any of its Restricted Subsidiaries of guarantees of Indebtedness of customers or suppliers in an aggregate amount atany one time outstanding not to exceed $50.0 million; and

(o) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, asapplicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuantto this clause (o), not to exceed the greater of (i) $125.0 million and (ii) 3.0% of the Company’s Consolidated Net Worth.

For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one ofthe categories of Permitted Debt described in clauses (a) through (o) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, theCompany shall, in its sole discretion, be permitted to classify such item of Indebtedness on the date of its incurrence, or later classify, reclassify or re-divide all ora portion of such item of Indebtedness in any manner that complies with this Section 4.09 and such item of Indebtedness shall be treated as having been incurredpursuant to only one of such clauses or pursuant to the first paragraph of this Section 4.09. Accrual of interest shall not be deemed to be an incurrence ofIndebtedness for purposes of this Section 4.09.

Section 4.10. Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to: (i) sell, lease, convey or otherwise dispose of any assets or rights, otherthan sales or returns of inventory in the ordinary course of business (provided that the sale, lease, conveyance or other distribution of all or substantially all of theassets of the Company and its Subsidiaries taken as a whole shall be governed by the provisions of Sections 4.13 and 5.01 hereof), or (ii) issue or sell EquityInterests in any of its Restricted Subsidiaries, in the case of either clause (i) or (ii) above, whether in a single transaction or a series of related transactions (eachof the foregoing, an “Asset Sale”), unless (x) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Saleat least equal to the fair market value (evidenced by a resolution of the Board of Directors of the Company set forth in an Officers’ Certificate delivered to theTrustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (y) either (1) at least 75% of the consideration received therefor by theCompany or such Restricted Subsidiary is in the form of cash or Cash Equivalents or (2) the fair market value of the aggregate of all consideration other thancash or Cash Equivalents for all Asset Sales since the date of this Indenture would not exceed 10% of Total Tangible Assets after giving effect to such AssetSale; provided that this 75% limitation shall not apply to any Asset Sale in which the after-tax cash or Cash Equivalents portion of the consideration received isequal or greater than what the net after-tax proceeds would have been had

47


such Asset Sale complied with the 75% limitation; provided, however, that the amount of: (A) any liabilities (of the type shown on the Company’s or suchRestricted Subsidiary’s most recent balance sheet or in the notes thereto), of the Company or any Restricted Subsidiary (other than contingent liabilities andliabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets; (B) any securities,notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are delivered within 20 days of the sale, subjectto ordinary settlement periods, that are within 90 days of receipt converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to theextent of the cash or Cash Equivalents received in that conversion); (C) accounts receivable of a business retained by the Company or such Restricted Subsidiary,as the case may be, following the sale of such business, provided that such accounts receivable are (i) not past due more than 90 days and (ii) not invoiced with apayment due date greater than 120 days from the date of the invoice creating such accounts receivable; (D) any payment of secured debt secured by the assetssold in the Asset Sale; (E) long-term assets that are used or useful in a Permitted Business and (F) the Capital Stock of any Person engaged in a PermittedBusiness if, in connection with the receipt by the Company or any Restricted Subsidiary of the Company of such Capital Stock (i) such Person becomes aRestricted Subsidiary of the Company or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of itsassets to, or is liquidated into, the Company or any Restricted Subsidiary of the Company, shall be deemed to be cash for purposes of this provision.Notwithstanding the preceding, the following shall not be deemed to be an Asset Sale: (i) a transfer of assets between or among the Company and itsSubsidiaries; (ii) an issuance of Equity Interests by a Subsidiary to the Company or to another Subsidiary; (iii) the sale or lease of equipment (and the relatedleasing or licensing of technology), inventory, accounts receivable or other assets in the ordinary course of business including dispositions of assets that areobsolete or no longer useful in the business; (iv) the sale or other disposition of cash or Cash Equivalents; (v) sales of accounts receivable or inventory andrelated assets of the type specified in the definition of “Qualified Receivables Transaction” to a Receivables Subsidiary for the fair market value thereof,including cash in an amount at least equal to 75% of the book value thereof as determined in accordance with GAAP, it being understood that, for the purposes ofthis clause (v), notes received in exchange for the transfer of accounts receivable or inventory and related assets will be deemed cash if the ReceivablesSubsidiary or other payor is required to repay said notes as soon as practicable from available cash collections less amounts required to be established as reservespursuant to contractual agreements with entities that are not Affiliates of the Company entered into as part of a Qualified Receivables Transaction; (vi) transfersof accounts receivable or inventory and related assets of the type specified in the definition of “Qualified Receivables Transaction” (or a fractional undividedinterest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction; (vii) a Restricted Payment or Permitted Investment that is permitted bySection 4.07 hereof; (viii) the creation of Liens otherwise permitted by this Indenture, including, without limitation, a pledge of assets otherwise permitted by thisIndenture; (ix) the exchange of assets held by the Company or any of its Restricted Subsidiaries for assets held by any Person or entity; provided that (A) theassets received by the Company or such Restricted Subsidiary in any such exchange will immediately constitute, be part of, or be used by the Company or suchRestricted Subsidiary in a Permitted Business and (B) any such assets received are of comparable fair market value to the assets exchanged as determined in goodfaith by the Company’s Board of Directors; (x) the sale or other disposition of distribution centers, warehouse facilities or administrative facilities, and relatedassets, that are sold or otherwise disposed of as part of the Consolidation Program; and (xi) the sale, transfer or other disposition of assets not described in theforegoing clauses (i) through (x) (including any sale and leaseback transaction) the aggregate fair market value of which assets, when taken together with the fairmarket value of all other assets sold, transferred or otherwise disposed of in reliance on this clause (xi) (in each case measured on the date of such sale, transfer ordisposition and without giving effect to subsequent changes in value), does not exceed 20% of Total Tangible Assets as of the end of the most recent quarterended prior to the date of such sale, transfer or other disposition; provided that (A) each such sale, transfer or other disposition complies with clauses (x) and(y) of this paragraph of this covenant as if such sale, transfer or other disposition were an Asset Sale and (B) for purposes of determining whether any such sale,transfer or other disposition complies with clause (y) of this covenant pursuant to the foregoing

48


clause (A) of this proviso, any retained Equity Interests in any Subsidiary in which any Equity Interests have been sold, transferred or otherwise disposed of shallbe deemed to be non-cash consideration received in respect of such sale, transfer or other disposition.

Within 365 days after the receipt of any Net Proceeds from any Asset Sale, the Company (or such Subsidiary) may apply the Net Proceeds from suchAsset Sale, at its option, to one or more of the following (a) to repay, prepay, repurchase or otherwise discharge Indebtedness under a Credit Facility; (b) toacquire (or enter into a binding agreement to acquire, provided that such commitment shall be subject only to customary conditions (other than financing) andsuch acquisition shall be consummated within 180 days after the end of such 365-day period) all or substantially all of the assets of, or a majority of the VotingStock of, another Permitted Business; (c) to make a capital expenditure or (d) to acquire (or enter into a binding agreement to acquire, provided that suchcommitment shall be subject only to customary conditions (other than financing) and such acquisition shall be consummated within 180 days after the end ofsuch 365-day period) other long-term assets that are used or useful in a Permitted Business or to permanently reduce borrowings and commitments underIndebtedness permitted to be incurred pursuant to clause (a) of the third paragraph of Section 4.09 hereof. Pending the final application of any such Net Proceeds,the Company (or such Subsidiary) may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is notprohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will bedeemed to constitute “Excess Proceeds.” Within five days of each date on which the aggregate amount of Excess Proceeds exceeds $50.0 million, the Companyshall commence an Asset Sale Offer pursuant to Section 3.09 hereof to purchase the maximum principal amount of Notes that may be purchased out of theExcess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damagesthereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in Section 3.09 hereof. To the extent that the aggregateamount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for anypurpose not otherwise prohibited by this Indenture. Upon completion of such offer to purchase, the amount of Excess Proceeds will be deemed to be reset at zero.

Section 4.11. Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to occur any transaction orseries of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for thebenefit of, any of its Affiliates (each of the foregoing, an “Affiliate Transaction”), unless such Affiliate Transaction is on terms that are not materially lessfavorable to the Company or the relevant Subsidiary than those that might reasonably have been obtained in a comparable transaction at such time on an arm’slength basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary; provided, however, that for an Affiliate Transaction with anaggregate value of $50.0 million or more, at the Company’s option, either (a) a majority of the disinterested members of the Board of Directors of the Companyshall determine in good faith that such Affiliate Transaction is on terms that are not materially less favorable than those that might reasonably have been obtainedin a comparable transaction at such time on an arm’s length basis from a Person that is not an Affiliate of the Company or (b) the Board of Directors of theCompany shall deliver to the Trustee an opinion from a nationally recognized investment banking, appraisal or accounting firm that such Affiliate Transaction ison terms that are not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm’s lengthbasis from a Person that is not an Affiliate of the Company; provided, however, that (i) any employment agreement, compensation or employee benefitarrangements, incentive arrangements or director fees (including grants of stock options or other Equity Interests) entered into by the Company or any of itsRestricted Subsidiaries in the ordinary course of business; (ii) transactions between or among the Company and/or its Restricted Subsidiaries; (iii) transactionswith a Person that is an Affiliate of the Company solely because the Company owns an

49


Equity Interest in, or controls, such Person; (iv) payment of reasonable directors fees; (v) sales or issuances of Equity Interests (other than Disqualified Stock) toAffiliates of the Company; (vi) transactions between or among the Company and/or its Restricted Subsidiaries or transactions between a Receivables Subsidiaryand any Person in which the Receivables Subsidiary has an Investment; (vii) transactions permitted under Section 4.07 hereof; (viii) customary loans, advances,fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its RestrictedSubsidiaries and (ix) transactions pursuant to any contract, or agreement in effect on the date of this Indenture as the same may be amended, modified or replacedfrom time to time so long as any such amendment, modification or replacement is no less favorable to the Company and its Restricted Subsidiaries than theoriginal contract or agreement as in effect on the date of this Indenture shall not be deemed Affiliate Transactions.

Section 4.12. Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien ofany kind securing Indebtedness on any asset now owned or hereafter acquired, except Permitted Liens, unless (i) in the case of the Company, the Notes aresecured by such Lien equally and ratably with, or prior to, the Indebtedness secured by such Lien or (ii) in the case of any Subsidiary Guarantor, such SubsidiaryGuarantor’s guarantee of the Notes is secured by such Lien equally and ratably with, or prior to, the Indebtedness secured by such Lien.

Section 4.13. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control Triggering Event, the Company shall make an offer (a “Change of Control Offer”) to each Holder torepurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes at a purchase price equal to 101% of the aggregate principalamount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the “Change of Control Payment”). Within 90days following any Change of Control Triggering Event, the Company shall mail a notice to each Holder describing the transaction or transactions that constitutethe Change of Control Triggering Event and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.13 and that all Notes tenderedwill be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 Business Days and no later than 60 Business Daysfrom the date such notice is mailed (the “Change of Control Payment Date”); (3) that any Note not tendered will continue to accrue interest; (4) that, unless theCompany defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease toaccrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will berequired to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes completed, to the Paying Agent at theaddress specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will beentitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of ControlPayment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and astatement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will beissued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principalamount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities lawsand regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes in connection with a Change ofControl Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with Section 4.13 of this Indenture, the Company willcomply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 4.13 of this Indenture by virtueof such conflict.

50


(b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properlytendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes orportions thereof properly tendered and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate statingthe aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notesproperly tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry)to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered by such Holder, if any; provided, that each such newNote shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer onor as soon as practicable after the Change of Control Payment Date.

The Company will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change ofControl Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.19 and all other provisions of thisIndenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change ofControl Offer.

Section 4.14. Limitation on Senior Subordinated Debt. Notwithstanding the provisions of Section 4.09 hereof, (i) the Company shall not incur any Indebtedness (including Permitted Debt) that is contractuallysubordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to theNotes on substantially identical terms and (ii) the Guarantors shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated inright of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the NoteGuarantees on substantially identical terms; provided, however, that no Indebtedness of the Company will be deemed to be contractually subordinated in right ofpayment to any other Indebtedness of the Company solely by virtue of being unsecured.

Section 4.15. [Section Intentionally Omitted].

Section 4.16. Limitation on Sale and Leaseback Transactions. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Companyor any Guarantor may enter into a sale and leaseback transaction if (i) the Company or that Guarantor, as applicable, could have (a) incurred Indebtedness in anamount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the firstparagraph of Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to the provisions of Section 4.12 hereof and (ii) the gross cashproceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors of the Companyand set forth in an Officers’ Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction.

Section 4.17. [Section Intentionally Omitted.]

Section 4.18. Additional Note Guarantees. Any Domestic Subsidiary of the Company (other than Blanco) which incurs, has outstanding or guarantees any Specified Indebtedness shall,simultaneously with such incurrence or guarantee (or, if the Domestic Subsidiary has outstanding or guarantees Specified Indebtedness at the time of its creationor

51


acquisition, at the time of such creation or acquisition) shall become a Guarantor and execute and deliver to the Trustee a Note Guarantee and a SupplementalIndenture pursuant to which such Subsidiary shall agree to guarantee the Company’s obligations under the Notes, except for all Subsidiaries that have properlybeen designated as Unrestricted Subsidiaries or Designated Non-Guarantors in accordance with this Indenture for so long as they continue to constituteUnrestricted Subsidiaries or Designated Non-Guarantors. The form of such Note Guarantee and Supplemental Indenture is attached hereto as Exhibit E andExhibit F, respectively.

Section 4.19. Changes in Covenants when Notes Rated Investment Grade. If on any date following the date of this Indenture:

(a) the Notes of all then outstanding series are assigned an Investment Grade Rating from either of the Rating Agencies (such date being the “Rating EventDate”); and

(b) no Default or Event of Default shall have occurred and be continuing, then beginning on that day and continuing at all times thereafter regardless of any changes in the rating of the Notes, Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.13,4.14 and 4.20 hereof, clause (i)(a) of the proviso to Section 4.16 and clause (iv) of Section 5.01 hereof will not longer be applicable to the Notes.

Section 4.20. Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause aDefault. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by theCompany and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation andwill reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 or Permitted Investments, as determined by the Company.That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of anUnrestricted Subsidiary. The Board of Directors of the Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignationwould not cause a Default under this Indenture.

ARTICLE 5.SUCCESSORS

Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not, directly or indirectly, consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign,transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, in oneor more related transactions to, another Person, unless (i) either the Company is the surviving corporation or the Person formed by or surviving any suchconsolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is acorporation, limited liability company or limited partnership organized or existing under the laws of the United States, any state thereof or the District ofColumbia, (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment,transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Registration Rights Agreement, the Notesand this Indenture pursuant to agreements reasonably satisfactory to the Trustee and, if such Person is a limited liability company or limited partnership, aco-issuer of the Notes that is a corporation will become obligated on the Notes and become party to this Indenture pursuant to a supplemental indenturesatisfactory to the Trustee and (iii)

52


immediately after such transaction, no Default or Event of Default exists and (iv) the Company or the Person formed by or surviving any such consolidation ormerger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (A) shall haveConsolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding thetransaction or (B) would on the date of such transaction after giving pro forma effect thereto and to any related financing transactions as if the same had occurredat the beginning of the most recently ended four fiscal quarters for which internal financial statements are available, have a Fixed Charge Coverage Ratio that isnot less than the Fixed Charge Coverage Ratio of the Company for such period calculated without giving pro forma effect to such transaction and any relatedfinancing transactions. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more relatedtransactions, to any other Person. The provisions of this Section 5.01 shall not apply to a sale, merger, assignment, transfer, conveyance or other disposition ofassets between or among the Company and any of its Restricted Subsidiaries.

Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of theCompany in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or towhich such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date ofsuch consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to thesuccessor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if suchsuccessor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay theprincipal of and interest on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company’s assets that meetsthe requirements of Section 5.01 hereof.

ARTICLE 6.DEFAULTS AND REMEDIES

Section 6.01. Events of Default. An “Event of Default” occurs with respect to each series of Notes if:

(a) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a periodof 30 days;

(b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity,upon redemption (including in connection with an offer to purchase) or otherwise;

(c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Section 4.07, 4.09 or 4.13 for 30 days from receipt ofwritten notice by the Trustee or the Holders of at least 25% in aggregate principal amount of any series of Notes then outstanding;

(d) the Company or any of its Restricted Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in thisIndenture for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of any series of Notes thenoutstanding;

53


(e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced anyIndebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of itsSubsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which (i) is caused by the failure to pay principalof, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a“Payment Default”), or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of suchIndebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has beenso accelerated, aggregates $50.0 million or more;

(f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any ofits Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remainundischarged for a period (during which execution shall not be effectively stayed pending appeal (or otherwise stayed)) of 60 days, provided that the aggregate ofall such undischarged judgments exceeds $50.0 million (net of any amount covered by insurance);

(g) the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a SignificantSubsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or

(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would

constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would

constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group ofRestricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary;

(iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, wouldconstitute a Significant Subsidiary; or

(iv) and the order or decree remains unstayed and in effect for 60 consecutive days; or

54


(i) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reasonto be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor’sNote Guarantee.

Section 6.02. Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any SignificantSubsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee maydeclare all the Notes to be due and payable immediately, and upon receipt of written instructions from the Holders of at least 25% in principal amount of anyseries of Notes then outstanding, the Trustee shall declare all Notes of such series to be due and payable immediately. Upon any such declaration with respect toany Notes, such Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) ofSection 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute aSignificant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregateprincipal amount of any series of Notes then outstanding by written notice to the Trustee may on behalf of all of the Holders of such series of Notes rescind anacceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment ofprincipal, interest or premium that has become due solely because of the acceleration) have been cured or waived.

Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, andinterest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay oromission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy orconstitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of any series of Notes then outstanding by notice to the Trustee may on behalf of theHolders of all Notes of such series waive an existing Default or Event of Default and its consequences hereunder with respect to such series, except a continuingDefault or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, such Notes (including in connection withan offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of such series of Notes then outstanding may rescind anacceleration and its consequences with respect to such series, including any related payment default that resulted from such acceleration). Upon any such waiver,such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no suchwaiver shall extend to any subsequent or other Default or impair any right consequent thereon.

55


Section 6.05. Control by Majority. Holders of a majority in principal amount of any series of Notes then outstanding may direct the time, method and place of conducting any proceeding forexercising any remedy available to the Trustee or exercising any trust or power conferred on it with respect to such series. However, the Trustee may refuse tofollow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes of suchseries or that may involve the Trustee in personal liability.

Section 6.06. Limitation on Suits. A Holder of a Note of any series may pursue a remedy with respect to this Indenture or with respect to such series of Notes only if:

(a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;

(b) the Holders of at least 25% in principal amount of such series of Notes then outstanding make a written request to the Trustee to pursue the remedy;

(c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liabilityor expense;

(d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

(e) during such 60-day period the Holders of a majority in principal amount of such series of Notes then outstanding do not give the Trustee a directioninconsistent with the request.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holderof a Note.

Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and LiquidatedDamages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or tobring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and astrustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid onthe Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses ofcollection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of theTrustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the

56


Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall beentitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any suchjudicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making ofsuch payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of theTrustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation,expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate inany such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions,dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan ofreorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt onbehalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize theTrustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and

liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably,

without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if anyand interest, respectively; and

Third: to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as aTrustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretionmay assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of theclaims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, ora suit by Holders of more than 10% in principal amount of any series of Notes then outstanding.

57


ARTICLE 7.TRUSTEE

Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use thesame degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that

are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions

expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shallexamine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was

negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it

pursuant to Section 6.05 hereof; and (iv) no permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or

remedy.

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Article 7. Theimmunities and exceptions from liability of the Trustee shall apply to the Trustee in all if its capacities provided for in this Indenture including its capacity as aRegistrar or Paying Agent, as the case may be, and shall extend to its officers, directors, employees and agents.

(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligationto exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security andindemnity satisfactory to it against any loss, liability or expense.

(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held intrust by the Trustee need not be segregated from other funds except to the extent required by law.

58


Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. TheTrustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liablefor any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee may consult with counsel and thewritten advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken,suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with duecare.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powersconferred upon it by this Indenture.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by anOfficer of the Company.

(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of theHolders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurredby it in compliance with such request or direction.

(g) At all reasonable times the Trustee and its duly authorized agents, accountants, attorneys, and experts, shall have the right to inspect fully all books,papers and records of the Company relating to the Notes and to take such photocopies and memoranda therefrom and in regard thereto as may be desired;provided that, in the event any request for the delivery of any books, papers or records described above would compromise the attorney-client privilege or anyother privilege of the Company then such delivery and access will not be required.

Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliateof the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it musteliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties.The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Notes, it shall not beaccountable for the Company’s use of the proceeds from the Notes or any money paid to the Company or upon the Company’s direction under any provision ofthis Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not beresponsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to thisIndenture other than its certificate of authentication.

59


Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall mail to Holders of Notes a notice ofthe Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, orinterest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding thenotice is in the interests of the Holders of the Notes. The Trustee shall not be required to inquire into or take notice, or be deemed to have notice or knowledge, ofany Event of Default under this Indenture or any other event which, with the passage of time, the giving of notice or both, would constitute an Event of Defaultunless a Responsible Officer shall have actual knowledge or be specifically notified in writing of such Event of Default or event. Except as otherwise expresslyprovided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Company, or any other party to the transactioncontemplated in this Indenture, of any of the terms, conditions, covenants or agreements herein or any of the documents executed in connection with the Notes.

Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trusteeshall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) hasoccurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2). The Trusteeshall also transmit by mail all reports as required by TIA § 313(c).

A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange onwhich the Notes are listed in accordance with TIA § 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. TheTrustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptlyupon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shallinclude the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or inconnection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against theCompany and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or anyHolder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any suchloss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seekindemnity. Failure by the Trustee to so notify the Company shall not relieve the Company or any of the Guarantors of their obligations hereunder. The Companyor such Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay thereasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent shallnot be unreasonably withheld.

60


The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

To secure the Company’s payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collectedby the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and thecompensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under anyBankruptcy Law.

The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent applicable.

Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance ofappointment as provided in this Section.

The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority inprincipal amount of then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove theTrustee if:

(a) the Trustee fails to comply with Section 7.10 hereof;

(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(c) a custodian or public officer takes charge of the Trustee or its property; or

(d) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee.Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successorTrustee to replace the successor Trustee appointed by the Company.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holdersof at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder maypetition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation orremoval of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to thesuccessor Trustee, provided all sums

61


owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuantto this Section 7.08, the Company’s obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successorcorporation without any further act shall be the successor Trustee.

Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of anystate thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities andthat has (or together with is corporate parent has) a combined capital and surplus of at least $100 million as set forth in its most recent published annual report ofcondition.

This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b).

Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall besubject to TIA § 311(a) to the extent indicated therein.

ARTICLE 8.LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers’ Certificate, at any time, elect to have eitherSection 8.02 or 8.03 hereof be applied to all outstanding Notes of any series upon compliance with the conditions set forth below in this Article Eight.

Section 8.02. Legal Defeasance and Discharge. Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02 with respect to any series of Notes, the Companyshall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to alloutstanding Notes of such series on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasancemeans that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes of the applicable series ofNotes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in(a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of theCompany, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated ordischarged hereunder: (a) the rights of Holders of the outstanding Notes of the applicable series to receive solely from the trust fund described in Section 8.04hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments aredue, (b) the Company’s obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,

62


trusts, duties and immunities of the Trustee hereunder and the Company’s obligations in connection therewith and (d) this Article Eight. Subject to compliancewith this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03. Covenant Defeasance. Upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 with respect to any series of Notes, the Company andthe Restricted Subsidiaries shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under thecovenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.18 and 4.20 hereof and clause (iv) of Section 5.01 hereof with respect to theoutstanding Notes of such series on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, “Covenant Defeasance”), and such Notesshall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of anythereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notesshall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes of theapplicable series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant,whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any otherprovision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof withrespect to such series of Notes, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon theCompany’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof with respect to any series of Notes, subject to the satisfactionof the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default with respect to such series ofNotes.

Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes of any series:

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to any series of Notes:

(a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of such series of Notes, cash in United States dollars,non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of an Independent Investment Banker, to paythe principal of, premium, if any, and interest on the outstanding Notes of such series on the stated date for payment thereof or on the applicable redemption date,as the case may be;

(b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United Statesreasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a rulingor (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon suchOpinion of Counsel shall confirm that, subject to customary assumptions and exceptions, the Holders of the outstanding Notes of such series will not recognizeincome, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in thesame manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

63


(c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United Statesreasonably acceptable to the Trustee confirming that, subject to customary assumptions and exceptions, the Holders of the outstanding Notes of such series willnot recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the sameamounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d) no Default or Event of Default with respect to such series of Notes shall have occurred and be continuing on the date of such deposit (other than aDefault or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease such series of Notespursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending onthe 91st day after the date of deposit;

(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement orinstrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91stday following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affectingcreditors’ rights generally;

(g) the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent ofpreferring the Holders of such series of Notes over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding anyother creditors of the Company; and

(h) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exceptions,each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or otherqualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes of such seriesshall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through anyPaying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become duethereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callableGovernment Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or othercharge which by law is for the account of the Holders of the outstanding Notes of such series.

Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of theCompany any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of an Independent InvestmentBank, expressed in a written certification thereof delivered to the Trustee (which may be the

64


opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent LegalDefeasance or Covenant Defeasance.

Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, orinterest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to theCompany on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to theCompany for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trusteethereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expenseof the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimedand that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of suchmoney then remaining will be repaid to the Company.

Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting suchapplication, then the Company’s obligations under this Indenture and such series of Notes shall be revived and reinstated as though no deposit had occurredpursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note followingthe reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held bythe Trustee or Paying Agent.

ARTICLE 9.AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the NoteGuarantees or the Notes without the consent of any Holder of a Note:

(a) to cure any ambiguity, defect or inconsistency;

(b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the relateddefinitions) in a manner that does not materially adversely affect any Holder;

(c) to provide for the assumption of the Company’s obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article10 hereof;

(d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rightshereunder of any Holder of the Note;

65


(e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(f) to provide for the issuance of Additional Notes of each series in accordance with the limitations set forth in this Indenture as of the date hereof; or

(g) to allow any Guarantor to execute a supplemental indenture and/ or a Note Guarantee with respect to the Notes.

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplementalIndenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in theexecution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements andstipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights,duties or immunities under this Indenture or otherwise.

Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and4.13 hereof), the Note Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including AdditionalNotes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, theNotes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of theprincipal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with anyprovision of this Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the thenoutstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offerfor, or purchase of, the Notes); provided, however, that any amendment to or supplement of this Indenture, the Note Guarantees or the Notes that by its termsaffects the rights of Holders of any series of then outstanding Notes but not the others series may be effected, and any default or compliance with any provisionof this Indenture affecting the Holders of any series of then outstanding Notes but not the other series may be waived, with the consent of at least a majority inprincipal amount of the Notes of the affected series (including, without limitation, consents obtained in connection with a purchase of, or tender offer orexchange offer for, Notes). Section 2.08 hereof shall determine which Notes are considered to be “outstanding” for purposes of this Section 9.02.

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplementalIndenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by theTrustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indentureunless such amended or supplemental Indenture directly affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which casethe Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.

It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment orwaiver, but it shall be sufficient if such consent approves the substance thereof.

66


After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a noticebriefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any wayimpair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority inaggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particularinstance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiverunder this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes;

(c) reduce the rate of or change the time for payment of interest, including default interest, on any Note;

(d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration ofthe Notes of any series by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes of such series (including AdditionalNotes, if any) and a waiver of the payment default that resulted from such acceleration);

(e) make any Note payable in money other than that stated in the Notes;

(f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments ofprincipal of or interest on the Notes;

(g) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; or

(h) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture.

Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA asthen in effect.

Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note andevery subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not madeon any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice ofrevocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance withits terms and thereafter binds every Holder.

67


Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company inexchange for all Notes of any series may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes of such series that reflectthe amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adverselyaffect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until, to the extent requiredby law, the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and(subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer’s Certificateand an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10.NOTE GUARANTEES

Section 10.01. Guarantee. Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated anddelivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or theobligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether atmaturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations ofthe Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof andthereof and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full whendue or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due ofany amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the sameimmediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

The Guarantors agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or thisIndenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, therecovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitabledischarge or defense of a guarantor. Each Guarantor waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvencyor bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that thisNote Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.

If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or othersimilar official acting in relation to either the

68


Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall bereinstated in full force and effect.

Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed herebyuntil payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders andthe Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of thisNote Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) inthe event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwithbecome due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-payingGuarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee.

Section 10.02. Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of suchGuarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform FraudulentTransfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders andthe Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent andfixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from orpayments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of suchGuarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance.

Section 10.03. Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 10.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the formincluded in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall beexecuted on behalf of such Guarantor by its President or one of its Vice Presidents.

Each Guarantor hereby agrees that its Note Guarantee set forth in Section 10.01 shall remain in full force and effect notwithstanding any failure to endorseon each Note a notation of such Note Guarantee.

If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note onwhich a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in thisIndenture on behalf of the Guarantors.

In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.19 hereof, theCompany shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.19 hereof and thisArticle 10, to the extent applicable.

69


Section 10.04. Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 10.05, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with ormerge with or into (whether or not such Guarantor is the surviving Person) another Person whether or not affiliated with such Guarantor unless:

(a) subject to Section 10.05 hereof, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any suchconsolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplementalindenture in form and substance reasonably satisfactory to the Trustee or by operation of law, under the Notes, this Indenture, the Note Guarantee and theRegistration Rights Agreement on the terms set forth herein or therein; and

(b) immediately after giving effect to such transaction, no Default or Event of Default exists.

In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by operation of law or by supplementalindenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctualperformance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substitutedfor the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of theNote Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to theTrustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore andthereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof.

Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notesshall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the propertyof a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.

Section 10.05. Releases. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other dispositionof all of the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of theCompany, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of suchGuarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will bereleased and relieved of its obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance withthe applicable provisions of this Indenture, including without limitation Section 4.10 hereof. In the event the Company designates any such Guarantor to be anUnrestricted Subsidiary in accordance with this Indenture, such Guarantor shall be released and relieved of its obligations under its Note Guarantee. In the eventany Guarantor shall cease (or simultaneously with the release of its Guarantee hereunder shall cease) to have outstanding or guarantee any SpecifiedIndebtedness, such Guarantor shall be released and relieved of its obligations under its Note Guarantee. Upon delivery by the Company to the Trustee of anOfficers’ Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions ofthis Indenture, including without limitation Section 4.10 hereof, or upon delivery by the Company to the Trustee of an Officers’ Certificate to the effect that theapplicable Guarantor has ceased (or simultaneously with the release of its Guarantee hereunder shall cease) to have

70


outstanding or guarantee any Specified Indebtedness or that the applicable Guarantor has been designated as an Unrestricted Subsidiary in accordance with theprovisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligationsunder its Note Guarantee.

Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notesand for the other obligations of any Guarantor under this Indenture as provided in this Article 10.

ARTICLE 11.SATISFACTION AND DISCHARGE

Section 11.01. Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (a) either: (i) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment

money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (ii) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of

redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to bedeposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or acombination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entireindebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to thedate of maturity or redemption;

(b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such

deposit will not result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company or anyGuarantor is a party or by which the Company or any Guarantor is bound;

(c) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and

(d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notesat maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exceptions, to the Trusteestating that all conditions precedent to satisfaction and discharge have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (ii) of clause(a) of this Section, the provisions of Section 11.02 and Section 8.06 shall survive.

71


Section 11.02. Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, inaccordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as itsown Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment suchmoney has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 by reason of any legal proceedingor by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s andany Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01;provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, theCompany shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee orPaying Agent.

ARTICLE 12.MISCELLANEOUS

Section 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA § 318(c), the imposed duties shall control.

Section 12.02. Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed byfirst class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others’ address:

If to the Company and/or any Guarantor: AmerisourceBergen Corporation

1300 Morris DriveChesterbrook, Pennsylvania 19087-5594Attention: Chief Financial OfficerFacsimile number: (610) 727-7000Telephone number: (610) 727-3600

With a copy to:

Dechert4000 Bell Atlantic Tower1717 Arch StreetPhiladelphia, Pennsylvania 19103Attention: Craig Godshall, Esq.Facsimile number: (215) 994-2222Telephone number: (215) 994-4000

72


If to the Trustee: J.P.Morgan Trust Company,

National Association4 New York Plaza, 15th FloorNew York, New York 10004Attention: Francine Springer/Global Trust ServicesFacsimile number: (212) 623-6205Telephone number: (212) 623-5782

The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or

communications.

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personallydelivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, iftelecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courierguaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Persondescribed in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect itssufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

Section 12.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, theTrustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

Section 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed actionhave been satisfied; and

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

73


Section 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate providedpursuant to TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include:

(a) a statement that the Person making such certificate or opinion has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate oropinion are based;

(c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express aninformed opinion as to whether or not such covenant or condition has been satisfied; and

(d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

Section 12.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and setreasonable requirements for its functions.

Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability forany obligations of the Company or such Guarantor under the Notes, this Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of,such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration forissuance of the Notes.

Section 12.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTESWITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWSOF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

Section 12.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Anysuch indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 12.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind itssuccessors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 10.05.

74


Section 12.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainingprovisions shall not in any way be affected or impaired thereby.

Section 12.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

Section 12.13. Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of referenceonly, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Signatures on following page]

75


SIGNATURES



BY:

NAME: TITLE:

AMBULATORY PHARMACEUTICAL SERVICES, INC.AMERISOURCEBERGEN DRUG CORPORATIONAMERISOURCEBERGEN HOLDING CORPORATIONAMERISOURCEBERGEN SERVICES CORPORATIONAMERISOURCE HEALTH SERVICES CORPORATIONAMERISOURCE SALES CORPORATIONANDERSON PACKAGING, INC.APS ENTERPRISES HOLDING COMPANYASD SPECIALTY HEALTHCARE, INC.AUTOMED TECHNOLOGIES, INC.BROWNSTONE PHARMACY, INC.CAPSTONE MED, INC.CAPSTONE PHARMACYOF DELAWARE, INC.CLINICARE CONCEPTS, INC.COMPUSCRIPT, INC.COMPUTRAN SYSTEMS, INC.DUNNINGTON RX SERVICESOF MASSACHUSETTS, INC.DUNNINGTON RX SERVICESOF RHODE ISLAND, INC.EXPRESS PHARMACY SERVICES, INC.FAMILY CENTER PHARMACY, INC.GOOT NURSING HOME PHARMACY, INC.HEALTH SERVICES CAPITAL CORPORATIONIHS ACQUISITION XXX, INC.IMEDEX, INC.INSTA-CARE PHARMACY SERVICES CORPORATIONINTEGRATED COMMERCIALIZATIONSOLUTIONS, INC.INTERNATIONAL PHYSICIAN NETWORKS, L.L.C.MEDICAL INITIATIVES, INC.PHARM PLUS ACQUISITION, INC.PHARMACY CORPORATIONOF AMERICA, INC.PHARMACY CORPORATIONOFAMERICA-MASSACHUSETTS, INC.PHARMERICA DRUG SYSTEMS, INC.PHARMERICA, INC.PMSI, INC.PREMIER PHARMACY, INC.ROMBRO’S DRUG CENTER, INC.RXFIRST, INC.SOLANA BEACH, INC.SOUTHWEST PHARMACIES, INC.

INDENTURE


SPECIALTY PHARMACY, INC.SPECIALTY PHARMACYOF CALIFORNIA, INC.TAYLOR & MANNO ASSET RECOVERY, INC.TELEPHARMACY SOLUTIONS, INC.THE LASH GROUP, INC.TMESYS(TM), INC.US BIOSERVICES CORPORATIONVALUE APOTHECARIES, INC.

By:

Name: Title:


BY:

VALUE APOTHECARIES, INC., ASGENERAL PARTNER

By: Name: Title:

REIMBURSEMENT EDUCATION NETWORK, LLC BY: THE LASH GROUP, INC., ITS SOLE MEMBER

By: Name: Title:


By:

Name: Title:

INDENTURE


J.P. MORGAN TRUST COMPANY,NATIONAL ASSOCIATION, ASTRUSTEE

BY:

NAME: TITLE:

INDENTURE


EXHIBIT A-1

[Face of Note]

CUSIP/CINS __________

5 5/8% Senior Notes due 2012

No. ___ $____________

AmerisourceBergen Corporation

promises to pay to

or registered assigns,

the principal sum of

Dollars on September 15, 2012.

Interest Payment Dates: March 15 and September 15

Record Dates: March 1 and September 1

Dated:


BY:

NAME: TITLE:

This is one of the Notes referred toin the within-mentioned Indenture:

J.P. MORGAN TRUST COMPANY,NATIONAL ASSOCIATIONas Trustee

By: Authorized Signatory

A-1


[Back of Note]5 5/8% Senior Notes due 2012

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. INTEREST. AmerisourceBergen Corporation, a Delaware corporation (the “Company”), promises to pay interest on the principal amount of this Note at5 5/8% per annum from September 14, 2005 until maturity and shall pay the Liquidated Damages payable pursuant to Section 6 of the Registration RightsAgreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on March 15 and September 15 of each year, or ifany such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on the Notes will accrue from the mostrecent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the paymentof interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shallaccrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be March 15, 2006. The Company shall payinterest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand ata rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law)on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to theextent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. METHODOF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who areregistered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceledafter such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. TheNotes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purposewithin or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailedto the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be requiredwith respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have providedwire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time ofpayment is legal tender for payment of public and private debts.

3. PAYING AGENTAND REGISTRAR. Initially, J.P. Morgan Trust Company, National Association, the Trustee under the Indenture, will act as PayingAgent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act inany such capacity.

4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 14, 2005 (“Indenture”) among the Company, the Guarantorsand the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for astatement of such terms. To the extent any

A-2


provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

5. OPTIONAL REDEMPTION. (a) Except pursuant to this clause (a) or clause (b) below, the Company shall not have the option to redeem the Notes. TheCompany shall have the option to redeem the Notes, upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder’sregistered address, in whole or in part, at the greater of the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued andunpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date:

(i) 100% of the principal amount thereof; or

(ii) as determined by an Independent Investment Banker, the sum of the present values of the Remaining Scheduled Payments discounted to theredemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate. Any redemption may, in the Company’s discretion, be made subject to the satisfaction of one or more conditions precedent. Subject to any conditions precedentthat may be applicable, unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on theNotes or portion thereof called for redemption.



(c) Any redemption pursuant to this paragraph five shall be made pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.

6. REPURCHASEAT OPTIONOF HOLDER.

(a) If there is a Change of Control Triggering Event, the Company shall be required to make an offer (a “Change of Control Offer”) to repurchase all orany part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes at a purchase price equal to 101% of the aggregate principal amount thereof plusaccrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the “Change of Control Payment”). Within 90 days following anyChange of Control Triggering Event, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer asrequired by the Indenture.

(b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceedsexceeds $50.0 million, the Company shall commence an offer to all Holders of Notes (as “Asset Sale Offer”) pursuant to Section 3.09 of the Indenture topurchase the maximum principal amount of Notes (including any Additional Notes) that may be

A-3


purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest andLiquidated Damages thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent thatthe aggregate amount of Notes (including any Additional Notes) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or suchSubsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds theamount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchasewill receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the formentitled “Option of Holder to Elect Purchase” on the reverse of the Notes.

7. NOTICEOF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holderwhose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of$1,000, unless all of the Notes held by a Holder are to be redeemed. Subject to any conditions precedent that may be applicable, on and after the redemption dateinterest ceases to accrue on Notes or portions thereof called for redemption.

8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of$1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder,among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required bylaw or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except forthe unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 daysbefore a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

9. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.

10. AMENDMENT, SUPPLEMENTAND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended orsupplemented with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding votingas a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and any existing default or eventof default (other than a default or event of default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resultingfrom an acceleration that has been rescinded) or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with theconsent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (includingconsents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); provided, however, that any amendment to or supplement ofthis Indenture, the Note Guarantees or the Notes that by its terms affects the rights of Holders of any series of then outstanding Notes but not the others seriesmay be effected, and any default or compliance with any provision of this Indenture affecting the Holders of any series of then outstanding Notes but not theother series may be waived, with the consent of at least a majority in principal amount of the Notes of the affected series (including, without limitation, consentsobtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of a Note, the Indenture, the NoteGuarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or inplace of certificated Notes, to provide for the assumption of the Company’s or Guarantor’s obligations to Holders of the Notes in case of a merger orconsolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legalrights under the Indenture of any such Holder, to

A-4


comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for theIssuance of Additional Notes of each series in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplementalindenture to the Indenture and/or a Note Guarantee with respect to the Notes.

11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (b) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remainundischarged for a period (during which execution shall not be effectively stayed pending appeal (or otherwise stayed)) of 60 days, provided that the aggregate ofall such undischarged judgments exceeds $50.0 million (net of any amount covered by insurance); (vii) certain events of bankruptcy or insolvency with respect tothe Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiarypursuant to or within the meaning of Bankruptcy Law; and (viii) except as permitted by the Indenture, any Note Guarantee shall be held in any judicialproceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor or any Person acting on its behalf shall denyor disaffirm its obligations under such Guarantor’s Note Guarantee. If any Event of Default occurs and is continuing, the Trustee may declare all the Notes to bedue and payable immediately, and upon receipt of written instructions from the Holders of at least 25% in principal amount of the then outstanding Notes of anyseries, the Trustee will declare all the Notes of such series to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising fromcertain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce theIndenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notesof any series may direct the Trustee in its exercise of any trust or power with respect to such series. The Trustee may withhold from Holders of the Notes noticeof any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines thatwithholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding of any series by written notice to theTrustee may on behalf of the Holders of all of the Notes of such series waive any existing Default or Event of Default and its consequences under the Indenturewith respect to such series except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is requiredto deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default orEvent of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

A-5


12. TRUSTEE DEALINGSWITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and performservices for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.

13. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall nothave any liability for any obligations of the Company or such Guarantor under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respectof, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part ofthe consideration for the issuance of the Notes.

14. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

15. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).

16. ADDITIONAL RIGHTSOF HOLDERSOF RESTRICTED GLOBAL NOTESAND RESTRICTED DEFINITIVE NOTES. In addition to the rightsprovided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in theExchange and Registration Rights Agreement dated as of September 14, 2005, among the Company and the parties named on the signature pages thereof (the“Registration Rights Agreement”).

17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company hascaused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. Norepresentation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placedonly on the other identification numbers placed thereon.

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement.Requests may be made to: AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594Attention: Chief Financial Officer

A-6


ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to: (Insert assignee’s legal name)

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________

Your Signature: (Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-7


OPTIONOF HOLDERTO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.13 of the Indenture, check the appropriate box below:

¨ Section 4.10 ¨ Section 4.13

If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the amount

you elect to have purchased:

$

Date:

Your Signature:

(Sign exactly as your name appears on the face

of this Note)Tax Identification No.:



A-8


SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another

Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange

Amount of decrease inPrincipal Amountof this Global Note

Amount of increase inPrincipal Amountof this Global Note

Principal Amountof this Global Note

following suchdecrease (or increase)

Signature of authorizedofficer of Trustee or

Note Custodian

* This schedule should be included only if the Note is issued in global form.

A-9


EXHIBIT A-2

[Face of Note]

CUSIP/CINS ____________


No. ___ $____________

AmerisourceBergen Corporation

promises to pay to

or registered assigns,

the principal sum of

Dollars on September 15, 2015.



Dated:


BY:

NAME: TITLE:



as Trustee


A-1


[Back of Note]

5 7/8% Senior Notes due 2015 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. INTEREST. AmerisourceBergen Corporation, a Delaware corporation (the “Company”), promises to pay interest on the principal amount of this Note at5 7/8% per annum from September 14, 2005 until maturity and shall pay the Liquidated Damages payable pursuant to Section 6 of the Registration RightsAgreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on March 15 and September 15 of each year, or ifany such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on the Notes will accrue from the mostrecent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the paymentof interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shallaccrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be March 15, 2006. The Company shall payinterest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand ata rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law)on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to theextent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. METHODOF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who areregistered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceledafter such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. TheNotes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purposewithin or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailedto the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be requiredwith respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have providedwire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time ofpayment is legal tender for payment of public and private debts.


4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 14, 2005 (“Indenture”) among the Company, the Guarantorsand the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for astatement of such terms. To the extent any

A-2


provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

5. OPTIONAL REDEMPTION. (a) Except pursuant to this clause (a) or clause (b) below, the Company shall not have the option to redeem the Notes. TheCompany shall have the option to redeem the Notes, upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder’sregistered address, in whole or in part, at the greater of the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued andunpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date:

(i) 100% of the principal amount thereof; or

(ii) as determined by an Independent Investment Banker, the sum of the present values of the Remaining Scheduled Payments discounted to theredemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate. Any redemption may, in the Company’s discretion, be made subject to the satisfaction of one or more conditions precedent. Subject to any conditions precedentthat may be applicable, unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on theNotes or portion thereof called for redemption.






(b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceedsexceeds $50.0 million, the Company shall commence an offer to all Holders of Notes (as “Asset Sale Offer”) pursuant to Section 3.09 of the Indenture topurchase the maximum principal amount of Notes (including any Additional Notes) that may be

A-3


purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest andLiquidated Damages thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent thatthe aggregate amount of Notes (including any Additional Notes) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or suchSubsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds theamount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchasewill receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the formentitled “Option of Holder to Elect Purchase” on the reverse of the Notes.




10. AMENDMENT, SUPPLEMENTAND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended orsupplemented with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding votingas a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and any existing default or eventof default (other than a default or event of default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resultingfrom an acceleration that has been rescinded) or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with theconsent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (includingconsents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); provided, however, that any amendment to or supplement ofthis Indenture, the Note Guarantees or the Notes that by its terms affects the rights of Holders of any series of then outstanding Notes but not the others seriesmay be effected, and any default or compliance with any provision of this Indenture affecting the Holders of any series of then outstanding Notes but not theother series may be waived, with the consent of at least a majority in principal amount of the Notes of the affected series (including, without limitation, consentsobtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of a Note, the Indenture, the NoteGuarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or inplace of certificated Notes, to provide for the assumption of the Company’s or Guarantor’s obligations to Holders of the Notes in case of a merger orconsolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legalrights under the Indenture of any such Holder, to

A-4


comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for theIssuance of Additional Notes of each series in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplementalindenture to the Indenture and/or a Note Guarantee with respect to the Notes.

11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (ii) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remainundischarged for a period (during which execution shall not be effectively stayed pending appeal (or otherwise stayed)) of 60 days, provided that the aggregate ofall such undischarged judgments exceeds $50.0 million (net of any amount covered by insurance); (vii) certain events of bankruptcy or insolvency with respect tothe Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiarypursuant to or within the meaning of Bankruptcy Law; and (viii) except as permitted by the Indenture, any Note Guarantee shall be held in any judicialproceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor or any Person acting on its behalf shall denyor disaffirm its obligations under such Guarantor’s Note Guarantee. If any Event of Default occurs and is continuing, the Trustee may declare all the Notes to bedue and payable immediately, and upon receipt of written instructions from the Holders of at least 25% in principal amount of the then outstanding Notes of anyseries, the Trustee will declare all the Notes of such series to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising fromcertain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce theIndenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notesof any series may direct the Trustee in its exercise of any trust or power with respect to such series. The Trustee may withhold from Holders of the Notes noticeof any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines thatwithholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding of any series by written notice to theTrustee may on behalf of the Holders of all of the Notes of such series waive any existing Default or Event of Default and its consequences under the Indenturewith respect to such series except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is requiredto deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default orEvent of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

A-5






16. ADDITIONAL RIGHTSOF HOLDERSOF RESTRICTED GLOBAL NOTESAND RESTRICTED DEFINITIVE NOTES. In addition to the rightsprovided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in theExchange and Registration Rights Agreement dated as of September 14, 2005, among the Company and the parties named on the signature pages thereof (the“Registration Rights Agreement”).



A-6


ASSIGNMENT FORM





and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________

Your Signature: (Sign exactly as your name appears on the face of this Note)



A-7





If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the amount

you elect to have purchased:

$

Date:

Your Signature:


of this Note)

Tax Identification No.:



A-8



The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another

Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange






Note Custodian


A-9


EXHIBIT B

[FORM OF CERTIFICATE OF TRANSFER]

AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594 [Registrar address block]

Re: [5 5/8% Senior Notes due 2012][5 7/8% Senior Notes due 2015]

Reference is hereby made to the Indenture, dated as of September 14, 2005 (the “Indenture”), among AmerisourceBergen Corporation, as issuer (the“Company”), the Guarantors named therein and J.P. Morgan Trust Company, National Association, as trustee. Capitalized terms used but not defined herein shallhave the meanings given to them in the Indenture.

___________________, (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in theprincipal amount of $___________ in such Note[s] or interests (the “Transfer”), to ___________________ (the “Transferee”), as further specified in Annex Ahereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1.¨Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. TheTransfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “Securities Act”), and,accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonablybelieved and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Personexercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transactionmeeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Uponconsummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to therestrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and theSecurities Act.

2.¨Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S.The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby furthercertifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside theUnited States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) thetransaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalfknows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirementsof Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirementsof the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Personor for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with

B-1


the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private PlacementLegend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

3.¨Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note pursuant to anyprovision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable tobeneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable bluesky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a)¨ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or (b)¨ such Transfer is being effected to the Company or a subsidiary thereof;

or (c)¨ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus

delivery requirements of the Securities Act;

or (d)¨ such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the

Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitationwithin the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in aRestricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificateexecuted by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time oftransfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to thiscertification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with theterms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the PrivatePlacement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act.

4.¨Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

(a)¨ Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act

and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) therestrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longerbe subject to the restrictions on transfer enumerated in the Private

B-2


Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

(b)¨ Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 underthe Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the UnitedStates and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with theSecurities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Notewill no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on RestrictedDefinitive Notes and in the Indenture.

(c)¨ Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from theregistration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in theIndenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and thePrivate Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordancewith the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the PrivatePlacement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

[Insert Name of Transferor]

By: Name: Title:

Dated:

B-3


ANNEX A TO CERTIFICATE OF TRANSFER

1. The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a) ¨ a beneficial interest in the:

(i) ¨ 144A Global Note (CUSIP _________), or

(ii) ¨ Regulation S Global Note (CUSIP _________), or

(iii) ¨ IAI Global Note (CUSIP _________); or

(b) ¨ a Restricted Definitive Note.

2. After the Transfer the Transferee will hold:

[CHECK ONE]

(a) ¨ a beneficial interest in the:

(i) ¨ 144A Global Note (CUSIP _________), or

(ii) ¨ Regulation S Global Note (CUSIP _________), or

(iii) ¨ IAI Global Note (CUSIP _________); or

(iv) ¨ Unrestricted Global Note (CUSIP _________); or

(b) ¨ a Restricted Definitive Note; or

(c) ¨ an Unrestricted Definitive Note, in accordance with the terms of the Indenture.

B-4


EXHIBIT C

[FORM OF CERTIFICATE OF EXCHANGE] AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594 [Registrar address block]


(CUSIP )


, (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of$ in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1.Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or BeneficialInterests in an Unrestricted Global Note

(a)¨ Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connectionwith the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principalamount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has beeneffected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of1933, as amended (the “Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order tomaintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicableblue sky securities laws of any state of the United States.

(b)¨ Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange ofthe Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is beingacquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to theRestricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the PrivatePlacement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with anyapplicable blue sky securities laws of any state of the United States.

(c)¨ Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner’sExchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is beingacquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to RestrictedDefinitive Notes and

C-1


pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are notrequired in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue skysecurities laws of any state of the United States.

(d)¨ Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner’s Exchange of a RestrictedDefinitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s ownaccount without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuantto and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required inorder to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue skysecurities laws of any state of the United States.

2.Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interestsin Restricted Global Notes

(a)¨ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of theOwner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that theRestricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance withthe terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private PlacementLegend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b)¨ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of theOwner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE]¨ 144A Global Note,¨ Regulation S Global Note,¨ IAI Global Note with anequal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) suchExchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with theSecurities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchangein accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private PlacementLegend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

C-2


This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

[Insert Name of Transferor]

By:

Name: Title:

Dated:

C-3


EXHIBIT D

[FORM OF CERTIFICATE FROMACQUIRING INSTITUTIONAL ACCREDITED INVESTOR]

AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594 [Registrar address block]



In connection with our proposed purchase of $ aggregate principal amount of:

(a)¨ a beneficial interest in a Global Note, or

(b)¨ a Definitive Note,

we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indentureand the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, suchrestrictions and conditions and the United States Securities Act of 1933, as amended (the “Securities Act”).

2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may notbe offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting ashereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordancewith Rule 144A under the Securities Act to a “qualified institutional buyer” (as defined therein), (C) to an institutional “accredited investor” (as defined below)that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form ofthis letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonablyacceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 ofRegulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statementunder the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in atransaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as statedherein.

3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company suchcertifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies

D-1


with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect.

4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have suchknowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and anyaccounts for which we are acting are each able to bear the economic risk of our or its investment.

5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is aninstitutional “accredited investor”) as to each of which we exercise sole investment discretion.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party inany administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

[Insert Name of Accredited Investor]

By:

Name: Title:

Dated:

D-2


EXHIBIT E

[FORM OF NOTATION OF GUARANTEE]

For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed,to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of September 14, 2005 (the “Indenture”) among AmerisourceBergenCorporation, the Guarantors listed on Schedule I thereto and J.P. Morgan Trust Company, National Association, as trustee (the “Trustee”), (a) the due andpunctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption orotherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctualperformance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of anyextension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed inaccordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holdersof Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby madeto the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions,(b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination asprovided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced bythis Note Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of theIndenture.

[NAMEOF GUARANTOR(S)]

By:

Name: Title:

E-1


EXHIBIT F

[FORM OF SUPPLEMENTAL INDENTURETO BE DELIVERED BY SUBSEQUENT GUARANTORS]

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of , 20 , among (the “Guaranteeing Subsidiary”),

a subsidiary of AmerisourceBergen Corporation (or its permitted successor), a Delaware corporation (the “Company”), the Company, the other Guarantors (asdefined in the Indenture referred to herein) and J.P. Morgan Trust Company, National Association, as trustee under the indenture referred to below (the“Trustee”).

WITNESSETH

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of September 14, 2005 providingfor the issuance of 5 5/8% Senior Notes due 2012 (the “2012 Notes”) and 5 7/8% Senior Notes due 2015 (the “2015 Notes”, together with the 2012 Notes, the“Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplementalindenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture onthe terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, theGuaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENTTO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the

Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or

otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to theHolders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid infull when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly andseverally obligated to pay the same immediately.

F-1


(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, theabsence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recoveryof any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitabledischarge or defense of a guarantor.

(c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency orbankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever.

(d) This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and theGuaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.

(e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidatoror other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this NoteGuarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

(f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteedhereby until payment in full of all obligations guaranteed hereby.

(g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteedhereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or otherprohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of suchobligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by theGuarantors for the purpose of this Note Guarantee.

(h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair therights of the Holders under the Guarantee.

(i) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that arerelevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contributionfrom or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, thisnew Note Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Note Guarantee will notconstitute a fraudulent transfer or conveyance.

3. EXECUTIONAND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding

any failure to endorse on each Note a notation of such Note Guarantee.

F-2


4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another

corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Sections 10.04 and 10.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a

Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form andsubstance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; and

(ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture,

executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctualperformance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and besubstituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to besigned any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by theCompany and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture asthe Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issuedat the date of the execution hereof.

(c) Except as set forth in Articles 4 and 5 and Section 10.05 of Article 10 of the Indenture, and notwithstanding clauses (a) and (b) above, nothingcontained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor,or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.

5. RELEASES.

(a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or otherdisposition of all to the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) aSubsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of thecapital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assetsof such Guarantor) will be released and relieved of its obligations under its Note Guarantee; provided that the Net Proceeds of such sale or otherdisposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. In the event theCompany designates any such Guarantor to be an Unrestricted Subsidiary in accordance with this Indenture, such Guarantor shall be released and relievedof its obligations under its Note Guarantee. In the event any Guarantor shall cease (or simultaneously with the release of its Guarantee hereunder shallcease) to have outstanding or guarantee any Specified Indebtedness, such Guarantor shall be released and relieved of its obligations under its NoteGuarantee. Upon delivery by the Company to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that such sale or other

F-3


disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, or upondelivery by the Company to the Trustee of an Officers’ Certificate to the effect that the applicable Guarantor has ceased (or simultaneously with the releaseof its Guarantee hereunder shall cease) to have outstanding or guarantee any Specified Indebtedness or that the applicable Guarantor has been designatedas an Unrestricted Subsidiary in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order toevidence the release of any Guarantor from its obligations under its Note Guarantee.

(b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest onthe Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture.

6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing

Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, theIndenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes byaccepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not beeffective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUETHIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENTTHAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of themtogether represent the same agreement.

9. EFFECTOF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this SupplementalIndenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.

[signature page attached]

F-4


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first abovewritten.

Dated: , 20

[GUARANTEEING SUBSIDIARY]

By:

Name: Title:


By: Name: Title:

AMBULATORY PHARMACEUTICAL SERVICES, INC.AMERISOURCEBERGEN DRUG CORPORATIONAMERISOURCEBERGEN HOLDING CORPORATIONAMERISOURCEBERGEN SERVICES CORPORATIONAMERISOURCE HEALTH SERVICES CORPORATIONAMERISOURCE SALES CORPORATIONANDERSON PACKAGING, INC.APS ENTERPRISES HOLDING COMPANYASD SPECIALTY HEALTHCARE, INC.AUTOMED TECHNOLOGIES, INC.BROWNSTONE PHARMACY, INC.CAPSTONE MED, INC.CAPSTONE PHARMACYOF DELAWARE, INC.CLINICARE CONCEPTS, INC.COMPUSCRIPT, INC.COMPUTRAN SYSTEMS, INC.DUNNINGTON RX SERVICESOF MASSACHUSETTS, INC.DUNNINGTON RX SERVICESOF RHODE ISLAND, INC.EXPRESS PHARMACY SERVICES, INC.FAMILY CENTER PHARMACY, INC.GOOT NURSING HOME PHARMACY, INC.HEALTH SERVICES CAPITAL CORPORATIONIHS ACQUISITION XXX, INC.IMEDEX, INC.INSTA-CARE PHARMACY SERVICES CORPORATIONINTEGRATED COMMERCIALIZATIONSOLUTIONS, INC.INTERNATIONAL PHYSICIAN NETWORKS, L.L.C.MEDICAL INITIATIVES, INC.PHARM PLUS ACQUISITION, INC.PHARMACY CORPORATIONOF AMERICA, INC.PHARMACY CORPORATIONOF

AMERICA-MASSACHUSETTS, INC.PHARMERICA DRUG SYSTEMS, INC.PHARMERICA, INC.PMSI, INC.PREMIER PHARMACY, INC.ROMBRO’S DRUG CENTER, INC.

F-5


RXFIRST, INC.SOLANA BEACH, INC.SOUTHWEST PHARMACIES, INC.SPECIALTY PHARMACY, INC.SPECIALTY PHARMACYOF CALIFORNIA, INC.TAYLOR & MANNO ASSET RECOVERY, INC.TELEPHARMACY SOLUTIONS, INC.THE LASH GROUP, INC.TMESYS(TM), INC.US BIOSERVICES CORPORATIONVALUE APOTHECARIES, INC.

By:

Name: Title:

PHARMACY HEALTHCARE SOLUTIONS, LTD.BY:

VALUE APOTHECARIES, INC., AS GENERAL

PARTNER

By: Name: Title:

REIMBURSEMENT EDUCATION NETWORK, LLCBY: THE LASH GROUP, INC., ITS SOLE MEMBER

By: Name: Title:


By:

Name: Title:

F-6


J.P. MORGAN TRUST COMPANY, NATIONALASSOCIATION, AS TRUSTEE


F-7


Exhibit 4.6

CUSIP 03073E AC 9

ISIN US03073EAC93


No. 001 $399,185,000

AmerisourceBergen Corporation promises to pay to CEDE & CO., INC., or registered assigns, the principal sum of Three Hundred and Ninety Nine Million One Hundred and Eighty-five Thousand Dollars ($399,185,000) on September 15, 2012. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 Dated: September 14, 2005


BY:

NAME: J. F. QUINNTITLE: VICE PRESIDENTAND CORPORATE TREASURER


J.P. MORGAN TRUST COMPANY,NATIONAL ASSOCIATIONas Trustee




THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE INCUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANYCIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TOSECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TOSECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATIONPURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSORDEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE“SECURITIES ACT”), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BERE-OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCHREGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OFTHE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BERELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144ATHEREUNDER. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIEDINSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND ISACQUIRING ITS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO 904 OF REGULATION S UNDER THE SECURITIES ACT,(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTEDBY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINALISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATEOF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, ASMAY BE REQUIRED BY APPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISETRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEENDECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TORULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDERTHE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYERTO WHOM NOTICE IF GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES,(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANINGOF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION


FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TOWHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THECOMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER(I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHERINFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT ACERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THE NOTE IS COMPLETED AND DELIVERED BYTHIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALERESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” UNITED STATES” AND “U.S.PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. INTEREST. AmerisourceBergen Corporation, a Delaware corporation (the “Company”), promises to pay interest on the principal amount of this Note at

5 5/8% per annum from September 14, 2005 until maturity and shall pay the Liquidated Damages payable pursuant to Section 6 of the Registration RightsAgreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on March 15 and September 15 of each year, or ifany such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on the Notes will accrue from the mostrecent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the paymentof interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shallaccrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be March 15, 2006. The Company shall payinterest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand ata rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law)on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to theextent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. METHODOF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who areregistered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceledafter such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. TheNotes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purposewithin or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailedto the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be requiredwith respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have providedwire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency


of the United States of America as at the time of payment is legal tender for payment of public and private debts.


4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 14, 2005 (“Indenture”) among the Company, the Guarantorsand the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for astatement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shallgovern and be controlling.

5. OPTIONAL REDEMPTION. (a) Except pursuant to this clause (a) or clause (b) below, the Company shall not have the option to redeem the Notes. TheCompany shall have the option to redeem the Notes, upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder’sregistered address, in whole or in part, at the greater of the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued andunpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date: (i) 100% of the principal amount thereof; or (ii) as determined by an Independent Investment Banker, the sum of the present values of the Remaining Scheduled Payments discounted to the

redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate. Any redemption may, in the Company’s discretion, be made subject to the satisfaction of one or more conditions precedent. Subject to any conditions precedentthat may be applicable, unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on theNotes or portion thereof called for redemption.







(b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceedsexceeds $50.0 million, the Company shall commence an offer to all Holders of Notes (as “Asset Sale Offer”) pursuant to Section 3.09 of the Indenture topurchase the maximum principal amount of Notes (including any Additional Notes) that may be purchased out of the Excess Proceeds at an offer price in cash inan amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for theclosing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any AdditionalNotes) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for generalcorporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall selectthe Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Companyprior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” on thereverse of the Notes.





10. AMENDMENT, SUPPLEMENTAND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended orsupplemented with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding votingas a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and any existing default or eventof default (other than a default or event of default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resultingfrom an acceleration that has been rescinded) or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with theconsent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (includingconsents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); provided, however, that any amendment to or supplement ofthis Indenture, the Note Guarantees or the Notes that by its terms affects the rights of Holders of any series of then outstanding Notes but not the others seriesmay be effected, and any default or compliance with any provision of this Indenture affecting the Holders of any series of then outstanding Notes but not theother series may be waived, with the consent of at least a majority in principal amount of the Notes of the affected series (including, without limitation, consentsobtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of a Note, the Indenture, the NoteGuarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or inplace of certificated Notes, to provide for the assumption of the Company’s or Guarantor’s obligations to Holders of the Notes in case of a merger orconsolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legalrights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture underthe Trust Indenture Act, to provide for the Issuance of Additional Notes of each series in accordance with the limitations set forth in the Indenture, or to allowany Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes.

11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (b) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a


Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed pending appeal(or otherwise stayed)) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $50.0 million (net of any amount covered byinsurance); (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries or any group of RestrictedSubsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law; and (viii) except aspermitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in fullforce and effect or any Guarantor or any Person acting on its behalf shall deny or disaffirm its obligations under such Guarantor’s Note Guarantee. If any Eventof Default occurs and is continuing, the Trustee may declare all the Notes to be due and payable immediately, and upon receipt of written instructions from theHolders of at least 25% in principal amount of the then outstanding Notes of any series, the Trustee will declare all the Notes of such series to be due andpayable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes willbecome due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject tocertain limitations, Holders of a majority in principal amount of the then outstanding Notes of any series may direct the Trustee in its exercise of any trust orpower with respect to such series. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default orEvent of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregateprincipal amount of the Notes then outstanding of any series by written notice to the Trustee may on behalf of the Holders of all of the Notes of such series waiveany existing Default or Event of Default and its consequences under the Indenture with respect to such series except a continuing Default or Event of Default inthe payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with theIndenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default orEvent of Default.





16. ADDITIONAL RIGHTSOF HOLDERSOF RESTRICTED GLOBAL NOTESAND RESTRICTED DEFINITIVE NOTES. In addition to the rightsprovided to Holders of Notes under the


Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Exchange and Registration RightsAgreement dated as of September 14, 2005, among the Company and the parties named on the signature pages thereof (the “Registration Rights Agreement”).




ASSIGNMENT FORM




(Print or type assignee’s name, address and zip code) and irrevocably appoint to transfer this Note onthe books of the Company. The agent may substitute another to act for him. Date:

Your Signature:


of this Note)







If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the amountyou elect to have purchased:

$ Date:

Your Signature:


of this Note)






The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of anotherGlobal Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange






Note Custodian



CUSIP U0268M AC 9

ISIN USU0268MAC92


No. 001 $815,000

AmerisourceBergen Corporation promises to pay to CEDE & CO., INC., or registered assigns, the principal sum of Eight Hundred Fifteen Thousand Dollars ($815,000) on September 15, 2012. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 Dated: September 14, 2005


BY:




as Trustee




11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (b) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a


ASSIGNMENT FORM




(Print or type assignee’s name, address and zip code) and irrevocably appoint to transfer this Note onthe books of the Company. The agent may substitute another to act for him. Date:

Your Signature:


of this Note)








$ Date:

Your Signature:


of this Note)







Date of Exchange






Note Custodian



Exhibit 4.7

CUSIP 03073E AE 5

ISIN US03073EAE59


No. 001 $498,135,000

AmerisourceBergen Corporation promises to pay to CEDE & CO., INC., or registered assigns, the principal sum of Four Hundred and Ninety-eight Million One Hundred Thirty-five Thousand Dollars ($498,135,000) on September 15, 2015. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 Dated: September 14, 2005


BY:




as Trustee




11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (ii) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a




The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement.Requests may be made to:

AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594Attention: Chief Financial Officer


ASSIGNMENT FORM





and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date:

Your Signature:


of this Note)








$

Date:

Your Signature:


of this Note)







Date of Exchange






Note Custodian



CUSIP U0268M AD 7

ISIN USU0268MAD75


No. 001 $1,865,000

AmerisourceBergen Corporation promises to pay to CEDE & CO., INC., or registered assigns, the principal sum of One Million Eight Hundred Sixty-five Thousand Dollars ($1,865,000) on September 15, 2015.



Dated: September 14, 2005


BY:




as Trustee




11. DEFAULTSAND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest or Liquidated Damages on theNotes; (ii) default in payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption(including in connection with an offer to purchase) or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09 or 4.13 of the Indenture for 30days from receipt of written notice by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding;(iv) failure by the Company to observe any other covenant, representation, warranty or other arrangement in the Indenture for 60 days after notice to theCompany by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes of any series then outstanding; (v) default occurs under anymortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by theCompany or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness orguarantee now exists, or is created after the date of this Indenture, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, onsuch Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”), or (ii) results in theacceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount ofany other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0 million or more;(vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of itsSignificant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a




The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement.Requests may be made to:

AmerisourceBergen Corporation1300 Morris DriveChesterbrook, Pennsylvania 19087-5594Attention: Chief Financial Officer


ASSIGNMENT FORM





and irrevocably appoint to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:

Your Signature:


of this Note)








$

Date:

Your Signature:


of this Note)







Date of Exchange






Note Custodian



Exhibit 4.8 EXECUTION COPY

Exchange and Registration Rights Agreement


among

AmerisourceBergen Corporation,

The Subsidiary Guarantors from time to time party hereto, and

Lehman Brothers Inc., on behalf of the Initial Purchasers


EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

This Exchange and Registration Rights Agreement (this “Agreement”) is made and entered into as of September 14, 2005 by and among

AmerisourceBergen Corporation, a Delaware corporation (the “Company”), the Subsidiary Guarantors (as defined herein) and Lehman Brothers Inc. on behalf ofBanc of America Securities LLC, J.P. Morgan Securities Inc., Scotia Capital (USA) Inc., Wachovia Securities, Inc. and Wells Fargo Securities, LLC(collectively, the “Initial Purchasers”).

This Agreement is made pursuant to the Purchase Agreement, dated September 8, 2005 (the “Purchase Agreement”), by and among the Company, theExisting Subsidiary Guarantors (as named in Schedule 1 hereto) and the Initial Purchasers, which provides for the sale by the Company to the Initial Purchasers of$400,000,000 aggregate principal amount of the Company’s 5 5/8% Senior Notes due 2012 (the “2012 Notes”) and $500,000,000 aggregate principal amount ofthe Company’s 5 7/8% Senior Notes due 2015 (the “2015 Notes” and, collectively with the 2012 Notes, the “Notes”). The Notes are, and the Exchange Notes (asdefined herein) will be, guaranteed on a senior basis by the Subsidiary Guarantors (as defined herein). In order to induce the Initial Purchasers to purchase theNotes, the Company and the Existing Subsidiary Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and deliveryof this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement.

The parties hereby agree as follows:

SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Affiliate: As defined in Rule 144 of the Securities Act. Additional Subsidiary Guarantor: Any subsidiary of the Company that executes a Guarantee under the Indenture after the date of this Agreement,

provided that if the Guarantee of any such subsidiary is released pursuant to the terms of the Indenture prior to the consummation of the Exchange Offer,such subsidiary will cease to be an Additional Subsidiary Guarantor following such release.

Advice: As defined in Section 6(e) hereof. Agreement: As defined in the preamble hereto. Blackout Period: As defined in Section 5(a) hereof. Blue Sky Application: As defined in Section 8(a) hereof. Broker-Dealer: Any broker or dealer registered under the Exchange Act.

2


Closing Date: The date of this Agreement. Commission: The U.S. Securities and Exchange Commission. Company: As defined in the preamble hereto. Consummate: A Registered Exchange Offer shall be deemed “Consummated” for purposes of this Agreement upon the occurrence of (i) the filing

and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the ExchangeOffer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than theminimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes inthe same aggregate principal amount as the aggregate principal amount of Notes that were tendered by Holders thereof pursuant to the Exchange Offer.

Effectiveness Target Date: As defined in Section 5(a) hereof. Damages Payment Date: With respect to the Notes, each Interest Payment Date. Exchange Act: The U.S. Securities Exchange Act of 1934, as amended. Exchange Notes: The Company’s 5 5/8% Senior Notes due 2012 and its 5 7/8% Senior Notes due 2015 to be issued pursuant to the Indenture in the

Exchange Offer, together with the related Guarantees. Exchange Offer: The registration by the Company under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to

which the Company offers the Holders of all outstanding Transfer Restricted Securities (which are not prohibited from law or policy from participating insuch offer) the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregateprincipal amount equal to the aggregate principal amount of the Transfer Restricted Securities validly tendered in such exchange offer by such Holders.

Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Existing Subsidiary Guarantors: The various Subsidiary Guarantors signatory to the Indenture as of the date hereof and as named in Schedule 1

hereto, provided that if the Guarantee of any such Subsidiary Guarantor is released pursuant to the terms of the Indenture prior to the consummation of theExchange Offer, such Subsidiary Guarantor will cease to be a Subsidiary Guarantor following such release.

Guarantees: Guarantees by the Subsidiary Guarantors of the Company’s obligations under the Notes, the Exchange Notes and the Indenture.

3


Holders: As defined in Section 2(b) hereof. Indenture: The Indenture, dated as of the date hereof, among the Company, the Existing Subsidiary Guarantors and J.P. Morgan Trust Company,

National Association, as trustee (the “Trustee”), pursuant to which the Notes and the Exchange Notes are to be issued, as such Indenture may be amendedor supplemented from time to time in accordance with the terms thereof.

Initial Purchasers: As defined in the preamble hereto. Interest Payment Date: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. Notes: As defined in the preamble hereto. Person: An individual, partnership, corporation, limited liability company, unincorporated organization, association, joint-stock company, trust, joint

venture, government or any agency or political subdivision thereof or any other entity. Prospectus: The prospectus included in a Registration Statement as amended or supplemented by any prospectus supplement and by all other

amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Purchase Agreement: As defined in the preamble hereto. Liquidated Damages: As defined in Section 5(a) hereof. Record Holder: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect

to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5(a) hereof. Registration Statement: Any Registration Statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or

(b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of thisAgreement, in each case including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and allexhibits and material incorporated by reference therein.

Securities Act: The U.S. Securities Act of 1933, as amended. Shelf Filing Deadline: As defined in Section 4(a) hereof.

4


Shelf Registration Period: As defined in Section 4(a) hereof. Shelf Registration Statement: As defined in Section 4(a) hereof. Subsidiary Guarantors: The Additional Subsidiary Guarantors and the Existing Subsidiary Guarantors. TIA: The U.S. Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note or Exchange Note (including the related Guarantees), as applicable, until the earliest to occur of (a) the

date on which such Note is exchanged by a person other than a Broker-Dealer in the Exchange Offer in exchange for an Exchange Note, so long as suchperson is not prohibited from reselling such Exchange Notes to the public without delivering a prospectus and the Prospectus in the Exchange OfferRegistration Statement is not sufficient for such purpose, (b) following the exchange by a Broker-Dealer in the Exchange Offer of a Note for an ExchangeNote, the date on which that Exchange Note is sold to a purchaser who receives from that Broker-Dealer on or prior to the date of such sale a copy of theProspectus contained in the Exchange Offer Registration Statement, (c) the date on which such Note or Exchange Note has been effectively registeredunder the Securities Act and disposed of in accordance with a Shelf Registration Statement and (d) the date on which such Note is sold by the Holderpursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering tothe public.

SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT

(a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a “Holder”) whenever such

Person owns Transfer Restricted Securities.

SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a)

below have been complied with) or one of the events set forth in Section 4(a)(ii) has occurred, the Company and the Subsidiary Guarantors shall use(i) their commercially reasonable efforts to cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than180 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) their

5


commercially reasonable efforts to cause such Registration Statement to be declared effective on or prior to 270 days after the Closing Date, (iii) inconnection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause suchRegistration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under theSecurities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the blue skylaws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer and (iv) upon the effectiveness of such Registration Statement,commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered inexchange for the Transfer Restricted Securities and to permit resales of Exchange Notes held by Broker-Dealers as contemplated by Section 3(c) below.

(b) The Company and the Subsidiary Guarantors shall use their commercially reasonable efforts to cause the Exchange Offer Registration Statementto be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable U.S.federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days.The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable U.S. federal and state securities laws. Nosecurities other than the Exchange Notes and the Guarantees shall be included in the Exchange Offer Registration Statement. The Company and theSubsidiary Guarantors shall use their commercially reasonable efforts to issue on or prior to the date 30 business days after the Exchange OfferRegistration Statement was declared effective by the Commission, or longer, if required by the federal securities laws, Exchange Notes in exchange for allNotes tendered prior thereto in the Exchange Offer.

(c) The Company and the Subsidiary Guarantors shall indicate in a “Plan of Distribution” section of the Prospectus contained in the Exchange OfferRegistration Statement that any Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as aresult of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchangesuch Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Securities Actand must, therefore, deliver a Prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received bysuch Broker-Dealer in the Exchange Offer, which Prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of theProspectus contained in the Exchange Offer Registration Statement. Such “Plan of Distribution” section shall also contain all other information withrespect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such “Plan of Distribution”shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission.

6


The Company and the Subsidiary Guarantors shall use their commercially reasonable efforts to keep the Exchange Offer Registration Statementcontinuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is availablefor resales of Exchange Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and toensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announcedfrom time to time, for a period of at least 90 days after the Consummation of the Exchange Offer or such shorter period until all Transfer RestrictedSecurities covered have been sold.

The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptlyupon request at any time during such 90-day period in order to facilitate such resales.

SECTION 4. SHELF REGISTRATION

(a) Shelf Registration. If (i) the Company and the Subsidiary Guarantors are not required to file an Exchange Offer Registration Statement or cannotConsummate the Exchange Offer because the Exchange Offer is not permitted by applicable U.S. law or Commission policy (after the procedures set forthin Section 6(a) below have been complied with) or (ii) any Holder of Transfer Restricted Securities that is either (A) a “qualified institutional buyer” (asdefined in Rule 144A under the Securities Act), (B) a non-U.S. person (within the meaning of Regulation S under the Securities Act) or (C) an “accreditedinvestor” (as defined in Rule 501(a) of the Securities Act) shall notify the Company prior to the 20th day following the Consummation of the ExchangeOffer that such Holder (A) is prohibited by applicable U.S. law or Commission policy from participating in the Exchange Offer, (B) may not resell theExchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the ExchangeOffer Registration Statement is not appropriate or available for such resales by such Holder or (C) is a Broker-Dealer and holds Notes acquired directlyfrom the Company or one of its affiliates, then the Company and the Subsidiary Guarantors shall:

(x) use their commercially reasonable efforts to cause to be filed a Registration Statement pursuant to Rule 415 under the Securities Act,which may be an amendment to the Exchange Offer Registration Statement if permitted by the rules and regulations of the Commission (in eitherevent, the “Shelf Registration Statement”) on or prior to the earlier of (1) 75 days after such filing obligation arises or (2) 45 days after the date onwhich the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) of paragraph (a) above (suchearliest date being the “Shelf Filing Deadline”), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities bythe Holders which shall have provided the information required pursuant to Section 4(b) hereof; and

7


(y) use their commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission on orprior to 120 days after such obligation arises.

Subject to Section 5(b), the Company and the Subsidiary Guarantors shall use their commercially reasonable efforts to keep such Shelf Registration Statementcontinuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it isavailable for resales of Notes or Exchange Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that itconforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time,for a period ending on the earlier of (i) two years following the Closing Date or (ii) such shorter period that will terminate when all Notes or Exchange Notescovered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (such period being the “Shelf Registration Period”) orotherwise become saleable pursuant to Rule 144(k) under the Securities Act. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities

may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishesto the Company in writing, within 20 days after receipt of a request therefor, such information as the Company may reasonably request for use inconnection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securitiesshall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all suchreasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Companyall information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.

SECTION 5. LIQUIDATED DAMAGES

(a) Subject to Section 4(b) above, if (i) any of the Registration Statements required by this Agreement are not filed with the Commission on or priorto the date specified for such filing in Sections 3(a) and 4(a), as applicable, (ii) any of such required Registration Statements have not been declaredeffective by the Commission on or prior to the date specified for such effectiveness in Sections 3(a) and 4(a), as applicable, (each, an “Effectiveness TargetDate”), (iii) the Exchange Offer has not been Consummated within 30 business days, or longer, if required by federal securities laws, after theEffectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filedand declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities withoutbeing succeeded within five (5) business days by a post-effective amendment to such Registration Statement that cures such failure and that is itselfimmediately declared effective (except as permitted in

8


paragraph (b); such period of time during which any such Registration Statement is not effective or any such Registration Statement or the relatedProspectus is not usable being referred to as a “Blackout Period”) (each such event referred to in clauses (i) through (iv), a “Registration Default”), theCompany and the Subsidiary Guarantors jointly and severally agree to pay liquidated damages (“Liquidated Damages”) to each Holder of TransferRestricted Securities adversely affected by such Registration Default, in an amount equal to 0.25% per annum per $1,000 principal amount of TransferRestricted Securities held by such Holder with respect to the first 90-day period immediately following the occurrence of such Registration Default. Theamount of Liquidated Damages shall increase by an additional 0.25% per annum per $1,000 principal amount of Transfer Restricted Securities withrespect to each subsequent 90-day period (or portion thereof) until all Registration Defaults have been cured, up to a maximum amount of LiquidatedDamages of 1.0% per annum per $1,000 principal amount of Transfer Restricted Securities, provided that the Company shall in no event be required to payLiquidated Damages for more than one Registration Default at any given time. All accrued Liquidated Damages shall be paid to Record Holders by theCompany and the Subsidiary Guarantors in the same manner as interest is paid under the Notes. Following the cure of all Registration Defaults relating toany particular Transfer Restricted Securities, the accrual of Liquidated Damages, which shall be determined on a daily basis, with respect to such TransferRestricted Securities will cease.

(b) A Registration Default referred to in Section 5(a)(iv) shall be deemed not to have occurred and be continuing in relation to a RegistrationStatement or the related Prospectus if (i) the Blackout Period has occurred solely as a result of (x) the filing of a post-effective amendment to such ShelfRegistration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yeteffective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events with respect to theCompany that would need to be described in such Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company isproceeding promptly and in good faith to amend or supplement (including by way of filing documents under the Exchange Act which are incorporated byreference into the Registration Statement) such Registration Statement and the related Prospectus to describe such events; provided, however, that in anycase if such Blackout Period occurs for a continuous period in excess of 90 days, a Registration Default shall be deemed to have occurred on the 91st dayof such Blackout Period and Liquidated Damages shall be payable in accordance with the above paragraph from the day such Registration Default occursuntil such Registration Default is cured or until the Company is no longer required pursuant to this Agreement to keep such Registration Statementeffective or such Registration Statement or the related Prospectus usable; provided, further, that in no event shall the total of all Blackout Periods exceed120 days in the aggregate of any 12-month period.

All payment obligations of the Company and the Subsidiary Guarantors set forth in this section that are outstanding with respect to any TransferRestricted

9


Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such payment obligations with respect tosuch security shall have been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

(a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall comply withall of the provisions of Section 6(c) below, shall use their commercially reasonable efforts to effect such exchange to permit the sale of Transfer RestrictedSecurities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions:

(i) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer RestrictedSecurities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company and theSubsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effectthat (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understandingwith any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notesin its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company’s and theSubsidiary Guarantors’ preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any suchHolder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not underCommission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Exxon Capital HoldingsCorporation (available May 13, 1988) and Morgan Stanley and Co., Inc. (available June 5, 1991), as interpreted in the Commission’s letter toShearman & Sterling dated July 2, 1993, and similar no-action letters, and (2) must comply with the registration and prospectus deliveryrequirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be coveredby an effective Registration Statement containing the selling security holder information required by Item 507 or 508, as applicable, of RegulationS-K if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired by such Holder directly from the Company.

(ii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall provide asupplemental letter to the Commission stating that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on theposition of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley and Co., Inc.(available June 5, 1991)

10


as interpreted in the Commission’s letter to Shearman & Sterling dated July 2, 1993, and shall represent to the Commission that neither theCompany nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to bereceived in the Exchange Offer and that, to the best of the Company’s and each Subsidiary Guarantor’s information and belief, each Holderparticipating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding withany Person to participate in the distribution of the Exchange Notes received in the Exchange Offer; and

(iii) shall issue, upon the request of any Holder of Notes covered by the Exchange Offer, Exchange Notes, having an aggregate principalamount equal to the aggregate principal amount of Notes surrendered to the Company by such Holder in exchange therefor; such Exchange Notes tobe registered in the name of such Holder or in the name of the purchaser(s) of such Exchange Notes, as the case may be; in return, the Notes held bysuch Holder shall be surrendered to the Company for cancellation.

(b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall comply withall the provisions of Section 6(c) below and shall use their commercially reasonable efforts to effect such registration to permit the sale of the TransferRestricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company and theSubsidiary Guarantors will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on anyappropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intendedmethod or methods of distribution thereof.

(c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale ofTransfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes andExchange Notes by Broker-Dealers), the Company and the Subsidiary Guarantors shall:

(i) use their commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financialstatements (including, if required by the Securities Act or any regulation thereunder, financial statements of any Subsidiary Guarantors) for theperiod specified in Sections 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such RegistrationStatement or the Prospectus contained therein (A) to contain a material misstatement or omit to state any material fact necessary to make thestatements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by thisAgreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement, in

11


the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use their commercially reasonableefforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for theirintended purpose(s) as soon as practicable thereafter. Notwithstanding the foregoing, the Company and the Subsidiary Guarantors may allow theShelf Registration Statement to cease to become effective and usable if (x) the board of directors of the Company determines in good faith that it isin the best interests of the Company not to disclose the existence of or facts surrounding any proposed or pending material corporate transactioninvolving the Company or the Subsidiary Guarantors, and the Company notifies the Holders within two business days after such boards of directorsmake such determination that the Shelf Registration Statement has ceased to become effective and usable (which notification shall not be required tospecify the reasons therefor) or (y) the Prospectus contained in the Shelf Registration Statement contains an untrue statement of a material fact oromits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made,not misleading; provided that the two-year period referred to in Section 4(a) hereof during which the Shelf Registration Statement is required to beeffective and usable shall be extended by the number of days during which such Registration Statement was not effective or usable pursuant to theforegoing provisions; and provided further that Liquidated Damages shall accrue on the Notes as provided in Section 5 hereof (including anydeferral of the accrual of Liquidated Damages as provided in Section 5);

(ii) use their commercially reasonable efforts to prepare and file with the Commission such amendments and post-effective amendments to theRegistration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof,as applicable; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner;and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement duringthe applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such RegistrationStatement or supplement to the Prospectus;

(iii) cooperate with the selling Holders of Transfer Restricted Securities and the underwriter(s), if any, to facilitate the timely preparation anddelivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such TransferRestricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least twobusiness days prior to any sale of Transfer Restricted Securities made by such underwriter(s);

12


(iv) use their commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to beregistered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or theunderwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities (provided, however, that the Company and theSubsidiary Guarantors shall not be obligated to qualify to do business in any jurisdiction in which they are not now so qualified or to take any actionthat would subject them to service of process in any jurisdiction in which they are not now so subject or subject to taxation);

(v) if any fact or event contemplated by clause (d)(i)(D) below shall exist or have occurred, prepare a supplement or post-effective amendmentto the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, asthereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omitto state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, notmisleading;

(vi) provide a CUSIP, CINS or ISIN number, as applicable, for all Transfer Restricted Securities not later than the effective date of theRegistration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in aform eligible for deposit with the depositary;

(vii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by anyunderwriter (including any “qualified independent underwriter”) that is required to be retained in accordance with the rules and regulations of theNASD;

(viii) otherwise use their best efforts to comply with all applicable rules and regulations of the Commission, and make generally available toits security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) forthe twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firmor best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company’s firstfiscal quarter commencing after the effective date of the Registration Statement;

(ix) use their best efforts to cause the Indenture to be qualified under the TIA not later than the effective date of the first RegistrationStatement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes and Exchange Notes toeffect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute,and use their commercially

13


reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documentsrequired to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and

(x) provide promptly to any Holder upon such Holder’s written request each document filed with the Commission pursuant to therequirements of Section 13 and Section 15 of the Exchange Act.

(d) Additional Provisions Applicable to Shelf Registration Statements. In connection with each Shelf Registration Statement, during the ShelfRegistration Period, the Company and the Subsidiary Guarantors shall:

(i) advise the underwriter(s), if any, and selling Holders of Transfer Restricted Securities promptly and, if requested by such Persons, toconfirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, withrespect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by theCommission for amendments to the Shelf Registration Statement or amendments or supplements to the Prospectus or for additional informationrelating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under theSecurities Act, of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale inany jurisdiction or of the initiation of any proceeding for any of the preceding purposes and (D) of the existence of any fact or the happening of anyevent that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus in order that the ShelfRegistration Statement and the Prospectus do not contain an untrue statement of a material fact or omit to state a material fact necessary to make thestatements made therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issueany stop order suspending the effectiveness of the Shelf Registration Statement, or any U.S. state securities commission or other regulatory authorityshall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under U.S. state securities orblue sky laws, the Company and the Subsidiary Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliestpossible time;

(ii) if requested in writing, furnish to each of the selling Holders of Transfer Restricted Securities and each of the underwriter(s), if any, beforefiling with the Commission, copies of any Shelf Registration Statement or any Prospectus included therein or any amendments or supplements toany such Shelf Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such ShelfRegistration Statement), which documents will be subject to the review of such Holders and underwriter(s), if

14


any, for a period of at least three business days, and the Company and the Subsidiary Guarantors will not file any such Shelf Registration Statementor Prospectus or any amendment or supplement to any such Shelf Registration Statement or Prospectus (including all such documents incorporatedby reference) if a selling Holder of Transfer Restricted Securities covered by such Shelf Registration Statement or the underwriter(s), if any, shallhave reasonably objected to the Shelf Registration Statement as set forth above; such Holders and underwriter(s) shall be deemed to have reasonablyobjected to such filing if such Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, containsan untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstancesunder which they were made, not misleading, or fails to comply with the applicable requirements of the Securities Act;

(iii) upon request, provide copies of any document that is to be incorporated by reference into a Shelf Registration Statement or Prospectus tothe selling Holders and to the underwriter(s), make the Company’s and the Subsidiary Guarantors’ representatives available for discussion of suchdocument and other customary due diligence matters, and include such information in such document prior to the filing thereof as such sellingHolders or underwriter(s), if any, reasonably may request;

(iv) make available for inspection at reasonable times at each of the Company’s principal place of business by a representative of the Holdersof Transfer Restricted Securities, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney oraccountant retained by such selling Holders or any of the underwriter(s) who shall certify to the Company and the Subsidiary Guarantors that theyhave a current intention to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement, and, such relevant financial and otherrecords, pertinent corporate documents and properties of the Company and the Subsidiary Guarantors as reasonably requested and cause theCompany’s and the Subsidiary Guarantors’ officers, directors and employees to respond to such inquiries as shall be reasonably necessary, in thereasonable judgment of counsel to such Holders, to conduct a reasonable investigation; provided, however, that the foregoing inspection andinformation gathering shall be coordinated on behalf of the selling Holders by one counsel designated by and on behalf of such Holders and,provided, further, that each such party shall be required to execute a customary confidentiality agreement reasonably satisfactory to the Company;

(v) if requested by any selling Holders of Transfer Restricted Securities or the underwriter(s), if any, promptly incorporate in any ShelfRegistration Statement or Prospectus pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holdersand underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the “Plan ofDistribution” of the

15


Transfer Restricted Securities information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s),the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and makeall required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company are notified of the mattersto be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to takeany action pursuant to this Section 6(d)(v) that would, in the opinion of counsel for the Company reasonably satisfactory to the Initial Purchasers,violate applicable law;

(vi) deliver to each selling Holder of Transfer Restricted Securities and each of the underwriter(s), if any, without charge, as many copies ofthe Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; theCompany and the Subsidiary Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of theselling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered bythe Prospectus or any amendment or supplement thereto;

(vii) furnish to each Holder whose Transfer Restricted Securities have been included in a Shelf Registration Statement in connection with suchexchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendmentthereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);

16


(viii) enter into an underwriting agreement on not more than one occasion in the case of an offering pursuant to a Shelf Registration, and makesuch representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of theTransfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonablyrequested by any Holder or Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of TransferRestricted Securities; provided that the Company and the Subsidiary Guarantors shall not be required to enter into any such agreement more thanonce with respect to all of the Transfer Restricted Securities and may delay entering into such agreement if the board of directors of each of theCompany and the Subsidiary Guarantors determines in good faith that it is in the best interests of the Company and the Subsidiary Guarantors not todisclose the existence of or facts surrounding any proposed or pending material corporate transaction involving the Company and the SubsidiaryGuarantors; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, theCompany and the Subsidiary Guarantors shall:

(A) furnish (or in the case of paragraphs (2) and (3), use their commercially reasonable efforts to cause to be furnished) to the InitialPurchasers, the Holders of Transfer Restricted Securities who hold at least 25% in aggregate principal amount of such class of TransferRestricted Securities and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily madein connection with an offering of debt securities pursuant to a Shelf Registration Statement (i) upon the effective date of the ShelfRegistration Statement (and if such Shelf Registration Statement contemplates an Underwritten Offering of Transfer Restricted Securitiesupon the date of the closing under the underwriting agreement related thereto) and (ii) upon the filing of any amendment or supplement tothe Shelf Registration Statement or any other document that is incorporated in the Shelf Registration Statement by reference and includesfinancial data with respect to a fiscal quarter or year:

(1) a certificate, dated the date of effectiveness of the Shelf Registration Statement signed by (y) the respective chief executiveofficer, the respective President or any Vice President and (z) the respective chief financial officer of each of the Company and eachof the Subsidiary Guarantors confirming, as of the date thereof, the matters set forth in Section 7(m) of the Purchase Agreement andsuch other matters as such parties may reasonably request;

(2) an opinion, dated the date of effectiveness of such Shelf Registration Statement, of securities counsel for the Companycovering matters similar to those set forth in Section 7(d) of the Purchase Agreement, which are appropriate for the circumstancesprovided herefore, and such other matters as such parties may reasonably request, and in any event including a statement (which maybe similar to the statement contained in the letter delivered pursuant to Section 7(d) of the Purchase Agreement) to the effect that suchcounsel has participated in conferences with officers and other representatives of the Company, representatives of the independentpublic accountants for the Company, the Initial Purchasers’ representatives and the Initial Purchasers’ counsel in connection with thepreparation of such Shelf Registration Statement and the related Prospectus although such counsel has not independently verified theaccuracy, completeness or fairness of such statements in such Shelf Registration Statement; and that such counsel advises that, on thebasis of the foregoing, such counsel’s work in connection with this work did not disclose information that gave such counsel reason tobelieve that the Shelf Registration Statement, at the time such Shelf Registration Statement or any post-effective amendment theretobecame effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein ornecessary to make the statements therein in light of the circumstances under which they were made not misleading, or that theProspectus contained in such Shelf

17


Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary inorder to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Suchcounsel may state further that such counsel expresses no view with respect to, assumes no responsibility for, and has notindependently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules, the financialprojections and other financial, statistical and accounting data included or incorporated by reference in the Shelf RegistrationStatement contemplated by this Agreement or the related Prospectus; and

(3) a customary comfort letter, dated as of the date of effectiveness of the Shelf Registration Statement from the Company’sindependent accountants, in the customary form and covering matters of the type customarily covered in comfort letters tounderwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters deliveredpursuant to Sections 7(i) and 7(j) of the Purchase Agreement;

(B) set forth in full or incorporated by reference in the underwriting agreement, if any, the indemnification provisions and proceduresof Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and

(C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause(A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company andthe Subsidiary Guarantors pursuant to this clause (viii), if any.

If at any time during the Shelf Registration Period the representations and warranties of the Company or the Subsidiary Guarantors contemplated in clause (A)(1)above cease to be true and correct, the Company or the Subsidiary Guarantors shall so advise the Initial Purchasers and the underwriters, if any, and each sellingHolder promptly and, if requested by such Persons, shall confirm such advice in writing; and (ix) prior to any public offering of Transfer Restricted Securities cooperate with the selling Holders of Transfer Restricted Securities the

underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities underthe securities or blue sky laws of such jurisdictions as the selling Holders of Transfer Restricted Securities or underwriter(s) may reasonably requestand do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer RestrictedSecurities covered by the Shelf Registration Statement filed pursuant to Section 4 hereof; provided, however, that the Company and the SubsidiaryGuarantors shall not be obligated to qualify as a

18


foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service ofprocess or taxation, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where it is not now sosubject.

(e) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of anyfact of the kind described in Section 6(d)(i) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to theShelf Registration Statement and cease to use the Prospectus constituting a part of such Shelf Registration Statement until such Holder’s receipt of thecopies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof, or until it is advised in writing (the “Advice”) by theCompany that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated byreference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company’s expense) all copies, other thanpermanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time ofreceipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Shelf RegistrationStatement set forth in Section 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the givingof such notice pursuant to Section 6(d)(i) hereof to and including the date when each selling Holder covered by such Shelf Registration Statement shallhave received the copies of the supplemented or amended Prospectus contemplated by Section 6(d)(vi) hereof or shall have received the Advice.

(f) The Company and the Subsidiary Guarantors may require each Holder of Transfer Restricted Securities as to which any registration is beingeffected to furnish to the Company such information regarding such Holder and such Holder’s intended method of distribution of the applicable TransferRestricted Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in orderto comply with the Securities Act. Each such Holder agrees to notify the Company as promptly as practicable of (i) any inaccuracy or change ininformation previously furnished by such Holder to the Company or (ii) the occurrence of any event, in either case, as a result of which any Prospectusrelating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder’s intended method ofdistribution of the applicable Transfer Restricted Securities or omits to state any material fact regarding such Holder or such Holder’s intended method ofdistribution of the applicable Transfer Restricted Securities required to be stated therein or necessary to make the statements made therein, in the light ofthe circumstances under which they were made, not misleading and promptly to furnish to the Company any additional information required to correct andupdate any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the distribution of theapplicable Transfer

19


Restricted Securities an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statementstherein not misleading.

SECTION 7. REGISTRATION EXPENSES

(a) All expenses incident to the Company’s and the Subsidiary Guarantors’ performance of or compliance with this Agreement will be borne by theCompany regardless of whether a Registration Statement becomes effective, including without limitation and as applicable: (i) all Commission, securitiesexchange or NASD registration and filing fees and expenses (including filings made by any Initial Purchasers or Holder with the NASD (and, ifapplicable, the fees and expenses of any “qualified independent underwriter” and its counsel that may be required by the rules and regulations of theNASD)); (ii) all fees and expenses of compliance with U.S. federal securities and state blue sky or securities laws and compliance with the rules of theNASD (including reasonable fees and disbursements of one counsel for Holders in connection with blue sky and/or NASD qualification of the ExchangeNotes); (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing ofProspectuses), messenger and delivery services; (iv) all fees and disbursements of counsel for the Company and the Subsidiary Guarantors; (v) all fees anddisbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by orincident to such performance) and (vi) the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principalamount of Transfer Restricted Securities covered by the Shelf Registration Statement to act as counsel for the Holders of those Transfer RestrictedSecurities in connection therewith.

The Company will, in any event, bear their and the Subsidiary Guarantors’ internal expenses (including, without limitation, all salaries and expensesof its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, includingspecial experts, retained by the Company or the Subsidiary Guarantors.

(b) Each Holder of Transfer Restricted Securities will pay all underwriting discounts, if any, and commissions and transfer taxes, if any, relating tothe disposition of such Holder’s Transfer Restricted Securities.

SECTION 8. INDEMNIFICATION

(a) The Company and each Subsidiary Guarantor shall, jointly and severally, indemnify and hold harmless each Holder of Transfer RestrictedSecurities, its officers and employees and each Person, if any, who controls any such Holders, within the meaning of the Securities Act, from and againstany loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability oraction relating to purchases, sales and registration of the Notes, the Guarantees and the Exchange Notes), to which that Holder, officer, employee orcontrolling Person may become subject, under the Securities Act or otherwise, insofar

20


as such loss, claim, damage, liability or action arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material factcontained (A) in any Registration Statement or preliminary Prospectus or Prospectus or in any amendment or supplement thereto or (B) in any Blue SkyApplication (as defined below) or other document prepared or executed by any Company or any Subsidiary Guarantor (or based upon any writteninformation furnished by any Company or any Subsidiary Guarantor) specifically for the purpose of qualifying any or all of the Notes under the securitieslaws of any state or other jurisdiction (any such application, document or information being hereinafter called a “Blue Sky Application,” or (ii) theomission or alleged omission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, orin any Blue Sky Application or Marketing Materials any material fact required to be stated therein or necessary to make the statements therein, in light ofthe circumstances under which they were made; and shall reimburse each Holder and each such officer, employee or controlling Person promptly upondemand for any legal or other expenses reasonably incurred by that Holder, officer, employee or controlling Person in connection with investigating ordefending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that theCompany and the Subsidiary Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of,or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement, preliminaryProspectus or Prospectus, or in any such amendment or supplement, or in any Blue Sky Application, in reliance upon and in conformity with writteninformation concerning such Holder furnished to the Company by or on behalf of any Holder specifically for inclusion therein; provided, further, that withrespect to any such untrue statement or omission made in any preliminary Prospectus or Prospectus, the indemnity agreement contained in this Section 8(a)shall not inure to the benefit of the Holder, its officers and employees and any Person who controls such Holder, from whom the Person asserting any suchlosses, claims, damages or liabilities purchased the Notes, Guarantees or Exchange Notes concerned if, to the extent that such sale was a sale by the Holderand any such loss, claim, damage or liability of such Holder is a result of the fact that both (A) a copy of the Prospectus (or the Prospectus as thenamended or supplemented) was not sent or given to such Person at or prior to written confirmation of the sale of such Notes or Exchange Notes to suchPerson and (B) the untrue statement or omission in the preliminary Prospectus or Prospectus delivered to the Person was corrected in the Prospectus (or theProspectus as then amended or supplemented) unless such failure to deliver the Prospectus was a result of noncompliance by the Company withSection 6(d)(vi) hereof. The foregoing indemnity agreement is in addition to any liability which the Company and the Subsidiary Guarantors mayotherwise have to any Holder or to any officer, employee or controlling Person of that Holder.

(b) Each Holder, severally and not jointly, shall indemnify and hold harmless each of the Company, each of the Subsidiary Guarantors, theirrespective directors, officers and employees, and each Person, if any, who controls either of the Company or any of the Subsidiary Guarantors within themeaning of the Securities Act,

21


from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Subsidiary Guarantors orany such director, officer or controlling Person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability oraction arises out of, or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement,preliminary Prospectus or Prospectus, or in any amendment or supplement thereto or (B) in any Blue Sky Application or (ii) the omission or allegedomission to state in any Registration Statement, preliminary Prospectus or Prospectus, or in any amendment or supplement thereto, or in any Blue SkyApplication any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extentthat the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with writteninformation concerning such Holders furnished to the Company by or on behalf of that Holder specifically for inclusion therein, which informationconsists of the information specified in Section 8(e) of the Purchase Agreement, and shall reimburse the Company, each of the Subsidiary Guarantors andeach such director, officer, employee and controlling Person for any legal or other expenses reasonably incurred by the Company, each such SubsidiaryGuarantor or each such director, officer, employee or controlling Person in connection with investigating or defending or preparing to defend against anysuch loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which anyHolder may otherwise have to the Company, any of the Subsidiary Guarantors or any such director, officer, employee or controlling Person.

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnifiedparty shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of theclaim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability whichit may have under this Section 8 except to the extent it has been materially prejudiced by such failure and; provided, further, that the failure to notify theindemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claimor action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled toparticipate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counselreasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense ofsuch claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequentlyincurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, any indemnifiedparty shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counselshall be at the expense of the indemnified party unless (i) the employment of such counsel has been specifically

22


authorized by the indemnifying party in writing, or (ii) such indemnified party shall have been advised by such counsel that there may be one or more legaldefenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counselit is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action andemploy counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that itelects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not, in connection with any one such action orseparate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees andexpenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall bedesignated in writing by (x) Lehman Brothers Inc. if the indemnified parties under this Section 8 consist of the Initial Purchasers or any of their respectiveofficers, employees or controlling Persons, (y) by the Company, if the indemnified parties under this Section 8 consist of any of the Company, any of theSubsidiary Guarantors or any of their respective directors, officers, employees or controlling Persons or (z) by the Holders of the majority of the aggregateprincipal amount of Notes then outstanding, in the case of parties indemnified pursuant to Section 8(a). Each indemnified party, as a condition of theindemnity agreement contained in this Section 8, shall use its best efforts to cooperate with the indemnifying party in the defense of any such claim. Noindemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle orcompromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of whichindemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action)unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim,action, suit or proceeding or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not beunreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, theindemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement orjudgment.

(d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified partyunder Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifyingparty shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss,claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by theCompany and the Subsidiary Guarantors, on the one hand, and the Holders on the other, from the sale of the Transfer Restricted Securities or (ii) if theallocation provided by clause (i) above is not permitted by applicable law, in such

23


proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and theSubsidiary Guarantors, on the one hand and the Holders on the other with respect to the statements or omissions which resulted in such loss, claim,damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by referenceto whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information suppliedby the Company or any of the Subsidiary Guarantors, on the one hand, or the Holders, on the other hand, the intent of the parties and their relativeknowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Subsidiary Guarantors and theHolders agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if theHolders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerationsreferred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof,referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by suchindemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Holdershall be required to contribute any amount in excess of the amount by which the net proceeds received by it in connection with its sale of Notes exceedsthe amount of any damages which such Holder has otherwise paid or become liable to pay by reason of the untrue or alleged untrue statement or omissionor alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled tocontribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to contribute as provided in thisSection 8(d) are several and not joint.

SECTION 9. RULE 144A

The Company and each Subsidiary Guarantor hereby agrees with each Holder of Transfer Restricted Securities, during any period in which theCompany or such Subsidiary Guarantor is not subject to Section 13 or 15(d) of the Exchange Act within the two-year period following the Closing Date, tomake available to any Holder or beneficial owner of Transfer Restricted Securities, in connection with any sale thereof and any prospective purchaser ofsuch Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order topermit resales of such Transfer Restricted Securities pursuant to Rule 144A.

SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS

No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer RestrictedSecurities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and(b) completes and executes all reasonable

24


questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of suchunderwriting arrangements.

SECTION 11. SELECTION OF UNDERWRITERS

Subject to Section 6(d)(i), the Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell suchTransfer Restricted Securities in an Underwritten Offering at such Holders’ expense. In any such Underwritten Offering, the investment banker or investmentbankers and manager or managers that will administer the offering will be selected by the Company.

SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors agree that monetary damages (including Liquidated Damages) would not be adequate

compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action forspecific performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into anyagreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with theprovisions hereof. Except as disclosed in the Offering Memorandum (as such term is defined in the Purchase Agreement), neither the Company nor anySubsidiary Guarantor has previously entered into any agreement with any Person that would require the inclusion of the Company’s or such SubsidiaryGuarantor’s securities in any Registration Statement. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistentwith the rights granted to the holders of the Company’s or any Subsidiary Guarantor’s securities under any agreement in effect on the date hereof.

(c) Adjustments Affecting the Notes. The Company and the Subsidiary Guarantors will not take any action, or permit any change to occur, withrespect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer.

(d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to ordepartures from the provisions hereof may not be given unless the Company have obtained the written consent of Holders of a majority of the outstandingprincipal amount of the Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or consent. Notwithstanding theforegoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tenderedpursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to

25


such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered orregistered.

(e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail(registered or certified, return receipt requested), telex, facsimile or air courier guaranteeing overnight delivery:

(i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture;and

(ii) if to the Company or the Subsidiary Guarantors to: AmerisourceBergen Corporation

1300 Morris Drive, Suite 100Chesterbrook, PA 19087Attention:Fax: (610) 727-3639

with a copy to: Dechert LLP

1717 Arch Street, Suite 400Philadelphia, PA 19103Attention: Craig Godshall, Esq.Fax: (215) 655-2491

Any such notices and communications shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any noticeor communication given or made by the Initial Purchasers.

Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at theaddress specified in the Indenture.

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties,including without limitation and without the need for an express assignment, subsequent Holders; provided, however, that this Agreement shall not inure tothe benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securitiesfrom such Holder.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of whichwhen so

26


executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED, IN ACCORDANCE WITH

THE LAW OF THE STATE OF NEW YORK. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid,

illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions containedherein shall not be affected or impaired thereby.

(k) Entire Agreement. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by theparties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the partieshereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth orreferred to herein with respect to the registration rights granted by the Company and the Subsidiary Guarantors with respect to the Transfer RestrictedSecurities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(Signature pages follow.)

27


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Very truly yours,

AMERISOURCEBERGEN CORPORATION.

By:

Name: Title:

AMBULATORY PHARMACEUTICAL SERVICES, INC.AMERISOURCEBERGEN DRUG CORPORATION

AMERISOURCEBERGEN HOLDING CORPORATION

AMERISOURCEBERGEN SERVICES CORPORATION

AMERISOURCE HEALTH SERVICES CORPORATION

ANDERSON PACKAGING, INC.APS ENTERPRISES HOLDING COMPANY

ASD SPECIALTY HEALTHCARE, INC.AUTOMED TECHNOLOGIES, INC.BROWNSTONE PHARMACY, INC.CAPSTONE PHARMACYOF DELAWARE, INC.CLINICARE CONCEPTS, INC.COMPUSCRIPT, INC.COMPUTRAN SYSTEMS, INC.DUNNINGTON RX SERVICESOF RHODE ISLAND, INC.EXPRESS PHARMACY SERVICES, INC.FAMILY CENTER PHARMACY, INC.GOOT NURSING HOME PHARMACY, INC.HEALTH SERVICES CAPITAL CORPORATION

IHS ACQUISITION XXX, INC.IMEDEX, INC.INSTA-CARE PHARMACY SERVICES CORPORATION

INTEGRATED COMMERCIALIZATION SOLUTIONS, INC.INTERNATIONAL PHYSICIAN NETWORKS, L.L.C.MEDICAL INITIATIVES, INC.

SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT


PHARM PLUS ACQUISITION, INC.PHARMACY CORPORATIONOF AMERICA

PHARMACY CORPORATIONOFAMERICA-MASSACHUSETTS, INC.

PHARMACY HEALTHCARE SOLUTIONS, LTD.PHARMERICA DRUG SYSTEMS, INC.PHARMERICA, INC.PMSI, INC.REIMBURSEMENT EDUCATION NETWORK, LLCRXFIRST, INC.SPECIALTY PHARMACY, INC.SPECIALTY PHARMACYOF CALIFORNIA, INC.TELEPHARMACY SOLUTIONS, INC.THE LASH GROUP, INC.TMESYS(TM), INC.US BIOSERVICES CORPORATION

VALUE APOTHECARIES, INC.

By:

Name: Title:


By:

Name: Title:

SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT


AMERISOURCE SALES CORPORATIONCAPSTONE MED, INC.DUNNINGTON RX SERVICESOF MASSACHUSETTS, INC.PREMIER PHARMACY, INC.ROMBRO’S DRUG CENTER, INC.SOLANA BEACH, INC.SOUTHWEST PHARMACIES, INC.TAYLOR & MANNO ASSET RECOVERY, INC.

By:

Name: Title:


By:

VALUE APOTHECARIES, INC., ASGENERAL PARTNER

By:

Name: Title:

REIMBURSEMENT EDUCATION NETWORK, LLC

By:

THE LASH GROUP, INC.,ITS SOLE MEMBER

By:

Name: Title:



Accepted on behalf of the Initial Purchasers:

LEHMAN BROTHERS, INC.

By:

Name: Title:



SCHEDULE 1

Existing Subsidiary Guarantors

Ambulatory Pharmaceutical Services, Inc.AmerisourceBergen Drug CorporationAmerisourceBergen Holding CorporationAmerisourceBergen Services CorporationAmeriSource Health Services CorporationAmeriSource Heritage CorporationAmeriSource Sales CorporationAnderson Packaging, Inc.APS Enterprises Holding CompanyASD Specialty Healthcare, Inc.AutoMed Technologies, Inc.Brownstone Pharmacy, Inc.Capstone Med, Inc.Capstone Pharmacy of Delaware, Inc.CliniCare Concepts, Inc.Compuscript, Inc.Computran Systems, Inc.Dunnington Rx Services of Massachusetts, Inc.Dunnington Rx Services of Rhode Island, Inc.Express Pharmacy Services, Inc.Family Center Pharmacy, Inc.Goot Nursing Home Pharmacy, Inc.Health Services Capital CorporationIHS Acquisition XXX, Inc.Imedex, Inc.Insta-Care Pharmacy Services CorporationIntegrated Commercialization Solutions, Inc.International Physician Networks, L.L.C.Medical Initiatives, Inc.Pharm Plus Acquisition, Inc.Pharmacy Corporation of AmericaPharmacy Corporation of America-Massachusetts, Inc.Pharmacy Healthcare Solutions, Ltd.PharMerica Drug Systems, Inc.PharMerica, Inc.PMSI, Inc.Premier Pharmacy, Inc.Reimbursement Education Network, LLCRombro’s Drug Center, Inc.RxFirst, Inc.Solana Beach, Inc.Southwest Pharmacies, Inc.Specialty Pharmacy, Inc.Specialty Pharmacy of California, Inc.Taylor & Manno Asset Recovery, Inc.Telepharmacy Solutions, Inc.The Lash Group, Inc.Tmesys(TM), Inc.US Bioservices CorporationValue Apothecaries, Inc.



Exhibit 10.17

Amended Plan Approved by BOD 11/10/04Amended Plan Approved by BOD 11/9/05


2001 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN, AS AMENDED

1. History and Purpose (a) History. This AmerisourceBergen Corporation 2001 Non-Employee Directors’ Stock Option Plan (the “Plan”) is the result of the merger,

effective August 29, 2001 (the “Effective Date”), of the Bergen Brunswig Corporation 1999 Non-Employee Directors’ Stock Plan with and into theAmeriSource Health Corporation 2001 Non-Employee Directors’ Stock Option Plan (collectively, with the Bergen Brunswig Corporation 1999Non-Employee Directors’ Stock Plan, the “Prior Plans”). Upon the merger of the Prior Plans, this Plan was amended and restated in the form set forth inthis document and renamed the AmerisourceBergen Corporation 2001 Non-Employee Directors’ Stock Option Plan (the “Plan”). The AmeriSource HealthCorporation 2001 Non-Employee Directors’ Stock Option Plan was approved by the shareholders of AmeriSource Corporation and the Bergen BrunswigCorporation 1999 Non-Employee Directors’ Stock Plan was approved by the shareholders of the Bergen Brunswig Corporation, in each case before theclosing of the merger which created AmerisourceBergen Corporation. Upon the closing of the merger which created AmerisourceBergen Corporation, thenumber of shares subject to options under the Prior Plans and the option price for such options were adjusted in accordance with the terms of the mergeragreement. Each of the Prior Plans was then adopted by AmerisourceBergen Corporation. This document applies to all grants of options made under thisPlan on or after the Effective Date. Each grant of options made under either of the Prior Plans will remain subject to the terms of the applicable Prior Plan,as in existence immediately prior to the Effective Date, provided that upon the forfeiture or lapse of any option granted under either of the Prior Plans, theshares underlying such option shall again be available for issuance pursuant to this Plan. Effective as of November 10, 2004, the Plan was further amendedto extend the time to exercise following Voluntary Retirement. Effective as of November 9, 2005, the Plan was further amended to change all references inthe Plan to “Black-Scholes Value” to “fair value.”

(b) Purpose. The purpose of this Plan is to provide members of the Board of Directors (the “Board”) of AmerisourceBergen Corporation (the“Company”) who are not employees of the Company or its subsidiaries with grants of non-qualified stock options. The Company believes that the Planwill encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company’s shareholders, and will align theeconomic interests of the participants with those of the shareholders.

2. Administration

(a) Committee. The Plan shall be administered and interpreted by a committee (the “Committee”), which shall consist of two or more personsappointed by the Board, all of whom shall be “non-employee directors”, as defined under Rule 16b-3 under the Securities Exchange Act of 1934 (the“Exchange Act”).

(b) Committee Determinations. The Committee shall have full power and authority to administer and interpret the Plan, to make factualdeterminations and to adopt or


amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary oradvisable, in its sole discretion. The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vestedin it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of theCommittee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Planand need not be uniform as to similarly situated individuals.

3. Options

Awards under the Plan shall consist of grants of non-qualified stock options that are not intended to qualify as “incentive stock options” within themeaning of section 422 of the Code (“Options” or “Non-qualified Stock Options”), as described in Section 6. All Options shall be subject to the terms andconditions set forth herein and to such other terms and conditions consistent with this Plan as the Committee deems appropriate and as are specified in writing bythe Committee to the individual in a grant instrument (the “Option Instrument”) or an amendment to the Option Instrument. The Committee shall approve theform and provisions of each Option Instrument.

4. Shares Subject to the Plan (a) Shares Authorized. As of the Effective Date, all shares of common stock of the Company (“Common Stock”) that remained available for issuance

or transfer under the Prior Plans (other than shares reserved for issuance or transfer upon the exercise of options then outstanding under the Prior Plans)became available for issuance or transfer under this Plan. Subject to the adjustment specified below, the aggregate number of such shares of CommonStock is 323,660 shares. Of the 323,660 shares, 169,000 shares had previously been reserved for issuance or transfer under the AmeriSource HealthCorporation 2001 Non-Employee Directors’ Stock Option Plan and 154,660 shares had previously been reserved for issuance or transfer under the BergenBrunswig Corporation 1999 Non-Employee Directors’ Stock Plan. In addition to the 323,660 shares, any shares underlying options granted under the PriorPlans which are forfeited or lapse under the terms of such options shall be reserved for issuance or transfer under this Plan. The shares may be authorizedbut unissued shares of Common Stock or reacquired shares of Common Stock, including shares purchased by the Company on the open market forpurposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered withouthaving been exercised, the shares subject to such Options shall again be available for purposes of the Plan.

(b) Adjustments. If there is any change in the number or kind of shares of Common Stock outstanding (i) by reason of a stock dividend, spinoff,recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation in which the Company is thesurviving corporation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting theoutstanding Common Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Common Stock issubstantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of shares ofCommon Stock available for Options, the number of shares covered by outstanding Options, the kind of shares issued under the Plan, and the price pershare

-2-


of Options may be appropriately adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issuedshares of Common Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Options; provided, however,that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding andconclusive.

5. Eligibility for Participation

All members of the Board who are not employees of the Company or a subsidiary (“Non-Employee Directors”) shall be eligible to participate in the Plan.

6. Grant of Options (a) Grants (i) Annual Grants. Effective for each annual meeting of the Company’s shareholders after the Effective Date, each Non-Employee Director

(also referred to as a “Grantee”) who is in office on the day immediately after the annual election of directors shall receive a grant of a Non-qualifiedStock Option to purchase Common Stock for a number of shares of Common Stock such that the fair value of such grant, measured as of the date ofsuch annual meeting, as determined by the Board in good faith, is $100,000. The date of grant for any Directors’ Annual Grant under thisSection 6(a)(i) shall be the day immediately after the annual election of directors. In its discretion, the Board may also provide for one or moregrants of Non-qualified Stock Options to any Non-Employee Director who becomes a Non-Employee Director at a time other than on the date of theannual meeting of the Company’s shareholders to reflect the pro-rata portion of the $100,000 fair value reflecting the portion of such Non-EmployeeDirector’s service on the Board for the one-year period scheduled to end at the next succeeding annual meeting.

(ii) Directors’ Equity Option. For each calendar year beginning after the Effective Date, under the Company’s Board Compensation Program,each Non-Employee Director may elect to forego 50% or more of the annual retainer compensation authorized by the Board. For each calendar yearbeginning after the Effective Date, each Non-Employee Director who elects to forego 50% or more of annual retainer compensation and does notelect to have the foregone amount credited in the form of restricted stock under the AmerisourceBergen 2001 Restricted Stock Plan shall receive agrant of a Non-qualified Stock Option to purchase Common Stock for a number of shares of Common Stock such that the fair value of such grant,measured as the date of the date of grant, as determined by the Board in good faith, is 1.5 times the amount of the foregone amount. The date ofgrant for any Directors’ Equity Option grant under this Section 6(a)(ii) for a calendar year grant after the Effective Date shall be January 1 of thecalendar year to which the grant applies.

(iii) Other Option Grants. The Board may also make grants of Non-qualified Stock Options to Non-Employee Directors from time to time in itssole and absolute discretion.

(b) Exercise Price. The purchase price per share of Common Stock subject to an Option (the “Exercise Price”) shall be equal to the Fair MarketValue of a share of Common Stock on the date of grant. If the Common Stock is publicly traded, then the Fair Market Value per share shall be determinedas follows: (x) if the principal trading market for the

-3-


Common Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were notrades on that date) the latest preceding date upon which a sale was reported, or (y) if the Common Stock is not principally traded on such exchange ormarket, the mean between the last reported “bid” and “asked” prices of Common Stock on the relevant date, as reported on Nasdaq or, if not so reported,as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committeedetermines. If the Common Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as setforth above, the Fair Market Value per share shall be as determined by the Committee.

(c) Option Term. The term of each Option shall be ten years. (d) Vesting of Options. Subject to Section 5(e), each Option granted to a Non-Employee Director pursuant to Section 5(a)(i) or Section 5(a)(ii) shall

vest and become exercisable in three equal annual installments, as of each of the first three anniversaries of the date of grant. Subject to Section 5(e), eachOption granted to a Non-Employee Director pursuant to Section 5(a)(iii) shall be vested and fully exercisable as of the first anniversary of the date ofgrant.

(e) Termination of Board Membership or Death (i) Except as provided below, an Option may only be exercised when vested and while the Grantee is a member of the Board. Except as

provided below, any Option that is not vested as of the date that the Grantee ceases to be a member of the Board will terminate immediately as ofthat date.

(ii) If a Grantee ceases to be a member of the Board for any reason other than for Cause (as defined below) or, for Awards granted on or afterNovember 10, 2004, Voluntary Retirement (as defined below), including, but not limited to, death and Disability (as defined below), the Grantee’sOptions shall become fully vested on the date of such cessation and shall remain exercisable until the earlier of the first anniversary of suchcessation or the date of expiration of the Option term. “Disability” shall mean eligibility for disability benefits under the terms of the Company’slong-term disability plan in effect at the time the Grantee becomes disabled.

(iii) If the Grantee ceases to be a member of the Board for “Cause”, any Option held by the Grantee shall terminate as of the date the Granteeceases to a member of the Board. “Cause” shall mean a finding by the Committee that the Grantee has breached his or her service contract with theCompany, or has been engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony orproven dishonesty in the course of his or her service, or has disclosed trade secrets or confidential information of the Company to persons notentitled to receive such information. In the event a Grantee ceases to be a member of the Board for Cause, in addition to the immediate terminationof all Options, the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yetdelivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares.

(iv) Effective with Awards granted on or after November 10, 2004, if a Grantee ceases to be a member of the Board due to VoluntaryRetirement (as defined below) after having completed five (5) years of continuous service on the Board, then the term of

-4-


the Grantee’s Stock Option shall end on the earlier of the date set forth in the applicable Award Agreement or three (3) years from the date of theGrantee’s Voluntary Retirement. For purposes of this Section 6, “Voluntary Retirement” shall mean any voluntary termination of Boardmembership by a Grantee after completing five (5) years of continuous service on the Board.

(f) Exercise of Options. A Grantee may exercise an Option, in whole or in part, by delivering a notice of exercise to the Company with payment ofthe Exercise Price in cash. Subject to Committee consent, a Grantee may pay the Exercise Price for an Option through a broker in accordance withprocedures established by the Committee consistent with Regulation T of the Federal Reserve Board. The Grantee shall pay the Exercise Price and theamount of any withholding tax due (pursuant to Section 7) at the time of exercise. Shares of Common Stock shall not be issued upon exercise of an Optionuntil the Exercise Price is fully paid and any required tax withholding is made.

7. Withholding of Taxes

(a) Required Withholding. All Options under the Plan shall be subject to any applicable federal (including FICA), state and local tax withholdingrequirements. The Company may require the Grantee or other person receiving such shares to pay to the Company the amount of any such taxes that theCompany is required to withhold with respect to such Options, or the Company may deduct from other compensation payable by the Company the amountof any withholding taxes due with respect to such Options.

(b) Election to Withhold Shares. If the Committee so permits, a Grantee may elect to satisfy the Company’s income tax withholding obligation withrespect to an Option by having shares withheld up to an amount that does not exceed the Grantee’s maximum marginal tax rate for federal (includingFICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Committee and shall be subject to the prior approval ofthe Committee.

8. Transferability of Options

(a) Nontransferability of Options. Except as provided below, only the Grantee or his or her authorized representative may exercise rights under anOption. A Grantee may not transfer those rights except by will or by the laws of descent and distribution or, if permitted under Rule 16b-3 of the ExchangeAct and if permitted by the Committee, pursuant to a domestic relations order (as defined under the Code or Title I of the Employee Retirement IncomeAct of 1974, as amended, or the regulations thereunder). When a Grantee dies, the personal representative or other person entitled to succeed to the rightsof the Grantee (“Successor Grantee”) may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right toreceive the Option under the Grantee’s will or under the applicable laws of descent and distribution.

(b) Permitted Transfer of Options. Notwithstanding the foregoing, the Committee may provide, in an Option Instrument, that a Grantee may transferNon-qualified Stock Options to family members or other persons or entities according to such terms as the Committee may determine; provided that theGrantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions aswere applicable to the Option immediately before the transfer.

-5-


9. Change of Control of the Company As used herein, a “Change of Control” shall be deemed to have occurred if: (a) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule

13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 35% of the voting power of the thenoutstanding securities of the Company, and such person owns more aggregate voting power of the Company’s then outstanding securities entitled to votegenerally in the election of directors than any other person;

(b) The shareholders of the Company approve (or, if shareholder approval is not required, the Board approves) an agreement providing for (i) themerger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger orconsolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to 50% or more of all votes towhich all shareholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock toelect directors by a separate class vote), (ii) the sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation ordissolution of the Company; or

(c) After the Effective Date, directors are elected such that a majority of the members of the Board shall have been members of the Board for lessthan two years, unless the election or nomination for election of each new director who was not a director at the beginning of such two-year period wasapproved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.

10. Consequences of a Change of Control

(a) Notice and Acceleration. Upon a Change of Control, the Company shall provide each Grantee who holds outstanding Options written notice ofthe Change of Control.

(b) Alternatives. Subject to subsection (c) below, upon or in anticipation of any Change of Control, the Committee may, in its sole and absolutediscretion and without the need for the consent of the Grantee, take one or more of the following actions with respect to any Option: (i) cancel the Optionin exchange for cash or other substitute consideration with a value (as determined by the Committee) equal to the difference between the Fair MarketValue of the Common Stock subject to that Option and the Exercise Price of that Option, (ii) terminate the Option after accelerating the vesting of thatOption and providing the Grantee with a reasonable opportunity to exercise that Option prior to the Change of Control, or (iii) cause the Option to bereplaced with an option to purchase common stock of any successor corporation, which replacement option is on terms that are at least as favorable to theGrantees as terms that would satisfy the requirements of Treasury Regulation § 1.425-1(a)(4)(i) (notwithstanding the fact that the original Option was notintended to satisfy the requirements for treatment as an Incentive Stock Option). Any such cash-out, termination or replacement will be contingent uponthe occurrence of the Change of Control.

(c) Limitations. Notwithstanding anything in the Plan to the contrary, the Committee shall not have the right to take any action (including withoutlimitation actions

-6-


described in Subsection (b) above) that would make the Change of Control ineligible for pooling of interest accounting treatment or that would make theChange of Control ineligible for desired tax treatment if, in the absence of such right, the Change of Control would qualify for such treatment and theCompany intends to use such treatment with respect to the Change of Control.

11. Amendment and Termination of the Plan

(a) Amendment. The Board may amend or terminate the Plan at any time. (b) Termination of Plan. The Plan shall terminate on the day immediately preceding the tenth anniversary of its effective date, unless the Plan is

terminated earlier by the Board or unless extended by the Board with the approval of the shareholders. (c) Termination and Amendment of Outstanding Options. A termination or amendment of the Plan that occurs after an Option is granted shall not

materially impair the rights of a Grantee unless the Grantee consents or unless the Committee acts under Section 17(a). The termination of the Plan shallnot impair the power and authority of the Committee with respect to an outstanding Option. Whether or not the Plan has terminated, the Committee shallnot permit the repricing of Options by any method, including by cancellation and reissuance, without first obtaining shareholder approval.

(d) Governing Document. The Plan shall be the controlling document. No other statements, representations, explanatory materials or examples, oralor written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

12. Funding of the Plan

This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets toassure the issuance or transfer of shares with respect to any Options under this Plan.

13. No Fractional Shares No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Option. The Committee shall determine whether cash, otherawards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited orotherwise eliminated.

14. Requirements for Issuance of Shares No Common Stock shall be issued or transferred in connection with any Option hereunder unless and until all legal requirements applicable to the issuanceor transfer of such Common Stock have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Optiongranted to any Grantee hereunder on such Grantee’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares ofCommon Stock as the Committee shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificatesrepresenting such shares may be legended to reflect any such restrictions. Certificates representing shares of

-7-


Common Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations andinterpretations, including any requirement that a legend be placed thereon.

15. Headings Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control.

16. Effective Date of the Plan The amendment and restatement of this Plan as the AmerisourceBergen Corporation 2001 Non-Employee Directors’ Stock Option Plan shall be effectiveon the Effective Date.

17. Miscellaneous (a) Compliance with Law. The Plan, the exercise of Options and the obligations of the Company to issue or transfer shares of Common Stock under

Options shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to personssubject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicableprovisions of Rule 16b-3 or its successors under the Exchange Act. The Committee may revoke any Option if it is contrary to law or modify an Option tobring it into compliance with any valid and mandatory government regulation. The Committee may, in its sole discretion, agree to limit its authority underthis Section.

(b) Ownership of Stock. A Grantee or Successor Grantee shall have no rights as a shareholder with respect to any shares of Common Stock covered

by an Option until the shares are issued or transferred to the Grantee or Successor Grantee on the stock transfer records of the Company.

(c) Governing Law. The validity, construction, interpretation and effect of the Plan and Option Instruments issued under the Plan shall exclusively begoverned by and determined in accordance with the law of State of Delaware, without giving effect to the conflicts of laws provisions thereof.

As approved by the Board of Directors of AmerisourceBergen Corporation on

October 31, 2001.

William D. Sprague

Secretary

-8-


Exhibit 10.34

CREDIT AGREEMENT

dated as of

December 2, 2004

among


The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

J.P. MORGAN SECURITIES INC.and

BANC OF AMERICA SECURITIES LLC,as Joint Lead Arrangers and Joint Bookrunners

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

THE BANK OF NOVA SCOTIA,

WACHOVIA BANK, NATIONAL ASSOCIATIONand

WELLS FARGO BANK, NATIONAL ASSOCIATION,as Documentation Agents


TABLE OF CONTENTS

ARTICLE I

Definitions SECTION 1.01. Defined Terms 1SECTION 1.02. Classification of Loans and Borrowings 20SECTION 1.03. Terms Generally 20SECTION 1.04. Accounting Terms; GAAP 21

ARTICLE II

The Credits SECTION 2.01. Commitments 21SECTION 2.02. Loans and Borrowings 21SECTION 2.03. Requests for Revolving Borrowings 22SECTION 2.04. Swingline Loans 23SECTION 2.05. Letters of Credit 24SECTION 2.06. Funding of Borrowings 28SECTION 2.07. Interest Elections 29SECTION 2.08. Termination and Reduction of Commitments 30SECTION 2.09. Repayment of Loans; Evidence of Debt 31SECTION 2.10. Prepayment of Loans 32SECTION 2.11. Fees 32SECTION 2.12. Interest 34SECTION 2.13. Alternate Rate of Interest 34SECTION 2.14. Increased Costs 35SECTION 2.15. Break Funding Payments 36SECTION 2.16. Taxes 36SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 38SECTION 2.18. Mitigation Obligations; Replacement of Lenders 39

ARTICLE III

Representations and Warranties SECTION 3.01. Organization; Powers 40SECTION 3.02. Authorization; Enforceability 41SECTION 3.03. Governmental Approvals; No Conflicts 41SECTION 3.04. Financial Condition; No Material Adverse Change 41SECTION 3.05. Properties 42SECTION 3.06. Litigation and Environmental Matters 42SECTION 3.07. Compliance with Laws and Agreements 42SECTION 3.08. Investment and Holding Company Status 42SECTION 3.09. Taxes 42SECTION 3.10. ERISA 43SECTION 3.11. Disclosure 43SECTION 3.12. Subsidiaries 43


SECTION 3.13. Insurance 43SECTION 3.14. Labor Matters 43SECTION 3.15. Senior Indebtedness 44SECTION 3.16. Restrictions on Securing of Obligations 44

ARTICLE IV

Conditions SECTION 4.01. Effective Date 44SECTION 4.02. Each Credit Event 45

ARTICLE V

Affirmative Covenants SECTION 5.01. Financial Statements and Other Information 46SECTION 5.02. Notices of Material Events 48SECTION 5.03. Existence; Conduct of Business 48SECTION 5.04. Payment of Obligations 48SECTION 5.05. Maintenance of Properties; Insurance 49SECTION 5.06. Books and Records; Inspection and Audit Rights 49SECTION 5.07. Compliance with Laws 49SECTION 5.08. Use of Proceeds and Letters of Credit 49SECTION 5.09. Additional Subsidiaries 49SECTION 5.10. Maintenance of Corporate Separateness 49SECTION 5.11. Senior Debt Status 50

ARTICLE VI

Negative Covenants SECTION 6.01. Indebtedness 50SECTION 6.02. Liens 51SECTION 6.03. Fundamental Changes 52SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions 52SECTION 6.05. Asset Sales 53SECTION 6.06. Hedging Agreements 54SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness 54SECTION 6.08. Transactions with Affiliates 55SECTION 6.09. Restrictive Agreements 55SECTION 6.10. Material Documents 56SECTION 6.11. Fixed Charge Coverage Ratio 56SECTION 6.12. Leverage Ratio 56SECTION 6.13. Restricted Properties 56SECTION 6.14. Fiscal Quarters 57SECTION 6.15. Amount of Permitted Debt under the Debt Instruments 57

ARTICLE VII

Events of Default

2


ARTICLE VIII

The Administrative Agent

ARTICLE IX

Miscellaneous SECTION 9.01. Notices 62SECTION 9.02. Waivers; Amendments 62SECTION 9.03. Expenses; Indemnity; Damage Waiver 64SECTION 9.04. Successors and Assigns 65SECTION 9.05. Survival 69SECTION 9.06. Counterparts; Integration; Effectiveness 69SECTION 9.07. Severability 69SECTION 9.08. Right of Setoff 70SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 70SECTION 9.10. WAIVER OF JURY TRIAL 70SECTION 9.11. Headings 71SECTION 9.12. Confidentiality 71SECTION 9.13. Interest Rate Limitation 72SECTION 9.14. Releases of Guarantors 72SECTION 9.15. U.S.A. PATRIOT Act 72

SCHEDULES:

Schedule 2.01 CommitmentsSchedule 2.05 Existing Letters of CreditSchedule 3.12 SubsidiariesSchedule 3.13 InsuranceSchedule 6.02 Existing LiensSchedule 6.04 Existing InvestmentsSchedule 6.09 Existing Restrictions

EXHIBITS:

Exhibit A Form of Assignment and AssumptionExhibit B Form of Guarantee AgreementExhibit C-1 Form of Opinion of Dechert LLP, Counsel for the BorrowerExhibit C-2 Form of Opinion of William D. Sprague, General Counsel of the Borrower

3


CREDIT AGREEMENT dated as of December 2, 2004, among AMERISOURCEBERGEN CORPORATION (the “Borrower”), the LENDERS partyhereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

The Borrower has requested the Lenders to establish a senior unsecured revolving credit facility in an aggregate principal amount of $700,000,000 (the“Facility”). The proceeds of loans under the Facility, and letters of credit issued under the Facility, will be used by the Borrower for general corporate purposes,including investments and acquisitions and the repayment of outstanding Indebtedness. The Lenders are willing to establish the Facility upon the terms andsubject to the conditions set forth herein.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at arate determined by reference to the Alternate Base Rate.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary,to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or isControlled by or is under common Control with the Person specified.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal FundsEffective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rateshall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.


“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If theCommitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect toany assignments.

“Applicable Rate” means, for any day, the applicable rate per annum set forth below under the caption “ABR Spread”, “Eurodollar Spread” or “FacilityFee Rate”, as the case may be, based upon the ratings established by S&P and Moody’s for the Index Debt as of the most recent determination date:

Category

Ratings(S&P/Moody’s)

Facility Fee(basis points per

annum)

LIBORSpread

(basis pointsper annum)

ABR Spread(basis pointsper annum)

Category 1 A/A2 or higher 8.0 32.0 0.0Category 2 A-/A3 10.0 35.0 0.0Category 3 BBB+/Baa1 12.5 50.0 0.0Category 4 BBB/Baa2 15.0 60.0 0.0Category 5 BBB-/Baa3 17.5 70.0 0.0Category 6 BB+/Ba1 20.0 80.0 0.0Category 7 BB/Ba2 25.0 100.0 0.0Category 8 BB-/Ba3 or lower 30.0 120.0 20.0 For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referredto in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 8; (ii) if the ratings established ordeemed to have been established by Moody’s and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higherof the two ratings unless one of the two ratings is two or more Categories above the other, in which case the Applicable Rate shall be determined by reference tothe Category one level above the Category corresponding to the lower rating; and (iii) if the ratings established or deemed to have been established by Moody’sand S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of thedate on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on theeffective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&Pshall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate ingood faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness ofany such amendment, the Applicable Rate shall be determined by reference to the rating of the other rating agency (or, if the circumstances referred to in thissentence shall affect both rating agencies, the ratings most recently in effect prior to such changes or cessations).

2


“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whoseconsent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the AdministrativeAgent.

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of terminationof the Commitments.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning assigned to such term in the preamble hereto.

“Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as towhich a single Interest Period is in effect, or (b) a Swingline Loan.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required bylaw to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are notopen for dealings in dollar deposits in the London interbank market.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangementconveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leaseson a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance withGAAP.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaningof the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of Equity Interestsrepresenting more than 30% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding EquityInterests of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were not(i) directors of the Borrower on the date of this Agreement, (ii) nominated by the board of directors of the Borrower or (iii) appointed by directors referred to inthe preceding clauses (i) and (ii); or (c) the occurrence of a

3


“Change of Control” (or other similar event or condition however denominated) under any Material Indebtedness.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or inthe interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or any Issuing Bank(or, for purposes of Section 2.14(b), by any lending office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any) with any request,guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans orSwingline Loans.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Co-Lead Arrangers” means J.P. Morgan Securities Inc. and Banc of America Securities LLC.

“Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations inLetters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s RevolvingCredit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01, or in theAssignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’Commitments is $700,000,000.

“Consolidated Cash Interest Expense” means, for any period, the sum, without duplication, of (i) the cash interest expense of the Borrower and theSubsidiaries for such period, determined on a consolidated basis in accordance with GAAP, excluding premiums, transaction expenses, discounts and otheramounts required to be amortized and (ii) all discount, interest, fees, premiums and other charges in respect of all Securitizations for such period.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted indetermining such Consolidated Net Income, the sum, without duplication, of (i) consolidated interest expense for such period, (ii) consolidated income taxexpense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any special one-time or extraordinary charges orextraordinary losses for such period, in each case to the extent not involving cash payments by the Borrower or any Subsidiary, and (vi) any

4


LIFO adjustment (if negative) or charge for such period, and minus (b) without duplication and to the extent included in determining such Consolidated NetIncome, any extraordinary non-cash gains for such period and any LIFO adjustment (if positive) or credit, all determined on a consolidated basis in accordancewith GAAP. In the event that the Borrower or any Subsidiary shall have completed an acquisition or disposition of any material Person, division or business unitsince the beginning of the relevant period, Consolidated EBITDA shall be determined for such period on a pro forma basis as if such acquisition or disposition,and any related incurrence or repayment of Indebtedness, had occurred at the beginning of such period.

“Consolidated EBITDAR” means, for any period, Consolidated EBITDA for such period plus rental payments by the Borrower and the Subsidiaries forsuch period (other than under capital leases), determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income or loss of the Borrower and the Subsidiaries for such period determined on aconsolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income or loss of any Person (other than the Borrower) that is not aSubsidiary, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of the Subsidiaries during such period, and(b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary orthe date that such Person’s assets are acquired by the Borrower or any Subsidiary.

“Consolidated Tangible Assets” shall mean the book value of the total consolidated assets of the Borrower and the Subsidiaries less the book value of allintangible assets, including goodwill, trademarks, non-compete agreements, customer relationships, patents, unamortized deferred financing fees, and other rightsor nonphysical resources that are presumed to represent an advantage to ABC in the marketplace, in each case determined on a consolidated basis in accordancewith GAAP.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whetherthrough the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived,become an Event of Default.

“Documentation Agents” means The Bank of Nova Scotia, Wachovia Bank, National Association and Wells Fargo Bank, National Association.

“dollars” or “$” refers to lawful money of the United States of America.

5


“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued,promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, themanagement, release or threatened release of any Hazardous Material or to health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines,penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) thegeneration, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release orthreatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability isassumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust orother equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer underSection 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (otherthan an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined inSection 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA ofan application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of anyliability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a planadministrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by theBorrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) thereceipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or

6


is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearinginterest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Subsidiary” means (a) Subsidiaries that do not own any assets (other than nominal assets) or conduct any operations, or directly or indirectlyown any Equity Interests in Subsidiaries not described in this clause (a), (b) Foreign Subsidiaries, (c) Securitization Entities, (d) Subsidiaries that are less than100% owned by the Borrower to the extent such Subsidiaries are prohibited by shareholders agreements, joint venture agreements or other similar organizationaldocuments from guaranteeing the Obligations, (e) Subsidiaries that have assets of less than $10,000,000 for any such Subsidiary (provided that all suchSubsidiaries’ assets shall not be in excess of $100,000,000 in the aggregate) and (f) JM Blanco, Inc.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by oron account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States ofAmerica, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, inwhich its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any otherjurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower underSection 2.18(b)), any withholding tax imposed by the United States of America that (i) is in effect and would apply to amounts payable to such Foreign Lender atthe time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or itsassignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect toany such withholding tax pursuant to Section 2.16(a), or (ii) is attributable to such Foreign Lender’s failure to comply with Section 2.16(e).

“Existing Credit Agreement” means the Credit Agreement dated as of August 29, 2001, as amended, among AmerisourceBergen Corporation, as borrower,the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

“Existing Letters of Credit” means each letter of credit previously issued for the account of the Company pursuant to the Existing Credit Agreement that(a) is outstanding on the Effective Date and (b) listed on Schedule 2.05.

“Facility” has the meaning assigned thereto in the preamble hereto.

7


“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates onovernight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeedingBusiness Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, ifnecessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers ofrecognized standing selected by it.

“Financed Amount” means, at any time, with respect to any Securitization, (a) if such Securitization involves any transfer of interests in accountsreceivable or inventory (i) to a trust, partnership, corporation or other entity (other than a Subsidiary) or (ii) in the case of a Securitization of accounts receivable,directly to one or more investors or other purchasers (other than any Subsidiary), the aggregate amount of the interests in accounts receivable so transferred, netof collections applied to such interests and net of any such interests that have been written off as uncollectible, or the aggregate book value of the interests ininventory transferred pursuant to such Securitization and not sold or otherwise disposed of by the purchaser or purchasers, or (b) if such Securitization involves atransaction in which a Subsidiary incurs Indebtedness secured by Liens on accounts receivable, the aggregate outstanding principal amount of the Indebtednesssecured by Liens on accounts receivable incurred pursuant to such Securitization.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of thisdefinition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereofor the District of Columbia.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state orlocal, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatoryor administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economiceffect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, andincluding any obligation of

8


the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or topurchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for thepurpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any otherfinancial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as anaccount party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall notinclude endorsements for collection or deposit in the ordinary course of business.

“Guarantee Agreement” means the Guarantee Agreement among the Subsidiary Loan Parties and the Administrative Agent, substantially in the form ofExhibit B.

“Guarantee Requirement” means, at any time, the requirement that the Administrative Agent shall have received from each Subsidiary Loan Party either(i) a counterpart of the Guarantee Agreement, duly executed and delivered on behalf of such Subsidiary Loan Party, or (ii) in the case of any Person that becomesa Subsidiary Loan Party after the Effective Date, a supplement to the Guarantee Agreement in the form specified therein, duly executed and delivered on behalfof such Subsidiary Loan Party; provided that a Subsidiary Loan Party shall not be required to become a Guarantor under the Guarantee Agreement if theBorrower shall have advised the Administrative Agent that it would be a violation of applicable law for such Subsidiary Loan Party to take such action or if, inthe judgment of the Administrative Agent, in consultation with the Borrower, the expense, tax or regulatory consequences or difficulty of taking such actionwould not, in light of the benefits to accrue to the Lenders, justify taking such action.

“Guarantor” means each Subsidiary required to enter into the Guarantee Agreement.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, includingpetroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all othersubstances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or otherinterest or currency exchange rate or commodity price hedging arrangement.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits (other thancustomer deposits in respect of accounts receivable maintained in the ordinary course of business consistent with past practices) or advances of any kind, (b) allobligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges arecustomarily paid (excluding

9


trade accounts payable and obligations to pay salary or benefits under deferred compensation, executive compensation or other benefit programs), (d) allobligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of suchPerson in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) allIndebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien onproperty owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person ofIndebtedness of others, (h) all Capital Lease Obligations and Synthetic Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of suchPerson as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’acceptances and (k) all obligations of such Person incurred under or in connection with a Securitization. The Indebtedness of any Person shall include theIndebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result ofsuch Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is notliable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Index Debt” means the Borrower’s senior, unsecured, non-credit-enhanced long-term Indebtedness for borrowed money.

“Information Memorandum” means the Confidential Information Memorandum dated November 2004 relating to the Borrower and the Transactions.

“Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.07.

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan), the first day of each January, April, July and October,(b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of aEurodollar Borrowing with an Interest Period of more than three months’ duration, each day that occurs at intervals of three months’ duration after the first dayof such Interest Period and continuing until the end of such Interest Period, and (c) with respect to any Swingline Loan, the day that such Loan is required to berepaid.

“Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numericallycorresponding day in the calendar month that is one, two, three or six months (or, with the consent of each Lender that will make a Loan as part of suchBorrowing, nine or 12 months) thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, suchInterest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall

10


in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on thelast Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shallend on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on whichsuch Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Issuing Bank” means JPMorgan Chase Bank, N.A. and any other Lender, that shall have become an Issuing Bank hereunder as provided inSection 2.05(k), each in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). Each IssuingBank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shallinclude any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregateamount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any timeshall be its Applicable Percentage of the total LC Exposure at such time.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender pursuant to an Assignment and Assumption,other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders”includes the Swingline Lender.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutivefiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of theBorrower most recently ended prior to such date); provided that for purposes of determining the Leverage Ratio at any time, the outstanding amount of theRevolving Loans and all other revolving Indebtedness, and the Financed Amount of all Securitizations, included in Total Indebtedness shall be deemed to equalthe average outstanding amount of the Revolving Loans and other revolving Indebtedness, and the average Financed Amount of all Securitizations, in each caseon the last day of each of the four most recently ended fiscal quarters, net of Permitted Investments not to exceed $50,000,000 on the last day of each suchquarter.

11


“Leverage Test” means, with respect to the Borrower, that the Leverage Ratio of the Borrower is not greater than 2.00 to 1.00.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service(or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currentlyprovided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest ratesapplicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of suchInterest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for anyreason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next1/100 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of theAdministrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to thecommencement of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or ofsuch asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease havingsubstantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right ofa third party with respect to such securities.

“Loan Documents” means this Agreement, each promissory note issued hereunder and the Guarantee Agreement.

“Loan Parties” means the Borrower and the Subsidiary Loan Parties.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

“Material Adverse Effect” means a material adverse effect on (a) the business, results of operations or financial condition of the Borrower and theSubsidiaries taken as a whole, (b) the ability of any Loan Party (other than any Subsidiaries that are not Significant Subsidiaries) to perform any of its obligationsunder any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements,of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $25,000,000. For purposes of determining MaterialIndebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be themaximum aggregate amount (giving effect to

12


any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

“Maturity Date” means December 2, 2009.


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

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Obligations” means (a) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency,receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, byacceleration, upon one or more dates set for prepayment or otherwise, (b) each payment required to be made by the Borrower under this Agreement in respect ofany Letter of Credit, when and as due, including payments in respect of reimbursement of reasonable disbursements, interest thereon and obligations to providecash collateral, (c) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed orotherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless ofwhether allowed or allowable in such proceeding), of the Loan Parties under this Agreement and the other Loan Documents and (d) the due and punctualpayment and performance of all obligations of the Borrower and the Subsidiaries under any Hedging Agreement and cash management arrangements oragreements (i) existing on the date hereof and with a Person that is a Lender on the date hereof (or an Affiliate of such a Lender) or (ii) with a Person that shallhave been a Lender at the time such Hedging Agreement or cash management arrangement or agreement was entered into (or an Affiliate of such a Lender).

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising fromany payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Participant” has the meaning set forth in Section 9.04.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Permitted Acquisition” means any non-hostile acquisition by the Borrower or any wholly owned Subsidiary of all or substantially all the assets of, or allthe Equity Interests (other than Equity Interests to be owned by management of such Person that does not constitute more than 10% of the Equity Interests insuch Person) in, a Person or division or line of business of a Person (including any such acquisition effected

13


by a merger of a Person into the Borrower or a Subsidiary in which the Borrower or a wholly owned Subsidiary is the surviving Person) if, immediately aftergiving effect thereto, (a) no Default has occurred and is continuing or would result therefrom, (b) the principal business of such Person shall be reasonablyrelated, ancillary or complementary to a business in which the Borrower and its Subsidiaries are engaged immediately prior to such acquisition or shall be ahealth care business, (c) (i) each Subsidiary formed for the purpose of or resulting from such acquisition shall be a Subsidiary organized and existing under thelaws of the United States and all the Equity Interests of each such Subsidiary shall be owned directly by the Borrower and/or a wholly owned Subsidiaryorganized and existing under the laws of the United States (other than Equity Interests permitted to be owned by management) and all actions required to betaken with respect to such acquired or newly formed Subsidiary under Section 5.09 shall have been taken or (ii) in the case of a Foreign Subsidiary the EquityInterests of which are owned directly by the Borrower or a Subsidiary other than a Foreign Subsidiary, no more than 65% of the outstanding voting EquityInterests of such Foreign Subsidiary shall be pledged for the benefit of the Lenders and on terms reasonably satisfactory to the Administrative Agent, (d) theBorrower and the Subsidiaries shall be in compliance, on a pro forma basis after giving effect to such acquisition (without giving effect to operating expensereductions other than cost savings permitted to be included under Regulation S-X), with the covenants contained in Sections 6.11 and 6.12 recomputed as at thelast day of the most recently ended fiscal quarter of the Borrower for which financial statements are available, as if such acquisition had occurred on the first dayof each relevant period for testing such compliance, and (e) if the consideration to be paid in respect of such acquisition (including Indebtedness to be assumed orrepaid by the Borrower or any Subsidiary) is greater than $25,000,000, the Borrower shall have delivered to the Administrative Agent an officers’ certificate tothe effect set forth in clauses (a), (b), (c) and (d) above, together with all relevant financial information for the Person or assets to be acquired and reasonablydetailed calculations demonstrating satisfaction of the requirement set forth in clause (d) above.

“Permitted Encumbrances” means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of

business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other

social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other

obligations of a like nature, in each case in the ordinary course of business;

14


(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of

business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinaryconduct of business of the Borrower or any Subsidiary;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Investments” means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by

any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within oneyear from the date of acquisition thereof;

(b) Indebtedness maturing within 12 months issued by and constituting direct obligations of any of the following agencies or any other likegovernmental or government-sponsored agency, as follows: Federal Farm Credit Bank; Federal Intermediate Credit Bank; Federal Financings Bank;Federal Home Loan Bank System; Federal Home Loan Mortgage Corporation; Federal National Mortgage Association; Tennessee Valley Authority;Student Loan Marketing Association; Export-Import Bank of the United States; Farmers Home Administration; Small Business Administration;Inter-American Development Bank; International Bank for Reconstruction and Development; Federal Land Banks; and Government National MortgageAssociation;

(c) direct and general obligations maturing within 12 months of any state of the United States of America or any municipality or political subdivisionof such state, including auction rate securities and non rated pre-funded debt, or obligations of any corporation, if such obligations, except pre-refundeddebt, are rated in the highest credit rating obtainable from at least two out of three Ratings Agencies;

(d) obligations (including asset-backed obligations) maturing within 12 months of any corporation, partnership, trust or other entity which are ratedin one of the three highest credit ratings obtainable from at least two out of three Rating Agencies.

(e) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, thehighest credit rating obtainable from S&P or from Moody’s (within which there may be sub-categories or gradations indicating relative standing), andinvestments in

15


master notes that are rated (or that have been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security withinthat class, that is comparable in priority and security with said master note) by S&P or Moody’s in the highest rating categories for short-term debtobligations (within which there may be sub-categories or gradations indicating relative standing);

(f) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereofissued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organizedunder the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than$500,000,000;

(g) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into witha financial institution satisfying the criteria described in clause (c) above (or subsidiaries or Affiliates of such financial institutions); and

(h) money market funds.

“Permitted Other Acquisition” means any acquisition or investment (other than a Permitted Acquisition) by the Borrower or any Subsidiary of or in aPerson or division or line of business of a Person (including any such acquisition or investment resulting from a merger of a Person into a Subsidiary) if,immediately after giving effect thereto, (a) no Default has occurred and is continuing or would result therefrom, (b) the principal business of such Person shall bereasonably related, ancillary or complementary to a business in which the Borrower and its Subsidiaries are engaged immediately prior to such acquisition orinvestment or shall be a health care business, (c) the Borrower and the Subsidiaries shall be in compliance, on a pro forma basis after giving effect to suchacquisition or investment (without giving effect to operating expense reductions other than cost savings permitted to be included under Regulation S-X), with thecovenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of the Borrower for which financialstatements are available, as if such acquisition or investment had occurred on the first day of each relevant period for testing such compliance, and (d) if theconsideration to be paid in respect of such acquisition or investment is greater than $25,000,000, the Borrower shall have delivered to the Administrative Agentan officers’ certificate to the effect set forth in clauses (a), (b) and (c) above, together with all relevant financial information for the Person or assets to beacquired and reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause (c) above.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, GovernmentalAuthority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the

16


Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 ofERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at itsprincipal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as beingeffective.

“Proceeds” has the meaning specified in Section 9-102 of the New York UCC.

“Ratings Agency” means S&P, Moody’s or Fitch, Inc.

“Ratings Test” means, with respect to the Borrower, that the rating established by S&P or Moody’s of the Index Debt of the Borrower is not less thanBBB- or Baa3, respectively.

“Register” has the meaning set forth in Section 9.04.

“Related Fund” means, with respect to any Lender that is a fund or trust that makes, buys or invests in commercial loans, any other fund or trust thatmakes, buys or invests in commercial loans and is managed by the same investment advisor as such Lender.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents andadvisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum ofthe total Revolving Credit Exposures and unused Commitments at such time.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in theBorrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of thepurchase, redemption, retirement, acquisition, cancelation or termination of any Equity Interests in the Borrower or any Subsidiary or any option, warrant orother right to acquire any such Equity Interests in the Borrower or any Subsidiary; provided that no such dividend, distribution or payment shall constitute a“Restricted Payment” to the extent made solely with common stock of the Borrower.

“Revolving Borrowing” means a Borrowing comprised of Revolving Loans.

17


“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s RevolvingLoans and its LC Exposure and Swingline Exposure at such time.

“Revolving Loan” means a Loan made pursuant to Section 2.01.

“S&P” means Standard & Poor’s.

“Securitization” means any transfer or pledge of accounts receivable, inventory and/or Proceeds thereof or interests therein (a) to a special purpose trust,partnership or corporation or other special purpose entity (which may but need not be a Subsidiary), which transfer or pledge is funded by such entity in whole orin part by (i) the issuance to one or more lenders or investors of indebtedness or other securities that are to receive payments principally from the cash flowderived from such accounts receivable, inventory and/or Proceeds thereof or interests therein or (ii) the transfer or pledge of such accounts, inventory and/orProceeds thereof (or interest therein) to one or more investors or other purchasers, or (b) in the case of accounts receivable, directly to one or more investors orother purchasers.

“Securitization Entity” means AmeriSource Receivables Financial Corporation , a Delaware corporation, and any other wholly owned limited purposeSubsidiary of the Borrower that purchases accounts receivable or inventory of the Borrower or any Subsidiary pursuant to a Securitization.

“Significant Subsidiary” means each Subsidiary other than any Subsidiary or Subsidiaries that individually or in the aggregate did not account for morethan 1% of the assets or revenues of the Borrower and the Subsidiaries on a consolidated basis at the end of or for the most recent four fiscal quarter period forwhich financial statements have been delivered under Section 5.01(a) or (b).

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the numberone minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimalestablished by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” inRegulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constituteeurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available fromtime to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of theeffective date of any change in any reserve percentage.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or otherentity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements wereprepared in

18


accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securitiesor other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or oneor more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Borrower.

“Subsidiary Loan Party” means each Subsidiary that is not an Excluded Subsidiary.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of anyLender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder.

“Swingline Loan” means a Loan made pursuant to Section 2.04.

“Syndication Agent” means Bank of America, N.A.

“Synthetic Lease” means a lease of property or assets designed to permit the lessees (i) to claim depreciation on such property or assets under U. S. tax lawand (ii) to treat such lease as an operating lease or not to reflect the leased property or assets on the lessee’s balance sheet under GAAP.

“Synthetic Lease Obligations” shall mean, with respect to any Synthetic Lease, at any time, an amount equal to the higher of (x) the aggregate terminationvalue or purchase price or similar payments in the nature of principal payable thereunder and (y) the then aggregate outstanding principal amount of the notes orother instruments issued by, and the amount of the equity investment, if any, in the lessor under such Synthetic Lease.

“2003 Securitization” means the receivables Securitization as contemplated by the Receivables Purchase Agreement dated as of July 10, 2003, amongAmerisource Receivables Financial Corporation, as seller, AmerisourceBergen Drug Corporation, as initial servicer, various purchaser groups from time to timeand Wachovia Bank National Association, as administrator.

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

“Total Indebtedness” means, as of any date, the sum, without duplication of (a) the aggregate principal amount of Indebtedness of the Borrower and the

19


Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordancewith GAAP, (b) the aggregate amount of the Financed Amounts of all Securitizations of the Borrower and the Subsidiaries, and (c) the aggregate principalamount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance withGAAP, determined on a consolidated basis.

“Transactions” means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing ofLoans, the use of the proceeds thereof, the issuance of the Letters of Credit, the creation of the Guarantees provided for herein and in the other Loan Documentsand the termination and repayment of the Existing Credit Agreement, all Indebtedness thereunder and security interests in relation thereto.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing,is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“wholly owned” means, as to any Subsidiary, that all the Equity Interests in such Subsidiary (other than directors’ qualifying shares) are owned, directly orindirectly, by the Borrower.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as suchterms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a“Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified andreferred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar RevolvingBorrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever thecontext may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shallbe deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unlessthe context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to suchagreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments,supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) thewords “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particularprovision

20


hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedulesto, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible andintangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall beconstrued in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requestsan amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operationof such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for suchpurpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall beinterpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have beenwithdrawn or such provision amended in accordance herewith.

(a) All pro forma computations required to be made hereunder giving effect to any acquisition, investment, sale, disposition, merger or similar event shallreflect on a pro forma basis such event as if it occurred on the first day of the relevant period and, to the extent applicable, the historical earnings and cash flowsassociated with the assets acquired or disposed of for such relevant period and any related incurrence or reduction of Indebtedness for such relevant period, butshall not take into account any projected synergies or similar benefits expected to be realized as a result of such event other than cost savings permitted to beincluded under Regulation S-X.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower indollars from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Credit Exposureexceeding such Lender’s Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepayand reborrow Revolving Loans.

SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by theLenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve anyother Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’sfailure to make Loans as required.

21


(b) Subject to Section 2.10, each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request inaccordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreignbranch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay suchLoan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integralmultiple of $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of$1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments orthat is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e).

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowingif the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of suchrequest by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of theproposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time on the date of the proposed Borrowing. Each suchtelephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a writtenBorrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shallspecify the following information in compliance with Section 2.02: (i) the aggregate amount of such Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the

definition of the term “Interest Period”; and (v) the location and number of the Borrower’s account with the Administrative Agent to which funds are to be disbursed. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respectto any

22


requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of aBorrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’sLoan to be made as part of the requested Borrowing.

SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to theBorrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregateprincipal amount of outstanding Swingline Loans exceeding $100,000,000 or (ii) the aggregate Revolving Credit Exposures exceeding the aggregateCommitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within theforegoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than2:00 p.m., New York City time, on the day of such proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (whichshall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such noticereceived from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general depositaccount of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as providedin Section 2.05(e), by remittance to the applicable Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Dayrequire the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregateamount of Swingline Loans in which the Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to eachLender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionallyagrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s ApplicablePercentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant tothis paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default orreduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided inSection 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and theAdministrative Agent shall promptly pay to the Swingline Lender

23


the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquiredpursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the SwinglineLender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receiptby the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received bythe Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraphand to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to theAdministrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participationsin a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters ofCredit in dollars for its own account, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time totime during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of anyform of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letterof Credit, the terms and conditions of this Agreement shall control. From and after the Effective Date, each Existing Letter of Credit shall be deemed, for thepurposes of this Agreement, to be a Letter of Credit issued under this Section.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal orextension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing sohave been approved by the applicable Issuing Bank) to an Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance,amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended,and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire(which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such otherinformation as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by an Issuing Bank, the Borrower also shall submit aletter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued,amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to representand warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $150,000,000 and (ii) the aggregateRevolving Credit Exposures shall not exceed the aggregate Commitments.

24


(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuanceof such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Daysprior to the Maturity Date; provided that at the request of the Borrower any Letter of Credit may contain customary “evergreen” provisions pursuant to whichsuch Letter of Credit will, in the absence of a notice given by the Issuing Bank, be automatically renewed (but in no event beyond the date that is five BusinessDays prior to the Maturity Date) for successive one-year periods.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any furtheraction on the part of the applicable Issuing Bank or the Lenders, each Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from theapplicable Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawnunder such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to theAdministrative Agent, for the account of such Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and notreimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to theBorrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters ofCredit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter ofCredit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without anyoffset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LCDisbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the date thatsuch LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, ifsuch notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New York City time, on (i) the Business Daythat the Borrower receives such notice, if such notice is received prior to 11:00 a.m., New York City time, on the day of receipt, or (ii) the Business Dayimmediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if suchLC Disbursement is not less than $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03or 2.04 that such payment be financed with an ABR Revolving Borrowing or a Swingline Loan in an equivalent amount and, to the extent so financed, theobligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to makesuch payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the

25


payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lendershall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 withrespect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agentshall promptly pay to the applicable Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of anypayment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extentthat Lenders have made payments pursuant to this paragraph to reimburse an Issuing Bank, then to such Lenders and such Issuing Bank as their interests mayappear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of ABRRevolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse suchLC Disbursement.

(f) Obligations Absolute. The Borrower’s obligations to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute,unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever andirrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or otherdocument presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in anyrespect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of suchLetter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of thisSection, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent,the Lenders, the Issuing Banks, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance ortransfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the precedingsentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to anyLetter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising fromcauses beyond the control of the applicable Issuing Bank; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liabilityto the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to theextent permitted by applicable law) suffered by the Borrower that are caused by an Issuing Bank’s failure to exercise care when determining whether drafts andother documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence orwilful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), an Issuing Bank shall be deemed to have exercisedcare in each such determination. In

26


furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face tobe in substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its sole discretion, either accept and make payment upon suchdocuments without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment uponsuch documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. An Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand forpayment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) ofsuch demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay ingiving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on thedate such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to butexcluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if theBorrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.12(c) shall apply. Interest accrued pursuantto this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant toparagraph (e) of this Section to reimburse an Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent,the replaced Issuing Bank and the successor Issuing Bank, if any. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank.At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant toSection 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an IssuingBank under this Agreement with respect to Letters of Credit to be issued by such Issuing Bank thereafter and (ii) references herein to the term “Issuing Bank”shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. Afterthe replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of anIssuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters ofCredit.

(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the

27


Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposures representing greater than 50%of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the AdministrativeAgent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accruedand unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall becomeimmediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described inclause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations ofthe Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over suchaccount. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of theAdministrative Agent (which will use reasonable efforts to obtain a return at market rates for such cash deposits) and at the Borrower’s risk and expense, suchdeposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by theAdministrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed and, to the extent not so applied, shall beheld for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated(but subject to the consent of Lenders with LC Exposures representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of theBorrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event ofDefault, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have beencured or waived.

(k) Designation of Additional Issuing Banks. From time to time, the Borrower may by notice to the Administrative Agent and the Lenders designate asadditional Issuing Banks one or more Lenders that agree to serve in such capacity as provided below. The acceptance by a Lender of an appointment as anIssuing Bank hereunder shall be evidenced by an agreement (an “Issuing Bank Agreement”), which shall be in a form satisfactory to the Borrower and theAdministrative Agent, shall set forth the LC Commitment of such Lender and shall be executed by such Lender, the Borrower and the Administrative Agent and,from and after the effective date of such agreement, (i) such Lender shall have all the rights and obligations of an Issuing Bank under this Agreement and theother Loan Documents and (ii) references herein and in the other Loan Documents to the term “Issuing Bank” shall be deemed to include such Lender in itscapacity as an Issuing Bank.

SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer ofimmediately available funds by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose bynotice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The

28


Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account designated bythe Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as providedin Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not makeavailable to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such shareavailable on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower acorresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then theapplicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon,for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at thegreater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbankcompensation (it being understood that any payment of such interest by the Borrower will be in lieu of any payment by the Borrower of interest on such amountto the applicable Lender). If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in suchBorrowing.

SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in thecase of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert suchBorrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided inthis Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall beallocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separateBorrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that aBorrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to bemade on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand deliveryor telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.

29


(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 and paragraph (e) of thisSection: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions

thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and(iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which

shall be a period contemplated by the definition of the term “Interest Period”. If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selectedan Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of suchLender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Periodapplicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABRBorrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request ofthe Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continuedas a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicablethereto.

SECTION 2.08. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate at 5:00 p.m., New YorkCity time, on the Maturity Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of theCommitments of any Class shall be in an amount that is an integral multiple of $5,000,000 and not less than $10,000,000 and (ii) the Borrower shall notterminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10, the aggregateRevolving Credit Exposures would exceed the aggregate Commitments.

30


(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at leasttwo Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receiptof any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall beirrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectivenessof other credit facilities, in which case such notice may be revoked or extended by the Borrower (by notice to the Administrative Agent on or prior to thespecified effective date) if such condition is not satisfied or the effectiveness of such other credit facilities is delayed. Any termination or reduction of theCommitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance withtheir respective Commitments of such Class.

SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for theaccount of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Maturity Date and (ii) to the Swingline Lender the thenunpaid principal amount of each Swingline Loan on the earlier of the Maturity Date and the seventh day after such Swingline Loan is made; provided that oneach date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lenderresulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof andthe Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to eachLender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s sharethereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amountsof the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not inany manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliverto such Lender one or more promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) andin a form

31


approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including afterassignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if suchpromissory note is a registered note, to such payee and its registered assigns).

SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or inpart, subject to the requirements of this Section.

(b) In the event and on such occasion that the aggregate Revolving Credit Exposures exceed the aggregate Commitments, the Borrower shall prepayRevolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agentpursuant to Section 2.05(j)) in an aggregate amount equal to such excess.

(c) Prior to any prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify suchselection in the notice of such prepayment pursuant to paragraph (e) of this Section.

(d) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone(confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time,three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, on thedate of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each suchnotice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid; provided that if anotice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.08, then such notice ofprepayment may be revoked or extended if such notice of termination is revoked or extended in accordance with Section 2.08. Promptly following receipt of anysuch notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partialprepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided inSection 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied byaccrued interest to the extent required by Section 2.12.

SECTION 2.11. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee, which shall accrue at theApplicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Effective Date to butexcluding the date on which such Commitment terminates; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitmentterminates, then such

32


facility fee shall continue to accrue on the daily amount of such Lender’s Revolving Credit Exposure from and including the date on which its Commitmentterminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on thefirst day of January, April, July and October of each year and on the date on which the Commitments terminate, commencing on the first such date to occur afterthe date hereof; provided that any facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All facility fees shall becomputed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations inLetters of Credit, which shall accrue at the Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans on the average dailyamount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including theEffective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LCExposure, and (ii) to each Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum (or as otherwise agreed with the applicable IssuingBank) on the average daily amount of the LC Exposure attributable to Letters of Credit issued by such Issuing Bank (excluding any portion thereof attributable tounreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of theCommitments and the date on which there ceases to be any LC Exposure, as well as such Issuing Bank’s standard fees with respect to the issuance, amendment,renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued participation fees and fronting fees shall be payable on the first dayof January, April, July and October of each year, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payableon the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand.Any other fees payable to the Issuing Banks pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shallbe computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed uponbetween the Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to an Issuing Bank, in thecase of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable underany circumstances (except that overpayments made in error shall be refunded or credited against future payments of fees).

33


SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rateplus the Applicable Rate.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowingplus the Applicable Rate.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paidwhen due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate perannum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs ofthis Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upontermination of the Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of anyrepayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on theprincipal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loanprior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate attimes when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each caseshall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBORate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.13. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not

exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly

reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

34


then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, untilthe Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Requestthat requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any BorrowingRequest requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

SECTION 2.14. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of,

or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or (ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar

Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligationto make any such Loan) or to increase the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reducethe amount of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowerwill pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, asthe case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rateof return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence ofthis Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a levelbelow that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law(taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respectto capital adequacy), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amountsas will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or itsholding company, as the case may be, and the manner in which such amount or amounts have been calculated, as specified in paragraph (a) or (b) of this Sectionshall be delivered to

35


the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown asdue on any such certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of suchLender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bankpursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender or such Issuing Bank, as the casemay be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention toclaim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six month periodreferred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.15. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an InterestPeriod applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Periodapplicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto(regardless of whether such notice may be revoked or extended under Section 2.10(d) and is revoked or extended in accordance therewith), or (d) the assignmentof any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.18, then,in any such event, the Borrower shall compensate each Lender for the loss, cost and expense (but not for any lost profit) attributable to such event. In the case ofa Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) theamount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate (not including theApplicable Rate) that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Periodtherefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount ofinterest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement ofsuch period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth anyamount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Administrative Agent (which shall advise theBorrower of the amount due to such Lender) and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on anysuch certificate within 10 days after receipt thereof.

SECTION 2.16. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall bemade free and clear of and without deduction for any Indemnified Taxes or Other Taxes;

36


provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increasedas necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the AdministrativeAgent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) theBorrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance withapplicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the fullamount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect toany payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxesimposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or withrespect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Acertificate as to the amount of such payment or liability delivered to the Borrower by a Lender or an Issuing Bank, or by the Administrative Agent on its ownbehalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shalldeliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of thereturn reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower islocated, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to theAdministrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law orreasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate.

(f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it hasbeen indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay over such refundto the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.16 with respect to theTaxes or Other Taxes

37


giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by therelevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agreesto repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to theAdministrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to itstaxes which it deems confidential) to the Borrower or any other Person.

SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by ithereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable underSection 2.14, 2.15 or 2.16, or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such timeis expressly required, prior to 1:00 p.m., New York City time), on the date when due, in immediately available funds, without set-off or counterclaim. Anyamounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeedingBusiness Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue,New York, New York, except payments to be made directly to the Issuing Banks or the Swingline Lender as expressly provided herein and except that paymentspursuant to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall bemade to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it in like funds for the account of any otherPerson to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a BusinessDay, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall bepayable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LCDisbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably amongthe parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal andunreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursedLC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any ofits

38


Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregateamount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by anyother Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations inLC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably inaccordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements andSwingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, suchparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall notbe construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained bya Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant,other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to theforegoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoingarrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a directcreditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the AdministrativeAgent for the account of the Lenders or an Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that theBorrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or such IssuingBank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or such Issuing Bank, asthe case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank withinterest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at thegreater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbankcompensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or 9.03(c), then theAdministrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agentfor the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if the Borrower isrequired to

39


pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall usereasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another ofits offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant toSection 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise bedisadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any suchdesignation or assignment.

(b) If any Lender requests compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or anyGovernmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then theBorrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, withoutrecourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assigneethat shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall havereceived the prior written consent of the Administrative Agent (and, if a Commitment is being assigned, the Issuing Banks and Swingline Lender), which consentshall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participationsin LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extentof such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignmentresulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a materialreduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiverby such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each Loan Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of itsorganization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in theaggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdictionwhere such qualification is required.

40


SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party’s corporate powers andhave been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrowerand constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, alegal, valid and binding obligation of the Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicablebankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless ofwhether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. (a) The Transactions (i) do not require any consent or approval of, registration or filing with, orany other action by, any Governmental Authority, (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documentsof any Loan Party or any order of any Governmental Authority, (iii) will not violate or result in a default under any indenture, material agreement or othermaterial instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party, and(iv) will not result in the creation or imposition of any Lien on any asset of any Loan Party (other than Liens created hereunder).

(b) Neither the Borrower nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for thepurpose of purchasing or carrying margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System). No part of the proceedsof any Loan will be used, whether directly or indirectly, for any purpose that would entail a violation of such Regulation U.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated andconsolidating balance sheet and statements of income, stockholders equity and cash flows (i) audited as of and for the fiscal year ended September 30, 2003,reported on by Ernst & Young LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended June 30,2004, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations andcash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end auditadjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b) Since September 30, 2003, there has been no material adverse change in the business, assets, operations, prospects or condition (financial or otherwise)of the Borrower and its Subsidiaries, taken as a whole. It is understood and agreed that the developments disclosed in the Borrower’s 10-Q dated as of June 30,2004, and the Information Memorandum do not, and will not without further development, constitute such a material adverse change.

41


SECTION 3.05. Properties. (a) The Borrower and each of its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal propertymaterial to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize suchproperties for their intended purposes.

(b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual propertymaterial to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any suchinfringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority(including, but not limited to, the United States Food and Drug Administration) pending against or, to the knowledge of the Borrower, threatened against oraffecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable likelihood of an adverse determination and that, if adversely determined,could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any of the Loan Documents or theTransactions.

(b) Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect,neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license orother approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respectto any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and ordersof any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except wherethe failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and iscontinuing.

SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an “investment company” as defined in,or subject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public UtilityHolding Company Act of 1935.

SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have beenfiled and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriateproceedings and for

42


which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could notreasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events forwhich liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefitobligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of themost recent financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of the assets of such Plan, and the present valueof all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting StandardsNo. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of theassets of all such underfunded Plans.

SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which theBorrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected toresult in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other informationfurnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other LoanDocument or delivered hereunder or thereunder (as modified or supplemented by other information so furnished), taken as a whole, contains any materialmisstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faithbased upon assumptions believed to be reasonable at the time.

SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Borrower in, each Subsidiary of the Borrower andidentifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.

SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of the Borrower and its Subsidiaries as of theEffective Date. As of the Effective Date, all premiums in respect of such insurance have been paid to the extent due. The Borrower believes that the insurancemaintained by or on behalf of the Borrower and its Subsidiaries is adequate.

SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, tothe knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been inviolation in any material respect of the Fair Labor Standards Act or any other applicable Federal, state, local or

43


foreign law dealing with such matters. All payments due from the Borrower or any Subsidiary, or for which any claim may be made against the Borrower or anySubsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of theBorrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of anyunion under any collective bargaining agreement to which the Borrower or any Subsidiary is bound.

SECTION 3.15. Senior Indebtedness. The Obligations constitute, and have been designated as, “Senior Indebtedness”, “Designated Senior Debt”,“Designated Guarantor Senior Debt” or any equivalent term, however defined, under and as defined in each document or instrument governing subordinatedIndebtedness of the Borrower or any Subsidiary.

SECTION 3.16. Restrictions on Securing of Obligations. Except as set forth in Schedule 6.09 or expressly permitted by the proviso in Section 6.09 (otherthan clause (iv) thereof), neither the Borrower nor any Subsidiary is on the date hereof party to any agreement or other arrangement that prohibits, restricts orimposes any condition upon the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to securethe Obligations or any of them (including, without limitation, negative pledges).

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall notbecome effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf

of such party or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signaturepage of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated theEffective Date) of (i) Dechert LLP, counsel for the Borrower, substantially in the form of Exhibit C-1 and (ii) William D. Sprague, General Counsel of theBorrower, in substantially the form of Exhibit C-2, in a form reasonably satisfactory to the Administrative Agent and covering such other matters relatingto the Loan Parties, the Loan Documents or the Transactions as the Administrative

44


Agent or the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request

relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating tothe Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a FinancialOfficer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02 and in paragraph (f) of this Section.Such certificate shall include all relevant calculations in detail satisfactory to the Administrative Agent.

(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to theextent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursedor paid by any Loan Party hereunder or under any other Loan Document.

(f) The Guarantee Requirement shall have been satisfied. (g) The Existing Credit Agreement and the commitments thereunder shall have been terminated, the loans and other amounts outstanding or payable

thereunder shall have been paid in full, all letters of credit outstanding thereunder shall have expired or been terminated or shall be Existing Letters ofCredit, and all liens securing such loans and other amounts shall have been released.

(h) The Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know yourcustomer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding theforegoing, the obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each ofthe foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on December 2, 2004 (and, in the eventsuch conditions are not so satisfied or waived, the Commitments shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue,

45


amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the followingconditions: (a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as

of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable. (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit,

as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by theBorrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid infull and all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, the Borrower covenants and agrees with the Lendersthat:

SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent, which will make available by meansof electronic posting to each Lender: (a) within 95 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations,

stockholders’ equity and cash flows as of the end of and for such year, in each case setting forth in comparative form the figures for the previous fiscalyear, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception andwithout any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all materialrespects the financial condition and results of operations of the Borrower and the consolidated Subsidiaries on a consolidated basis in accordance withGAAP consistently applied;

(b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its unaudited consolidated balance sheetand related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of thefiscal year, in each case setting forth in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as ofthe end of) the

46


previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition and results of operations of theBorrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end auditadjustments and the absence of footnotes;

(c) within 95 days after the end of each fiscal year of the Borrower, its unaudited consolidating balance sheet and related statements of operations inrespect of each of (i) AmerisourceBergen Drug Company, (ii) PharMerica, Inc. and (iii) all other Subsidiaries, taken as a whole, in each case as of the endof and for such year;

(d) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower(i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to betaken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.11 and 6.12 and (iii) stating whetherany change in GAAP or in the application thereof has occurred since the date of the Borrower’s audited financial statements referred to in Section 3.04and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(e) promptly after the same become publicly available, the Borrower will provide to each Lender copies of all periodic and other reports, proxystatements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authoritysucceeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholdersgenerally, as the case may be;

(f) promptly following a request therefor, any documentation or other information that a Lender reasonably requests in order to comply with itsongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act; and

(g) promptly following any request therefor, such other information regarding the operations, business affairs, assets and financial condition of theBorrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent, or any Lender through the AdministrativeAgent, may reasonably request, it being understood that the Borrower may require any Lender receiving such information to confirm in writing itsconfidentiality obligations under Section 9.12.

Information required to be delivered pursuant to this Section shall be deemed to have been delivered on the date on which the Borrower provides notice to

the Administrative Agent that such information has been posted on the Borrower’s website on the Internet at http://www.amerisourcebergen.com or at theappropriate Borrower

47


designated website at http://www.sec.gov or http://intralinks.com; provided that the Borrower shall deliver paper copies of the information referred to in thisSection after the date delivery is required thereunder to any Lender which requests such delivery within 5 Business Days after such request.

SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of thefollowing: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the

Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to

result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $25,000,000; (d) the amendment, modification or waiver of any provision of any agreement or instrument relating to any Securitization in effect on the date hereof

or to the 2003 Securitization to (i) add any termination event or other similar event, however denominated, or to make any existing such event moreonerous to the Borrower, any Subsidiary or any Securitization Entity, (ii) advance the stated date on which such Securitization terminates, (iii) reduce theFinanced Amount of such Securitization or (iv) materially reduce the advance rate of such Securitization; and

(e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth thedetails of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessaryto preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks andtrade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permittedunder Section 6.03.

SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its Indebtedness and other obligations,including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faithby appropriate

48


proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contesteffectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation and (d) the failure to make payment pendingsuch contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all propertymaterial to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound andreputable insurance companies insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similarbusinesses operating in the same or similar locations.

SECTION 5.06. Books and Records; Inspection and Audit Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books ofrecord and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will,and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect its properties, toexamine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at suchreasonable times and as often as reasonably requested, subject to such reasonable notice requirements and other procedures as shall from time to time be agreedupon by the Borrower and the Administrative Agent.

SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and ordersof any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably beexpected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used only for the purposes set forth in the preamble of thisAgreement. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations ofthe Board, including Regulations U and X. Letters of Credit will be issued only for general corporate purposes.

SECTION 5.09. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date, the Borrower will, within 45 days aftersuch Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and cause the Guarantee Requirement to be satisfied with respectto such Subsidiary (if it is not an Excluded Subsidiary).

SECTION 5.10. Maintenance of Corporate Separateness. The Borrower will, and will cause each of its Subsidiaries to, satisfy customary corporate orlimited liability company formalities, including the maintenance of corporate and business

49


records. No Loan Party or other Subsidiary (i) shall make any payment to a creditor of another Loan Party or Subsidiary in respect of any liability of such otherLoan Party or Subsidiary (other than pursuant to Guarantees permitted hereunder) or (ii) shall receive any payment from a creditor of another Loan Party orSubsidiary in respect of any liability owing to such other Loan Party or Subsidiary, and the Borrower shall ensure that to the extent that cash of any Loan Party orSubsidiary or payments by any creditor to such Loan Party or Subsidiary shall have been commingled with cash of any other Loan Party or Subsidiary in anybank account or otherwise, accurate records exist to ensure that all such monies are able to be traced to each such Loan Party or Subsidiary. No Loan Party norany Subsidiary shall take any action, or conduct its affairs in a manner, which is reasonably likely to result in the corporate existence of such Loan Party orSubsidiary, or any other Loan Party or Subsidiary, being ignored, or in the assets and liabilities of any Loan Party or Subsidiary being substantively consolidatedwith those of any other Loan Party or Subsidiaries in a bankruptcy, reorganization or other insolvency proceeding.

SECTION 5.11. Senior Debt Status. In the event that the Borrower or any Subsidiary Loan Party shall at any time issue or have outstanding anyIndebtedness that by its terms is subordinated to any other Indebtedness of the Borrower or such Subsidiary, the Borrower shall take or cause such Subsidiary totake all such actions as shall be necessary to cause the Obligations to constitute senior indebtedness (however denominated) in respect of such subordinatedIndebtedness and to enable the Lenders to have and exercise any payment blockage or other remedies available or potentially available to holders of seniorindebtedness under the terms of such subordinated Indebtedness. Without limiting the foregoing, the Obligations are hereby designated as “senior indebtedness”and, if relevant, as “designated senior indebtedness” in respect of all such subordinated Indebtedness and are further given all such other designations as shall berequired under the terms of any such subordinated Indebtedness in order that the Lenders may have and exercise any payment blockage or other remediesavailable or potentially available to holders of senior indebtedness under the terms of such subordinated indebtedness.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full andall Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, the Borrower covenants and agrees with the Lenders that:

SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtednessunder any Securitization of inventory, or any Indebtedness of an Excluded Subsidiary, other than:

(a) Indebtedness existing or deemed to exist under any inventory Securitization, to the extent that the aggregate Financed Amount of all suchSecuritizations does not exceed $500,000,000; provided that, in the event any

50


Indebtedness existing or deemed to exist under any inventory Securitization shall contain any financial covenants, change of control provisions or event ofdefault, termination event, amortization event or similar thresholds with respect to cross-defaults or analogous events, non-payment of judgments or ERISAliabilities more restrictive than those contained in this Agreement, such financial covenants, change of control provisions or thresholds, for so long as they shallremain in effect, shall be deemed to be incorporated by reference, mutatis mutandis, into this Agreement;

(b) Indebtedness of Excluded Subsidiaries (other than JM Blanco, Inc. and any Securitization Entity) in an aggregate principal amount not exceeding$300,000,000 at any time outstanding; and

(c) Indebtedness of JM Blanco, Inc. in an aggregate principal amount not exceeding $55,000,000 at any time outstanding.

SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property orasset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Permitted Encumbrances;

(b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) suchLien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on thedate hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of anyPerson that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created incontemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any otherproperty or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or thedate such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principalamount thereof;

(d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens secure onlyIndebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including any Capital Lease Obligations or otherIndebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, andextensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an

51


earlier maturity date or decreased weighted average life thereof, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost ofacquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower orany Subsidiary;

(e) Liens on accounts receivable, inventory and the Proceeds thereof existing or deemed to exist in connection with any Securitization permitted pursuantto Section 6.01; and

(f) other Liens securing obligations not greater than $50,000,000 in the aggregate.

SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person,or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that if at the time thereof and immediately after giving effectthereto no Default shall have occurred and be continuing, (i) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the survivingcorporation, (ii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary and (if any party to such merger is aSubsidiary Loan Party) is a Subsidiary Loan Party and (iii) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrowerdetermines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; providedthat any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted bySection 6.04.

(b) The Borrower will not, and will not permit any of the Subsidiaries to, engage to any material extent in any business other than businesses of the typeconducted by the Borrower and the Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto or to the healthcare industryor such other business as shall have been approved by the Required Lenders.

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will not permit any of the Subsidiaries to,purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any Equity Interestsin or evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist anyloans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwiseacquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) investments of the Borrower under Hedging Agreements entered into in accordance with Section 6.06;

52


(b) Permitted Investments; (c) investments existing on the date hereof and set forth on Schedule 6.04; (d) Permitted Acquisitions; (e) Permitted Other Acquisitions in respect of which the aggregate amount of consideration paid after the date hereof (including Indebtedness

assumed or repaid by the Borrower or a Subsidiary) does not exceed at any time $100,000,000; (f) loans or advances made by the Borrower to any Subsidiary or made by any Subsidiary to the Borrower or any other Subsidiary other than loans

and advances made by Loan Parties to Subsidiaries that are not Loan Parties; and (g) other investments, loans, advances, and Guarantees constituting Indebtedness not prohibited by Section 6.01; provided that the aggregate amount

thereof, at any time, shall not exceed $250,000,000 at the time of incurrence unless the Leverage Test or the Ratings Test shall be satisfied at such time andwould remain satisfied upon the completion of each such investment, loan, advance or Guarantee.

SECTION 6.05. Asset Sales. The Borrower will not, and will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset,

including any Equity Interest owned by it, nor will the Borrower permit any of its Subsidiaries to issue any additional Equity Interest in such Subsidiary, except: (a) sales of inventory, obsolete or surplus equipment and Permitted Investments in the ordinary course of business; (b) sales, transfers and dispositions to the Borrower or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary

that is not a Loan Party shall be made in compliance with Section 6.08; (c) sales of accounts receivable, inventory and the Proceeds thereof under any Securitization; provided that the aggregate amount of the inventory

subject to any such Securitization of inventory shall not exceed $500,000,000 at any time; and (d) sales, transfers and other dispositions of assets that are not permitted by any other clause of this Section (including any sale and leaseback

transactions); provided that (i) the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (d) shallnot exceed, at any time, 20% of the Consolidated Tangible Assets of the Borrower and its Subsidiaries as of the most recent such sale, transfer ordisposition and (ii) any retained Equity Interests in any Subsidiary in which any Equity Interests have been sold, transferred or otherwise disposed of shallbe deemed to be noncash consideration received in respect of such sale, transfer or other disposition;

53


provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clauses (b) and (c) above) shall be made for fairvalue and for at least 75% cash consideration (it being understood that all noncash consideration constituting investments, and the retention of minority interestsin sold Subsidiaries, shall be subject to Section 6.04(e), and that contingent payouts, earnouts and similar consideration will be valued based upon the maximumconsideration permitted to be received on a present value basis based upon reasonable assumptions).

SECTION 6.06. Hedging Agreements. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other thanHedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conductof its business or the management of its liabilities and not for any speculative purpose.

SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness. (a) Unless either the Leverage Test or the Ratings Test shall be satisfied at suchtime and would remain satisfied after giving effect to such payment or distribution, the Borrower will not, and will not permit any of the Subsidiaries to, declareor make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) Subsidiariesmay declare and pay dividends ratably with respect to their capital stock, (ii) so long as no Default or Event of Default shall have occurred and be continuing atthe time of such payment and no Default would occur as a result of making such payment, (A) the Borrower may make Restricted Payments to the extent that theaggregate amount of all such Restricted Payments in the current fiscal quarter, taken together with the aggregate amount of all such Restricted Payments inrespect of such Restricted Payments in the three fiscal quarters immediately preceding such fiscal quarter, is not in excess of $100,000,000 plus 25% of AdjustedConsolidated Net Income for the four fiscal quarter period ending most recently prior to the time any such Restricted Payment is made and (B) the Borrower maypay regular dividends or distributions in respect of preferred stock issued after the date hereof, and (iii) notwithstanding the limitation in subsection (ii) above, solong as no Default or Event of Default shall have occurred and be continuing at the time of a repurchase and no Default or Event of Default would occur as aresult of making that repurchase, the Borrower may repurchase its capital stock to the extent that the aggregate amount since August 4, 2004, of all suchpayments in respect of such repurchases shall not exceed $500,000,000, in addition to any repurchases allowed under subsection (ii) above. For purposes ofclause (ii) above, “Adjusted Consolidated Net Income” for any period shall mean the sum, without duplication, for such period of Consolidated Net Income plusany special one-time or extraordinary non-cash charges deducted in calculating such Consolidated Net Income.

(b) Unless either the Leverage Test or the Ratings Test shall be satisfied at such time and would remain satisfied upon making such payment ordistribution, the Borrower will not, and will not permit any of its Subsidiaries to, make or agree to pay or make, directly or indirectly, any payment or otherdistribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution(whether in cash, securities or other property), including

54


any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Indebtedness, except: (i) payment of Indebtedness created under the Loan Documents; (ii) payment of regularly scheduled interest payments and scheduled or mandatory principal payments as and when due in respect of any

Indebtedness, other than payments in respect of subordinated debt prohibited by the subordination provisions thereof, and payments made to theBorrower or any Subsidiary by Securitization Entities in respect of subordinated Indebtedness incurred pursuant to any Securitization;

(iii) refinancings of Indebtedness to the extent permitted by Section 6.01; (iv) repayments of Indebtedness of acquired Persons or businesses in connection with and substantially simultaneously with the consummation

of Permitted Acquisitions or Permitted Other Acquisitions; (v) payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such

Indebtedness; and (vi) the conversion of 5% Convertible Subordinated Notes issued by Amerisource Health Corporation (now known as AmerisourceBergen

Services Corporation) due December 1, 2007 to, or the exchange of such Notes for, common stock of the Borrower, or the redemption of such Notesfor cash pursuant to a notice of redemption given at a time when no Default or Event of Default shall have occurred and be continuing (or wouldoccur as a result of the redemption of all such Notes for cash).

SECTION 6.08. Transactions with Affiliates. The Borrower will not, and will not permit any of the Subsidiaries to, sell, lease or otherwise transfer any

material amount of property or assets to, or purchase, lease or otherwise acquire any material amount of property or assets from, or otherwise engage in any othermaterial transactions with, any Affiliate of the Borrower or such Subsidiary, except (a) transactions that are at prices and on terms and conditions not lessfavorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among theBorrower and the Subsidiary Loan Parties not involving any other Affiliate, (c) transactions between the Borrower or any Subsidiary and any SecuritizationEntity pursuant to any Securitization and (d) any Restricted Payment permitted by Section 6.07.

SECTION 6.09. Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur orpermit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary tocreate, incur or permit

55


to exist any Lien upon any of its property or assets (including, without limitation, negative pledges, but other than negative pledges that do not prohibit, restrict orimpose any condition upon Liens securing this Agreement or the Obligations), or (b) the ability of any Subsidiary to pay dividends or other distributions withrespect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of theBorrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document or byany agreement, document or instrument relating to any Securitization or any indenture, agreement or instrument evidencing or governing Indebtedness, in eachcase, as in effect on the date hereof or as modified in accordance herewith, or relating to the 2003 Securitization as modified in accordance herewith, (ii) theforegoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.09 (but shall apply to any amendment or modificationexpanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreementsrelating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale ispermitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtednesspermitted by this Agreement if such Indebtedness is incurred in accordance with Section 6.01 and such restrictions or conditions apply only to the property orassets financed with such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting theassignment thereof and (vi) the Borrower may enter into agreements limiting Guarantees by Subsidiaries, provided that any such agreements do not limit orimpair the Guarantees issued or required to be issued by the Loan Parties in connection with this Agreement.

SECTION 6.10. Material Documents. The Borrower will not, nor will it permit any Subsidiary to, amend, modify or waive in any manner that couldreasonably be expected to adversely affect the Lenders any of its rights under (i) any indenture, material agreement or material instrument evidencing orgoverning Indebtedness or (ii) its certificate of incorporation, by-laws or other organizational documents.

SECTION 6.11. Fixed Charge Coverage Ratio. The Borrower will not permit the ratio of (a) Consolidated EBITDAR to (b) the sum, without duplication,of (i) Consolidated Cash Interest Expense, (ii) cash dividends on Equity Interests in the Borrower and (iii) rental payments of the Borrower and the Subsidiaries(other than under capital leases), determined on a consolidated basis in accordance with GAAP, in each case for any period of four consecutive fiscal quartersending on any date that is the last day of a fiscal quarter, to be less than 3.00 to 1.00 on the last day of such period.

SECTION 6.12. Leverage Ratio. The Borrower will not permit the Leverage Ratio as of the last day of any fiscal quarter to exceed 3.00 to 1.00.

SECTION 6.13. Restricted Properties. The Borrower will not, and will not permit any Subsidiary to, permit any property that is a “Restricted Property” orany equivalent term, however defined, under and for the purposes of each document or instrument governing subordinated Indebtedness of the Borrower or anySubsidiary, to be

56


owned by any Person other than a Subsidiary that has no assets other than Restricted Properties, no parent other than the parent specified in such document orinstrument and no activities other than the ownership of Restricted Properties.

SECTION 6.14. Fiscal Quarters. The Borrower will not change, and will not permit any Subsidiary to change, the fiscal quarter ends of the Borrower orany Subsidiary to any date other than March 31, June 30, September 30 or December 31, respectively.

SECTION 6.15. Amount of Permitted Debt under the Debt Instruments. The Borrower will not incur additional indebtedness or letters of credit in anaggregate amount that would at any time result in the Borrower not being permitted under any document or instrument governing subordinated Indebtedness ofthe Borrower or any Subsidiary to borrow Revolving Loans and obtain Letters of Credit in an aggregate principal or face amount equal to the aggregate amountof the unused Commitments.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur: (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the

same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this

Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continueunremedied for a period of three Business days;

(c) any representation, warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with any LoanDocument or any amendment or modification thereof or waiver thereunder, or any report, certificate, financial statement or other document furnishedpursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrectin any material respect when made or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the existenceof the Borrower), 5.06 or 5.08 or in Article VI;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those

57


specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from theAdministrative Agent to the Borrower (which notice will be given at the request of any Lender);

(f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of anyMaterial Indebtedness, when and as the same shall become due and payable prior to the expiration of any grace period applicable to such payment;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permitsthe holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or torequire the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity, or there shall occur any default, event of default,event of termination or other event that results in, or entitles any person other than the Borrower or a Subsidiary to cause, the acceleration of anyIndebtedness, or the termination of the purchase of accounts receivable or inventory, under any Securitization; provided that this clause (g) shall not applyto secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief inrespect of the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy,insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator orsimilar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shallcontinue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganizationor other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to theinstitution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for orconsent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for asubstantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a generalassignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Borrower or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they becomedue;

58


(k) one or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 which is not paid or fully covered byinsurance shall be rendered against the Borrower, any Significant Subsidiary, any Subsidiary Loan Party or any combination thereof and the same shallremain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by ajudgment creditor to attach or levy upon any assets of the Borrower or any Significant Subsidiary or any Subsidiary Loan Party to enforce any suchjudgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that haveoccurred, could reasonably be expected to result in liability of the Borrower and the Significant Subsidiaries and Subsidiary Loan Parties in an aggregateamount exceeding $25,000,000;

(m) any Guarantee under the Guarantee Agreement shall cease to be, or shall be asserted by any Loan Party not to be, a valid, binding andenforceable obligation of the applicable Subsidiary Loan Party; or

(n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower or any Significant Subsidiary described in clause (h) or (i) of this Article), and atany time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to theBorrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shallterminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to bedue and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together withaccrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment,demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower or anySignificant Subsidiary described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans thenoutstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due andpayable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII


Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent totake such actions on its behalf and to exercise such powers as are delegated to it by the terms of the Loan Documents, together with such actions and powers asare reasonably incidental thereto.

59


Any bank serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and mayexercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engagein any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generalityof the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and iscontinuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rightsand powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or suchother number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in theLoan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to theBorrower or any of its Subsidiaries that is communicated to or obtained by any bank serving as Administrative Agent or any of its Affiliates in any capacity. TheAdministrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other numberor percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or wilfulmisconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to theAdministrative Agent, by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) anystatement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document deliveredthereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any LoanDocument, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) thesatisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be deliveredto the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent,statement, instrument, document or other writing believed by them to be genuine and to have been signed or sent by the proper Person. The Administrative Agentalso may rely upon any statement made to them orally or by telephone and believed by them to be made by the proper Person, and shall not incur any liability forrelying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other expertsselected by them, and shall not be liable for

60


any action taken or not taken by them in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all their duties and exercise its rights and powers by or through any one or more sub-agents appointed bythe Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through theirrespective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of theAdministrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided forherein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at anytime by notifying the Lenders, the Issuing Banks and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation withthe Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and theIssuing Banks, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank, that isreasonably acceptable to the Borrower. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeedto and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall bedischarged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable toits predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of thisArticle and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respectof any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on suchdocuments and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledgesthat it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall fromtime to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Documentor related agreement or any document furnished hereunder or thereunder.

The parties agree that the Syndication Agent and the Documentation Agents shall have no obligations or liabilities whatsoever in their capacities as such.

61


ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and othercommunications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sentby telecopy, as follows: (i) if to the Borrower, to it at 1300 Morris Drive, Suite 100, Chesterbrook, PA 19087, Attention of J.F. Quinn (Telecopy (610) 727-3639), with

a copy to the Borrower, Attention of General Counsel; (ii) if to the Administrative Agent, the Swingline Lender or JPMorgan Chase Bank, N.A., in its capacity as Issuing Bank, JPMorgan Chase

Bank, N.A., Loan and Agency Services Group, 1111 Fannin, Floor 10, Houston, TX 77002, Attention of Erin Merritt, with a copy to JPMorganChase Bank, N.A., 270 Park Avenue, New York, New York 10017, Attention of Dawn Lee Lum (Telecopy No. (212) 270-3279);

(iii) if to any other Issuing Bank or Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to proceduresapproved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the AdministrativeAgent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to ithereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices orcommunications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. Allnotices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the dateof receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right orpower hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or anyabandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right orpower. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulativeand are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or

62


consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and thensuch waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, themaking of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lenderor any Issuing Bank may have had notice or knowledge of such Default at the time.

(b) None of this Agreement, any Loan Document or any provision hereof or thereof may be waived, amended or modified except, in the case of thisAgreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, in the case of any other LoanDocument, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are partiesthereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without thewritten consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any feespayable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or the required date of reimbursement ofany LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, orpostpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) ina manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of thisSection or the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage ofLenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, withoutthe written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release any Subsidiary Loan Party from its Guarantee under theGuarantee Agreement (except as expressly provided in this Agreement or the Guarantee Agreement), or limit its liability in respect of such Guarantee, withoutthe written consent of each Lender or (vii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect ofpayments or prepayments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent ofLenders holding a majority in interest of the outstanding Loans and unused Commitments of the adversely affected Class; provided further that no suchagreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Banks or the Swingline Lender without the priorwritten consent of the Administrative Agent, each Issuing Bank or the Swingline Lender, as the case may be. Notwithstanding the foregoing, any provision ofthis Agreement may be amended by an agreement in writing entered into by the Borrower, the Required Lenders and the Administrative Agent (and, if theirrights or obligations are affected thereby, the Issuing Banks and the Swingline Lender) if (i) by the terms of such agreement the Commitment of each Lender notconsenting to the amendment provided for therein shall terminate upon the effectiveness of such

63


amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interestaccrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by theAdministrative Agent, the Co-Lead Arrangers and their Affiliates, including the reasonable fees, charges and disbursements of outside counsel for theAdministrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents orany amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated),(ii) all reasonable out-of-pocket expenses incurred by the Issuing Banks in connection with the issuance, amendment, renewal or extension of any Letter of Creditor any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Co-Lead Arranger, any Issuing Bank orany Lender, including the fees, charges and disbursements of any outside counsel for such Administrative Agent, Co-Lead Arranger, any Issuing Bank or anyLender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or inconnection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring ornegotiations in respect of such Loans or Letters of Credit.

(b) The Borrower shall indemnify the Administrative Agent, each Co-Lead Arranger, each Issuing Bank and each Lender, and each Related Party of any ofthe foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages,liabilities and related expenses, including the reasonable fees, charges and disbursements of any outside counsel for any Indemnitee, incurred by or assertedagainst any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement orinstrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of theTransactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by anIssuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with theterms of such Letter of Credit), (iii) any Environmental Liability related in any way to the Borrower or any of the Subsidiaries, or (iv) any actual or prospectiveclaim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether anyIndemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilitiesor related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilfulmisconduct of such Indemnitee and provided further that the Borrower, in connection with any indemnified matter, shall only be required to pay the fees andexpenses of joint counsel engaged to represent all Indemnitees, except to the

64


extent that the use of joint counsel could reasonably be expected to give rise to any conflict of interest for any such counsel or any Indemnitee shall havedetermined that it may have legal defenses available to it that are different from, additional to or in conflict with those available to any other Indemnitee.

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, a Co-Lead Arranger, an Issuing Bank orthe Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Co-Lead Arranger, suchIssuing Bank or the Swingline Lender, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense orindemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, asthe case may be, was incurred by or asserted against the Administrative Agent, such Co-Lead Arranger, such Issuing Bank or the Swingline Lender in itscapacity as such. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the total Revolving Credit Exposuresand unused Commitments at the time.

(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory ofliability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, thisAgreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that the Borrower maynot assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment ortransfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon anyPerson (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letterof Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Co-Lead Arrangers, the Issuing Banksand the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights andobligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consentnot to be unreasonably withheld) of: (A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an

Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee;

65


(B) the Administrative Agent and the Swingline Lender; and (C) each Issuing Bank. (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the

assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the datethe Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unlesseach of the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Event ofDefault has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations underthis Agreement;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with aprocessing and recordation fee of $3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

For purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similarextensions of credit in the ordinary course of its business and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate ofan entity that administers or manages a Lender.

(c) Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignmentand Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rightsand obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment andAssumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’srights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of

66


Sections 2.14, 2.15, 2.16 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with thisparagraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance withparagraph (e) of this Section.

(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy ofeach Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, andprincipal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in theRegister shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded inthe Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall beavailable for inspection by any Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completedAdministrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of thisSection and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment andAssumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has beenrecorded in the Register as provided in this paragraph. Following the effectiveness of any assignment, the Administrative Agent shall, if so requested, causepromissory notes reflecting such assignment to be issued to the Assignee and, if applicable, to the Assignor, upon cancellation of any existing promissory notesoriginally issued to the Assignor.

(f) Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Banks or the Swingline Lender, sell participations to oneor more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion ofits Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shallremain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Banksand the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the LoanDocuments and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument mayprovide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso toSection 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits ofSections 2.14,

67


2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extentpermitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subjectto Section 2.17(c) as though it were a Lender.

(g) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled toreceive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior writtenconsent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is notified ofthe participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as though it were a Lender.

(h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of suchLender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment ofa security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute anysuch pledgee or assignee for such Lender as a party hereto.

(i) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Bank”) may grant to a special purpose funding vehicle (an “SPC”)of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrowers, the option toprovide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to Section 2.01,provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC, (ii) if an SPC elects not to exercise such option or otherwise fails toprovide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof, (iii) all amounts payable by theBorrower to any SPC hereunder in respect of any Loan and the applicability of the cost protection provisions contained in Section 2.14, 2.15 and 2.16 shall bedetermined as if the Granting Lender had made such Loan and (iv) any notices given by the Administrative Agent, the Borrower and the other Lenders withrespect to any Loan provided by an SPC may be given to the Granting Lender and the Granting Lender shall have the authority to act on behalf of the SPC withrespect to such Loans and/or notices. The making of a Loan by an SPC hereunder shall be deemed to utilize the Commitment of the, Granting Bank to the sameextent, and as if, such Loan were made by the Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreementfor which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing,each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, itwill not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidationproceedings or similar proceedings

68


under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04, any SPC may assignall or a portion of its interests in any Loans to its Granting Bank or to any financial institutions providing liquidity and/or credit facilities to or for the account ofsuch SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in thecertificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been reliedupon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters ofCredit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or anyLender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continuein full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstandingand unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment ofthe Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on differentcounterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other LoanDocuments and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating tothe subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except asprovided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the AdministrativeAgent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be bindingupon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of thisAgreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisionshereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

69


SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized atany time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional orfinal) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of andall the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall havemade any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to otherrights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed bythe law of the State of New York.

(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of theState of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from anythereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the partieshereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New YorkState or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall beconclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any otherLoan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceedingrelating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may nowor hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any courtreferred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of aninconvenient forum to the maintenance of such action or proceeding in any such court.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BYAPPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISINGOUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO

70


REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHERPARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT ITAND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUALWAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of thisAgreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of theInformation (as defined below), and will not use such confidential Information for any purpose or in any manner except in connection with this Agreement,except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and otheradvisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed tokeep such Information confidential), (b) to the extent requested by any governmental, supervisory or regulatory authority (it being understood that it will to theextent reasonably practicable provide the Borrower with an opportunity to request confidential treatment from such authority), (c) to the extent required byapplicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of anyremedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder orthereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or anyprospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) toany swap or derivative transaction relating to the Borrower and its obligations, (g) with the written consent of the Borrower or (h) to the extent such Information(i) becomes publicly available other than as a result of a breach of this Section or any other confidentiality agreement to which it is party with the Borrower orany Subsidiary or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than theBorrower. For the purposes of this Section, “Information” means all confidential information received from the Borrower relating to the Borrower or itsbusinesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior todisclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified atthe time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to havecomplied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Personwould accord to its own confidential information.

71


SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, togetherwith all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximumlawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance withapplicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to theMaximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of theoperation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but notabove the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment,shall have been received by such Lender.

SECTION 9.14. Releases of Guarantors. (a) Notwithstanding any contrary provision herein or in any other Loan Document, if the Borrower shall requestthe release under the Guarantee Agreement of any Guarantor and shall deliver to the Administrative Agent a certificate to the effect that such sale and thedisposition or the proceeds thereof will comply with the terms of this Agreement, the Administrative Agent, if satisfied in its reasonable judgment that theapplicable certificate is correct, shall, without the consent of any Lender, execute and deliver all such releases and other instruments, and take all such furtheractions, as shall be necessary to effect the release of such Guarantor.

Without limiting the provisions of Section 9.05, the Borrower shall reimburse the Administrative Agent and the Lenders for all costs and expenses,including attorney’s fees and disbursements, incurred by any of them in connection with any action contemplated by this Section 9.14.

SECTION 9.15. U.S.A. PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III ofPub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, whichinformation includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with theAct.

72


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and yearfirst above written.

AMERISOURCEBERGEN CORPORATION,

By /s/ JACK .F. QUINN

Name: Jack F. QuinnTitle: Vice President and Treasurer

JPMORGAN CHASE BANK, N.A.,individually and as administrative agent, issuing bank andswingline lender,

By /s/ DAWN LEE LUM

Name: Dawn Lee LumTitle: Vice President

73



FIRST AMENDMENT dated as of September 29, 2005 (this “Amendment”), to the Credit Agreement dated as of December 2, 2004 (asamended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among AMERISOURCEBERGEN CORPORATION, aDelaware corporation (the “Borrower”), the lenders from time to time party thereto (the “Lenders”), the issuing banks from time to time partythereto (the “Issuing Banks”) and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”) for theLenders.

The Borrower has requested that the Credit Agreement be amended as set forth herein.

In consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:

SECTION 1. Amendments effective as of the Amendment Effective Date. On the Amendment Effective Date set forth in paragraph (a) of Section 4 below,

the Credit Agreement is hereby amended as follows:

(a) Section 1.01 of the Credit Agreement is amended by inserting the following definitions in their proper alphabetical order, each such definition toreplace the existing definition in its entirety in Section 1.01 where such definition exists: “Canadian Dollars” and “Cdn.$” shall mean lawful currency of Canada. “Domestic Subsidiary” means any Subsidiary other than a Foreign Subsidiary. “Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the

economic effect of guaranteeing any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and includingany obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness orto purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or servicesfor the purpose of assuring the owner of such Indebtedness of the payment thereof, (c) to maintain working capital, equity capital or any other financialstatement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (d) as an account party in respect ofany letter of credit or letter of guaranty issued to support such Indebtedness; provided, that the term Guarantee shall not include endorsements forcollection or deposit in the ordinary course of business.”

“Fitch” means Fitch, Inc. “Investment Grade” means (a) in the case of S&P, BBB- or higher, (b) in the case of Moody’s, Baa3 or higher and (c) in the case of Fitch, BBB- or

higher.


“New Bonds” means the Borrower’s (a) 5 5/8% Senior Notes due 2012 in an aggregate principal amount of $400,000,000 and (b) 5 7/8% Senior Notesdue 2015 in an aggregate principal amount of $500,000,000.

“Ratings Agency” means S&P, Moody’s or Fitch.

(b) The definition of “Permitted Acquisitions” in Section 1.01 of the Credit Agreement is amended by replacing clause (c) thereof in its entirety with thefollowing: “(c) in the case of any Subsidiary formed for the purpose of or resulting from such acquisition organized and existing under the laws of the United States,

all the Equity Interests of each such Subsidiary shall be owned directly by the Borrower and/or a wholly owned Subsidiary organized and existing underthe laws of the United States (other than Equity Interests permitted to be owned by management) and all actions required to be taken with respect to suchacquired or newly formed Subsidiary under Section 5.09 shall have been taken,”

(c) Section 6.01 of the Credit Agreement is amended by (i) replacing paragraphs (c) and (d) thereof in their entirety with the following paragraphs (c) and

(d) and (ii) inserting the following paragraph (e): “(c) Indebtedness of Excluded Subsidiaries (other than JM Blanco, Inc., Project Snow, Inc., any Subsidiary of Project Snow, Inc. and any

Securitization Entity) in an aggregate principal amount not exceeding $300,000,000 at any time outstanding; (d) Indebtedness of JM Blanco, Inc. in an aggregate principal amount not exceeding $55,000,000 at any time outstanding; and (e) Indebtedness of Project Snow, Inc. and its Subsidiaries, taken as a whole, in an aggregate principal amount not exceeding Cdn.$135,000,000 at

any time outstanding.”

(d) Section 6.03(a) of the Credit Agreement is amended by renumbering clause (iii) thereof as clause (iv) and inserting the following new clause(iii) immediately after clause (ii) thereof: “(iii) any Permitted Acquisition or Permitted Other Acquisition permitted under Section 6.04 may be accomplished by a merger of one or more

Subsidiaries in a transaction in which the surviving entity is a Subsidiary and (if any Subsidiary party to such merger is a Subsidiary Loan Party) is aSubsidiary Loan Party”.

(e) Section 6.04 of the Credit Agreement is amended by inserting the following proviso immediately following paragraph (d) thereof:

“; provided that the cumulative aggregate consideration to be paid in respect of (x) all such Permitted Acquisitions of Foreign Subsidiaries under thisparagraph and (y) all Permitted Other Acquisitions permitted under paragraph (e), in each case during the

2


term of this Agreement (including Indebtedness to be assumed or repaid by the Borrower or any Subsidiary) shall not exceed $850,000,000;”

(f) Section 6.04 of the Credit Agreement is further amended by replacing paragraphs (e) and (h) thereof in their entirety with the following paragraphs(e) and (h): “(e) Permitted Other Acquisitions in respect of which the aggregate amount of consideration paid after the date hereof (including Indebtedness

assumed or repaid by the Borrower or a Subsidiary) does not exceed at any time $200,000,000;” “(h) other investments, loans, advances and Guarantees constituting Indebtedness not prohibited by Section 6.01; provided that the aggregate amount

thereof (excluding (x) any such Guarantees entered into prior to September 29, 2005, to the extent the Indebtedness guaranteed thereby does not increaseon or after such date, and (y) any such Guarantee in respect of Indebtedness permitted under Section 6.01(e)) shall not exceed $350,000,000 at the time ofand after giving effect to the making or incurrence of any such investment, loan, advance or Guarantee unless the Leverage Test or the Ratings Test shallbe satisfied at such time and would remain satisfied upon the completion of such investment, loan, advance or Guarantee.”

(g) Article VII of the Credit Agreement is amended by inserting at the end of paragraph (d) thereof the words “or in Section 9.16(b)”.

SECTION 2. Further Amendment effective as of the Guarantee Amendment Effective Date. On the Guarantee Amendment Effective Date set forth in

paragraph (b) of Section 4 below, the Credit Agreement is hereby further amended by adding thereto the following new Section 9.16: “SECTION 9.16. Release of Guarantees; New Guarantees. (a) Notwithstanding any other provision of this Agreement, if at any time (i) the New

Bonds shall have Investment Grade ratings from at least two of the three Ratings Agencies, (ii) immediately following the application of this Section, noSubsidiary shall be liable for the New Bonds or any other Material Indebtedness (other than (x) Indebtedness referred to in clauses (a) through (e) ofSection 6.01, (y) Guarantees by Foreign Subsidiaries of Material Indebtedness of other Foreign Subsidiaries and (z) Material Indebtedness of ForeignSubsidiaries that is not Guaranteed by any Domestic Subsidiary), whether as a primary obligor or as a Guarantor, and (iii) the Borrower shall havedelivered to the Administrative Agent a certificate confirming that the conditions set forth in the preceding clauses (i) and (ii) shall be satisfiedsimultaneously with the termination of the Guarantee Agreement, the Guarantee Agreement shall automatically terminate and the proviso to paragraph(d) of Section 6.04 shall be automatically deleted, in each case without any further action or consent by any party hereto or to the Guarantee Agreement.

(b) The Borrower will not permit any Subsidiary to be liable for the New Bonds or any other Material Indebtedness (other than (x) Indebtednessreferred to in clauses (a) through (e) of Section 6.01, (y) Guarantees by Foreign Subsidiaries of Material Indebtedness of other Foreign Subsidiaries and(z) Material Indebtedness of Foreign

3


Subsidiaries that is not Guaranteed by any Domestic Subsidiary), whether as a primary obligor or under any Guarantee, unless such Subsidiary shall haveexecuted and delivered a Guarantee of the Obligations satisfactory in form and substance to the Administrative Agent. The Borrower will not permit anysuch Material Indebtedness to contain any provision requiring, contingently or otherwise, that any Subsidiary guarantee any obligations thereunder (otherthan any provision requiring Guarantees by Foreign Subsidiaries of Material Indebtedness of other Foreign Subsidiaries) unless this Agreement shall havebeen amended to incorporate such provision, mutatismutandis, into the appropriate Article herein.”

SECTION 3. Representations and Warranties. The Borrower represents and warrants as of the Amendment Effective Date to the Lenders that:

(a) Before and after giving effect to this Amendment, all representations and warranties of each Loan Party set forth in the Loan Documents(as amended hereby) are true and correct in all material respects except to the extent that any representation or warranty expressly relates to anearlier date (in which case such representation or warranty is correct as of such earlier date).

(b) Immediately before and after giving effect to this Amendment, no Default has occurred and is continuing. (c) The execution and delivery of this Amendment and the effectiveness of the provisions hereof will not violate or result in a default under

any indenture or other material agreement or instrument binding upon the Borrower or any of its Subsidiaries or on their assets, or give rise to a rightthereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and will not result in the creation or imposition thereunderof any Lien on any asset of the Borrower or any of the other Subsidiaries.

SECTION 4. Conditions to Effectiveness. (a) This Amendment shall become effective (except as to Section 2 hereof) on the date (the “Amendment

Effective Date”) on which each of the following conditions is satisfied (or waived in accordance with Section 9.02 of the Credit Agreement): (i) The Administrative Agent shall have received counterparts hereof duly executed and delivered by the Borrower, each Subsidiary Loan

Party, the Administrative Agent and the Required Lenders. (ii) The Administrative Agent shall have received all amounts due hereunder or under the Credit Agreement and payable on or prior to the

Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, charges anddisbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any Loan Document.

The Administrative Agent shall notify the Borrower and the Lenders of the Amendment Effective Date, and such notice shall be conclusive andbinding.

4


(b) Section 2 of this Amendment shall become effective on the date (the “Guarantee Amendment Effective Date”) on which each of the followingconditions is satisfied (or waived in accordance with Section 9.02 of the Credit Agreement): (i) the Amendment Effective Date shall have occurred; (ii) the Administrative Agent shall have received counterparts hereof duly executed and delivered by the Borrower, each Subsidiary Loan

Party, the Administrative Agent and each Lender; and (iii) The Administrative Agent shall have received the Amendment Fee. The Administrative Agent shall notify the Borrower and the Lenders of the Guarantee Amendment Effective Date, and such notice shall be

conclusive and binding.

SECTION 5. Agreements. (a) Except as specifically stated herein, the provisions of the Credit Agreement are and shall remain in full force and effect. Asused herein, the terms “Credit Agreement”, “herein”, “hereunder”, “hereinafter”, “hereto”, “hereof” and words of similar import shall, unless the contextotherwise requires, refer to the Credit Agreement, as amended hereby. (b) Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect therights and remedies of the Lenders or the Administrative Agent under, the Credit Agreement or any other Loan Document, and shall not alter, modify, amend orin any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, the Guarantee Agreement or any otherLoan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any ofthe Borrowers or Guarantors to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants oragreements contained in the Credit Agreement, the Guarantee Agreement or any other Loan Document in similar or different circumstances. This Amendmentshall constitute a “Loan Document” for all purposes of the Credit Agreement, the Guarantee Agreement and the other Loan Documents.

SECTION 6. Amendment Fee. The Borrower agrees to pay on the Guarantee Amendment Effective Date in immediately available funds to theAdministrative Agent for the account of each Lender an amendment fee (the “Amendment Fee”) equal to 0.05% of the Commitment of such Lender as of theGuarantee Amendment Effective Date. The parties agree that no fees shall be payable to Lenders in respect of this Amendment other than as set forth in thisAmendment.

SECTION 7. Expenses. The Borrower agrees to reimburse the Administrative Agent for all reasonable out-of-pocket expenses incurred by it in connectionwith this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent.

5


SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWSOF THE STATE OF NEW YORK.

SECTION 9. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original but all of which whentaken together shall constitute but one contract. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective asdelivery of a manually executed counterpart of this Amendment.

SECTION 10. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

6


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

AMERISOURCEBERGEN CORPORATION,

By /s/ JACK F. QUINN

Name: Jack F. QuinnTitle: Vice President and Treasurer

JPMORGAN CHASE BANK, N.A.individually and as Administrative Agent,

By /s/ DAWN LEE LUM

Name: Vice President

7


SIGNATURE PAGE to the FIRST AMENDMENT dated as ofSeptember 29, 2005, in respect of the CREDIT AGREEMENTdated as of December 2, 2004.

To approve the amendment:

Lender:

By: Name: Title:

By: Name: Title:

8


AMBULATORY PHARMACEUTICAL SERVICES, INC.AMERISOURCEBERGEN DRUG CORPORATIONAMERISOURCEBERGEN SERVICES CORPORATIONAMERISOURCE HEALTH SERVICES CORPORATIONAMERISOURCEBERGEN HOLDING CORPORATIONAMERISOURCE SALES CORPORATIONANDERSON PACKAGING, INC.ASD SPECIALTY HEALTHCARE, INC.AUTOMED TECHNOLOGIES, INC.SOLANA BEACH, INC.BROWNSTONE PHARMACY, INC.CAPSTONE MED, INC.CAPSTONE PHARMACY OF DELAWARE, INC.CHOICE MEDICAL, INC.CLINICARE CONCEPTS, INC.COMPUSCRIPT, INC.COMPUTRAN SYSTEMS, INC.DUNNINGTON RX SERVICES OF MASSACHUSETTS,INC.DUNNINGTON RX SERVICES OF RHODE ISLAND, INC.EXPRESS PHARMACY SERVICES, INC.FAMILY CENTER PHARMACY, INC.GOOT NURSING HOME PHARMACY, INC.HEALTH SERVICES CAPITAL CORPORATIONIHS ACQUISITION XXX, INC.IMEDEX, INC.INSTA-CARE PHARMACY SERVICES CORPORATIONINTEGRATED COMMERCIALIZATION SOLUTIONS, INC.INTERNATIONAL PHYSICIAN NETWORKS, LLCMEDICAL INITIATIVES, INC.PHARM PLUS ACQUISITION, INC.

9


PHARMACY CORPORATION OF AMERICAPHARMACY CORPORATION OFAMERICA-MASSACHUSETTS, INC.PHARMERICA DRUG SYSTEMS, INC.PHARMERICA, INC.PMSI, INC.PREMIER PHARMACY, INC.ROMBRO’S DRUG CENTER, INC.SOUTHWEST PHARMACIES, INC.SPECIALTY PHARMACY, INC.SPECIALTY PHARMACY OF CALIFORNIA, INC.TAYLOR & MANNO ASSET RECOVERY, INC.TELPHARMACY SOLUTIONS, INC.THE LASH GROUP, INC.TMESYS (TM), INC.US BIOSERVICES CORPORATIONVALUE APOTHECARIES, INC.,

by Name: Title:

AMERISOURCE HERITAGE CORPORATION,

by Name: Title:

10


REIMBURSEMENT EDUCATION NETWORK, LLC,

by Name: Title:

PHARMACY HEALTH CARE SOLUTIONS, LTD., by VALUE APOTHECARIES, INC., as General Partner,

by Name: Title:

by

AMERISOURCEBERGEN DRUGCORPORATION, as Limited Partner,

by Name: Title:

11



THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

THIS THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of December 2, 2004 (this “Amendment”) is entered intoamong AMERISOURCE RECEIVABLES FINANCIAL CORPORATION, a Delaware corporation (in such capacity, the “Seller”), AMERISOURCEBERGENDRUG CORPORATION, a Delaware corporation, as the initial Servicer (in such capacity, the “Servicer”), the VARIOUS PURCHASER GROUPS FROMTIME TO TIME PARTY THERETO, and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as administrator for each of thePurchaser Groups party thereto (together with its successors and assigns in such capacity, the “Administrator”).

RECITALS

A. The Seller, Servicer, the various Purchaser Groups from time to time party thereto and the Administrator have entered into that certain ReceivablesPurchase Agreement, dated as of July 10, 2003 (as amended, supplemented or otherwise modified from time to time, the “Agreement”).

B. Calyon New York Branch (“Calyon”), Atlantic Asset Securitization Corp. (“Atlantic”) and Transamerica Occidental Life Insurance Company(“Transamerica”, and together with Calyon and Atlantic, the “Exiting Parties”) wish to cease to be parties to the Agreement.

C. The parties to the Agreement desire to enter into this Amendment to amend the Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Certain Defined Terms. Capitalized terms used but not defined herein shall have the meanings set forth for such terms in Exhibit I to the Agreement.

2. Amendments to the Agreement. The Agreement is hereby amended as follows: 2.1 The first sentence of Section 1.3 of the Agreement is hereby amended and restated in its entirety as follows: Seller shall provide the Administrator and each Purchaser Agent with prior written irrevocable notice in the form set forth as Exhibit XV hereto (a

“Reduction Notice”) of any proposed reduction of Aggregate Invested Amount at least one Business Day prior to any such proposed reduction. 2.2 Clause (u) of Section 7.3 of the Agreement is hereby amended and restated in its entirety as follows:


(u) Financial Statements. In the event that (i) the balance sheet and/or the statements of income and cash flow (as described in Section 5.3(k))of AmerisourceBergen and its Consolidated Subsidiaries are no longer publicly available and (ii) the Credit Agreement has been terminated,AmerisourceBergen shall, within 90 or 120 days of the end of the applicable quarter or Fiscal Year, respectively, provide copies of such balancesheet and/or statements of income and cash flow to the Administrator (which shall promptly forward a copy to each Purchaser Agent).

2.3 Clause (o) of Section 9.1 of the Agreement is hereby amended and restated in its entirety as follows: (o) AmerisourceBergen shall default or fail in the performance or observance of any of the covenants set forth in Sections 6.11 or 6.12 of the

Credit Agreement as in effect on the date hereof (without giving effect to any amendment, waiver, termination, supplement or other modificationthereof unless consented to by the Required Purchaser Agents; or

2.4 Clause (s) of Section 9.1 of the Agreement is hereby amended and restated in its entirety as follows: (s) (i) definition of “Excluded Subsidiary” (clause (c) thereof), “Loan Parties,” “Securitization,” “Securitization Entity,” or “Subsidiary Loan

Party” contained in the Credit Agreement is amended, modified or waived without the prior written consent of the Administrator and the RequiredPurchaser Agents; (ii) Section 6.01(b), 6.02(e), 6.04(g), 6.05(b), 6.05(c), 6.07(a)(i), 6.07(b)(ii), 6.08(b), 6.08(c), 6.08(d) or 6.09 (clause (i) of thefirst proviso thereto) of the Credit Agreement is amended, modified or waived without the prior written consent of the Administrator and theRequired Purchaser Agents; or (iii) any other provision of (including by the addition of a provision) the Credit Agreement is amended, modified orwaived without the prior written consent of the Administrator and the Required Purchaser Agents in any way which could materially and adverselyimpair the interests of the Administrator, any Purchaser Agent or any Purchaser in the Receivables, Related Security or Collections or could result inthe creation of a Lien thereof; or

2.5 The Scheduled Facility Termination Dates with respect to the Commitment of Bank of America, National Association, as set forth on FleetSecurities, Inc.’s signature page to the Agreement, are hereby amended by (i) deleting the date “July 6, 2006” therein and substituting the date “November29, 2007” therefor and (ii) deleting the date “July 7, 2005” therein and substituting the date “December 1, 2005” therefor.

2.6 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of The Bank of Nova Scotia, as set forth on itssignature page to the

2


Agreement, are hereby amended and restated in their entirety as set forth on The Bank of Nova Scotia’s signature page hereto. 2.7 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of Wachovia Bank, National Association, as set

forth on its signature page to the Agreement, are hereby amended and restated in their entirety as set forth on the Administrator’s signature page hereto. 2.8 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of PNC Bank, National Association, as set forth on

its signature page to the Agreement, are hereby amended and restated in their entirety as set forth on PNC Bank, National Association’s signature pagehereto.

2.9 Exhibit I to the Agreement is hereby amended by adding the following definitions where alphabetically appropriate: “Government Receivable Excess” means, the amount by which the aggregate Outstanding Balance of all Government Receivables exceeds an

amount equal to 5.0% of the Outstanding Balance of all Eligible Receivables. “Invoice Payment Terms” means, with respect to any Receivable, the number of days following the date of the related original invoice by

which such Receivable is required to be paid in full, as set forth in such original invoice. “Walgreen Extended Term Receivables” has the meaning set forth in clause (q) of the definition of Eligible Receivable. 2.10 The definition of “Credit Agreement” as set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows: “Credit Agreement” shall mean the Credit Agreement dated as of December 2, 2004, among AmerisourceBergen, the lenders named therein

and JPMorgan Chase Bank, N.A., as administrative agent, as the same may from time to time be amended, supplemented or otherwise modified. 2.11 Clause (q) of the definition of “Eligible Receivable” as set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as

follows: (q) which by its terms has Invoice Payment Terms of up to 30 days; provided, that Receivables due from Walgreen Co. may have Invoice

Payment Terms of up to 34 days (“Walgreen Extended Term Receivables”); provided, further, that an amount not to exceed 5% of aggregate of alloutstanding Receivables, excluding Walgreen Extended Term Receivables, may have Invoice Payment Terms of between 31 and 60 days; andprovided, further, that an amount not to exceed 5% of

3


aggregate of all outstanding Receivables may have Invoice Payment Terms of between 61 and 90 days; 2.12 Clause (w) of the definition of “Eligible Receivable” as set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as

follows: (w) [Reserved.] 2.13 The definition of “Net Pool Balance” as set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows: “Net Pool Balance” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by (i) the

aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Obligor ConcentrationLimit for such Obligor, (ii) the Rebate Reserve and (iii) the Government Receivable Excess.

2.14 The last sentence in the definition of “Obligor Concentration Limit” as set forth in Exhibit I to the Agreement is hereby amended and restated inits entirety as follows:

As of December 2, 2004, Longs Drug Stores Corporation and Medco Health Solutions, Inc. shall have a Special Concentration Limit of 8.0%, and5.75%, respectively.

2.15 The definition of “Pledge Agreement” as set forth in Exhibit I to the Agreement is hereby deleted in its entirety. 2.16 The definition of “Required Reserve Factor Floor” as set forth in Exhibit I to the Agreement is hereby amended by replacing the reference to

“20.75%” therein with “18.75%”. 2.17 The definition of “Security Agreement” as set forth in Exhibit I to the Agreement is hereby deleted in its entirety. 2.18 The definition of “Settlement Reporting Date” as set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as

follows: “Settlement Reporting Date” means the 25

thday of each month immediately following the Cut-Off Date (or if any such day is not a Business

Day, the next succeeding Business Day thereafter) or such other days of any month as Administrator or any Purchaser Agent may request inconnection with Section 8.5.

3. Exiting Parties. Each of the parties hereto acknowledges and agrees that upon the effectiveness of this Amendment, Calyon shall cease to be a Purchaser

Agent and Related Committed Purchaser for Atlantic, Transamerica shall cease to be a Related Committed

4


Purchaser for Atlantic and Atlantic shall cease to be a Conduit Purchaser under the Agreement. Each of the Exiting Parties shall have no further rights orobligations under the Agreement or any other Transaction Documents (other than any rights or obligations that specifically survive termination of the Agreementor any other Transaction Documents, pursuant to its terms and that are the result of actions or otherwise that occurred prior to the date hereof).

4. Representations and Warranties. Each of the Seller and Servicer hereby represents and warrants to each Purchaser Group and the Administrator asfollows: (a) Representations and Warranties. The representations and warranties of such Person contained in Article V of the Agreement are true and correct as

of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlierdate).

(b) Enforceability. The execution and delivery by such Person of this Amendment, and the performance of each of its obligations under thisAmendment and the Agreement, as amended hereby, are within its corporate powers and have been duly authorized by all necessary corporate action on itspart. This Amendment and the Agreement, as amended hereby, are such Person’s valid and legally binding obligations, enforceable in accordance with itsterms.

(c) No Default. Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Amortization Event or UnmaturedAmortization Event exists or shall exist.

5. Effect of Amendment. This Amendment shall become effective upon the execution of such Amendment by all of the parties hereto. Except as expressly

amended and modified by this Amendment, all provisions of the Agreement shall remain in full force and effect. After this Amendment becomes effective, allreferences in each of the Agreements to “this Agreement”, “hereof”, “herein”, or words of similar effect referring to such Agreement shall be deemed to bereferences to the Agreement, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement anyprovision of the Agreement (or any related document or agreement) other than as set forth herein.

6. Effectiveness. This Amendment shall become effective on the date hereof upon (i) receipt by the Administrator of this Amendment executed by each ofthe other parties hereto (including facsimile signature pages), or other evidence satisfactory to the Administrator of the execution and delivery of this Amendmentby such other parties, (ii) satisfaction of the Rating Agency Condition, (iii) receipt by each Purchaser Agent of the amendment fee set forth in its respective feeletter, dated as of the date hereof, among the Seller, the Servicer and such Purchaser Agent and (iv) receipt by each of the Exiting Parties from the Seller of allfees and other amounts owed to such Person pursuant to the Agreement and the other Transaction Documents as such amounts are set forth on Schedule I hereto.

5


7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpartshall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

8. Governing Law. This Amendment shall be governed by, and construed in accordance with the law of the State of New York without regard to anyotherwise applicable principles of conflicts of law.

9. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of thisAmendment, or the Agreements or any provision hereof or thereof.

[signature pages begin on next page]

6


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

AMERISOURCE RECEIVABLES FINANCIALCORPORATION, as Seller

By:

Name: Title:

AMERISOURCEBERGEN DRUGCORPORATION, as initial Servicer

By:

Name: Title:

S-1 Third Amendment to Receivables Purchase Agreement (ARFC)


BLUE RIDGE ASSET FUNDINGCORPORATION, as a Conduit Purchaser

BY: WACHOVIA CAPITAL MARKETS, LLC,its attorney-in-fact

By:

Name: Title:

WACHOVIA BANK, NATIONALASSOCIATION, as Administrator and as PurchaserAgent and Related Committed Purchaser for BlueRidge Asset Funding Corporation

By:

Name: Title:

By:

Name: Title:

Commitment: $325,000,000

Scheduled Facility Termination Date: December 1, 2005 withrespect to $75,000,000 of the Commitment and November 29,2007 with respect to the remaining $250,000,000 of theCommitment.



YC SUSI TRUST, as a Conduit Purchaser

By: Bank of America, National Association, asadministrative trustee

By:

Name: Title:

BANK OF AMERICA, NATIONALASSOCIATION, as a Related Committed Purchaserfor YC SUSI Trust

By:

Name: Title:



LIBERTY STREET FUNDING CORP., as aConduit Purchaser

By:

Name: Title:

THE BANK OF NOVA SCOTIA, as Purchaser Agent andRelated Committed Purchaser for Liberty Street Funding Corp.

By:

Name: Title:





MARKET STREET FUNDING CORPORATION, as a ConduitPurchaser

By:

Name: Title:

PNC BANK, NATIONAL ASSOCIATION, as Purchaser Agentand Related Committed Purchaser for Market Street FundingCorporation

By:

Name: Title:





ACKNOWLEDGED AND AGREED:

TRANSAMERICA OCCIDENTAL LIFE INSURANCECOMPANY, as a RelatedCommitted Purchaser

By:

Name: Title:



ACKNOWLEDGED AND AGREED:

ATLANTIC ASSET SECURITIZATION CORP.,as a Conduit Purchaser

BY: CALYON NEW YORK BRANCH, its attorney-in-fact

By:

Name: Title:

CALYON NEW YORK BRANCH (AS SUCCESSOR TOCREDIT LYONNAIS, NEW YORK BRANCH), as PurchaserAgent and Related Committed Purchaser for Atlantic AssetSecuritization Corp.

By:

Name: Title:

By:

Name: Title:



SCHEDULE I

PERSON

AMOUNT

Calyon New York Branch and Atlantic Asset SecuritizationCorp. $ 43,916.67

Sch-I Third Amendment to Receivables Purchase Agreement (ARFC)



CREDIT AGREEMENT

dated as of

October 3, 2005

among

PROJECT SNOW, INC.

and


and

The Lenders Party Hereto

and

THE BANK OF NOVA SCOTIA,

as Administrative Agent and Lead Arranger.


TABLE OF CONTENTS

Page

ARTICLE IDEFINITIONS 1

SECTION 1.01. Defined Terms 1

SECTION 1.02. Classification of Loans and Borrowings 23

SECTION 1.03. Terms Generally 23

SECTION 1.04. Accounting Terms; GAAP 23

ARTICLE IITHE CREDITS 24

SECTION 2.01. Commitments 24

SECTION 2.02. Loans and Borrowings 24

SECTION 2.03. Requests for Revolving Borrowings 25

SECTION 2.04. Swingline Loans 26

SECTION 2.05. Letters of Credit 27

SECTION 2.06. Bankers’ Acceptances 32

SECTION 2.07. Funding of Borrowings 35

SECTION 2.08. Interest Elections 35

SECTION 2.09. Termination and Reduction of Commitments 37

SECTION 2.10. Repayment of Loans; Evidence of Debt 37

SECTION 2.11. Prepayment of Loans 38

SECTION 2.12. Fees 39

SECTION 2.13. Interest 41

SECTION 2.14. Alternate Rate of Interest 42

SECTION 2.15. Increased Costs 42

SECTION 2.16. Break Funding Payments 43

-i-



Page

SECTION 2.17. Taxes 44

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 45

SECTION 2.19. Mitigation Obligations; Replacement of Lenders 47

ARTICLE IIIREPRESENTATIONS AND WARRANTIES 48

SECTION 3.01. Organization; Powers 48

SECTION 3.02. Authorization; Enforceability 48

SECTION 3.03. Governmental Approvals; No Conflicts 49

SECTION 3.04. Financial Condition; No Material Adverse Change 49

SECTION 3.05. Properties 49

SECTION 3.06. Litigation and Environmental Matters 50

SECTION 3.07. Compliance with Laws and Agreements 50

SECTION 3.08. Investment and Holding Company Status 50

SECTION 3.09. Taxes 50

SECTION 3.10. ERISA 50

SECTION 3.11. Disclosure 51

SECTION 3.12. Subsidiaries 51

SECTION 3.13. Insurance 51

SECTION 3.14. Labor Matters 51

SECTION 3.15. Senior Indebtedness 51

SECTION 3.16. Restrictions on Securing of Obligations 52

ARTICLE IVCONDITIONS 52

SECTION 4.01. Effective Date 52

-ii-



Page

SECTION 4.02. Each Credit Event 53

ARTICLE VAFFIRMATIVE COVENANTS 54

SECTION 5.01. Financial Statements and Other Information 54

SECTION 5.02. Notices of Material Events 55

SECTION 5.03. Existence; Conduct of Business 56

SECTION 5.04. Payment of Obligations 56

SECTION 5.05. Maintenance of Properties; Insurance 57

SECTION 5.06. Books and Records; Inspection and Audit Rights 57

SECTION 5.07. Compliance with Laws 57

SECTION 5.08. Use of Proceeds and Letters of Credit 57

SECTION 5.09. [Intentionally Omitted.] 57

SECTION 5.10. Maintenance of Corporate Separateness 57

SECTION 5.11. Senior Debt Status 58

ARTICLE VINEGATIVE COVENANTS 58

SECTION 6.01. Indebtedness 58

SECTION 6.02. Liens 59

SECTION 6.03. Fundamental Changes 60

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions 61

SECTION 6.05. Asset Sales 62

SECTION 6.06. Hedging Agreements 62

SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness 63

-iii-



Page

SECTION 6.08. Transactions with Affiliates 64

SECTION 6.09. Restrictive Agreements 64

SECTION 6.10. Material Documents 65

SECTION 6.11. Fixed Charge Coverage Ratio 65

SECTION 6.12. Leverage Ratio 65

SECTION 6.13. Restricted Properties 65

SECTION 6.14. Fiscal Quarters 65

SECTION 6.15. Amount of Permitted Debt under the Debt Instruments 65

ARTICLE VIIEVENTS OF DEFAULT 66

SECTION 7.01. 66

ARTICLE VIIITHE ADMINISTRATIVE AGENT 68

SECTION 8.01. 68

SECTION 8.02. 68

SECTION 8.03. 69

SECTION 8.04. 69

SECTION 8.05. 69

SECTION 8.06. 70

SECTION 8.07. 70

ARTICLE IXMISCELLANEOUS 70

SECTION 9.01. Notices 70

SECTION 9.02. Waivers; Amendments 71

-iv-



Page

SECTION 9.03. Expenses; Indemnity; Damage Waiver 72

SECTION 9.04. Successors and Assigns 74

SECTION 9.05. Survival 78

SECTION 9.06. Counterparts; Integration; Effectiveness 78

SECTION 9.07. Severability 78

SECTION 9.08. Right of Setoff 79

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 79

SECTION 9.10. WAIVER OF JURY TRIAL 79

SECTION 9.11. Headings 79

SECTION 9.12. Confidentiality 79

SECTION 9.13. Interest Rate Limitations and Calculations 81

SECTION 9.14. Reimbursement 81

SECTION 9.15. U.S.A. PATRIOT Act 82

SECTION 9.16. Judgment Currency 82

SECTION 9.17. Dollar Equivalent 82

ARTICLE XPARENT GUARANTEE 83

SECTION 10.01. Guarantee 83

SECTION 10.02. Acceleration of Parent Guarantee 83

SECTION 10.03. Guarantee Absolute, etc. 83

SECTION 10.04. Reinstatement, etc. 84

SECTION 10.05. Waiver, etc. 85

SECTION 10.06. Postponement of Subrogation, etc. 85

SECTION 10.07. Successors, Transferees and Assigns; Transfers of Notes, etc. 85

-v-


SCHEDULES:

Schedule 2.01 Commitments

Schedule 3.12 Subsidiaries

Schedule 3.13 Insurance

Schedule 6.02 Existing Liens

Schedule 6.04 Existing Investments

Schedule 6.09 Existing Restrictions

EXHIBITS:

Exhibit A Form of Assignment and Assumption

Exhibit B-1 Form of Opinion of Dechert LLP, Counsel for the Parent

Exhibit B-2 Form of Opinion of John G. Chou, Deputy General Counsel of the Parent and the Borrower

Exhibit B-3 Form of Opinion of McMillan Binch Mendelsohn LLP, Counsel for the Borrower

Exhibit C Form of Acknowledgement and Confirmation


CREDIT AGREEMENT dated as of October 3, 2005, among PROJECT SNOW, INC. (“PSI”), AMERISOURCEBERGEN CORPORATION (the“Parent”), the LENDERS party hereto, and THE BANK OF NOVA SCOTIA (“Scotia Capital”), as Administrative Agent.

The Borrower has requested the Lenders to establish a senior unsecured revolving credit facility in an aggregate principal amount of C$135,000,000 (the“Facility”). The proceeds of loans under the Facility, and letters of credit issued under the Facility, will be used by the Borrower for general corporate purposes,including investments and acquisitions and the repayment of outstanding Indebtedness. The Lenders are willing to establish the Facility upon the terms andsubject to the conditions set forth herein. The Parent has agreed to guarantee the obligations of the Borrower under the Facility.

Simultaneously, with the execution of this Agreement, PSI will be amalgamated (the “Amalgamation”) with Trent Drugs (Wholesale) Ltd., a corporationamalgamated under the laws of Canada (“Target Co.”), with the amalgamated corporation having the name Trent Drugs (Wholesale) Ltd. and continuing as the“Borrower” hereunder.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at arate determined by reference to the Alternate Base Rate.

“Acknowledgement and Confirmation” means the acknowledgement and confirmation substantially in the form of Exhibit C hereto.

“Administrative Agent” means Scotia Capital, in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or isControlled by or is under common Control with the Person specified.


“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal FundsEffective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rateshall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If theCommitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect toany assignments.

“Applicable Rate” means, for any day, the applicable rate per annum set forth below under the caption “ABR and Canadian Prime Spread”, “LIBOR andBA Stamping Fee Spread” or “Facility Fee Rate”, as the case may be, based upon the ratings established by S&P and Moody’s for the Index Debt as of the mostrecent determination date:

Category

Ratings(S&P/Moody’s)

Facility Fee(basis

points perannum)

LIBOR andBA StampingFee Spread

(basis pointsper annum)

ABR andCanadian

Prime Spread(basis pointsper annum)

Category 1 A/A2 or higher 8.0 32.0 0.0Category 2 A-/A3 10.0 35.0 0.0Category 3 BBB+/Baa1 12.5 37.5 0.0Category 4 BBB/Baa2 15.0 47.5 0.0Category 5 BBB-/Baa3 17.5 57.5 0.0Category 6 BB+/Ba1 20.0 67.5 0.0Category 7 BB/Ba2 25.0 87.5 0.0Category 8 BB-/Ba3 or lower 30.0 120.0 20.0 For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referredto in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 8; (ii) if the ratings established ordeemed to have been established by

2


Moody’s and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless one of thetwo ratings is two or more Categories above the other, in which case the Applicable Rate shall be determined by reference to the Category one level above theCategory corresponding to the lower rating; and (iii) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shallbe changed (other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is firstannounced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such changeand ending on the date immediately preceding the effective date of the next such change; provided that in the case of a Loan by way of Bankers’ Acceptance orBA Equivalent Note outstanding, any such change to the applicable BA Stamping Fee shall not take effect until the maturity date of such Loan. If the ratingsystem of Moody’s or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower andthe Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agencyand, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating of the other rating agency (or, if thecircumstances referred to in this sentence shall affect both rating agencies, the ratings most recently in effect prior to such changes or cessations).

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whoseconsent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the AdministrativeAgent.

“Authorized Foreign Bank” has the meaning ascribed thereto in subsection 248(1) of the ITA and, by reference therein, the meaning ascribed thereto bysection 2 of the Bank Act (Canada), as amended, and any successor thereto.

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of terminationof the Commitments.

“BA Discount Proceeds” means, with respect to a particular Bankers’ Acceptance or BA Equivalent Note, the following amount:

F1+D x T

365 where F means the face amount of such Bankers’ Acceptance or BA Equivalent Note;

3


D means the applicable BA Discount Rate for such Bankers’ Acceptance or BA Equivalent Note; and T means the number of days to maturity of such Bankers’ Acceptance or BA Equivalent Note (but excluding the maturity date thereof), with the amount as so determined being rounded up or down to the fifth decimal place and .000005 being rounded up.

“BA Discount Rate” means, (a) for any Bankers’ Acceptance or BA Equivalent Note to be accepted by a BA Lender that is a Schedule I Lender on the dateof any Borrowing, continuance or conversion, as the case may be, CDOR on such date, for a period identical to the term to maturity of the relevant Bankers’Acceptance or BA Equivalent Note and (b) for any Bankers’ Acceptance or BA Equivalent Note to be accepted by a BA Lender that is not a Schedule I Lender,the lesser of (i) such Lender’s own bankers’ acceptance rate and (ii) the Administrative Agent’s own bankers’ acceptance rate plus 0.10% per annum in eithercase for a period identical to the term to maturity of the relevant Bankers’ Acceptance or BA Equivalent Note.

“BA Equivalent Note” when used in reference to a Loan or Borrowing refers to whether such Loan, or the Loans comprising such Borrowing are made inthe form of non-interest bearing promissory notes of the Borrower issued in favour of a Non BA Lender.

“BA Lender” means any Lender which has not notified the Administrative Agent in writing that it is unwilling or unable to accept Drafts as provided for inSection 2.06.

“BA Stamping Fee” means the amount calculated by multiplying the face amount of a Bankers’ Acceptance or a BA Equivalent Note by the BA StampingFee Rate and then multiplying the result by a fraction, the numerator of which is the number of days to elapse from and including the date of acceptance of suchBankers’ Acceptance or purchase of such BA Equivalent Note by a Lender up to but excluding the maturity date of such Bankers’ Acceptance or BA EquivalentNote and the denominator of which is 365.

“BA Stamping Fee Rate” means, with respect to a Bankers’ Acceptance or a BA Equivalent Note, the applicable percentage rate per annum indicatedbelow the references to “BA Stamping Fee Spread” in the definition of “Applicable Rate” relevant to the period in respect of which a determination is beingmade, as adjusted pursuant to the definition of “Applicable Rate”.

“Bankers’ Acceptance” when used in reference to any Loan or Borrowing refers to whether such Loan, or the Loans comprising such Borrowing are madein the form of a depository bill, as defined in the Depository Bills and Notes Act (Canada) in Canadian dollars that is in the form of a Draft signed by or on behalfof the Borrower and

4


accepted by a BA Lender as contemplated under Section 2.06 or, for Lenders not participating in clearing services as contemplated in that Act, a draft or otherbill of exchange in Canadian Dollars that is signed on behalf of the Borrower and accepted by a Lender.

“Beneficiaries” has the meaning assigned to such term in Section 10.01(b).

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” means PSI (prior to the Amalgamation), and following the Amalgamation, Trent Drugs (Wholesale) Ltd., the corporation resulting from theAmalgamation.

“Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as towhich a single Interest Period is in effect and in the case of Bankers’ Acceptances (or BA Equivalent Notes) have the same term to maturity, or (b) a SwinglineLoan.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Toronto, Ontario areauthorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude anyday on which banks are not open for dealings in dollar deposits in the London interbank market.

“Canadian Banking Business” has the meaning ascribed thereto in subsection 248(1) of the ITA.

“Canadian Banking Business Asset” means an amount receivable the interest on which is, or would be, an amount paid or credited to an AuthorizedForeign Bank in respect of its Canadian Banking Business.

“Canadian Dollars”, “Cdn Dollars”, “Cdn $” or “C$” refers to the lawful money of Canada.

“Canadian Prime” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearinginterest at a rate determined by reference to the Canadian Prime Rate.

“Canadian Prime Rate” means a fluctuating rate of interest per annum, expressed on the basis of a year of 365 days, which is equal at all times to thegreater of (a) the reference rate of interest (however designated) of the Administrative Agent for determining interest chargeable by it on Canadian Dollarcommercial loans made in Canada; and (b) 1.0% above CDOR from time to time for one month Canadian Dollar

5


bankers’ acceptances having a face amount comparable to the face amount in respect of which the applicable Prime Rate calculation is being made.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangementconveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leaseson a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance withGAAP.

“CDOR” means, for any day and relative to Bankers’ Acceptances having any specified term and face amount, the average of the annual rates for Bankers’Acceptances having such specified term and face amount (or a term and face amount as closely as possible comparable to such specified term and face amount)of the banks named in Schedule I of the Bank Act (Canada) that appears on the Reuters Screen CDOR page as of 10:00 a.m. on such day (or, if such day is not aBusiness Day, as of 10:00 a.m. (Toronto time) on the preceding Business Day), provided that if such rate does not appear on the Reuters Screen CDOR page atsuch time on such date, CDOR for such date will be the annual discount rate of interest (rounded upward to the nearest whole multiple of 1/100 of 1%) as of10:00 a.m. (Toronto time) on such date at which the Administrative Agent is then offering to purchase bankers’ acceptances accepted by it having a comparableaggregate face amount and identical maturity date to the aggregate face amount and maturity date of such Bankers’ Acceptances.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaningof the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of Equity Interestsrepresenting more than 30% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding EquityInterests of the Parent or the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent or the Borrowerby Persons who were not (i) directors of the Parent or the Borrower on the date of this Agreement, (ii) nominated by the board of directors of the Parent or theBorrower or (iii) appointed by directors referred to in the preceding clauses (i) and (ii); or (c) the occurrence of a “Change of Control” (or other similar event orcondition however denominated) under any Material Indebtedness.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or inthe interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or any Issuing Bank(or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any) with any request,guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

6


“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans orSwingline Loans.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations inLetters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s RevolvingCredit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01, or in theAssignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’Commitments is C$135,000,000.

“Consolidated Cash Interest Expense” means, for any period, the sum, without duplication, of (i) the cash interest expense of the Parent and theSubsidiaries for such period, determined on a consolidated basis in accordance with GAAP, excluding premiums, transaction expenses, discounts and otheramounts required to be amortized and (ii) all discount, interest, fees, premiums and other charges in respect of all Securitizations for such period.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted indetermining such Consolidated Net Income, the sum, without duplication, of (i) consolidated interest expense for such period, (ii) consolidated income taxexpense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any special one-time or extraordinary charges orextraordinary losses for such period, in each case to the extent not involving cash payments by the Parent or any Subsidiary, and (vi) any LIFO adjustment (ifnegative) or charge for such period, and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, anyextraordinary non-cash gains for such period and any LIFO adjustment (if positive) or credit, all determined on a consolidated basis in accordance with GAAP.In the event that the Parent or any Subsidiary shall have completed an acquisition or disposition of any material Person, division or business unit since thebeginning of the relevant period, Consolidated EBITDA shall be determined for such period on a pro forma basis as if such acquisition or disposition, and anyrelated incurrence or repayment of Indebtedness, had occurred at the beginning of such period.

“Consolidated EBITDAR” means, for any period, Consolidated EBITDA for such period plus rental payments by the Parent and the Subsidiaries for suchperiod (other than under capital leases), determined on a consolidated basis in accordance with GAAP.

7


“Consolidated Net Income” means, for any period, the net income or loss of the Parent and the Subsidiaries for such period determined on a consolidatedbasis in accordance with GAAP; provided that there shall be excluded (a) the income or loss of any Person (other than the Parent) that is not a Subsidiary, exceptto the extent of the amount of dividends or other distributions actually paid to the Parent or any of the Subsidiaries during such period, and (b) the income or lossof any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Parent or any Subsidiary or the date that such Person’sassets are acquired by the Parent or any Subsidiary.

“Consolidated Tangible Assets” shall mean the book value of the total consolidated assets of the Parent and the Subsidiaries less the book value of allintangible assets, including goodwill, trademarks, non-compete agreements, customer relationships, patents, unamortized deferred financing fees, and other rightsor nonphysical resources that are presumed to represent an advantage to ABC in the marketplace, in each case determined on a consolidated basis in accordancewith GAAP.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whetherthrough the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Crown” means Her Majesty the Queen in right of Canada or any Province thereof.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived,become an Event of Default.

“dollars” or “$” or “U.S.$” refers to lawful money of the United States of America.

“Draft” has the meaning assigned to such term in Section 2.06(a).

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued,promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, themanagement, release or threatened release of any Hazardous Material or to health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines,penalties or indemnities), of the Parent or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) thegeneration, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to

8


any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or otherconsensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust orother equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Parent, is treated as a single employer underSection 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (otherthan an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined inSection 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA ofan application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Parent or any of its ERISA Affiliates of anyliability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Parent or any ERISA Affiliate from the PBGC or a planadministrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Parent orany of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by theParent or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Parent or any ERISA Affiliate of any notice, concerning theimposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning ofTitle IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearinginterest at a rate determined by reference to the LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excess Amount” is defined in Section 2.11(b).

“Exchange Rate” means, on any day, for the purpose of calculations under this agreement, the amount of Canadian Dollars into which US Dollars may beconverted (or vice versa) using the Administrative Agent’s mid rate for converting the first currency into the other currency at or about 11:00 a.m. (New Yorktime) on the relevant day.

9


“Excluded Subsidiary” means (a) Subsidiaries that do not own any assets (other than nominal assets) or conduct any operations, or directly or indirectlyown any Equity Interests in Subsidiaries not described in this clause (a), (b) Foreign Subsidiaries (other than the Borrower) and Securitization Entities,(c) Subsidiaries that are less than 100% owned by the Parent to the extent such Subsidiaries are prohibited by shareholders agreements, joint venture agreementsor other similar organizational documents from guaranteeing the Obligations, (d) Subsidiaries that have assets of less than $10,000,000 for any such Subsidiary(provided that all such Subsidiaries’ assets shall not be in excess of $100,000,000 in the aggregate) and (e) JM Blanco, Inc.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by oron account of any obligation of the Borrower or the Guarantor hereunder, (a) taxes on (or measured by) net income or capital, or branch profits taxes, in eachcase imposed by a Governmental Authority based on the connection of such Administrative Agent, Lender or Issuing Bank to the jurisdiction of suchGovernmental Authority, excluding any connection arising solely on account of the Administrative Agent, Lender or Issuing Bank, as applicable, being a partyto, receiving any payment in respect of, performing under, or exercising any enforcement rights under this Agreement, and (b) in the case of a Foreign Lender ora Foreign Issuing Bank (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), at any time prior to the occurrence and continuationof a Default under clauses (a), (b), (h), (i) or (j) of Section 7.01, any withholding tax imposed by Canada that (i) is in effect and would apply to amounts payableto such Foreign Lender or Foreign Issuing Bank at the time such Foreign Lender or Foreign Issuing Bank becomes a party to this Agreement (or designates a newlending office), except to the extent that (I) such Foreign Lender or Foreign Issuing Bank (or its assignor, if any) was entitled, at the time of designation of a newlending office (or assignment), to receive additional amounts from the Borrower with respect to any such withholding tax pursuant to Section 2.17(a), and (II)such additional amounts after the assignment or designation are no greater than the additional amounts that would be payable pursuant to Section 2.17(a) prior tothe designation or assignment, or (ii) is imposed as a result of the representations and warranties made by such Foreign Lender or Foreign Issuing Bank pursuantto Section 2.17(e) not being true, or the failure of the Foreign Lender or Foreign Issuing Bank to comply with its agreements made pursuant to suchSection 2.17(e).

“Facility” has the meaning assigned thereto in the preamble hereto.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates onovernight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeedingBusiness Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, ifnecessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers ofrecognized standing selected by it.

10


“Financed Amount” means, at any time, with respect to any Securitization, (a) if such Securitization involves any transfer of interests in accountsreceivable or inventory (i) to a trust, partnership, corporation or other entity (other than a Subsidiary) or (ii) in the case of a Securitization of accounts receivable,directly to one or more investors or other purchasers (other than any Subsidiary), the aggregate amount of the interests in accounts receivable so transferred, netof collections applied to such interests and net of any such interests that have been written off as uncollectible, or the aggregate book value of the interests ininventory transferred pursuant to such Securitization and not sold or otherwise disposed of by the purchaser or purchasers, or (b) if such Securitization involves atransaction in which a Subsidiary incurs Indebtedness secured by Liens on accounts receivable, the aggregate outstanding principal amount of the Indebtednesssecured by Liens on accounts receivable incurred pursuant to such Securitization.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Parent or the Borrower as the contextindicates.

“Fitch” means Fitch, Inc.

“Foreign Issuing Bank” means any Issuing Bank that is a “non-resident” of Canada for purposes of Part I of the ITA.

“Foreign Lender” means any Lender that is a “non-resident” of Canada for purposes of Part I of the ITA.

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any state thereofor the District of Columbia.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, the Government of Canada, any other nation or any politicalsubdivision thereof, whether, state, provincial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercisingexecutive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economiceffect of guaranteeing any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligationof the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or toadvance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose ofassuring the owner of such Indebtedness of the payment thereof, (c) to maintain working capital, equity capital or any other financial

11


statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (d) as an account party in respect of anyletter of credit or letter of guaranty issued to support such Indebtedness; provided, that the term Guarantee shall not include endorsements for collection ordeposit in the ordinary course of business.

“Guarantor” means the Parent.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, includingpetroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all othersubstances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or otherinterest or currency exchange rate or commodity price hedging arrangement.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits (other thancustomer deposits in respect of accounts receivable maintained in the ordinary course of business consistent with past practices) or advances of any kind, (b) allobligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges arecustomarily paid (excluding trade accounts payable and obligations to pay salary or benefits under deferred compensation, executive compensation or otherbenefit programs), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) allobligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course ofbusiness), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by)any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person ofIndebtedness of others, (h) all Capital Lease Obligations and Synthetic Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of suchPerson as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’acceptances and (k) all obligations of such Person incurred under or in connection with a Securitization. The Indebtedness of any Person shall include theIndebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result ofsuch Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is notliable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.

12


“Index Debt” means the Parent’s senior, unsecured, non-credit-enhanced long-term Indebtedness for borrowed money.

“Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08.

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan) and each Canadian Prime Loan (other than a SwinglineLoan), the first day of each January, April, July and October, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to theBorrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day thatoccurs at intervals of three months’ duration after the first day of such Interest Period and continuing until the end of such Interest Period, and (c) with respect toany Swingline Loan, the day that such Loan is required to be repaid.

“Interest Period” means (a) with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on thenumerically corresponding day in the calendar month that is one, two, three or six months (or, with the consent of each Lender that will make a Loan as part ofsuch Borrowing, nine or 12 months) thereafter, as the Borrower may elect; and (b) with respect to each Bankers’ Acceptance or BA Equivalent Note Borrowing,the period commencing on the date of such Borrowing, conversion or continuance and being of 30, 60, 90 or 180 days duration, as selected by the Borrower;provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Dayunless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Dayand (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in thelast calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date ofa Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation ofsuch Borrowing.

“Issuing Bank” means Scotia Capital and any other Lender, that shall have become an Issuing Bank hereunder as provided in Section 2.05(k), each in itscapacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). Each Issuing Bank may, in its discretion,arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliatewith respect to Letters of Credit issued by such Affiliate.

“ITA” means the Income Tax Act (Canada), as amended, and any successor thereto, and any regulations promulgated thereunder.

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of Credit.

13


“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregateamount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any timeshall be its Applicable Percentage of the total LC Exposure at such time.

“Lead Arranger” means Scotia Capital, in its capacity as lead arranger for the Lenders hereunder.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender pursuant to an Assignment and Assumption,other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders”includes the Swingline Lender.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutivefiscal quarters of the Parent ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Parent mostrecently ended prior to such date); provided that for purposes of determining the Leverage Ratio at any time, the outstanding amount of all revolvingIndebtedness, and the Financed Amount of all Securitizations, included in Total Indebtedness shall be deemed to equal the average outstanding amount of suchrevolving Indebtedness, and the average Financed Amount of all Securitizations, in each case on the last day of each of the four most recently ended fiscalquarters, net of Permitted Investments not to exceed $50,000,000 on the last day of each such quarter.

“Leverage Test” means, with respect to the Parent, that the Leverage Ratio of the Parent is not greater than 2.00 to 1.00.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service(or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currentlyprovided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest ratesapplicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of suchInterest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for anyreason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to the next1/100 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of theAdministrative Agent in immediately available funds in the London interbank market at approximately

14


11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or ofsuch asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease havingsubstantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right ofa third party with respect to such securities.

“Loan Documents” means this Agreement and each promissory note issued hereunder.

“Loan Parties” means the Parent, the Borrower and the Subsidiary Loan Parties.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement, including by way of the discounting and acceptance ofBankers’ Acceptances and purchase of BA Equivalent Notes; provided that where reference is made to a Borrowing of Bankers’ Acceptances or Bankers’Acceptance Loans, such Loan or Borrowing shall be deemed to include BA Equivalent Notes to the extent such Loan or Borrowing is to be made by a Non BALender.

“Material Adverse Effect” means a material adverse effect on (a) the business, results of operations or financial condition of the Parent and the Subsidiariestaken as a whole, (b) the ability of any Loan Party (other than any Subsidiaries that are not Significant Subsidiaries) to perform any of its obligations under anyLoan Document or (c) the rights of or benefits available to the Lenders under any Loan Document.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements,of any one or more of the Parent and its Subsidiaries in an aggregate principal amount exceeding $25,000,000. For purposes of determining MaterialIndebtedness, the “principal amount” of the obligations of the Parent or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximumaggregate amount (giving effect to any netting agreements) that the Parent or such Subsidiary would be required to pay if such Hedging Agreement wereterminated at such time.

“Maturity Date” means December 2, 2009.


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

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

15


“Non BA Lender” means any Lender which is not a BA Lender.

“Obligations” means (a) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency,receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, byacceleration, upon one or more dates set for prepayment or otherwise, (b) each payment required to be made by the Borrower under this Agreement in respect ofany Letter of Credit, when and as due, including payments in respect of reimbursement of reasonable disbursements, interest thereon and obligations to providecash collateral, (c) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed orotherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless ofwhether allowed or allowable in such proceeding), of the Loan Parties under this Agreement and the other Loan Documents and (d) the due and punctualpayment and performance of all obligations of the Parent, the Borrower and the other Subsidiaries under any Hedging Agreement and cash managementarrangements or agreements (i) existing on the date hereof and with a Person that is a Lender on the date hereof (or an Affiliate of such a Lender) or (ii) with aPerson that shall have been a Lender at the time such Hedging Agreement or cash management arrangement or agreement was entered into (or an Affiliate ofsuch a Lender).

“Obligors” means the Parent, the Borrower, each Subsidiary, each Affiliate and each other Subsidiary of Parent obligated under a Loan Document, and“Obligor” means any one of them.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising fromany payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Parent” has the meaning assigned to such term in the preamble hereto.

“Participant” has the meaning set forth in Section 9.04.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Permitted Acquisition” means any non-hostile acquisition by the Parent or any wholly owned Subsidiary of all or substantially all the assets of, or all theEquity Interests (other than Equity Interests to be owned by management of such Person that does not constitute more than 10% of the Equity Interests in suchPerson) in, a Person or division or line of business of a Person (including any such acquisition effected by a merger or an amalgamation of a Person into theParent or a Subsidiary in which the Parent or a wholly owned Subsidiary is the surviving Person) if, immediately after giving effect thereto, (a) no Default hasoccurred and is continuing or would result therefrom, (b) the principal business of such Person shall be reasonably related, ancillary or

16


complementary to a business in which the Parent and its Subsidiaries are engaged immediately prior to such acquisition or shall be a health care business, (c) inthe case of any Subsidiary formed for the purpose of or resulting from such acquisition organized and existing under the laws of the United States, all the EquityInterests of each such Subsidiary shall be owned directly by the Parent and/or a wholly owned Subsidiary organized and existing under the laws of the UnitedStates (other than Equity Interests permitted to be owned by management), (d) the Parent and the Subsidiaries shall be in compliance, on a pro forma basis aftergiving effect to such acquisition (without giving effect to operating expense reductions other than cost savings permitted to be included under Regulation S X),with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of the Parent for which financialstatements are available, as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and (e) if the consideration to bepaid in respect of such acquisition (including Indebtedness to be assumed or repaid by the Parent or any Subsidiary) is greater than $25,000,000, the Parent shallhave delivered to the Administrative Agent an officers’ certificate to the effect set forth in clauses (a), (b), (c) and (d) above, together with all relevant financialinformation for the Person or assets to be acquired and reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause(d) above.

“Permitted Encumbrances” means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of

business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other

social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other

obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; and (f) easements, zoning restrictions, rights-of-way, reservations, limitations, provisos and conditions, if any, expressed in any original grants of real

property from the Crown and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure anymonetary obligations and do not materially detract from the value of the affected

17


property or interfere with the ordinary conduct of business of the Parent or any Subsidiary; provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Investments” means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by

any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America) or Canada (or by any agencythereof to the extent such obligations are backed by the full faith and credit of Canada), in each case maturing within one year from the date of acquisitionthereof;

(b) Indebtedness maturing within 12 months issued by and constituting direct obligations of any of the following agencies or any other likegovernmental or government-sponsored agency, as follows: Federal Farm Credit Bank; Federal Intermediate Credit Bank; Federal Financings Bank;Federal Home Loan Bank System; Federal Home Loan Mortgage Corporation; Federal National Mortgage Association; Tennessee Valley Authority;Student Loan Marketing Association; Export-Import Bank of the United States; Farmers Home Administration; Small Business Administration;Inter-American Development Bank; International Bank for Reconstruction and Development; Federal Land Banks; and Government National MortgageAssociation;

(c) direct and general obligations maturing within 12 months of any state of the United States of America or any province of Canada or anymunicipality or political subdivision of such state, including auction rate securities and non rated pre-funded debt, or obligations of any corporation, if suchobligations, except pre-refunded debt, are rated in the highest credit rating obtainable from at least two out of three Ratings Agencies;

(d) obligations (including asset-backed obligations) maturing within 12 months of any corporation, partnership, trust or other entity which are ratedin one of the three highest credit ratings obtainable from at least two out of three Rating Agencies.

(e) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, thehighest credit rating obtainable from S&P or from Moody’s (within which there may be sub-categories or gradations indicating relative standing), andinvestments in master notes that are rated (or that have been issued by an issuer that is rated with respect to a class of short-term debt obligations, or anysecurity within that class, that is comparable in priority and security with said master note) by S&P or Moody’s in the highest rating categories forshort-term debt obligations (within which there may be sub-categories or gradations indicating relative standing);

18


(f) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereofissued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organizedunder the laws of the United States of America or any State thereof or Canada or any province thereof which has a combined capital and surplus andundivided profits of not less than $500,000,000;

(g) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into witha financial institution satisfying the criteria described in clause (c) above (or subsidiaries or Affiliates of such financial institutions); and

(h) money market funds.

“Permitted Other Acquisition” means any acquisition or investment (other than a Permitted Acquisition) by the Parent or any Subsidiary of or in a Personor division or line of business of a Person (including any such acquisition or investment resulting from a merger or an amalgamation of a Person into aSubsidiary) if, immediately after giving effect thereto, (a) no Default has occurred and is continuing or would result therefrom, (b) the principal business of suchPerson shall be reasonably related, ancillary or complementary to a business in which the Parent and its Subsidiaries are engaged immediately prior to suchacquisition or investment or shall be a health care business, (c) the Parent and the Subsidiaries shall be in compliance, on a pro forma basis after giving effect tosuch acquisition or investment (without giving effect to operating expense reductions other than cost savings permitted to be included under Regulation S X),with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of the Parent for which financialstatements are available, as if such acquisition or investment had occurred on the first day of each relevant period for testing such compliance, and (d) if theconsideration to be paid in respect of such acquisition or investment is greater than $25,000,000, the Parent shall have delivered to the Administrative Agent anofficers’ certificate to the effect set forth in clauses (a), (b) and (c) above, together with all relevant financial information for the Person or assets to be acquiredand reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause (c) above.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, GovernmentalAuthority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of theCode or Section 302 of ERISA, and in respect of which the Parent or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 ofERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

19


“Prime Rate” means the rate of interest per annum publicly announced from time to time by Scotia Capital as its prime rate in effect at its principal officein New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Proceeds” has the meaning specified in Section 9-102 of the New York UCC.

“Ratings Agencies” mean S&P, Moody’s or Fitch.

“Ratings Test” means, with respect to the Parent, that the rating established by S&P or Moody’s of the Index Debt of the Parent is not less than BBB- orBaa3, respectively.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents andadvisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the sum ofthe total Revolving Credit Exposures and unused Commitments at such time.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in theParent or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of thepurchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in the Parent or any Subsidiary or any option, warrant or otherright to acquire any such Equity Interests in the Parent or any Subsidiary; provided that no such dividend, distribution or payment shall constitute a “RestrictedPayment” to the extent made solely with common stock of the Parent.

“Revolving Borrowing” means a Borrowing comprised of Revolving Loans.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s RevolvingLoans and its LC Exposure and Swingline Exposure at such time.

“Revolving Loan” means a Loan made pursuant to Section 2.01.

“S&P” means Standard & Poor’s.

“Schedule I Lender” means a bank which is chartered under the Bank Act (Canada) and named in Schedule I thereto.

20


“Scotia Capital” has the meaning assigned to such term in the preamble hereto.

“Securitization” means any transfer or pledge of accounts receivable, inventory and/or Proceeds thereof or interests therein (a) to a special purpose trust,partnership or corporation or other special purpose entity (which may but need not be a Subsidiary), which transfer or pledge is funded by such entity in whole orin part by (i) the issuance to one or more lenders or investors of indebtedness or other securities that are to receive payments principally from the cash flowderived from such accounts receivable, inventory and/or Proceeds thereof or interests therein or (ii) the transfer or pledge of such accounts, inventory and/orProceeds thereof (or interest therein) to one or more investors or other purchasers, or (b) in the case of accounts receivable, directly to one or more investors orother purchasers.

“Securitization Entity” means AmeriSource Receivables Financial Corporation , a Delaware corporation, and any other wholly owned limited purposeSubsidiary of the Parent that purchases accounts receivable or inventory of the Parent or any Subsidiary pursuant to a Securitization.

“Significant Subsidiary” means each Subsidiary other than any Subsidiary or Subsidiaries that individually or in the aggregate did not account for morethan 1% of the assets or revenues of the Parent and the Subsidiaries on a consolidated basis at the end of or for the most recent four fiscal quarter period forwhich financial statements have been delivered under Section 5.01(a) or (b).

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or otherentity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements wereprepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) ofwhich securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of apartnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwiseControlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Parent (including the Borrower).

“Subsidiary Loan Party” means each Subsidiary that is not an Excluded Subsidiary.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of anyLender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.

21


“Swingline Lender” means Scotia Capital, in its capacity as lender of Swingline Loans hereunder.

“Swingline Loan” means a Loan made pursuant to Section 2.04.

“Synthetic Lease” means a lease of property or assets designed to permit the lessees (i) to claim depreciation on such property or assets under U. S. tax lawand (ii) to treat such lease as an operating lease or not to reflect the leased property or assets on the lessee’s balance sheet under GAAP.

“Synthetic Lease Obligations” shall mean, with respect to any Synthetic Lease, at any time, an amount equal to the higher of (x) the aggregate terminationvalue or purchase price or similar payments in the nature of principal payable thereunder and (y) the then aggregate outstanding principal amount of the notes orother instruments issued by, and the amount of the equity investment, if any, in the lessor under such Synthetic Lease.

“2003 Securitization” means the receivables Securitization as contemplated by the Receivables Purchase Agreement dated as of July 10, 2003, amongAmerisource Receivables Financial Corporation, as seller, AmerisourceBergen Drug Corporation, as initial servicer, various purchaser groups from time to timeand Wachovia Bank National Association, as administrator.

“Target Co.” is defined in the recitals.

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

“Termination Date” means the date of termination of all of the commitments, and the date on which all Obligations have been paid in full in cash and allLetters of Credit have been terminated or expired (or cash collateralized in accordance with the terms of this Agreement).

“Total Indebtedness” means, as of any date, the sum, without duplication of (a) the aggregate principal amount of Indebtedness of the Parent and theSubsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordancewith GAAP, (b) the aggregate amount of the Financed Amounts of all Securitizations of the Parent and the Subsidiaries, and (c) the aggregate principal amountof Indebtedness of the Parent and the Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance with GAAP,determined on a consolidated basis.

“Transactions” means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing ofLoans, the use of the proceeds thereof, the issuance of the Letters of Credit, the creation of the Guarantee provided for herein and in the other Loan Documents.

22


“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing,is determined by reference to the LIBO Rate, the Alternate Base Rate, the Canadian Prime Rate or whether such Loan or Borrowing has been effected by theissuance and acceptance of Bankers’ Acceptances or BA Equivalent Notes hereunder.

“wholly owned” means, as to any Subsidiary, that all the Equity Interests in such Subsidiary (other than directors’ qualifying shares) are owned, directly orindirectly, by the Parent.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as suchterms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a“Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified andreferred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar RevolvingBorrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever thecontext may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shallbe deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unlessthe context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to suchagreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments,supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) thewords “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particularprovision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits andSchedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangibleand intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall beconstrued in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requestsan amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operationof such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an

23


amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the applicationthereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective untilsuch notice shall have been withdrawn or such provision amended in accordance herewith.

(b) All pro forma computations required to be made hereunder giving effect to any acquisition, investment, sale, disposition, merger, amalgamation orsimilar event shall reflect on a pro forma basis such event as if it occurred on the first day of the relevant period and, to the extent applicable, the historicalearnings and cash flows associated with the assets acquired or disposed of for such relevant period and any related incurrence or reduction of Indebtedness forsuch relevant period, but shall not take into account any projected synergies or similar benefits expected to be realized as a result of such event other than costsavings permitted to be included under Regulation S X.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans to the Borrower indollars or Canadian Dollars from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s RevolvingCredit Exposure exceeding such Lender’s Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower mayborrow, prepay and reborrow Revolving Loans.

SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by theLenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve anyother Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’sfailure to make Loans as required.

(b) Subject to Section 2.11, each Revolving Borrowing shall be comprised entirely of ABR Loans, Canadian Prime Loans and Bankers’ Acceptance Loansand BA Equivalent Note Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Loan or aCanadian Prime Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to makesuch Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of thisAgreement. Borrowings of more than one Type may be outstanding at the same time.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integralmultiple

24


of C$5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple ofUS$1,000,000 and at the time each Canadian Prime Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple ofC$1,000,000; provided in either case that such a Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the totalCommitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Borrowing, conversion orcontinuance of Bankers’ Acceptances and BA Equivalent Notes shall be in a minimum aggregate face amount of C$1,000,000 and integral multiples thereof.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowingif the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of suchrequest by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of theproposed Borrowing, (b) in the case of an ABR Borrowing or a Canadian Prime Borrowing, not later than 12:00 noon, New York City time, one Business Dayprior to the date of the proposed Borrowing or (c) in the case of a Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing, not later than 12:00 noon,New York City time, two Business Days before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall beconfirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agentand signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of such Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing, Canadian Prime Borrowing, Bankers’ Acceptance Borrowing, BA Equivalent Note

Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing the initial Interest Period to be

applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and (v) the location and number of the Borrower’s account with the Administrative Agent to which funds are to be disbursed.

25


If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respectto any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration and if the Interest Periodis specified with respect to any requested Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing then the Borrower shall be deemed to have selectedan Interest Period of 30 days’ duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shalladvise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to theBorrower from time to time during the Availability Period in dollars or Canadian Dollars, in an aggregate principal amount at any time outstanding that will notresult in (i) the aggregate principal amount of outstanding Swingline Loans exceeding C$100,000,000 or (ii) the aggregate Revolving Credit Exposuresexceeding the aggregate Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstandingSwingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow SwinglineLoans.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than2:00 p.m., New York City time, on the day of such proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (whichshall be a Business Day), currency and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of anysuch notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the generaldeposit account of the Borrower with the Swingline Lender in the applicable currency specified in the notice referenced in this clause (b) (or, in the case of aSwingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank) by 3:00p.m., New York City time, on the requested date of such Swingline Loan.

(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Dayrequire the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregateamount of Swingline Loans in which the Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to eachLender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionallyagrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s ApplicablePercentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant tothis paragraph is absolute and unconditional and shall not be affected by any

26


circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such paymentshall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wiretransfer of immediately available funds, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shallapply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts soreceived by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to thisparagraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amountsreceived by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the SwinglineLender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by theAdministrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph andto the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to theAdministrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participationsin a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters ofCredit in dollars or Canadian Dollars for its own account, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at anytime and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the termsand conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bankrelating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal orextension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing sohave been approved by the applicable Issuing Bank) to an Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance,amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended,and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire(which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such otherinformation as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by an Issuing Bank, the Borrower also shall submit aletter of credit application on such Issuing Bank’s standard form in connection with any request

27


for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of eachLetter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LCExposure shall not exceed C$25,000,000 and (ii) the aggregate Revolving Credit Exposures shall not exceed the aggregate Commitments.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuanceof such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Daysprior to the Maturity Date; provided that at the request of the Borrower any Letter of Credit may contain customary “evergreen” provisions pursuant to whichsuch Letter of Credit will, in the absence of a notice given by the Issuing Bank, be automatically renewed (but in no event beyond the date that is five BusinessDays prior to the Maturity Date) for successive one-year periods.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any furtheraction on the part of the applicable Issuing Bank or the Lenders, each Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from theapplicable Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawnunder such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to theAdministrative Agent, for the account of such Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and notreimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to theBorrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters ofCredit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter ofCredit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without anyoffset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LCDisbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the date thatsuch LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, ifsuch notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New York City time, on (i) the Business Daythat the Borrower receives such notice, if such notice is received prior to 11:00 a.m., New York City time, on the day of receipt, or (ii) the Business Dayimmediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of

28


receipt; provided that, if such LC Disbursement is not less than C$1,000,000 (if denominated in C$) or U.S.$1,000,000 (if denominated in U.S.$), the Borrowermay, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABRRevolving Borrowing, or a U.S.$ denominated Swingline Loan, if such LC Disbursement was in U.S.$, or with a Canadian Prime Borrowing or a C$denominated Swingline Loan, if such Borrowing was in C$, in an equivalent amount and, to the extent so financed, the obligation to make such payment shall bedischarged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, theAdministrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’sApplicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of thepayment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply,mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts soreceived by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, theAdministrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraphto reimburse an Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to thisparagraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans, Canadian Prime Loans or a Swingline Loanas contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligations to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute,unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever andirrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or otherdocument presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in anyrespect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of suchLetter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of thisSection, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent,the Lenders, the Issuing Banks, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance ortransfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the precedingsentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to anyLetter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or

29


any consequence arising from causes beyond the control of the applicable Issuing Bank; provided that the foregoing shall not be construed to excuse theapplicable Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which arehereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by an Issuing Bank’s failure to exercise carewhen determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that,in the absence of gross negligence or willful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), an IssuingBank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the partiesagree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, an Issuing Bankmay, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice orinformation to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of suchLetter of Credit.

(g) Disbursement Procedures. An Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand forpayment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) ofsuch demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay ingiving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on thedate such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to butexcluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans if such LC Disbursementwas made in US$ or at the rate per annum then applicable to Canadian Prime Loans in such LC Disbursement was made in C$; provided that, if the Borrowerfails to reimburse such LC Disbursement when due pursuant to clause (e) of this Section, then Section 2.13(d) shall apply. Interest accrued pursuant to thisparagraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant toparagraph (e) of this Section to reimburse an Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent,the replaced Issuing Bank and the successor Issuing Bank, if any. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank.At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant toSection 2.12(b).

30


From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under thisAgreement with respect to Letters of Credit to be issued by such Issuing Bank thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed torefer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement ofan Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bankunder this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from theAdministrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposures representing greater than 50%of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the AdministrativeAgent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accruedand unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall becomeimmediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described inclause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations ofthe Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over suchaccount. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of theAdministrative Agent (which will use reasonable efforts to obtain a return at market rates for such cash deposits) and at the Borrower’s risk and expense, suchdeposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by theAdministrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed and, to the extent not so applied, shall beheld for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated(but subject to the consent of Lenders with LC Exposures representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of theBorrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event ofDefault, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have beencured or waived.

(k) Designation of Additional Issuing Banks. From time to time, the Borrower may by notice to the Administrative Agent and the Lenders designate asadditional Issuing Banks one or more Lenders that agree to serve in such capacity as provided below. The acceptance by a Lender of an appointment as anIssuing Bank hereunder shall be evidenced by an agreement (an “Issuing Bank Agreement”), which

31


shall be in a form satisfactory to the Borrower and the Administrative Agent, shall set forth the LC Commitment of such Lender and shall be executed by suchLender, the Borrower and the Administrative Agent and, from and after the effective date of such agreement, (i) such Lender shall have all the rights andobligations of an Issuing Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term“Issuing Bank” shall be deemed to include such Lender in its capacity as an Issuing Bank.

SECTION 2.06. Bankers’ Acceptances. (a) To facilitate the procedures contemplated in this Agreement, the Borrower irrevocably appoints each Lenderfrom time to time as the attorney-in-fact of the Borrower to execute, endorse and deliver on behalf of the Borrower in handwriting or by facsimile or mechanicalsignature as and when deemed necessary by such Lender, drafts in the forms prescribed by such Lender (if such Lender is a BA Lender), for bankers’acceptances denominated in Cdn. Dollars (each such executed draft which has not yet been accepted by a Lender being referred to as a “Draft”) or BAEquivalent Note. Each Bankers’ Acceptance and BA Equivalent Note executed and delivered by a Lender on behalf of the Borrower as provided for in thisSection will be as binding upon the Borrower as if it had been executed and delivered by a duly authorized officer of the Borrower.

(b) All such Drafts or BA Equivalent Notes will be held by each Lender subject to the same degree of care as if they were such Lender’s own property keptat the place at which the Drafts or BA Equivalent Notes are ordinarily kept by such Lender. Each Lender, upon written request of the Borrower, will promptlyadvise the Borrower of the number and designation, if any, of the Drafts and BA Equivalent Notes then held by it.

(c) The Administrative Agent, promptly following receipt of a Borrowing Request requesting Bankers’ Acceptances, will (i) advise each BA Lender of theface amount and the term of the Draft to be accepted by it, and (ii) advise each applicable Non BA Lender of the face amount and term of the BA EquivalentNote to be purchased by it. All Drafts to be accepted from time to time by each BA Lender that is a member of a clearing service will be payable to such clearingservice. The term of all Bankers’ Acceptances and BA Equivalent Notes issued pursuant to any Borrowing Request will be identical. Each Bankers’ Acceptanceand BA Equivalent Note will be dated the date on which it is issued and will be for a term of 30, 60, 90 or 180 days provided that in no event will the term of aBankers’ Acceptance or a BA Equivalent Note extend beyond the Maturity Date. The face amount of the Draft (or the aggregate face amount of the Drafts) to beaccepted at any time by each Lender which is a BA Lender, and the face amount of the BA Equivalent Notes to be purchased at any time by each Lender whichis a Non BA Lender, will be determined by the Administrative Agent based upon the Applicable Percentage of the respective Commitments of the Lenders. Indetermining a Lender’s Applicable Percentage of a request for Bankers’ Acceptances, the Administrative Agent, in its sole discretion, will be entitled to increaseor decrease the face amount of any Draft, or BA Equivalent Note to the nearest $1,000.

32


(d) Each BA Lender will complete and accept on the applicable date of Borrowing a Draft having a face amount (or Drafts having the face amounts) andterm advised by the Administrative Agent pursuant to Section 2.06(c). Each applicable BA Lender will purchase on the applicable date of Borrowing theBankers’ Acceptance or Bankers’ Acceptances accepted by it, for an aggregate price equal to the BA Discount Proceeds of such Bankers’ Acceptance (orBankers’ Acceptances). Each applicable BA Lender that is a member of a clearing service is hereby authorized to release the Bankers’ Acceptance accepted by itto such clearing house upon receipt of confirmation that such clearing house holds such Bankers’ Acceptance for the account of such BA Lender.

(e) Each Non BA Lender, in lieu of accepting Drafts or purchasing Bankers’ Acceptances on any date of Borrowing, will complete and purchase from theBorrower on such date of Borrowing a BA Equivalent Note in a face amount and for a term identical to the face amount and term of the Draft or Drafts whichsuch Non BA Lender would have been required to accept on such date of Borrowing if it were a BA Lender, for a price equal to the BA Discount Proceeds ofsuch BA Equivalent Note.

(f) The Borrower will pay to each BA Lender in respect of each Draft tendered by the Borrower to and accepted by such BA Lender, and to each Non BALender in respect of each BA Equivalent Note tendered to and purchased by such Non BA Lender, as a condition of such acceptance or purchase, the BAStamping Fee in accordance with Section 2.06(g) below.

(g) Upon acceptance of each Draft or purchase of each BA Equivalent Note, the Borrower will pay to the applicable Lender the related fee specified inSection 2.06(f), and to facilitate payment such Lender will be entitled to deduct and retain for its own account the amount of such fee from the amount to betransferred by such Lender to the Administrative Agent for the account of the Borrower pursuant to this Agreement in respect of the sale of the related Bankers’Acceptance or of such BA Equivalent Note.

(h) If the Administrative Agent determines in good faith, which determination will be final, conclusive and binding upon the Borrower, and so notifies theBorrower, that there does not exist at the applicable time a normal market in Canada for the purchase and sale of bankers’ acceptances, any right of the Borrowerto require the Lenders to purchase Bankers’ Acceptances and BA Equivalent Notes under this Agreement will be suspended until the Administrative Agentdetermines that such market does exist and gives notice thereof to the Borrower and any Borrowing Request requesting Bankers’ Acceptances will be deemed tobe a Borrowing Request requesting a Canadian Prime Loan in a similar aggregate principal amount.

(i) On the date of maturity of each Bankers’ Acceptance or BA Equivalent Note, the Borrower will pay to the Administrative Agent, for the account of theholder of such Bankers’ Acceptance or BA Equivalent Note, in Canadian Dollars an amount equal to the face amount of such Bankers’ Acceptance or BAEquivalent Note, as the case may be. In the case of a continuance of a Bankers’ Acceptance or BA Equivalent Note, in order to satisfy the continuing liability ofthe Borrower to a Lender for the face amount of the maturing Bankers’ Acceptance or BA Equivalent Note, the

33


Lender will determine and retain the BA Discount Proceeds of the new Bankers’ Acceptance or BA Equivalent Note, and the Borrower will, on the maturity dateof the maturing Bankers’ Acceptance or BA Equivalent Note, pay to the Administrative Agent for the account of the relevant Lender (i) the difference betweenthe principal amount of the maturing Bankers’ Acceptance or BA Equivalent Note and the BA Discount Proceeds from the new Bankers’ Acceptance or BAEquivalent Note, and (ii) the BA Stamping Fee in respect of the new Bankers’ Acceptance or BA Equivalent Note. The obligation of the Borrower to make suchpayment will not be prejudiced by the fact that the holder of such Bankers’ Acceptance is the Lender that accepted such Bankers’ Acceptances. No days of gracewill be claimed by the Borrower for the payment at maturity of any Bankers’ Acceptance or BA Equivalent Note. If the Borrower does not make such payment,from the proceeds of a Borrowing obtained under this Agreement or otherwise, the amount of such required payment will be deemed to be a Canadian PrimeLoan to the Borrower from the Lender that accepted such Bankers’ Acceptance or purchased such BA Equivalent Note.

(j) The signature of any duly authorized officer of the Borrower (or its attorneys, including attorneys appointed pursuant to Section 2.06(a)) on a Draft or aBA Equivalent Note may be mechanically reproduced in facsimile, and all Drafts and BA Equivalent Notes bearing such facsimile signature will be as bindingupon the Borrower (or its attorneys, including attorneys appointed pursuant to Section 2.06(a)) as if they had been manually signed by such officer,notwithstanding that such Person whose manual or facsimile signature appears on such Draft or BA Equivalent Note may no longer hold office at the date ofsuch Draft or BA Equivalent Note or at the date of acceptance of such Draft by a BA Lender or at any time thereafter.

(k) If any Event of Default has occurred and is continuing, the Borrower will deposit in an account with the Administrative Agent, established in the nameof the Administrative Agent for the benefit of the Lenders, an amount in cash equal to the face amount of all Bankers’ Acceptances then outstanding; providedthat the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, withoutdemand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII. Eachsuch deposit shall be held by the Administrative Agent as collateral for the payment and performance by the Borrower of its obligations under this Agreement.The Borrower will take all steps reasonably necessary to ensure that the security interest of the Lender in such deposit has priority over all other interests therein.The Administrative Agent shall have exclusive dominion and control, including exclusive right of withdrawal, over such account. Other than any interest earnedon the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent (which will use reasonableefforts to obtain a return at market rates for such cash deposits) and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, ifany , on such investments shall accumulate in such account. Moneys in such account will be applied by the Administrative Agent to reimburse the Lenders forpayments made under Bankers’ Acceptances for which they have not been reimbursed and, to the extent not so applied, if the maturity of the Loans has beenaccelerated, be applied to satisfy other obligations of

34


the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event ofDefault, such amount (to the extent not applied as aforesaid) will be returned to the Borrower within three Business Days after all Events of Default have beencured or waived.

SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer ofimmediately available funds by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose bynotice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to theBorrower by promptly crediting the amounts so received, in like funds, to an account designated by the Borrower in the applicable Borrowing Request; providedthat ABR Revolving Loans, or Canadian Prime Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remittedby the Administrative Agent to the applicable Issuing Bank.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not makeavailable to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such shareavailable on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower acorresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then theapplicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon,for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at thegreater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbankcompensation (it being understood that any payment of such interest by the Borrower will be in lieu of any payment by the Borrower of interest on such amountto the applicable Lender). If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in suchBorrowing.

SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in thecase of a Eurodollar Borrowing, Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing, shall have an initial Interest Period as specified in suchBorrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of aEurodollar Borrowing, Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing, may elect Interest Periods therefor, all as provided in this Section.The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratablyamong the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate

35


Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that aBorrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to bemade on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand deliveryor telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 and paragraph (e) of thisSection: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions

thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and(iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing, Canadian Prime Borrowing, Bankers’ Acceptance Borrowing, BA

Equivalent Note Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, a Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing, the Interest

Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “InterestPeriod”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selectedan Interest Period of one month’s duration or requests a Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing but does not specify an InterestPeriod, then the Borrower shall be deemed to have selected an Interest Period of 30 days’ duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of suchLender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Periodapplicable

36


thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Ifthe Borrower fails to deliver a timely Interest Election Request with respect to a Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing prior to theend of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall beconverted to a Canadian Prime Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and theAdministrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstandingBorrowing may be converted to or continued as a Eurodollar Borrowing or a Bankers’ Acceptance Borrowing or BA Equivalent Note Borrowing and (ii) unlessrepaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and each Bankers’ AcceptanceBorrowing or BA Equivalent Note Borrowing shall be converted to a Canadian Prime Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate at 5:00 p.m., New YorkCity time, on the Maturity Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of theCommitments of any Class shall be in an amount that is an integral multiple of C$5,000,000 and not less than C$10,000,000 and (ii) the Borrower shall notterminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the aggregateRevolving Credit Exposures would exceed the aggregate Commitments.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at leasttwo Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receiptof any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall beirrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectivenessof other credit facilities, in which case such notice may be revoked or extended by the Borrower (by notice to the Administrative Agent on or prior to thespecified effective date) if such condition is not satisfied or the effectiveness of such other credit facilities is delayed. Any termination or reduction of theCommitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance withtheir respective Commitments of such Class.

SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for theaccount of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Maturity Date and (ii) to the Swingline Lender the thenunpaid principal

37


amount of each Swingline Loan on the earlier of the Maturity Date and the seventh day after such Swingline Loan is made; provided that on each date that aRevolving Borrowing is made, the Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lenderresulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof andthe Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to eachLender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s sharethereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amountsof the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not inany manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliverto such Lender one or more promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) andin a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including afterassignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if suchpromissory note is a registered note, to such payee and its registered assigns).

SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or inpart, subject to the requirements of this Section.

(b) In the event and on such occasion that the aggregate Revolving Credit Exposures exceed the aggregate Commitments, due to currency fluctuations orotherwise, the Borrower shall prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in anaccount with the Administrative Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess; provided that if, due to exchange ratefluctuations or for any reason whatsoever, the aggregate Revolving Credit Exposures outstanding shall, at any time, exceed 105% of the aggregate Commitments(the amount of such excess, an “Excess Amount”), based on the Exchange Rate in effect from time to time, then upon written notice from the

38


Administrative Agent, the Borrower shall first, prepay the Revolving Loans and/or Swingline Loans in an amount so as to, as nearly as possible, eliminate suchExcess Amount; and second, if any Excess Amount shall remain after such prepayment, provide cash collateral (such cash collateral to be held in accordance withSection 2.06(k)) as the Administrative Agent may require in Canadian Dollars or dollars, as applicable, in an amount equal to the remaining Excess Amount,which collateral shall secure all Obligations outstanding and shall remain in the Administrative Agent’s possession until such Excess Amount is eliminatedwhereupon the collateral shall be released by the Administrative Agent to the Borrower. Notwithstanding any other provision of this Agreement, including anyprovision contemplating a continuation or conversion, whenever an Excess Amount exists, (A) upon the maturity date of any Banker’s Acceptance, the Borrowershall repay the Banker’s Acceptance, or (B) upon the last day of the Interest Period in respect of a Eurodollar Loan, the Borrower shall repay the EurodollarLoan, in each case to the extent necessary to cover the Excess Amount and any repayments under clauses (A) and (B) shall be applied in reduction of the ExcessAmount.

(c) Prior to any prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify suchselection in the notice of such prepayment pursuant to paragraph (e) of this Section.

(d) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone(confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing a Bankers’ Acceptance Borrowing or a BAEquivalent Note Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment ofan ABR Borrowing or a Canadian Prime Borrowing, not later than 12:00 noon, New York City time, on the date of prepayment or (iii) in the case of prepaymentof a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify theprepayment date, the principal amount of each Borrowing or portion thereof to be prepaid; provided that if a notice of prepayment is given in connection with aconditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked or extended if suchnotice of termination is revoked or extended in accordance with Section 2.09. Promptly following receipt of any such notice (other than a notice relating solely toSwingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amountthat would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall beapplied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13.Notwithstanding the foregoing, Bankers’ Acceptances may only be paid on their maturity dates unless the Borrower cash collateralizes the face amount of suchBankers’ Acceptance in accordance with Section 2.06(k)

SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee in Canadian Dollars,

39


which shall accrue at the Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and includingthe Effective Date to but excluding the date on which such Commitment terminates; provided that, if such Lender continues to have any Revolving CreditExposure after its Commitment terminates, then such facility fee shall continue to accrue on the daily amount of such Lender’s Revolving Credit Exposure fromand including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure.Accrued facility fees shall be payable in arrears on the first day of January, April, July and October of each year and on the date on which the Commitmentsterminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Commitmentsterminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of dayselapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee in dollars or Canadian Dollars, asapplicable, with respect to its participations in Letters of Credit, which shall accrue at the Applicable Rate used to determine the interest rate applicable toEurodollar Revolving Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LCDisbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminatesand the date on which such Lender ceases to have any LC Exposure, and (ii) to each Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% perannum (or as otherwise agreed with the applicable Issuing Bank) on the average daily amount of the LC Exposure attributable to Letters of Credit issued by suchIssuing Bank (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to butexcluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as such Issuing Bank’sstandard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued participationfees and fronting fees shall be payable on the first day of January, April, July and October of each year, commencing on the first such date to occur after theEffective Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on whichthe Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Banks pursuant to this paragraph shall be payable within 10 daysafter demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of dayselapsed (including the first day but excluding the last day).

(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed uponbetween the Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to an Issuing Bank, in the

40


case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable underany circumstances (except that overpayments made in error shall be refunded or credited against future payments of fees).

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rateplus the Applicable Rate.

(b) The Loans comprising each Canadian Prime Borrowing shall bear interest at the Canadian Prime Rate plus the Applicable Rate.

(c) The Loans comprising each Eurodollar Borrowing shall bear interest at the LIBO Rate for the Interest Period in effect for such Borrowing plus theApplicable Rate.

(d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paidwhen due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate perannum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs ofthis Section or (ii) in the case of any other amount denominated in U.S.$, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) ofthis Section, and (iii) in the case of any other amount denominated in C$, 2% plus the rate applicable to Canadian Prime Revolving Loans as provided inparagraph (b) of this Section.

(e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upontermination of the Commitments; provided that (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of anyrepayment or prepayment of any Loan (other than a prepayment of an ABR or Canadian Prime Revolving Loan prior to the end of the Availability Period),accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversionof any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of suchconversion.

(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate attimes when the Alternate Base Rate is based on the Prime Rate or interest computed by reference to the Canadian Prime Rate shall be computed on the basis of ayear of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding thelast day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absentmanifest error.

41


SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not

exist for ascertaining the LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the

cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, untilthe Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Requestthat requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any BorrowingRequest requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of,

or credit extended by, any Lender (except any such reserve requirement reflected in the LIBO Rate) or any Issuing Bank; or (ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar

Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligationto make any such Loan) or to increase the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reducethe amount of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowerwill pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, asthe case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rateof return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence ofthis Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a levelbelow that which such Lender or

42


such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration suchLender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then fromtime to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lenderor such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or itsholding company, as the case may be, and the manner in which such amount or amounts have been calculated, as specified in paragraph (a) or (b) of this Sectionshall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be,the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of suchLender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bankpursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender or such Issuing Bank, as the casemay be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention toclaim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six month periodreferred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an InterestPeriod applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Periodapplicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto(regardless of whether such notice may be revoked or extended under Section 2.11(d) and is revoked or extended in accordance therewith), or (d) the assignmentof any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then,in any such event, the Borrower shall compensate each Lender for the loss, cost and expense (but not for any lost profit) attributable to such event. In the case ofa Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) theamount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate (not including the ApplicableRate) that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, inthe case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest whichwould accrue on such principal amount for such period at

43


the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period fromother banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to thisSection shall be delivered to the Administrative Agent (which shall advise the Borrower of the amount due to such Lender) and shall be conclusive absentmanifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or the Guarantor hereunder or under any other LoanDocument shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower, the Guarantor, or theAdministrative Agent, as applicable, shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall beincreased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), theAdministrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions beenmade, (ii) the Borrower or the Guarantor shall make such deductions and (iii) the Borrower or the Guarantor shall pay the full amount deducted to the relevantGovernmental Authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the fullamount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect toany payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxesimposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or withrespect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Acertificate as to the amount of such payment or liability delivered to the Borrower by a Lender or an Issuing Bank, or by the Administrative Agent on its ownbehalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or the Guarantor to a Governmental Authority, theBorrower or the Guarantor shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authorityevidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.The Administrative Agent shall supply a copy of such documentation to any Lender upon such Lender’s request.

44


(e) Any Foreign Lender or Foreign Issuing Bank: (i) either (I)(A) shall designate, for the purpose and throughout the term of such Loan, an office of suchPerson in Canada as its applicable lending office; (B) severally represent and warrant that, as of the date such Person becomes a party to this Agreement, it is anAuthorized Foreign Bank; (C) covenant and agree that at all material times other than by reason of a change in treaty, law, rule or regulation occurring after thedate of this Agreement (1) such Person will continue to be an Authorized Foreign Bank, (2) such Loan will be a Canadian Banking Business Asset, and (3) suchPerson will record such Canadian Banking Business Asset and any income thereon in all financial statements for its Canadian Banking Business that are filed (orare required to be filed) with the Superintendent of Financial Institutions, and will include in its income for a taxation year from the Canadian Banking Businessany income in respect of that Canadian Banking Business Asset or (II) if such Person becomes a Foreign Lender or Foreign Issuing Bank pursuant to anassignment under Section 9.04, shall represent to the Borrower, at any time prior to the occurrence and continuation of an Event of Default under clause (a), (b),(h), (i) or (j) of Section 7.01, that it is entitled to receive payments of interest hereunder without imposition of Canadian withholding tax or subject to Canadianwithholding tax at no greater rate than applied to the transferor; and (ii) shall, upon request, provide the Borrower and the Administrative Agent with suchdocumentation as may be reasonably necessary to establish the Lender’s entitlement to an exemption from Canadian withholding tax on payments hereunder (butonly so long as such Person is or remains lawfully entitled to do so). Each Foreign Lender or Foreign Issuing Bank shall promptly notify the Borrower in writingupon becoming aware at any time that it is not in compliance with the provisions of this Section 2.17(e).

(f) If the Administrative Agent, a Lender, or an Issuing Bank determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes asto which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.17, it shall payover such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.17 withrespect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender or Issuing Bank andwithout interest; provided, that the Borrower, upon the request of the Administrative Agent or such Lender or Issuing Bank, agrees to repay the amount paid overto the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority in respect of such refunded amounts) to theAdministrative Agent or such Lender or Issuing Bank in the event the Administrative Agent or such Lender or Issuing Bank is required to repay such refund tosuch Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender or Issuing Bank to make available to theBorrower its tax returns or any other information relating to its taxes which it reasonably deems confidential and which is not otherwise generally available to thepublic.

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by ithereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable underSection 2.15, 2.16 or 2.17, or otherwise)

45


prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 1:00 p.m.,New York City time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any datemay, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interestthereon. All such payments shall be made to the Administrative Agent at its offices at 720 King Street West, 3 rd Floor, Toronto, Ontario, Canada, M5V2T3,Attention: John Hall, except payments to be made directly to the Issuing Banks or the Swingline Lender as expressly provided herein and except that paymentspursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall bemade to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it in like funds for the account of any otherPerson to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a BusinessDay, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall bepayable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LCDisbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably amongthe parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal andunreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursedLC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any ofits Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of theaggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion receivedby any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans andparticipations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by theLenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LCDisbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto isrecovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of thisparagraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or anypayment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans

46


or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisionsof this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lenderacquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to suchparticipation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the AdministrativeAgent for the account of the Lenders or an Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that theBorrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or such IssuingBank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or such Issuing Bank, asthe case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank withinterest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at thegreater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbankcompensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 9.03(c), then theAdministrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agentfor the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if the Borrower isrequired to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lendershall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder toanother of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payablepursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would nototherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection withany such designation or assignment.

(b) If (i) any Lender requests compensation under Section 2.15, (ii) the Borrower is required to pay any additional amount to any Lender or anyGovernmental Authority for the account of any Lender pursuant to Section 2.17, (iii) any Lender fails to execute and deliver any consent, amendment or waiverto this Agreement requested by

47


the Borrower by a date specified by the Borrower (or gives the Borrower written notice prior to such date of its intention not to do so), or (iv) any Lender defaultsin its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent,require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rightsand obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts suchassignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Commitment is being assigned,the Issuing Banks and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal tothe outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amountspayable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all otheramounts), and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant toSection 2.17, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignmentand delegation if, prior thereto, as a result of a waiver, consent or amendment by such Lender or otherwise, the circumstances entitling the Borrower to requiresuch assignment and delegation cease to apply.

ARTICLE III

Representations and Warranties

The Borrower and the Parent jointly and severally represent and warrant to the Lenders that:

SECTION 3.01. Organization; Powers. Each Loan Party is duly organized, validly existing and in good standing (where applicable) under the laws of thejurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individuallyor in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, everyjurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party’s corporate powers andhave been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrowerand the Parent and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, willconstitute, a legal, valid and binding obligation of the Borrower, the Parent or such Loan Party (as the case may be), enforceable in accordance with its terms,subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject

48


to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. (a) The Transactions (i) do not require any consent or approval of, registration or filing with, orany other action by, any Governmental Authority, (ii) will not violate any applicable law or regulation or the charter, by laws or other organizational documentsof any Loan Party or any order of any Governmental Authority, (iii) will not violate or result in a default under any indenture, material agreement or othermaterial instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party, and(iv) will not result in the creation or imposition of any Lien on any asset of any Loan Party (other than Liens created hereunder).

(b) Neither the Parent nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for thepurpose of purchasing or carrying margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System). No part of the proceedsof any Loan will be used, whether directly or indirectly, for any purpose that would entail a violation of such Regulation U.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Parent has heretofore furnished to the Lenders its consolidated andconsolidating balance sheet and statements of income, stockholders equity and cash flows (i) audited as of and for the fiscal year ended September 30, 2004,reported on by Ernst & Young LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended June 30,2005, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations andcash flows of the Parent and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustmentsand the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b) Since September 30, 2004, there has been no material adverse change in the business, assets, operations, prospects or condition (financial or otherwise)of the Parent and its Subsidiaries, taken as a whole.

SECTION 3.05. Properties. (a) The Parent and each of its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal propertymaterial to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize suchproperties for their intended purposes.

(b) Each of the Parent and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual propertymaterial to its business, and the use thereof by the Parent and its Subsidiaries does not infringe upon the rights of any other Person, except for any suchinfringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

49


SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority(including, but not limited to, the United States Food and Drug Administration) pending against or, to the knowledge of the Borrower and the Parent, threatenedagainst or affecting the Parent or any of its Subsidiaries (i) as to which there is a reasonable likelihood of an adverse determination and that, if adverselydetermined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any of the Loan Documentsor the Transactions.

(b) Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect,neither the Parent nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license orother approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respectto any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Parent and its Subsidiaries is in compliance with all laws, regulations and orders ofany Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where thefailure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and iscontinuing.

SECTION 3.08. Investment and Holding Company Status. Neither the Parent nor any of its Subsidiaries is (a) an “investment company” as defined in, orsubject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public UtilityHolding Company Act of 1935.

SECTION 3.09. Taxes. Each of the Parent and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filedand has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriateproceedings and for which the Parent or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do socould not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events forwhich liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefitobligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of themost recent financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of the assets of such Plan, and the present valueof all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of

50


Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than$25,000,000 the fair market value of the assets of all such underfunded Plans.

SECTION 3.11. Disclosure. The Borrower and the Parent have disclosed to the Lenders all agreements, instruments and corporate or other restrictions towhich the Parent or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably beexpected to result in a Material Adverse Effect. No reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party tothe Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder(as modified or supplemented by other information so furnished), taken as a whole, contains any material misstatement of fact or omits to state any material factnecessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projectedfinancial information, the Parent and the Borrower represent only that such information was prepared in good faith based upon assumptions believed to bereasonable at the time.

SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Parent in, each Subsidiary of the Parent as of theEffective Date.

SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of the Parent and its Subsidiaries as of theEffective Date. As of the Effective Date, all premiums in respect of such insurance have been paid to the extent due. The Parent believes that the insurancemaintained by or on behalf of the Parent and its Subsidiaries is adequate.

SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Parent or any Subsidiary pending or, to theknowledge of the Parent, threatened. The hours worked by and payments made to employees of the Parent and the Subsidiaries have not been in violation in anymaterial respect of the Fair Labor Standards Act or any other applicable Federal, provincial, state, local or foreign law dealing with such matters. All paymentsdue from the Parent or any Subsidiary, or for which any claim may be made against the Parent or any Subsidiary, on account of wages and employee health andwelfare insurance and other benefits, have been paid or accrued as a liability on the books of the Parent or such Subsidiary. The consummation of theTransactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to whichthe Parent or any Subsidiary is bound.

SECTION 3.15. Senior Indebtedness. The Obligations constitute, and have been designated as, “Senior Indebtedness”, “Designated Senior Debt”,“Designated Guarantor Senior Debt” or any equivalent term, however defined, under and as defined in each document or instrument governing subordinatedIndebtedness of the Parent or the Borrower.

51


SECTION 3.16. Restrictions on Securing of Obligations. Except as set forth in Schedule 6.09 or expressly permitted by the proviso in Section 6.09 (otherthan clause (iv) thereof), neither the Parent nor any Subsidiary is on the date hereof party to any agreement or other arrangement that prohibits, restricts orimposes any condition upon the ability of the Parent or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure theObligations or any of them (including, without limitation, negative pledges).

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall notbecome effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf

of such party or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signaturepage of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated theEffective Date) of (i) Dechert LLP, counsel for the Guarantor, substantially in the form of Exhibit B-1, (ii) John G. Chou, Deputy General Counsel of theGuarantor, in substantially the form of Exhibit B-2, and (iii) McMillan Binch Mendelsohn LLP, counsel for the Borrower, in substantially the form ofExhibit B-3 and each otherwise in a form reasonably satisfactory to the Administrative Agent and covering such other matters relating to the Loan Parties,the Loan Documents or the Transactions as the Administrative Agent or the Required Lenders shall reasonably request. The Borrower hereby requestssuch counsel to deliver such opinions.

(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably requestrelating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating tothe Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a FinancialOfficer of the Borrower, confirming compliance with the conditions set

52


forth in paragraphs (a) and (b) of Section 4.02. Such certificate shall include all relevant calculations in detail satisfactory to the Administrative Agent. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the

extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursedor paid by any Loan Party hereunder or under any other Loan Document.

(f) The Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know yourcustomer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act.

(g) There has been no material adverse effect on the financial condition, results of operations, assets, business, properties or prospects of the Parentand its Subsidiaries since September 30, 2004.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding theforegoing, the obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each ofthe foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on October 3, 2005 (and, in the event suchconditions are not so satisfied or waived, the Commitments shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue,amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the followingconditions: (a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as

of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable. (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit,

as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by theBorrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

SECTION 4.03. Condition Subsequent. The obligations of the Lenders to continue to make Loans and of the Issuing Banks to continue to issue Letters ofCredit hereunder shall be subject to the Administrative Agent’s receipt of the Acknowledgement and Confirmation duly executed and delivered by Target Co.and Parent.

53


ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid infull and all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, the Borrower and the Parent jointly and severallycovenant and agree with the Lenders that:

SECTION 5.01. Financial Statements and Other Information. The Parent will furnish to the Administrative Agent, which will make available by means ofelectronic posting to each Lender: (a) within 95 days after the end of each fiscal year of the Parent, its audited consolidated balance sheet and related statements of operations,

stockholders’ equity and cash flows as of the end of and for such year, in each case setting forth in comparative form the figures for the previous fiscalyear, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception andwithout any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all materialrespects the financial condition and results of operations of the Parent and the consolidated Subsidiaries on a consolidated basis in accordance with GAAPconsistently applied;

(b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent, its unaudited consolidated balance sheet andrelated statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscalyear, in each case setting forth in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the endof) the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition and results of operationsof the Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end auditadjustments and the absence of footnotes;

(c) within 95 days after the end of each fiscal year of the Parent, its unaudited consolidating balance sheet and related statements of operations inrespect of each of (i) AmerisourceBergen Drug Company, (ii) PharMerica, Inc., (iii) the Borrower and (iv) all other Subsidiaries, taken as a whole, in eachcase as of the end of and for such year;

54


(d) (concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Parent(i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to betaken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.11 and 6.12 and (iii) stating whetherany change in GAAP or in the application thereof has occurred since the date of the Parent’s audited financial statements referred to in Section 3.04 and, ifany such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(e) promptly after the same become publicly available, the Parent will provide to each Lender copies of all periodic and other reports, proxystatements and other materials filed by the Parent or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authoritysucceeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Parent to its shareholdersgenerally, as the case may be;

(f) promptly following a request therefor, any documentation or other information that a Lender reasonably requests in order to comply with itsongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act; and

(g) promptly following any request therefor, such other information regarding the operations, business affairs, assets and financial condition of theParent or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent, or any Lender through the AdministrativeAgent, may reasonably request, it being understood that the Parent may require any Lender receiving such information to confirm in writing itsconfidentiality obligations under Section 9.12.

Information required to be delivered pursuant to this Section shall be deemed to have been delivered on the date on which the Parent provides notice to the

Administrative Agent that such information has been posted on the Parent’s website on the Internet at http://www.amerisourcebergen.com or at the appropriateParent designated website at http://www.sec.gov or http://intralinks.com; provided that the Parent shall deliver paper copies of the information referred to in thisSection after the date delivery is required thereunder to any Lender which requests such delivery within 5 Business Days after such request.

SECTION 5.02. Notices of Material Events. The Parent or the Borrower will furnish to the Administrative Agent and each Lender prompt written notice ofthe following: (a) the occurrence of any Default;

55


(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting theParent or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected toresult in liability of the Parent and its Subsidiaries in an aggregate amount exceeding $25,000,000;

(d) the amendment, modification or waiver of any provision of any agreement or instrument relating to any Securitization in effect on the date hereofor to the 2003 Securitization to (i) add any termination event or other similar event, however denominated, or to make any existing such event moreonerous to the Parent, any Subsidiary or any Securitization Entity, (ii) advance the stated date on which such Securitization terminates, (iii) reduce theFinanced Amount of such Securitization or (iv) materially reduce the advance rate of such Securitization; and

(e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent or the Borrowersetting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Parent and the Borrower will, and will cause each of their respective Subsidiaries to, do or cause tobe done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents,copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, amalgamation,consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.04. Payment of Obligations. The Parent and the Borrower will, and will cause each of their respective Subsidiaries to, pay its Indebtedness andother obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is beingcontested in good faith by appropriate proceedings, (b) the Parent or such Subsidiary or the Borrower or such Subsidiary has set aside on its books adequatereserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and the enforcement of anyLien securing such obligation and (d) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

56


SECTION 5.05. Maintenance of Properties; Insurance. The Parent and the Borrower will, and will each cause each of their respective Subsidiaries to,(a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain,with financially sound and reputable insurance companies insurance in such amounts and against such risks as are customarily maintained by companies engagedin the same or similar businesses operating in the same or similar locations.

SECTION 5.06. Books and Records; Inspection and Audit Rights. The Parent and the Borrower will, and will cause each of their respective Subsidiaries to,keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.The Parent and the Borrower will, and will cause each of their respective Subsidiaries to, permit any representatives designated by the Administrative Agent orany Lender to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with itsofficers and independent accountants, all at such reasonable times and as often as reasonably requested, subject to such reasonable notice requirements and otherprocedures as shall from time to time be agreed upon by the Parent, the Borrower and the Administrative Agent.

SECTION 5.07. Compliance with Laws. The Parent and the Borrower will, and will cause each of their respective Subsidiaries to, comply with all laws,rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate,could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used only for the purposes set forth in the preamble of thisAgreement. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations ofthe Board, including Regulations U and X. Letters of Credit will be issued only for general corporate purposes.

SECTION 5.09. [Intentionally Omitted.]

SECTION 5.10. Maintenance of Corporate Separateness. The Parent and the Borrower will, and will cause each of their respective Subsidiaries to, satisfycustomary corporate or limited liability company formalities, including the maintenance of corporate and business records. No Loan Party or other Subsidiary(i) shall make any payment to a creditor of another Loan Party or Subsidiary in respect of any liability of such other Loan Party or Subsidiary or (ii) shall receiveany payment from a creditor of another Loan Party or Subsidiary in respect of any liability owing to such other Loan Party or Subsidiary, and the Borrower andthe Parent shall ensure that to the extent that cash of any Loan Party or Subsidiary or payments by any creditor to such Loan Party or Subsidiary shall have beencommingled with cash of any other Loan Party or Subsidiary in any bank account or otherwise, accurate records exist to ensure that all such monies are able to betraced to each such Loan Party or Subsidiary. No Loan Party nor any

57


Subsidiary shall take any action, or conduct its affairs in a manner, which is reasonably likely to result in the corporate existence of such Loan Party orSubsidiary, or any other Loan Party or Subsidiary, being ignored, or in the assets and liabilities of any Loan Party or Subsidiary being substantively consolidatedwith those of any other Loan Party or Subsidiaries in a bankruptcy, reorganization or other insolvency proceeding.

SECTION 5.11. Senior Debt Status. In the event that the Parent or any Subsidiary Loan Party shall at any time issue or have outstanding any Indebtednessthat by its terms is subordinated to any other Indebtedness of the Parent or such Subsidiary, the Parent shall take or cause such Subsidiary to take all such actionsas shall be necessary to cause the Obligations to constitute senior indebtedness (however denominated) in respect of such subordinated Indebtedness and toenable the Lenders to have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under theterms of such subordinated Indebtedness. Without limiting the foregoing, the Obligations are hereby designated as “senior indebtedness” and, if relevant, as“designated senior indebtedness” in respect of all such subordinated Indebtedness and are further given all such other designations as shall be required under theterms of any such subordinated Indebtedness in order that the Lenders may have and exercise any payment blockage or other remedies available or potentiallyavailable to holders of senior indebtedness under the terms of such subordinated indebtedness.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full andall Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, the Borrower and the Parent jointly and severally covenant andagree with the Lenders that:

SECTION 6.01. Indebtedness. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, create, incur, assume orpermit to exist any Indebtedness under any Securitization of inventory, or any Indebtedness of an Excluded Subsidiary, other than: (a) Indebtedness existing or deemed to exist under any inventory Securitization, to the extent that the aggregate Financed Amount of all such

Securitizations does not exceed $500,000,000; provided that, in the event any Indebtedness existing or deemed to exist under any inventory Securitizationshall contain any financial covenants, change of control provisions or event of default, termination event, amortization event or similar thresholds withrespect to cross-defaults or analogous events, non-payment of judgments or ERISA liabilities more restrictive than those contained in this Agreement, suchfinancial covenants, change of control provisions or thresholds, for so long as they shall

58


remain in effect, shall be deemed to be incorporated by reference, mutatis mutandis, into this Agreement; (b) Indebtedness under the 2003 Securitization or any other receivables Securitization; (c) Indebtedness of Excluded Subsidiaries (other than JM Blanco, Inc., any Subsidiary of Borrower and any Securitization Entity) in an aggregate

principal amount not exceeding $300,000,000 at any time outstanding; (d) Indebtedness of JM Blanco, Inc. in an aggregate principal amount not exceeding $55,000,000 at any time outstanding; and (e) Indebtedness of the Borrower in respect of Loans hereunder.

SECTION 6.02. Liens. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or permit toexist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rightsin respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Parent or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such

Lien shall not apply to any other property or asset of the Parent or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures onthe date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(c) any Lien existing on any property or asset prior to the acquisition thereof by the Parent or any Subsidiary or existing on any property or asset ofany Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created incontemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to anyother property or assets of the Parent or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of suchacquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase theoutstanding principal amount thereof;

(d) Liens on fixed or capital assets acquired, constructed or improved by the Parent or any Subsidiary; provided that (i) such Liens secure onlyIndebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including any Capital Lease Obligations orother Indebtedness assumed in connection with the acquisition of

59


any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any suchIndebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof,(ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of suchconstruction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixedor capital assets and (iv) such security interests shall not apply to any other property or assets of the Parent or any Subsidiary;

(e) Liens on accounts receivable, inventory and the Proceeds thereof existing or deemed to exist in connection with any Securitization permittedpursuant to Section 6.01; and

(f) other Liens securing obligations not greater than $50,000,000 in the aggregate.

SECTION 6.03. Fundamental Changes. (a) The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, merge into orconsolidate with any other Person, or permit any other Person to merge into, amalgamate with or consolidate with it, or liquidate or dissolve, except that if at thetime thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (i) any Subsidiary may merge into or amalgamate withthe Parent in a transaction in which the Parent is the surviving corporation, (ii) any Subsidiary may merge into or amalgamate with any Subsidiary in atransaction in which the surviving entity is a Subsidiary, including the Amalgamation of PSI and Target Co. and (if any party to such merger is a Subsidiary LoanParty) is a Subsidiary Loan Party; (iii) any Permitted Acquisition or Permitted Other Acquisition permitted under Section 6.04 may be accomplished by a mergerof one or more Subsidiaries in a transaction in which the surviving entity is a Subsidiary and (if any Subsidiary party to such merger is a Subsidiary Loan Party)is a Subsidiary Loan Party and (iv) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Parent determines in good faith that suchliquidation or dissolution is in the best interests of the Parent and is not materially disadvantageous to the Lenders; provided that any such merger oramalgamation involving a Person that is not a wholly owned Subsidiary immediately prior to such merger or amalgamation shall not be permitted unless alsopermitted by Section 6.04.

(b) The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, engage to any material extent in any business otherthan businesses of the type conducted by the Parent and the Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto orto the healthcare industry or such other business as shall have been approved by the Required Lenders.

60


SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Parent and the Borrower will not, and will not permit any of theirrespective Subsidiaries to, purchase, hold or acquire (including pursuant to any merger or amalgamation with any Person that was not a wholly owned Subsidiaryprior to such merger or amalgamation) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right toacquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or anyother interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting abusiness unit, except: (a) investments of the Parent, Borrower or Subsidiaries under Hedging Agreements entered into in accordance with Section 6.06; (b) Permitted Investments; (c) investments existing on the date hereof and set forth on Schedule 6.04; (d) Permitted Acquisitions; provided that the cumulative aggregate consideration to be paid in respect of (x) all such Permitted Acquisitions of

Foreign Subsidiaries under this paragraph and (y) all Permitted Other Acquisitions permitted under paragraph (e), in each case during the term of thisAgreement (including Indebtedness to be assumed or repaid by the Parent or any Subsidiary) shall not exceed $850,000,000;

(e) Permitted Other Acquisitions in respect of which the aggregate amount of consideration paid after the date hereof (including Indebtednessassumed or repaid by the Parent or a Subsidiary) does not exceed at any time $200,000,000;

(f) loans or advances made by the Parent to any Subsidiary or made by any Subsidiary to the Parent or any other Subsidiary other than loans andadvances made by Loan Parties to Subsidiaries that are not Loan Parties; and

(g) other investments, loans, advances, and Guarantees constituting Indebtedness not prohibited by Section 6.01; provided that the aggregate amountthereof, at any time, shall not exceed $250,000,000 at the time of incurrence unless the Leverage Test or the Ratings Test shall be satisfied at such time andwould remain satisfied upon the completion of each such investment, loan, advance or Guarantee.

(h) other investments, loans, advances and Guarantees constituting Indebtedness not prohibited by Section 6.01; provided that the aggregate amountthereof (excluding (x) any such Guarantees entered into prior to September 29, 2005, to the extent the Indebtedness guaranteed thereby does not increaseon or after such date, and (y) any such Guarantee in respect of Loans permitted under this Agreement) shall not exceed $350,000,000 at the time of and

61


after giving effect to the making or incurrence of any such investment, loan, advance or Guarantee unless the Leverage Test or the Ratings Test shall besatisfied at such time and would remain satisfied upon the completion of such investment, loan, advance or Guarantee.

SECTION 6.05. Asset Sales. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, sell, transfer, lease or

otherwise dispose of any asset, including any Equity Interest owned by it, nor will the Parent or Borrower permit any of their respective Subsidiaries to issue anyadditional Equity Interest in such Subsidiary, except: (a) sales of inventory, obsolete or surplus equipment and Permitted Investments in the ordinary course of business; (b) sales, transfers and dispositions to the Parent or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary that is

not a Loan Party shall be made in compliance with Section 6.08; (c) sales of accounts receivable, inventory and the Proceeds thereof under any Securitization; provided that the aggregate amount of the inventory

subject to any such Securitization of inventory shall not exceed $500,000,000 at any time; and (d) sales, transfers and other dispositions of assets that are not permitted by any other clause of this Section (including any sale and leaseback

transactions); provided that (i) the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (d) shallnot exceed, at any time, 20% of the Consolidated Tangible Assets of the Parent and its Subsidiaries as of the most recent such sale, transfer or dispositionand (ii) any retained Equity Interests in any Subsidiary in which any Equity Interests have been sold, transferred or otherwise disposed of shall be deemedto be noncash consideration received in respect of such sale, transfer or other disposition;

provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clauses (b) and (c) above) shall be made for fairvalue and for at least 75% cash consideration (it being understood that all noncash consideration constituting investments, and the retention of minority interestsin sold Subsidiaries, shall be subject to Section 6.04(e), and that contingent payouts, earnouts and similar consideration will be valued based upon the maximumconsideration permitted to be received on a present value basis based upon reasonable assumptions).

SECTION 6.06. Hedging Agreements. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, enter into anyHedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Parent or anySubsidiary is exposed in

62


the conduct of its business or the management of its liabilities and not for any speculative purpose.

SECTION 6.07. Restricted Payments; Certain Payments of Indebtedness. (a) Unless either the Leverage Test or the Ratings Test shall be satisfied at suchtime and would remain satisfied after giving effect to such payment or distribution, the Parent will not, and will not permit any of the Subsidiaries to, declare ormake, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) Subsidiariesmay declare and pay dividends ratably with respect to their capital stock, (ii) so long as no Default or Event of Default shall have occurred and be continuing atthe time of such payment and no Default would occur as a result of making such payment, (A) the Parent may make Restricted Payments to the extent that theaggregate amount of all such Restricted Payments in the current fiscal quarter, taken together with the aggregate amount of all such Restricted Payments inrespect of such Restricted Payments in the three fiscal quarters immediately preceding such fiscal quarter, is not in excess of $100,000,000 plus 25% of AdjustedConsolidated Net Income for the four fiscal quarter period ending most recently prior to the time any such Restricted Payment is made and (B) the Parent maypay regular dividends or distributions in respect of preferred stock issued after the date hereof, and (iii) notwithstanding the limitation in subsection (ii) above, solong as no Default or Event of Default shall have occurred and be continuing at the time of a repurchase and no Default or Event of Default would occur as aresult of making that repurchase, the Parent may repurchase its capital stock to the extent that the aggregate amount since August 4, 2004, of all such payments inrespect of such repurchases shall not exceed $500,000,000, in addition to any repurchases allowed under subsection (ii) above. For purposes of clause (ii) above,“Adjusted Consolidated Net Income” for any period shall mean the sum, without duplication, for such period of Consolidated Net Income plus any specialone-time or extraordinary non-cash charges deducted in calculating such Consolidated Net Income.

(b) Unless either the Leverage Test or the Ratings Test shall be satisfied at such time and would remain satisfied upon making such payment ordistribution, the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make or agree to pay or make, directly or indirectly,any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment orother distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption,retirement, acquisition, cancellation or termination of any Indebtedness, except: (i) payment of Indebtedness created under the Loan Documents; (ii) payment of regularly scheduled interest payments and scheduled or mandatory principal payments as and when due in respect of any

Indebtedness, other than payments in respect of subordinated debt prohibited by the subordination provisions thereof, and payments made to

63


the Parent or any Subsidiary by Securitization Entities in respect of subordinated Indebtedness incurred pursuant to any Securitization; (iii) refinancings of Indebtedness to the extent permitted by Section 6.01; (iv) repayments of Indebtedness of acquired Persons or businesses in connection with and substantially simultaneously with the consummation

of Permitted Acquisitions or Permitted Other Acquisitions; and (v) payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such

Indebtedness.

SECTION 6.08. Transactions with Affiliates. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, sell, lease orotherwise transfer any material amount of property or assets to, or purchase, lease or otherwise acquire any material amount of property or assets from, orotherwise engage in any other material transactions with, any Affiliate of the Parent, Borrower or such Subsidiary, except (a) transactions that are at prices andon terms and conditions not less favorable to the Parent, Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated thirdparties, (b) transactions between or among the Parent and the Subsidiary Loan Parties not involving any other Affiliate, (c) transactions between the Parent or anySubsidiary and any Securitization Entity pursuant to any Securitization and (d) any Restricted Payment permitted by Section 6.07.

SECTION 6.09. Restrictive Agreements. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, directly orindirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of theParent or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets (including, without limitation, negative pledges, but otherthan negative pledges that do not prohibit, restrict or impose any condition upon Liens securing this Agreement or the Obligations), or (b) the ability of anySubsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Parent or any otherSubsidiary or to Guarantee Indebtedness of the Parent or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditionsimposed by law or by any Loan Document or by any agreement, document or instrument relating to any Securitization or any indenture, agreement or instrumentevidencing or governing Indebtedness, in each case, as in effect on the date hereof or as modified in accordance herewith, or relating to the 2003 Securitization asmodified in accordance herewith, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.09 (but shallapply to any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictionsand conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the

64


Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by anyagreement relating to secured Indebtedness permitted by this Agreement if such Indebtedness is incurred in accordance with Section 6.01 and such restrictions orconditions apply only to the property or assets financed with such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leasesand other contracts restricting the assignment thereof and (vi) the Parent may enter into agreements limiting Guarantees by Subsidiaries.

SECTION 6.10. Material Documents. The Parent and the Borrower will not, nor will it permit any of their respective Subsidiaries to, amend, modify orwaive in any manner that could reasonably be expected to adversely affect the Lenders any of its rights under (i) any indenture, material agreement or materialinstrument evidencing or governing Indebtedness or (ii) its certificate of incorporation, by laws or other organizational documents.

SECTION 6.11. Fixed Charge Coverage Ratio. The Parent will not permit the ratio of (a) Consolidated EBITDAR to (b) the sum, without duplication, of(i) Consolidated Cash Interest Expense, (ii) cash dividends on Equity Interests in the Parent and (iii) rental payments of the Parent and the Subsidiaries (otherthan under capital leases), determined on a consolidated basis in accordance with GAAP, in each case for any period of four consecutive fiscal quarters ending onany date that is the last day of a fiscal quarter, to be less than 3.00 to 1.00 on the last day of such period.

SECTION 6.12. Leverage Ratio. The Parent will not permit the Leverage Ratio as of the last day of any fiscal quarter to exceed 3.00 to 1.00.

SECTION 6.13. Restricted Properties. The Parent and the Borrower will not, and will not permit any of their respective Subsidiaries to, permit any propertythat is a “Restricted Property” or any equivalent term, however defined, under and for the purposes of each document or instrument governing subordinatedIndebtedness of the Parent or any Subsidiary, to be owned by any Person other than a Subsidiary that has no assets other than Restricted Properties, no parentother than the parent specified in such document or instrument and no activities other than the ownership of Restricted Properties.

SECTION 6.14. Fiscal Quarters. The Parent will not change, and will not permit any Subsidiary to change, the fiscal quarter ends of the Parent or anySubsidiary to any date other than March 31, June 30, September 30 or December 31, respectively.

SECTION 6.15. Amount of Permitted Debt under the Debt Instruments. The Borrower and the Parent will not incur additional indebtedness or letters ofcredit in an aggregate amount that would at any time result in the Borrower not being permitted under any document or instrument governing subordinatedIndebtedness of the Borrower or any Subsidiary to borrow Revolving Loans and obtain Letters of Credit in an aggregate principal or face amount equal to theaggregate amount of the unused Commitments.

65


ARTICLE VII

Events of Default

SECTION 7.01. If any of the following events (“Events of Default”) shall occur: (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the

same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this

Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continueunremedied for a period of three Business Days;

(c) any representation, warranty made or deemed made by or on behalf of the Parent, the Borrower or any Subsidiary in or in connection with anyLoan Document or any amendment or modification thereof or waiver thereunder, or any report, certificate, financial statement or other document furnishedpursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrectin any material respect when made or deemed made;

(d) the Parent or the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect tothe existence of the Parent and the Borrower), 5.06 or 5.08 or in Article VI;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than thosespecified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from theAdministrative Agent to the Borrower (which notice will be given at the request of any Lender);

(f) the Parent or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any MaterialIndebtedness, when and as the same shall become due and payable prior to the expiration of any grace period applicable to such payment;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permitsthe holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or torequire the prepayment, repurchase, redemption or defeasance thereof, prior to its

66


scheduled maturity, or there shall occur any default, event of default, event of termination or other event that results in, or entitles any person other thanthe Parent or a Subsidiary to cause, the acceleration of any Indebtedness, or the termination of the purchase of accounts receivable or inventory, under anySecuritization; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of theproperty or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief inrespect of the Parent, the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreignbankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,conservator or similar official for the Parent, the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, suchproceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Parent, the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation,reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consentto the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for orconsent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Parent, the Borrower or any of theirrespective Subsidiaries or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any suchproceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Parent, the Borrower or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as theybecome due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 which is not paid or fully covered byinsurance shall be rendered against the Parent, the Borrower, any Significant Subsidiary, any Subsidiary Loan Party or any combination thereof and thesame shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legallytaken by a judgment creditor to attach or levy upon any assets of the Parent, the Borrower or any Significant Subsidiary or any Subsidiary Loan Party toenforce any such judgment;

67


(l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that haveoccurred, could reasonably be expected to result in liability of the Parent and the Significant Subsidiaries and Subsidiary Loan Parties in an aggregateamount exceeding $25,000,000;

(m) any Guarantee under this Agreement shall cease to be, or shall be asserted by the Parent not to be, a valid, binding and enforceable obligation ofthe Parent; or

(n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Parent, the Borrower or any Significant Subsidiary described in clause (h) or (i) of thisArticle), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, bynotice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon theCommitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal notso declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable,together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, withoutpresentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Parent, theBorrower or any Significant Subsidiary described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of theLoans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically becomedue and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII


SECTION 8.01. Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes theAdministrative Agent to take such actions on its behalf and to exercise such powers as are delegated to it by the terms of the Loan Documents, together with suchactions and powers as are reasonably incidental thereto.

SECTION 8.02. Any bank serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any otherLender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to andgenerally engage in any kind

68


of business with the Parent or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

SECTION 8.03. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Withoutlimiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Defaulthas occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, exceptdiscretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the RequiredLenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except asexpressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, anyinformation relating to the Parent or any of its Subsidiaries that is communicated to or obtained by any bank serving as Administrative Agent or any of itsAffiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the RequiredLenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of itsown gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written noticethereof is given to the Administrative Agent, by the Parent, the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any dutyto ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate,report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other termsor conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement,instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of itemsexpressly required to be delivered to the Administrative Agent.

SECTION 8.04. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate,consent, statement, instrument, document or other writing believed by them to be genuine and to have been signed or sent by the proper Person. TheAdministrative Agent also may rely upon any statement made to them orally or by telephone and believed by them to be made by the proper Person, and shall notincur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independentaccountants and other experts selected by them, and shall not be liable for any action taken or not taken by them in accordance with the advice of any suchcounsel, accountants or experts.

SECTION 8.05. The Administrative Agent may perform any and all their duties and exercise its rights and powers by or through any one or moresub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rightsand powers through their

69


respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of theAdministrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided forherein as well as activities as Administrative Agent.

SECTION 8.06. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agentmay resign at any time by notifying the Lenders, the Issuing Banks and the Borrower. Upon any such resignation, the Required Lenders shall have the right, inconsultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted suchappointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of theLenders and the Issuing Banks, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of anysuch bank, that is reasonably acceptable to the Borrower. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, suchsuccessor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiringAdministrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shallbe the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignationhereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and theirrespective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

SECTION 8.07. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and basedon such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender alsoacknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and informationas it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any otherLoan Document or related agreement or any document furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and othercommunications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sentby telecopy, as follows: (i) if to the Parent, to it at 1300 Morris Drive, Chesterbrook, PA 19087, Attention: Jack F. Quinn, Telecopy No. (610) 727-3613.

70


(ii) if to the Borrower, to it at 210 Binnington Court, Kingston, Ontario, Canada, K7M8R6, Attention: Richard Normandeau, TelecopyNo. (610) 727-3613, with a copy to the Parent;

(iii) if to the Administrative Agent, the Swingline Lender or Scotia Capital, in its capacity as Issuing Bank, to it at 720 King Street West, 3 rd

Floor, Toronto, Ontario, Canada, M5V2T3, Attention: John Hall, Telecopy No. 416-866-5991; or (iv) if to any other Issuing Bank or Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to proceduresapproved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the AdministrativeAgent and the applicable Lender. The Administrative Agent, the Parent or the Borrower may, in their discretion, agree to accept notices and othercommunications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limitedto particular notices or communications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. Allnotices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the dateof receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right orpower hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or anyabandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right orpower. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulativeand are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departureby any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consentshall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan orissuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bankmay have had notice or knowledge of such Default at the time.

71


(b) None of this Agreement, any Loan Document or any provision hereof or thereof may be waived, amended or modified except, in the case of thisAgreement, pursuant to an agreement or agreements in writing entered into by the Parent, the Borrower and the Required Lenders or, in the case of any otherLoan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are partiesthereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without thewritten consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any feespayable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or the required date of reimbursement ofany LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, orpostpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) ina manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of thisSection or the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage ofLenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, withoutthe written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release the Parent from its Guarantee under this Agreement (except asexpressly provided in this Agreement), or limit its liability in respect of such Guarantee without the written consent of each Lender or (vii) change any provisionsof any Loan Document in a manner that by its terms adversely affects the rights in respect of payments or prepayments due to Lenders holding Loans of anyClass differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans andunused Commitments of the adversely affected Class; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of theAdministrative Agent, the Issuing Banks or the Swingline Lender without the prior written consent of the Administrative Agent, each Issuing Bank or theSwingline Lender, as the case may be. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered intoby the Parent, the Borrower, the Required Lenders and the Administrative Agent (and, if their rights or obligations are affected thereby, the Issuing Banks and theSwingline Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminateupon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full ofthe principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Parent and the Borrower shall be jointly and severally obliged to pay (i) all reasonableout-of-pocket expenses incurred by the Administrative Agent, the Lead Arranger and its Affiliates, including the reasonable fees, charges and disbursements ofoutside counsel for the Administrative Agent, in connection with the syndication of the credit facilities

72


provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whetheror not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Banks inconnection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocketexpenses incurred by the Administrative Agent, Lead Arranger, any Issuing Bank or any Lender, including the fees, charges and disbursements of any outsidecounsel for such Administrative Agent, Lead Arranger, any Issuing Bank or any Lender, in connection with the enforcement or protection of its rights inconnection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder,including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) The Borrower and the Parent shall jointly and severally indemnify the Administrative Agent, the Lead Arranger, each Issuing Bank and each Lender,and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, anyand all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any outside counsel for anyIndemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Documentor any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder orthe consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom(including any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand donot strictly comply with the terms of such Letter of Credit), (iii) any Environmental Liability related in any way to the Parent or any of the Subsidiaries, or(iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theoryand regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that suchlosses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resultedfrom the gross negligence or wilful misconduct of such Indemnitee and provided further that the Parent and the Borrower, in connection with any indemnifiedmatter, shall only be required to pay the fees and expenses of joint counsel engaged to represent all Indemnitees, except to the extent that the use of joint counselcould reasonably be expected to give rise to any conflict of interest for any such counsel or any Indemnitee shall have determined that it may have legal defensesavailable to it that are different from, additional to or in conflict with those available to any other Indemnitee.

(c) To the extent that the Parent or the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, an Issuing Bank or theSwingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Issuing Bank or the SwinglineLender, as the

73


case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaidamount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or assertedagainst the Administrative Agent, such Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall bedetermined based upon its share of the sum of the total Revolving Credit Exposures and unused Commitments at the time.

(d) To the extent permitted by applicable law, the Borrower and the Parent shall not assert, and hereby waives, any claim against any Indemnitee, on anytheory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as aresult of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that the Borrower andthe Parent may not assign or otherwise transfer any of their respective rights or obligations hereunder without the prior written consent of each Lender (and anyattempted assignment or transfer by the Borrower or the Parent without such consent shall be null and void). Nothing in this Agreement, expressed or implied,shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate ofany Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, theLead Arranger, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights andobligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consentnot to be unreasonably withheld) of: (A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an

Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; (B) the Administrative Agent and the Swingline Lender; and (C) each Issuing Bank.

74


(ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the

assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the datethe Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than C$5,000,000 unlesseach of the Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Borrower shall be required if an Eventof Default has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations underthis Agreement;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with aprocessing and recordation fee of C$3,500;

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and (E) so long as no Event of Default has occurred and is continuing under Section 7.01, no assignee of a Lender, Issuing Bank or Swingline

Lender shall be a Foreign Lender or Foreign Issuing Bank, unless such assignee meets the requirements of Section 2.17(e)(i)(II).

For purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similarextensions of credit in the ordinary course of its business and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate ofan entity that administers or manages a Lender.

(c) Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignmentand Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rightsand obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment andAssumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’srights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15,2.16 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated forpurposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

75


(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy ofeach Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, andprincipal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in theRegister shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded inthe Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall beavailable for inspection by any Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completedAdministrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of thisSection and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment andAssumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has beenrecorded in the Register as provided in this paragraph. Following the effectiveness of any assignment, the Administrative Agent shall, if so requested, causepromissory notes reflecting such assignment to be issued to the Assignee and, if applicable, to the Assignor, upon cancellation of any existing promissory notesoriginally issued to the Assignor.

(f) Any Lender may, without the consent of the Borrower, the Parent, the Administrative Agent, the Issuing Banks or the Swingline Lender, sellparticipations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement(including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remainunchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Parent,the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’srights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lendershall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents;provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modificationor waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower and the Parent agreethat each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest byassignment pursuant to paragraph (b) of this Section, at the time such Participant acquires his participation interest. To the extent permitted by law, eachParticipant also shall be entitled to the benefits of Section 9.08 as though it were a

76


Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.

(g) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled toreceive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior writtenconsent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified ofthe participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender.

(h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of suchLender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment ofa security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute anysuch pledgee or assignee for such Lender as a party hereto.

(i) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Bank”) may grant to a special purpose funding vehicle (an “SPC”)of such Granting Bank, identified as such in writing from time to time by the Granting Bank to the Administrative Agent, the Borrower and the Parent, the optionto provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to Section 2.01,provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC, (ii) if an SPC elects not to exercise such option or otherwise fails toprovide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof, (iii) all amounts payable by theBorrower to any SPC hereunder in respect of any Loan and the applicability of the cost protection provisions contained in Section 2.15, 2.16 and 2.17 shall bedetermined as if the Granting Bank had made such Loan and all payments made in respect of the Loan were made to the Granting Bank, (iv) any notices given bythe Administrative Agent, the Borrower and the other Lenders with respect to any Loan provided by an SPC may be given to the Granting Bank and the GrantingBank shall have the authority to act on behalf of the SPC with respect to such Loans and/or notices, and (v) the SPC is not, and will not be, a Foreign Lender. Themaking of a Loan by an SPC hereunder shall be deemed to utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made bythe Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Agreement for which a Lender would otherwise beliable, for so long as, and to the extent, the related Granting Bank makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that,prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join anyother person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under thelaws of the United States or any State thereof. In addition, notwithstanding anything to the contrary

77


contained in this Section 9.04 (except Section 9.04(b)(ii)(E)), any SPC may assign all or a portion of its interests in any Loans to its Granting Bank or to anyfinancial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities(if any) issued by such SPC to fund such Loans.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in thecertificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been reliedupon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters ofCredit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or anyLender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continuein full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstandingand unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment ofthe Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on differentcounterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other LoanDocuments and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating tothe subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except asprovided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the AdministrativeAgent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be bindingupon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of thisAgreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisionshereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

78


SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized atany time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional orfinal) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Parent or any of itsSubsidiaries (including the Borrower) against any of and all the obligations of the Parent or any of its Subsidiaries (including the Borrower) now or hereafterexisting under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and althoughsuch obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff)which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed bythe law of the State of New York.

(b) The Borrower and the Parent each hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of theSupreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and anyappellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment,and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard anddetermined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any suchaction or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing inthis Agreement or any other Loan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bringany action or proceeding relating to this Agreement or any other Loan Document against the Borrower, the Parent or either of their properties in the courts of anyjurisdiction.

(c) The Borrower and the Parent each hereby irrevocably and unconditionally waive, to the fullest extent it may legally and effectively do so, any objectionwhich it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other LoanDocument in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law,the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BYAPPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISINGOUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY(WHETHER BASED ON

79


CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OFANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OFLITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVEBEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THISSECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of thisAgreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of theInformation (as defined below), and will not use such confidential Information for any purpose or in any manner except in connection with this Agreement,except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and otheradvisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed tokeep such Information confidential), (b) to the extent requested by any governmental, supervisory or regulatory authority (it being understood that it will to theextent reasonably practicable provide the Borrower with an opportunity to request confidential treatment from such authority), (c) to the extent required byapplicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of anyremedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder orthereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or anyprospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) toany swap or derivative transaction relating to the Borrower and its obligations, (g) with the written consent of the Borrower or (h) to the extent such Information(i) becomes publicly available other than as a result of a breach of this Section or any other confidentiality agreement to which it is party with the Parent or anySubsidiary or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than the Parentor the Borrower. For the purposes of this Section, “Information” means all confidential information received from the Borrower relating to the Borrower or itsbusinesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior todisclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified atthe time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to havecomplied with its obligation to do so if such Person has exercised the

80


same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13. Interest Rate Limitations and Calculations. (a) Notwithstanding anything herein to the contrary, if at any time the interest rate applicable toany Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shallexceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan inaccordance with applicable law (including, without limitation, under the Criminal Code (Canada)), the rate of interest payable in respect of such Loan hereunder,together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would havebeen payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable tosuch Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together withinterest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender;

(b) All interest payments to be made under this Agreement will be paid without allowance or deduction for deemed re-investment or otherwise, bothbefore and after maturity and before and after default and/or judgment, if any, until payment of the amount on which such interest is accruing, and interest willaccrue on overdue interest, if any;

(c) Unless otherwise stated, wherever in this Agreement reference is made to a rate of interest or rate of fees “per annum” or a similar expression is used,such interest or fees will be calculated on the basis of a calendar year of 365 days or 366 days or 360 days, as the case may be, and using the nominal rate methodof calculation, and will not be calculated using the effective rate method of calculation or on any other basis that gives effect to the principle of deemedre-investment of interest.

(d) For the purposes of the Interest Act (Canada) and disclosure under such act, whenever interest to be paid under this Agreement is to be calculated onthe basis of a year of 365 days or 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determinedpursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to beascertained and divided by either 365, 360 or such other period of time, as the case may be.

SECTION 9.14. Reimbursement. (a) [Reserved.]

(b) Without limiting the provisions of Section 9.05, the Borrower shall reimburse the Administrative Agent and the Lenders for all costs and expenses,including attorney’s fees and disbursements, incurred by any of them in connection with any action contemplated by this Section 9.14.

81


SECTION 9.15. U.S.A. PATRIOT Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III ofPub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, whichinformation includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with theAct.

SECTION 9.16. Judgment Currency. This Agreement and other Loan Documents evidence an international loan transaction in which the specification ofcurrency and payment in Canada is of the essence, and the obligations of the Obligors under this Agreement and the other Loan Documents to make payment to(or for the account of) the Administrative Agent or a Lender in Canadian Dollars or dollars, as applicable (the “Subject Currency”) shall not be discharged orsatisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency or in another place except to the extent that suchtender or recovery results in the effective receipt by the Administrative Agent or such Lender in Canada of the full amount of the Subject Currency payable to theAdministrative Agent or such Lender under this Agreement or such Loan Document. If for the purpose of obtaining judgment in any court it is necessary toconvert a sum due hereunder in the Subject Currency into another currency (called the “judgment currency”), the rate of exchange that shall be applied shall bethat at which in accordance with normal banking procedures the Administrative Agent could purchase such dollars at its New York City office with the judgmentcurrency on the Business Day next preceding the day on which such judgment is rendered. The obligation of the Obligors in respect of any such sum due from itto the Administrative Agent or any Lender hereunder or under any Loan Document (called an “Entitled Person”) shall, notwithstanding the rate of exchangeactually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sumadjudged to be due hereunder in the judgment currency such Entitled Person may in accordance with normal banking procedures purchase and transfer dollars toNew York City with the amount of the judgment currency so adjudged to be due; and each Obligor hereby, as a separate obligation and notwithstanding any suchjudgment, agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in the Subject Currency, the amount (if any) by whichthe sum originally due to such Entitled Person in the Subject Currency hereunder exceeds the amount of the Subject Currency so purchased and transferred.

SECTION 9.17. Dollar Equivalent. To the extent necessary or applicable, amounts designated in Canadian Dollars (including Section 2.01, Section 2.04and Section 2.05) shall be deemed to include references to the dollar equivalent thereof calculated using the Exchange Rate; provided that credit extensions madein Canadian Dollars must be repaid in Canadian Dollars, and those made in dollars must be repaid in dollars.

82


ARTICLE X

Parent Guarantee

SECTION 10.01. Guarantee. The Parent hereby absolutely, unconditionally and irrevocably: (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or

otherwise, of all monetary Obligations of the Borrower and each other Obligor now or hereafter existing, whether for principal, interest, fees, expenses orotherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United StatesBankruptcy Code, 11 U.S.C. §362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. §502(b) and§506(b) or any similar bankruptcy, insolvency or similar law applicable to such Obligor), and

(b) indemnifies and holds harmless the Administrative Agent, each Lender and each holder of a Note (collectively the “Beneficiaries”) for any andall costs and expenses (including reasonable attorney’s fees and expenses) incurred by such Beneficiary in enforcing any rights under the guarantee setforth in this Article X.

The guarantee set forth in this Article X constitutes a guarantee of payment when due and not of collection, and the Parent specifically agrees that it shall not benecessary or required that any Beneficiary exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any otherObligor (or any other Person) before or as a condition to the obligations of the Parent under the guarantee set forth in this Article X.

SECTION 10.02. Acceleration of Parent Guarantee. The Parent agrees that, in the event of the dissolution or insolvency of the Borrower, any other Obligoror the Parent, or the inability or failure of the Borrower, any other Obligor or the Parent to pay debts as they become due, or an assignment by the Borrower, anyother Obligor or the Parent for the benefit of creditors, or the commencement of any case or proceeding in respect of the Borrower, any other Obligor or theParent under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the monetary Obligations of the Borrower and eachother Obligor may not then be due and payable, the Parent agrees that it will pay to the Beneficiaries forthwith the full amount which would be payable under theguarantee set forth in this Article X by the Parent if all such monetary Obligations were then due and payable.

SECTION 10.03. Guarantee Absolute, etc. The guarantee set forth in this Article X shall in all respects be a continuing, absolute, unconditional andirrevocable guarantee of payment, and shall remain in full force and effect until the Termination Date. The Parent guarantees that the monetary Obligations of theBorrower and each other Obligor will be paid strictly in accordance with the terms of this Agreement and

83


each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of suchterms or the rights of any Beneficiary with respect thereto. The liability of the Parent under the guarantee set forth in this Article X shall be absolute,unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Beneficiary (i) to assert any claim or demand or to enforce any right or remedy against any Borrower, any other Obligor or any other Person (including

any other guarantor (including the Parent)) under the provisions of this Agreement, any Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor (including the Parent) of, or collateral securing, any Obligations of the

Borrower or any other Obligor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower or any other Obligor

(other than the Parent), or any other extension, compromise or renewal of any Obligation of the Borrower or any other Obligor (other than the Parent); (d) any reduction, limitation, impairment or termination of any Obligations of the Borrower for any reason, including any claim of waiver, release,

surrender, alteration or compromise, and shall not be subject to (and the Parent hereby waives any right to or claim of) any defense or setoff, counterclaim,recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any otherevent or occurrence affecting, any Obligations of the Borrower or otherwise;

(e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Noteor any other Loan Document;

(f) any addition, exchange, release, surrender or non perfection of any collateral, or any amendment to or waiver or release or addition of, or consentto departure from, any other guarantee, held by any Beneficiary securing any of the Obligations of the Borrower; or

(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Borrower, any surety orany guarantor.

SECTION 10.04. Reinstatement, etc. The Parent agrees that the guarantee set forth in this Article X shall continue to be effective or be reinstated, as the

84


case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Beneficiary, upon theinsolvency, bankruptcy or reorganization of the Borrower or any other Obligor or otherwise, all as though such payment had not been made.

SECTION 10.05. Waiver, etc. The Parent hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of theObligations of the Borrower and each other Obligor and the guarantee set forth in this Article X, or exhaust any right or take any action against the Borrower, anyother Obligor or any other Person (including any other guarantor (including the Parent)) or entity.

SECTION 10.06. Postponement of Subrogation, etc. The Parent agrees that it will not exercise any rights which it may acquire by way of rights ofsubrogation under the guarantee set forth in this Article X, by any payment made under the guarantee set forth in this Article X or otherwise, until the TerminationDate. Any amount paid to the Parent on account of any such subrogation rights prior to the payment in full in cash of all monetary Obligations of the Borrowerand each other Obligor shall be held in trust for the benefit of the Beneficiaries and shall immediately be paid to the Administrative Agent for the benefit of theBeneficiaries and credited and applied against the monetary Obligations of the Borrower and each other Obligor, whether matured or unmatured, in accordancewith the terms of this Agreement; provided, however, that if

(a) the Parent has made payment to the Beneficiaries of all or any part of the monetary Obligations of the Borrower, and

(b) the Termination Date has occurred, each Lender and each holder of a Note agrees that, at the Parent’s request, the Administrative Agent, on behalf of the Beneficiaries, will execute and deliver tothe Parent appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to the Parent of aninterest in the monetary Obligations of the Borrower resulting from such payment by the Parent. In furtherance of the foregoing, for so long as any Obligations orCommitments remain outstanding, the Parent shall refrain from taking any action or commencing any proceeding against the Borrower (or its successors orassigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under the guarantee set forthin this Article X to any Lender or any holder of a Note.

SECTION 10.07. Successors, Transferees and Assigns; Transfers of Notes, etc. The guarantee set forth in this Article X shall: (a) be binding upon the Parent and its successors, transferees and assigns; (b) inure to the benefit of and be enforceable by each Beneficiary; and

85


(c) shall not constitute a novation. Without limiting the generality of the foregoing clause (b), any Lender may assign or otherwise transfer (in whole or in part) any Note, Loan or Commitmentheld by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted tosuch Lender under any Loan Document (including the guarantee set forth in this Article X) or otherwise, subject, however, to any contrary provisions in suchassignment or transfer, and to the provisions of Section 9.04 and Article VIII.

86


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and yearfirst above written.

PROJECT SNOW, INC

By: /s/ JOHN G. CHOU

Name: John G. ChouTitle: Vice President and Secretary

Credit Agreement



By: /s/ J.F. QUINN

Name: J.F. QuinnTitle: Vice President and Corporate Treasurer

Credit Agreement


THE BANK OF NOVA SCOTIAIndividually and as administrative agent, issuingbank and swingline lender

By: /s/ BYRON KWAN

Name: Byron KwanTitle: Director

Credit Agreement


NAME OF INSTITUTION:

By:

Name: Title:

By:

Name: Title:

Credit Agreement



FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

THIS FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of October 31, 2005 (this “Amendment”) is entered intoamong AMERISOURCE RECEIVABLES FINANCIAL CORPORATION, a Delaware corporation (in such capacity, the “Seller”), AMERISOURCEBERGENDRUG CORPORATION, a Delaware corporation, as the initial Servicer (in such capacity, the “Servicer”), the VARIOUS PURCHASER GROUPS party to theAgreement (as defined below), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as administrator for each of thePurchaser Groups party thereto (in such capacity, the “Administrator”).

RECITALS

A. The Seller, Servicer, the various Purchaser Groups and the Administrator have entered into that certain Receivables Purchase Agreement, dated as ofJuly 10, 2003 (as amended, supplemented or otherwise modified from time to time, the “Agreement”).

B. The parties to the Agreement desire to enter into this Amendment to amend the Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Certain Defined Terms. Capitalized terms used but not defined herein shall have the meanings set forth for such terms in Exhibit I to the Agreement.

2. Amendments to the Agreement. The Agreement is hereby amended as follows: 2.1 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of Bank of America, National Association, as set

forth on Fleet Securities, Inc.’s signature page to the Agreement, are hereby amended and restated in their entirety as set forth on Bank of America,National Association’s signature page hereto.

2.2 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of The Bank of Nova Scotia, as set forth on itssignature page to the Agreement, are hereby amended and restated in their entirety as set forth on The Bank of Nova Scotia’s signature page hereto.

2.3 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of Wachovia Bank, National Association, as setforth on its signature page to the Agreement, are hereby amended and restated in their entirety as set forth on the Administrator’s signature page hereto.

2.4 The Commitment and Scheduled Facility Termination Dates with respect to the Commitment of PNC Bank, National Association, as set forth onits signature page


to the Agreement, are hereby amended and restated in their entirety as set forth on PNC Bank, National Association’s signature page hereto. 2.5 The definition of “Purchase Limit” set forth in Exhibit I to the Agreement is hereby amended by deleting the amount “$1,050,000,000” therein

and substituting the amount “$700,000,000” therefor.

3. [Reserved.]

4. Effect of Amendment. This Amendment shall become effective upon the execution of such Amendment by all of the parties hereto. Except as expresslyamended and modified by this Amendment, all provisions of the Agreement shall remain in full force and effect. After this Amendment becomes effective, allreferences in each of the Agreements to “this Agreement”, “hereof”, “herein”, or words of similar effect referring to such Agreement shall be deemed to bereferences to the Agreement, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement anyprovision of the Agreement (or any related document or agreement) other than as set forth herein.

5. Effectiveness. This Amendment shall become effective on the date hereof upon (i) receipt by the Administrator of counterparts of this Amendmentexecuted by each of the other parties hereto (including facsimile signature pages), or other evidence satisfactory to the Administrator of the execution anddelivery of this Amendment by such other parties, (ii) satisfaction of the Rating Agency Condition and (iii) receipt by the Administrator of such otheragreements, documents and instruments as the Administrator may request.

6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpartshall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

7. Governing Law. This Amendment shall be governed by, and construed in accordance with the law of the State of New York without regard to anyotherwise applicable principles of conflicts of law (other than Section 5-1401 of the New York General Obligations Law).

8. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of thisAmendment, or the Agreements or any provision hereof or thereof.

[signature pages begin on next page]

2


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

AMERISOURCE RECEIVABLES FINANCIALCORPORATION, as Seller

By: /s/ J.F. QUINN


AMERISOURCEBERGEN DRUG CORPORATION, as initialServicer

By: /s/ J.F. QUINN


S-1 Fourth Amendment to Receivables Purchase Agreement (ARFC)


BLUE RIDGE ASSET FUNDING CORPORATION, as aConduit Purchaser

BY: WACHOVIA CAPITAL MARKETS, LLC, its attorney-in-fact

By: /s/ DOUGLAS R. WILSON, SR. Name: Douglas R. Wilson, Sr.Title: Vice President

WACHOVIA BANK, NATIONALASSOCIATION, as Administrator and as PurchaserAgent and Related Committed Purchaser for BlueRidge Asset Funding Corporation

By: /s/ CECIL NOBLE

Name: Cecil NobleTitle: Vice President


Scheduled Facility Termination Date: November 29, 2007



YC SUSI TRUST, as a Conduit Purchaser

By: Bank of America, National Association, asadministrative trustee

By: /s/ CHRISTOPHER G. YOUNG

Name: Christopher G. YoungTitle: Vice President

BANK OF AMERICA, NATIONAL ASSOCIATION, as aRelated Committed Purchaser for YC SUSI Trust

By: /s/ CHRISTOPHER G. YOUNG

Name: Christopher G. YoungTitle: Vice President





LIBERTY STREET FUNDING CORP., as aConduit Purchaser

By: /s/ BERNARD J. ANGELO

Name: Bernard J. AngeloTitle: Vice President

THE BANK OF NOVA SCOTIA, as Purchaser Agent andRelated Committed Purchaser for Liberty Street Funding Corp.

By: /s/ NORMAN LAST

Name: Norman LastTitle: Managing Director





MARKET STREET FUNDING LLC, as a Conduit Purchaser

By: /s/ DORIS J. HEARN

Name: Doris J. HearnTitle: Vice President

PNC BANK, NATIONAL ASSOCIATION, as Purchaser Agentand Related Committed Purchaser for Market Street FundingLLC

By: /s/ DENISE D. KILLEN

Name: Denis D. KillenTitle: Vice President





Exhibit 21

Subsidiaries

Name Jurisdiction of Formation

AmerisourceBergen Drug Corporation DelawareAmerisourceBergen Holding Corporation DelawareAmerisource Health Services Corporation DelawareAmerisource Receivables Financial Corporation DelawareAmerisource Heritage Corporation DelawarePharMerica, Inc. DelawarePMSI, Inc. Florida


Exhibit 23

Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements Nos. 333-102090 and 333-105743 on Form S-3, Nos. 333-68012, 333-69254,333-86012, 333-88230, 333-101042, 333-101043 and 333-110431 on Form S-8 and No. 333-61440 on Form S-4/S-8 of AmerisourceBergen Corporation of ourreports dated December 8, 2005, with respect to the consolidated financial statements and schedule of AmerisourceBergen Corporation and subsidiaries,AmerisourceBergen Corporation management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internalcontrol over financial reporting of AmerisourceBergen Corporation and subsidiaries, included in this Annual Report (Form 10-K) for the year ended September30, 2005.

/s/ Ernst & Young LLPPhiladelphia, PennsylvaniaDecember 8, 2005


Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer I, R. David Yost, certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theRegistrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscalquarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theRegistrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of Registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control overfinancial reporting.

Date: December 9, 2005

/s/ R. DAVID YOST R. David Yost

Chief Executive Officer


Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer I, Michael D. DiCandilo, certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theRegistrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscalquarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theRegistrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theRegistrant’s auditors and the audit committee of Registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control overfinancial reporting.

Date: December 9, 2005

/s/ MICHAEL D. DICANDILO Michael D. DiCandilo

Executive Vice President andChief Financial Officer


Exhibit 32.1

Section 1350 Certification of Chief Executive Officer

In connection with the Annual Report of AmerisourceBergen Corporation (the “Company”) on Form 10-K for the fiscal year ended September 30, 2005 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. David Yost, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ R. DAVID YOST R. David Yost

Chief Executive OfficerDecember 9, 2005


Exhibit 32.2

Section 1350 Certification of Chief Financial Officer

In connection with the Annual Report of AmerisourceBergen Corporation (the “Company”) on Form 10-K for the fiscal year ended September 30, 2005 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. DiCandilo, Executive Vice President and Chief FinancialOfficer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best ofmy knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL D. DICANDILO Michael D. DiCandilo

Executive Vice President andChief Financial Officer

December 9, 2005

_______________________________________________Created by 10KWizard www.10KWizard.com


http://www.10kwizard.com

amerisourecebergenform 10-k for 2005

Business

registrant item

registrant ex

business item

properties item

financial data item

financial disclosure

procedures item

indenture ex