1 EXHIBIT 10.10 LOAN AND SECURITY AGREEMENT BY AND BETWEEN KING PHARMACEUTICALS, INC., AS BORROWER

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EXHIBIT 10.10

LOAN AND SECURITY AGREEMENT

BY AND BETWEEN

KING PHARMACEUTICALS, INC., AS BORROWER

AND

FIRST AMERICAN NATIONAL BANK, AS LENDER

$4,000,000

AUGUST 21, 1997
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TABLE OF CONTENTS
LOAN AND SECURITY AGREEMENT

ARTICLE I - DEFINITION OF TERMS
Section 1.01. Definitions ........................................... 1
Section 1.02. Other Definitional Provisions ......................... 6

ARTICLE II - CREDIT FACILITIES
Section 2.01 Revolving Commitments.................................. 7
Section 2.02 Manner of Borrowing.................................... 7
(a) Authorization to make Advances......................... 7
(b) Notice Irrevocable..................................... 7
(c) Funding................................................ 7
Section 2.03 Fees................................................... 7
Section 2.04 Extension of Commitment Period......................... 8
Section 2.05 Term Loan.............................................. 8
Section 2.06 Use of Proceeds........................................ 8

ARTICLE III - NOTES AND NOTE PAYMENTS
Section 3.01 Revolving Credit Notes................................. 8
Section 3.02 Interest Rates......................................... 8
Section 3.03 Calculation of Interest Rates.......................... 9
Section 3.04 Manner and Application of Payments..................... 9
Section 3.05 Term Promissory Note................................... 9

ARTICLE IV - CONDITIONS PRECEDENT
Section 4.01 Initial Advances....................................... 9
(a) Revolving Credit Note..................................... 9
(b) Term Promissory Note...................................... 9
(c) Opinion of Borrower's Counsel............................. 9
(d) Officers' Certificate..................................... 9
(e) Resolutions of Borrower................................... 10
(f) Incumbency Certificate of Borrower........................ 10
(g) Certificates.............................................. 10
(h) Charter and Bylaws........................................ 10
(i) Operating Budget.......................................... 10
(j) Financial Information..................................... 10
(k) Collateral Documents...................................... 10
(l) Litigation................................................ 10
(m) Insurance................................................. 11
(n) Additional Information.................................... 11

Section 4.02 All Advances
(a) No Defaults............................................... 11
(b) Compliance with Agreement................................. 11
(c) No Material Adverse Change................................ 11
(d) Representations and Warranties............................ 11

(e) Financial Statements.......................................... 11
(f) Bankruptcy Proceedings........................................ 11

ARTICLE V - SECURITY INTERESTS
Section 5.01 Grant of Security Interests................................ 12
Section 5.02 Filings.................................................... 12

ARTICLE VI - REPRESENTATIONS AND WARRANTIES
Section 6.01 Organization and Good Standing............................. 13
Section 6.02 Authorization and Power.................................... 13
Section 6.03 No Conflicts or Consents................................... 13
Section 6.04 Enforceable Obligations.................................... 13
Section 6.05 No Liens................................................... 13
Section 6.06 Financial Condition........................................ 13
Section 6.07 Full Disclosure............................................ 14
Section 6.08 No Default................................................. 14
Section 6.09 Material Agreements........................................ 14
Section 6.10 No Litigation.............................................. 14
Section 6.11 Burdensome Contracts....................................... 14
Section 6.12 Regulatory Defects......................................... 14
Section 6.13 Use of Proceeds; Margin Stock.............................. 14
Section 6.14 No Financing of Corporate Takeovers........................ 14
Section 6.15 Taxes...................................................... 15
Section 6.16 Principal Office, Etc...................................... 15
Section 6.17 ERISA...................................................... 15
Section 6.18 Compliance with Law........................................ 15
Section 6.19 Government Regulation...................................... 15
Section 6.20 Insider.................................................... 15
Section 6.21 Subsidiaries............................................... 15
Section 6.22 Fair Labor Standards Act................................... 16
Section 6.23 Casualties................................................. 16
Section 6.24 Investment Company Act..................................... 16
Section 6.25 Sufficiency of Capital..................................... 16
Section 6.26 Hazardous Substances....................................... 16
Section 6.27 Collateral Documents; Description of Assets................ 16
Section 6.28 Corporate Name............................................. 16
Section 6.29 Representations and Warranties............................. 16
Section 6.30 Survival of Representations and Warranties................. 17

ARTICLE VII - AFFIRMATIVE COVENANTS
Section 7.01 Financial Statements, Reports and Documents................ 17
(a) Quarterly Statements.......................................... 17
(b) Annual Statements............................................. 17
(c) Audit Reports................................................. 17
(d) Other Reports................................................. 18
(e) Compliance Certificate........................................ 18
(f) Accountants Certificates...................................... 18
(g) Other Information............................................. 18

Section 7.02 Payment of Taxes and Other Indebtedness.................... 18
Section 7.03 Maintenance of Existence and Rights; Conduct of Business... 18

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Section 7.04 Notice of Default.............................................................. 19
Section 7.05 Other Notices ................................................................. 19
Section 7.06 Compliance with Loan Documents................................................. 19
Section 7.07 Compliance with Material Agreements............................................ 19
Section 7.08 Operations and Properties...................................................... 19
Section 7.09 Books and Records; Access...................................................... 19
Section 7.10 Compliance with Law............................................................ 19
Section 7.11 Insurance...................................................................... 19
Section 7.12 Authorizations and Approvals................................................... 19
Section 7.13 ERISA Compliance............................................................... 19
Section 7.14 Further Assurances............................................................. 20
Section 7.17 Minimum Net Worth.............................................................. 20
Section 7.18 Indemnity by Borrower.......................................................... 20

ARTICLE VIII - NEGATIVE COVENANT
Section 8.01 Limitation on Indebtedness..................................................... 21
Section 8.02 Negative Pledge................................................................ 21
Section 8.03 Restrictions on Dividends...................................................... 21
Section 8.04 Limitation on Investments...................................................... 21
Section 8.05 Limitation on Sale of Properties............................................... 22
Section 8.06 Name, Fiscal Year and Accounting Method........................................ 22
Section 8.07 Current Ratio.................................................................. 22
Section 8.08 Debt to Net Worth Ratio........................................................ 22
Section 8.09 Cash Flow Coverage............................................................. 22
Section 8.10 Liquidation, Mergers, Consolidations and Dispositions of
Substantial Assets............................................................. 22
Section 8.11 Lines of Business.............................................................. 22
Section 8.12 No Amendments.................................................................. 22
Section 8.13 Purchase of Substantial Assets................................................. 22

ARTICLE IX - EVENTS OF DEFAULT
Section 9.01 Events of Default.............................................................. 22
Section 9.02 Remedies Upon Event of Default................................................. 24
Section 9.03 Performance by Lender.......................................................... 24

ARTICLE IX - MISCELLANEOUS
Section 10.01 Modification................................................................... 25
Section 10.02 Accounting Terms and Reports................................................... 25
Section 10.03 Waiver......................................................................... 25
Section 10.04 Payment of Expenses............................................................ 25
Section 10.05 Notices........................................................................ 25
Section 10.06 Governing Law.................................................................. 26
Section 10.07 Waiver of Jury Trial; Choice of Forum; Consent to Service of
Process and Jurisdiction....................................................... 27
Section 10.08 Invalid Provisions............................................................. 27
Section 10.09 Maximum Interest Rate.......................................................... 27
Section 10.10 Confidentiality................................................................ 27
Section 10.11 Nonliability of Lender......................................................... 28
Section 10.12 Offset......................................................................... 28
Section 10.13 Binding Effect................................................................. 28
Section 10.14 Entirety....................................................................... 28

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Section 10.15 Headings................................................................. 28
Section 10.16 Survival................................................................. 28
Section 10.17 No Third Party Beneficiary............................................... 28
Section 10.18 Multiple Counterparts.................................................... 28

Exhibit A................................................................................. 31
Exhibit A2................................................................................ 34
Exhibit B................................................................................. 36
Exhibit C................................................................................. 38
Exhibit D................................................................................. 39
Exhibit E................................................................................. 40
Exhibit F................................................................................. 41
Exhibit G................................................................................. 42
Exhibit H................................................................................. 43

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LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is hereby made and
entered into on this the 21st day of August, 1997 by and between KING
PHARMACEUTICALS, INC., a Tennessee corporation (hereinafter called "Borrower"),
and FIRST AMERICAN NATIONAL BANK (hereinafter called "Lender").

WITNESSETH:

WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans to
Borrower; and

WHEREAS, Lender is willing to make such loans to Borrower upon the
terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITION OF TERMS

SECTION 1.01. Definitions. For the purposes of this Agreement, unless
the context otherwise requires, the following terms shall have the respective
meanings assigned to them in this ARTICLE I or in the Section or recital
referred to below:

"Accounts" shall have the meaning assigned to such term in Section
9-106 of the Uniform Commercial Code.

"Advance" shall mean a loan (except the Term Loan made hereunder) made
from time to time by Lender to Borrower pursuant to the Loan Documents;
"Advances" shall mean all of such loans.

"Affiliate" of any Person shall mean any other Person directly or
indirectly, controlling, controlled by, or under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common 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 the management
and policies of such Person, whether through the ownership of Voting Shares or
by contract or otherwise.

"Agreement" shall have the meaning assigned to such term in the
preamble hereof.

"Borrower" shall mean King Pharmaceuticals, Inc., a Tennessee
corporation and any permitted successors and assigns.

"Business Day" shall mean any day except a Saturday, Sunday or other
day on which Lender is normally and customarily closed.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Collateral" shall mean all of the property which is subject or is to
be subject to the Liens as provided in ARTICLE V, of this Agreement.

"Collateral Documents" shall mean all mortgages, deeds of trust,
security agreements, pledge agreements, guaranty agreements, notes, financing
statements, fixture filings and any other agreements, documents or instruments
executed or delivered to evidence and/or secure repayment of the Obligation or
any part thereof.

"Commitment" shall mean the obligation of Lender to extend credit to
Borrower under this Agreement in an aggregate principal amount not to exceed
Lender's Committed Sum.

"Commitment Period" shall mean the period beginning on the date hereof
and ending on the earlier of (i) the Commitment Termination Date, or (ii) the
date on which Lender terminates its Commitments after the occurrence of an Event
of Default.

"Committed Sum" shall mean the sum of exactly Two Million Nine Hundred
Seventy Five Thousand Dollars ($2,975,000).

"Commitment Termination Date" shall mean August 20, 2000 or, if such
date is not a Business Day, the Business Day next preceding such date.

"Current Assets" shall mean, as of any date, the current assets which
would be reflected on the balance sheet of Borrower prepared as of such date in
accordance with Generally Accepted Accounting Principles, but excluding (i) all
Accounts in respect of products, goods and/or services which were delivered or
performed by Borrower more than one hundred and twenty (120) days prior to such
date, and (ii) intangible assets.

"Current Liabilities" shall mean, as of any date, the current
liabilities which would be reflected on the balance sheet of Borrower prepared
as of such date in accordance with Generally Accepted Accounting Principles.

"Controlled Group" shall mean (i) the controlled group of corporations
as defined in Code Section 1563, or (ii) the group of trades or businesses under
common control as defined in Code Section 414(c) of which Borrower is a part or
may become a part.

"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or
similar laws from time to time in effect affecting the rights of creditors
generally.

"Default" shall mean any of the events specified in ARTICLE IX of this
Agreement, regardless of whether there shall have occurred any passage of time
or giving of notice or both that would be necessary in order to constitute such
event an Event of Default.

"Dividends" shall mean (i) cash distributions or any other
distributions on, or in respect of, any class of capital stock of Borrower,
except for distributions made solely in shares of stock of the same class, and
(ii) any and all funds, cash or other payments made in respect of the
redemption, repurchase or acquisition of such stock, unless such stock shall be
redeemed or acquired through the exchange of such stock with stock of the same
class.

"Dollars" and the sign "$" shall refer to currency of the United States
of America.

"Earnings Before Interest Taxes Depreciation and Amortization" shall
mean for any period, the sum of (i) the income (or deficit) of Borrower before
provision for income taxes for such period, plus (ii) interest expense for such
period, plus (iii) all amounts in respect of depreciation and amortization for
such period.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, together with all regulations issued pursuant thereto.

"Event of Default" shall have the meaning assigned to such term in
SECTION 9.01 of this Agreement

"Generally Accepted Accounting Principles" shall mean those generally
accepted accounting principles and practices which are recognized as such by the
American Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods after the date hereof so as to properly reflect the financial
condition, and the results of operations and changes in financial position, of
Borrower, except that any accounting principle or practice required to be
changed by the said Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of the said Boards) in
order to continue as a generally accepted accounting principle or practice may
so be changed. In the event of a change in Generally Accepted Accounting
Principles, Lender and Borrower will thereafter negotiate in good faith to
revise any covenants of this Agreement affected thereby in order to make such
covenants consistent with Generally Accepted Accounting Principles then in
effect.

"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.

"Indebtedness" shall mean all indebtedness, obligations and liabilities
of Borrower, including without limitation (i) all "liabilities" which would be
reflected on a balance sheet of Borrower, prepared in accordance with Generally
Accepted Accounting Principles, (ii) all obligations of Borrower in respect of
any guaranty, (iii) all obligations of Borrower in respect of any capital lease,
(iv) all obligations, indebtedness and liabilities secured by any lien or any
security interest on any property or assets of such Person, and (v) all
redeemable preferred stock of Borrower valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends.

"Lender" shall mean First American National Bank.

"LIBOR" shall mean, for each interest period, the rate per annum
offered to the Lender (at approximately 11:00 A.M. London time, on the date two
Business Days in London prior to the first day of such interest period) by prime
banks in the London Interbank Market for deposits of Dollars for a period equal
to the length of such interest period and in an amount of the Advances which
have been made (or will be made) by Lender to Borrower hereunder and are
scheduled to be outstanding during such interest period. Each determination of
the LIBOR by Lender shall, in the absence of manifest error, be conclusive and
binding.

"Lien" shall mean any lien, mortgage, deed of trust, security interest,
tax lien, pledge, encumbrance, conditional sale or title retention arrangement,
or any other interest in property

designed to secure the repayment of Indebtedness, whether arising by agreement
or under any statute or law, or otherwise

"Loan Documents" shall mean this Agreement, the Revolving Credit Note
(including any renewals, extensions and refundings thereof), the Term Promissory
Note, the Collateral Documents and any agreements or documents (and with respect
to this Agreement, and such other agreements and documents, any amendments or
supplements thereto or modifications thereof) executed or delivered pursuant to
the terms of this Agreement.

"Material Adverse Effect" means any (i) material adverse effect
whatsoever upon the validity, performance or enforceability of any Loan
Documents, (ii) material adverse effect upon the financial condition or business
operations of Borrower, (iii) material adverse effect upon the ability of
Borrower to fulfill its obligations under the Loan Documents, or (iv) causes an
Event of Default or any event which, with notice or lapse of time or both, could
become an Event of Default.

"Maximum Rate" shall mean, on any day, the highest nonusurious rate of
interest (if any) permitted by applicable law on such day that at any time, or
from time to time, may be contracted for, taken, reserved, charged or received
on the Indebtedness evidenced by the Revolving Credit Note and/or Term
Promissory Note under the laws which are presently in effect of the United
States of America and the State of Tennessee applicable to the holders of the
Revolving Credit Note and/or Term Promissory Note and such Indebtedness or, to
the extent permitted by law, under such applicable laws of the United States of
America and the State of Tennessee which may hereafter be in effect and which
allow a higher maximum nonusurious interest rate than applicable laws now allow.

"Net Worth" shall mean, as of any date, the total shareholders' equity
(including capital stock, additional paid-in capital and retained earnings after
deducting treasury stock) which would appear on the balance sheet of Borrower
and prepared as of such date in accordance with Generally Accepted Accounting
Principles.

"Notice of Borrowing" shall mean any telephonic or other instructions
received from any person purporting to an officer of Borrower or other
authorized person.

"Obligation" shall mean

(i) all present and future indebtedness, obligations and liabilities
of Borrower to Lender arising pursuant to this Agreement, regardless of whether
such indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, joint, several, or joint and several;

(ii) all present and future indebtedness, obligations and liabilities
of Borrower to Lender arising pursuant to or represented by the Revolving Credit
Note and/or Term Promissory Note and all interest accruing thereon, and
attorneys' fees incurred in the enforcement or collection thereof;

(iii) all present and future indebtedness, obligations and liabilities
of Borrower evidenced by or arising pursuant to any of the Loan Documents'

(iv) all costs incurred by Lender to obtain, preserve, perfect and
enforce the liens and security interests securing payment of such indebtedness,
liabilities and obligations, and to maintain, preserve and collect the property
in which Lender have been granted a Lien to secure

payment of the Loans, or any part thereof, including but not limited to, taxes,
assessments, insurance premiums, repairs, reasonable attorneys' fees and legal
expenses, rent, storage charges, advertising costs, brokerage fees and expenses
of sale; and

(v) all renewals, extensions and modifications of the indebtedness
referred to in the foregoing clauses, or any part thereof.

"PBGC" shall mean the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.

"Permitted Liens" shall mean: (i) Liens (if any) granted to Lender to
secure the Obligation, (ii) Liens described on EXHIBIT H attached hereto, (iii)
pledges or deposits made to secure payment of worker's compensation insurance
(or to participate in any fund in connection with worker's compensation
insurance), unemployment insurance, pensions or social security programs, (iv)
Liens imposed by mandatory provisions of law such as for materialmen's,
mechanics', warehousemen's and other like Liens arising in the ordinary course
of business, securing Indebtedness whose payment is not yet due, (v) Liens for
taxes, assessments and governmental charges or levies imposed upon a Person or
upon such Person's income or profits or property, if the same are not yet due
and payable or if the same are being contested in good faith and as to which
adequate cash reserves have been provided, (vi) Liens arising from good faith
deposits in connection with tenders, leases, real estate bids or contracts
(other than contracts involving the borrowing of money), pledges or deposits to
secure public or statutory obligations and deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the payment of
taxes, assessments, customs duties or other similar charges, or (vii)
encumbrances consisting of zoning restrictions, easements, or other restrictions
on the use of real property, provided that such items do not impair the use of
such property for the purposes intended, and none of which is violated by
existing or proposed structures or land use.

"Person" shall include an individual, a corporation (including without
limitation Borrower), a joint venture, a general or limited partnership, a
trust, an unincorporated organization or a government or any agency or political
subdivision thereof.

"Plan" shall mean an employee benefit plan or other plan maintained by
Borrower for employees of Borrower and covered by Title IV of ERISA, or subject
to the minimum funding standards under Section 412 of the Code of 1954, as
amended

"Process Agent" shall mean Xxxx X. Xxxxxxx whose address is 000 Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000.

"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System 12 C.F.R. Part 204, or any successor or other regulation
relating to reserve requirements applicable to member banks of the Federal
Reserve System.

"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 207, or any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.

"Regulation U" shall mean Regulation U promulgated by the Board
of Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any successor
or other regulation hereafter

promulgated by said Board to replace the prior Regulation U and having
substantially the same function.

"Regulation X" shall mean Regulation X promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any successor
or other regulation hereafter promulgated by said Board to replace the prior
Regulation X and having substantially the same function.

"Reportable Event" shall have the meaning assigned to such term in
Title IV of ERISA.

"Revolving Credit Note" shall mean the note executed by Borrower and
delivered pursuant to the terms of this Agreement, together with any renewals,
extensions or modifications thereof.

"Solvent" means, with respect to any Person on a particular date, that
on such date (i) the fair value of the property of such Person is greater than
the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

"Term Loan" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower as provided in SECTION 2.05 hereof.

"Term Promissory Note" shall mean that certain Term Promissory Note
dated of even date herewith by Borrower in favor of Lender in the original
principal amount of One Million Twenty Five Thousand Dollars ($1,025,000).

"Voting Shares" of any corporation shall mean shares of any class or
classes (however designated) having ordinary voting power for the election of at
least a majority of the members of the Board of Directors (or other governing
bodies) of such corporation, other than shares having such power only by reason
of the happening of a contingency.

SECTION 1.02. Other Definitional Provisions.

(a) All terms defined in this Agreement shall have the above-defined
meanings when used in the Revolving Credit Note, Term Promissory Note or any
Loan Documents, certificate, report or other document made or delivered pursuant
to this Loan Agreement, unless the context therein shall otherwise require.

(b) Defined terms used herein in the singular shall import the plural
ant vice-versa.

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(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement

ARTICLE II

CREDIT FACILITIES

SECTION 2.01. Revolving Commitments. Subject to the terms and
conditions of this Agreement (and on reliance upon the representations and
warranties made hereunder), Lender agrees to lend to Borrower on a revolving
basis in one or more Advances from time to time during the Commitment Period an
aggregate principal amount not to exceed the Committed Sum. In the event that
the outstanding principal of Advances shall at any time exceed the limitations
herein, all such Advances shall nonetheless be secured by the Collateral and
shall be entitled to all the benefits of this Agreement. Within the limits of
this Section 2.01 and subject to the other terms and conditions of this
Agreement, during the Commitment Period Borrower may borrow, repay and reborrow
in accordance with the terms and conditions of this Agreement.

SECTION 2.02. Manner of Borrowing.

(a) Authorization to make Advances. Lender is authorized to make the
Advances based upon any Notice of Borrowing or, at the discretion of Lender, if
such Advances are necessary to satisfy any Obligation. All Notice of Borrowing
hereunder shall specify the date on which the requested Advance is to be made
(which day shall be a Business Day) and the amount of the requested Advances.
Any Notice of Borrowing received after 11:00 A.M. Kingsport, Tennessee time on
any day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Advances under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.

(b) Notice Irrevocable. Each Notice of Borrowing shall be irrevocable
and binding on Borrower, and Borrower shall indemnify Lender against any cost,
loss or expense incurred by Lender as a result of any failure to fulfill, on or
before the date specified for an Advance, the conditions to such Advance set
forth herein, including without limitation, any cost, loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by Lender to fund the Advance to be made by Lender.

(c) Funding. After receiving a Notice of Borrowing in the manner
provided herein, Lender shall, before 7:00 p.m. Kingsport, Tennessee time on
the date an Advance is requested as specified in a Notice of Borrowing, deposit
in the account(s) designated by Borrower, pursuant to the terms and conditions
of this Agreement, such Advance in immediately available funds.

SECTION 2.03. Fees. Borrower shall pay an unused credit fee for the
Commitment Period computed at a rate per annum (based on a year of 365 or 366
days, as the case may be) equal to (a) one quarter percent (.25%) on the average
daily unborrowed amount of Lender's Committed Sum in effect during the period
for which payment is made. Such commitment fees

shall be payable quarterly in arrears on the last day of each March, June,
September and December during the Commitment Period, on the date of termination
of the Commitment of Lender hereunder, and on the Commitment Termination Date.

SECTION 2.04. Extension of Commitment Period. The Commitment Period
shall expire automatically unless Borrower makes a written request to Lender
not later than thirty (30) days prior to the expiration of the Commitment
Period and such request is approved in writing by Lender prior to the expiration
of the Commitment Period. The right of Lender not to extend the Commitment
Period shall be unconditional and within its sole discretion, notwithstanding
that no Event of Default exists under this Agreement and the Loan Documents and
regardless of the adequacy of the Collateral for Borrower's performance of its
obligations hereunder and thereunder.

SECTION 2.05. Term Loan. Lender is making a Term Loan to Borrower in
the original principal amount of One Million Twenty Five Thousand Dollars
($1,025,000). The Term Loan is (i) evidenced by a Term Promissory Note in such
original principal amount duly executed and delivered by Borrower to Lender
concurrently herewith; (ii) to be repaid, together with interest and other
amounts, in accordance with this Agreement, the Term Promissory Note, and the
other Collateral Documents and (iii) secured by a deed of trust on the
collateral subordinate only to the deed of trust securing the Advances made
pursuant to this Agreement. Notwithstanding anything herein to the contrary, the
Term Loan, together with all interest thereon, shall become immediately due and
payable from the proceeds of any public offering made by Borrower. ,

SECTION 2.06. Use of Proceeds. Subject to this Agreement and the Loan
Documents, the proceeds of each Advance and the Term Loan shall be used to
assist in the acquisition of the "Cortisporin" product line and for the general
corporate purposes of Borrower.

ARTICLE III

NOTES AND NOTE PAYMENTS

SECTION 3.01. Revolving Credit Note. The Advances made under SECTION
2.01 hereof by Lender shall be evidenced by a promissory note ("Revolving Credit
Note") executed by Borrower, which Revolving Credit Note shall (i) be dated the
date hereof, (ii) be in the amount of Lender's Committed Sum, (iii) be payable
to the order of Lender at its office in Kingsport, Tennessee, (iv) bear interest
in accordance with SECTION 3.02 hereof, and (v) be in the form of EXHIBIT A
attached hereto, and which is incorporated fully herein by this reference, with
blanks appropriately completed in conformity herewith. Notwithstanding the
principal amount of the Revolving Credit Note as stated on the face thereof, the
amount of principal actually owing on such Revolving Credit Note at any given
time shall be the aggregate of the principal amount of all Advances theretofore
made to Borrower hereunder, less all payments of principal theretofore actually
received hereunder by Lender.

SECTION 3.02. Interest Rates. Interest shall accrue on average daily
outstanding principal balance of Advances at a rate per annum equal to the sum
of ninety (90) days LIBOR plus one and three quarters percent (1.75%) for such
day. Interest shall be paid by Borrower monthly in arrears on the first day of
each month and shall be paid by Lender charging Borrower's Advance account. The
final payment of all accrued and unpaid interest shall be due and payable on the
date the outstanding principal amount of the Advances is paid or due and payable
in full. In the event of a Default, the Advances shall bear interest on the

outstanding principal amount thereof, for each day from the date of the Default
until the Advances are paid, at a rate equal to the Maximum Rate.

SECTION 3.03. Calculation of Interest Rates. Interest for Advances
hereunder shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).

SECTION 3.04. Manner and Application of Payments. Absent a Default or
an Event of Default, the outstanding principal amount of the Advances (together
with accrued and unpaid interest and expenses and any other obligations that may
be due to the Lender under this Agreement or the Loan Documents) shall be due
and payable by Borrower to Lender on the earlier of (i) the Commitment
Termination Date; or (ii) the termination of this Agreement by Lender or
Borrower in accordance with terms of this Agreement. All payments by Borrower
shall be made to Lender at its address set forth herein in lawful money of the
United States of America and in immediately available funds. Whenever any
payment to be made hereunder shall be due on a day which is not a Business Day,
such payment shall be made on the first Business Day thereafter, and such
extension of time shall in such case be included in the computation of interest
hereunder. As payments become due and payable, Lender may and is hereby
authorized by Borrower, as set forth in SECTION 2.02 (a), to charge Borrower's
account in a manner to effect any such payments that are due.

SECTION 3.05. Term Promissory Note. The Term Loan made under SECTION
2.05 hereof by Lender shall be evidenced by a the Term Promissory Note
{substantially in form presented in EXHIBIT A2 attached hereto and incorporated
fully herein by this reference) executed by Borrower, which Term Promissory Note
shall (i) be dated the date hereof, (ii) be in the original principal amount of
One Million Twenty Five Thousand Dollars ($1,025,000) (iii) be payable to the
order of Lender at its office in Kingsport, Tennessee, and (iv) bear interest
equal per annum to the sum of ninety (90) days LIBOR plus one and three quarters
percent (1.75%).

CONDITIONS PRECEDENT

SECTION 4.01. Initial Advances. The obligation of Lender to make its
initial Advance and Term Loan hereunder is subject to the condition precedent
that, on or before the date of such Advance and Term Loan, Lender shall have
received from Borrower the following in form and substance satisfactory to
Lender:

(a) Revolving Credit Note. A duly executed Revolving Credit Note,
payable to the order of Lender, in the form of EXHIBIT A attached hereto and
incorporated herein fully by this reference with appropriate insertions.

(b) Term Promissory Note. A duly executed Term Promissory Note payable
to the order of Lender, in the form of EXHIBIT A2 with appropriate insertions.

(d) Officers Certificate. A certificate signed by a duly authorized
officer of Borrower, stating that (to the best knowledge and belief of such
officer, after reasonable and due

investigation and review of matters pertinent to the subject matter of such
certificate): (i) all of the representations and warranties contained in ARTICLE
VI hereof and the Loan Documents are true and correct as of the date of the
Advance and Term Loan; and (ii) no event has occurred and is continuing, or
would result from the Advance and Term Loan, which constitutes a Default or an
Event of Default.

(e) Resolutions of Borrower. Resolutions of Borrower approving the
execution, delivery and performance of this Agreement, the Revolving Credit
Note, the Term Promissory Note, the Loan Documents and the transactions
contemplated herein and therein, duly adopted by Borrower's Board of Directors
and accompanied by a certificate of the Secretary or Assistant Secretary of
Borrower stating that such resolutions are true and correct, have not been
altered or repealed and are in full force and effect.

(f) Incumbency Certificate of Borrower. A signed certificate of the
Secretary or Assistant Secretary of Borrower which shall certify the names of
the officers of Borrower authorized to sign each of the Loan Documents to be
executed by such Person and the other documents or certificates to be delivered
by such Person pursuant to the Loan Documents. Lender may conclusively rely on
the certificate of Borrower until Lender shall receive a further certificate of
the Secretary or Assistant Secretary of Borrower canceling or amending the prior
certificate, provided such certificate does not retroactively void the prior
certificate.

(g) Certificates. Certificates of good standing (or other similar
instruments) for Borrower by the Secretary of State of the state of
incorporation of Borrower, and certificates of qualification and good standing
(or other similar instruments) for Borrower issued by the Secretary of State of
each of the states wherein Borrower is qualified to do business as a foreign
corporation, each dated no more than thirty (30) days prior to the execution of
this Agreement.

(h) Charter and Bylaws. A copy of the charter/articles of incorporation
of Borrower, and all amendments thereto, certified by the Secretary or Assistant
Secretary of Borrower, and dated as of the date of the execution of this
Agreement and a copy of the bylaws of Borrower and, and all amendments thereto,
certified by the Secretary or Assistant Secretary of Borrower, as being true,
correct and complete as of the date of such certification.

(i) Operating Budget. Projections of the cash flow and the operating
budget for Borrower for the fiscal year ending December 31, 1997.

(j) Financial Information. Copies of the financial statements referred
to in SECTION 7.01.

(k) Collateral Documents. Each of the Collateral Documents duly
executed by the parties thereto. Each document (including, without limitation,
any UCC financing statement, fixture filing and deed of trust) required by the
Collateral Documents or under law or requested by Lender to be filed, registered
or recorded in order to create, in favor of Lender for the benefit of Lender, a
perfected first Lien on the collateral described therein shall have been
properly filed, registered or recorded in each jurisdiction in which the filing
registration or recordation thereof is so required or requested, and Lender
shall have received an acknowledgement copy, or other evidence satisfactory to
it, of each such filing, registration or recordation and satisfactory evidence
of the payment of any necessary fee, tax or expense relating thereto.

(1) Litigation. A certificate signed by a duly authorized officer of
Borrower stating that no litigation, investigation or proceeding before or by an
abitrator or Governmental Authority

is continuing or threatened against Borrower or any of its officers, directors
or affiliates (i) with respect to this Agreement, the Revolving Credit Note, the
Term Promissory Note, the Collateral Documents, any other Loan Documents or any
of the transactions contemplated hereby or thereby, or (ii) which could have a
Material Adverse Effect. Lender shall also receive either a summary and analysis
of all litigation in which Borrower or any of its officers, directors or
affiliates is involved or an opinion of counsel, in form and substance
acceptable to Lender, to the effect that no litigation in which Borrower or any
of its officers, directors or affiliates is involved would, in the event of an
adverse determination, have a Material Adverse Effect.

(m) Insurance. Evidence satisfactory to Lender that Borrower has
obtained and have in full force the insurance policies required by this
Agreement or the Collateral Documents.

(n) Additional Information. Such other information and documents as may
reasonably be required by Lender and Lender's legal counsel.

SECTION 4.02. Advances and Term Loan. The obligation of Lender to make
any Advance or Term Loan under this Agreement (including the initial Advance)
shall be subject to the following conditions precedent:

(a) No Defaults. As of the date of the making of such Advance or Term
Loan there exists no Default or Event of Default.

(b) Compliance with Agreement. Borrower shall have performed and
complied with all agreements and conditions contained herein and in each of the
Loan Documents which are required to be performed or complied with by Borrower
before or on the date of such Advance or Term Loan.

(c) No Material Adverse Change. As of the date of making such Advance
or Term Loan, no change that would cause a Material Adverse Effect has occurred
since the date of the financial statements referenced in SECTION 6.06.

(d) Representations and Warranties. The representations and warranties
contained in ARTICLE VI hereof and in each of the Loan Documents shall be true
in all respects on the date of making of such Advance or Term Loan, with the
same force and effect as though made on and as of that date.

(e) Financial Statements. The most recent financial statements of
Borrower delivered to Lender pursuant to SECTION 7.01 are true and correct,
fairly represent the financial condition of Borrower and have been prepared in
accordance with Generally Accepted Accounting Principles applied on a basis
consistent with that of prior periods; as of the date of such Advance and Term
Loan, there are no obligations, liabilities or Indebtedness (including
contingent and indirect liabilities and obligations or unusual forward or
long-term commitments) of Borrower which are (separately or in the aggregate)
material and are not reflected in such financial statements.

(f) Bankruptcy Proceedings. No proceeding or case under the United
States Bankruptcy Code shall have been commenced by or against Borrower.

ARTICLE V

SECURITY INTERESTS

SECTION 5.01 Grant of Security Interests. To secure the due and
punctual payment of all Obligations, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing or
due or to become due, in accordance with the terms hereof and to secure the due
and punctual performance of all of the obligations of Borrower contained in the
other Loan Documents and in any other documents or instruments to which Borrower
and Lender are parties and in order to induce Lender to enter into this
Agreement and to make Advances and Term Loan Borrower does hereby mortgage,
pledge and assign to Lender (all of which are herein collectively called the
"Collateral"):

(a) All of the land in the county of Xxxxxxxx, State of Tennessee,
described more particularly in the attached EXHIBIT B, which is by this
reference fully incorporated herein (referred to hereinafter sometimes as the
"Property"), to have and to hold the same, together with all the improvements
now or hereafter erected on such Property and all fixtures now or hereafter
attached thereto, together with each and every tenements, hereditaments,
easements, rights, powers, privileges, immunities and appurtenances thereunto
belonging or in anywise appertaining and the reversion and reversions, remainder
and remainders, and also all the estate, right, title, interest, homestead,
property, possession and claim whatsoever in law as well as in equity of
Borrower of, in and to the same in every part and parcel thereof unto Lender in
fee simple.

(b) Together with a security interest in all fixtures affixed to or
located on the Property.

(c) Together with all rents, issues, profits, revenue, income and other
benefits from the Property to be applied to the Obligation secured by the Loan
Documents provided however, that permission is hereby given to Borrower so long
as no default has occurred hereunder, to collect, receive, and use such benefits
from the Property as they become due and payable, but not in advance thereof.

Provided always, that if Borrower shall pay to Lender the Obligations
at the times and in the manner stipulated by this Agreement, the Revolving
Credit Note, the Term Promissory Note and in all other instruments securing the
Obligation, including renewals, extension or modification thereof, and in this
Agreement and in all other instruments securing the Obligations, to be kept,
performed or observed by Borrower, then the herein described security interest
in the Collateral, shall cease and be void, but shall otherwise remain in full
force and effect.

SECTION 5.02 Filings. To further evidence the security interests of
Lender in the Collateral, Borrower shall executed and deliver to Lender, in a
form satisfactory to Lender, a deed of trust(s), and any other documents or
instruments reasonably deemed necessary or advisable (including any
modifications or extensions thereof), at any time by Lender.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

To induce Lender to make Advances and the Term Loan hereunder, Borrower
represents and warrants to Lender that:

SECTION 6.01. Organization and Good Standing. Borrower is a corporation
duly organized and existing in good standing under the laws of the state of its
incorporation, is duly qualified as a foreign corporation and in good standing
in all states in which it is doing business and has the corporate power and
authority to own its properties and assets and to transact the business in which
it is engaged and is or will be qualified in those states wherein it proposes to
transact business in the future.

SECTION 6.02. Authorization and Power. Borrower has the corporate power
and requisite authority to execute, deliver and perform the Loan Documents to be
executed by it. Borrower is duly authorized to, and has taken all corporate
action necessary to authorize it to, execute, deliver and perform the Loan
Documents executed by it. Borrower is and will continue to be duly authorized to
perform the Loan Documents executed by it.

SECTION 6.03. No Conflicts or Consents. Neither the execution and
delivery of the Loan Documents, nor the consummation of any of the transactions
therein contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any provision of law, statute or
regulation to which Borrower is subject or any judgment, license, order or
permit applicable to Borrower, or any indenture, loan agreement, mortgage, deed
of trust, or other agreement or instrument to which Borrower is a party or by
which Borrower may be bound, or to which Borrower may be subject, or violate any
provision of the charter or bylaws of Borrower. No consent, approval,
authorization or order of any court or governmental authority or third party is
required in connection with the execution and delivery by Borrower of the Loan
Documents or to consummate the transactions contemplated hereby or thereby.

SECTION 6.04. Enforceable Obligations. The Loan Documents have been
duly executed and delivered by Borrower and are the legal and binding
obligations of Borrower, enforceable in accordance with their respective terms,
except as limited by Debtor Laws.

SECTION 6.05. No Liens. Except for Permitted Liens, the Collateral is
free and clear of all Liens and other adverse claims of any nature, and Borrower
has good and marketable title to the Collateral.

SECTION 6.06. Financial Condition. Borrower has delivered to Lender
copies of the consolidated and consolidating balance sheet of Borrower as of
December 31, 1996, and the related consolidated and consolidating statements of
income, stockholders' equity and changes in financial position for the year
ended such date, certified by independent certified public accountants; such
financial statements are true and correct, fairly represent the financial
condition of Borrower as of such date and have been prepared in accordance with
Generally Accepted Accounting Principles applied on a basis consistent with that
of prior periods; as of the date hereof, there are no obligations, liabilities
or Indebtedness (including contingent and indirect liabilities and obligations)
of Borrower which are (separately or in the aggregate) material and are not
reflected in such financial statements; no changes having a Material Adverse
Effect have occurred since the date of such financial statements.

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SECTION 6.07. Full Disclosure. There is no material fact that Borrower
has not disclosed to Lender which could have a Material Adverse Effect on the
properties, business, prospects or condition (financial or otherwise) of
Borrower. Neither the financial statements referenced in SECTION 6.06 hereof,
nor any certificate or statement delivered herewith or heretofore by Borrower
to Lender in connection with negotiations of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary to
keep the statements contained herein or therein from being misleading.

SECTION 6.08. No Default. No event has occurred and is continuing which
constitutes a Default or an Event of Default.

SECTION 6.09. Material Agreements. Borrower is not in default in any
material respect under any contract, lease, loan agreement, indenture, mortgage,
security agreement or other material agreement or obligation to which it is a
party or by which any of its properties is bound.

SECTION 6.10. No Litigation. Except as disclosed on EXHIBIT C, there
are no actions, suits or legal, equitable, arbitration or administrative
proceedings pending, or to the knowledge of Borrower threatened, against
Borrower that could, if adversely determined, have a Material Adverse Effect.
There has been no change since the date of this Agreement in the status of any
of the actions, suits, investigations, litigation or proceedings referred to in
the litigation disclosed to Lender pursuant to EXHIBIT C that is materially
adverse to Borrower or to any transactions contemplated by any Loan Document.

SECTION 6.11. Burdensome Contracts. Borrower is not a party to, or
bound by, any contract which is a burdensome contract having a Material Adverse
Effect.

SECTION 6.12. Regulatory Defects. As of the date hereof, Borrower has
advised Lender, in writing, of all regulatory defects which could cause a
Material Adverse Effect of which Borrower has been advised or has actual
knowledge.

SECTION 6.13. Use of Proceeds; Margin Stock. The proceeds of the
Advances and the Term Loan hereunder will be used by Borrower solely for the
purposes herein specified. None of such proceeds will be used for the purpose
of purchasing or carrying any "margin stock" as defined in Regulation U,
Regulation X, or Regulation G or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry a "margin stock"
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation U, Regulation X, or Regulation G.
Borrower is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stocks. Neither Borrower nor any Person acting on
behalf of Borrower has taken or will take any action which might cause the
Advances, Term Loan, or any of the other Loan Documents, including this
Agreement, to violate Regulation U, Regulation X, or Regulation G or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 8 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Borrower owns no "margin stock."

SECTION 6.14. No Financing of Corporate Takeovers. No proceeds of the
Advances and Term Loan hereunder will be used to acquire any security in any
transaction which is subject to Sections 13 or 14 of the Securities Exchange Act
of 1934, including particularly (but without limitation) Sections 13(d) and 14
(d)thereof.

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SECTION 6.15. Taxes. All tax returns required to be filed by Borrower
in any jurisdiction have been filed and all taxes (including mortgage recording
taxes), assessments, fees and other governmental charges upon Borrower or upon
any of its properties, income or franchises have been paid prior to the time
that such taxes could give rise to a lien thereon. There is no proposed tax
assessment against Borrower and there is no basis for such assessment.

SECTION 6.16. Principal Office, Etc. The principal office, chief
executive office and principal place of business of Borrower is at 000 Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx. Borrower maintains its principal records and books
at such address

SECTION 6.17. ERISA. (a) No Reportable Event has occurred and is
continuing with respect to any Plan; (b) PBGC has not instituted proceedings
to terminate any Plan; (c) neither the Borrower, any member of the Controlled
Group, nor any duly-appointed administrator of a Plan (i) has incurred any
liability to PBGC with respect to any Plan other than for premiums not yet due
or payable, or (ii) has instituted or intends to institute proceedings to
terminate any Plan under Sections 4041 or 4041A of ERISA or withdraw from any
Multi-Employer Pension Plan (as that term is defined in Section 3(37) of
ERISA); (d) each Plan of Borrower has been maintained and funded in all
material respects in accordance with its terms and with all provisions of ERISA
and the Code applicable thereto; (e) Borrower and all members of any Controlled
Group have complied with all applicable minimum funding requirements of ERISA
and the Code with respect to each Plan; (f) no member of any Controlled Group
has been required to contribute to a Multi-Employer Pension Plan since
September 2, 1974 except as set forth on EXHIBIT D; (g) there are no unfunded
benefit liabilities (as defined in Section 4001(a)(18) of ERISA) with respect
to any Plan of Borrower or any member of the Controlled Group which pose a risk
of causing a lien to be created in in the of of Borrower, and (h) no material
prohibited transaction under the Code or ERISA has occurred with respect to any
Plan of Borrower or a member of the Controlled Group.

SECTION 6.18. Compliance with Law. Borrower is in compliance with all
laws, rules, regulations, orders and decrees which are applicable to Borrower
or its properties.

SECTION 6.19. Government Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as
any of the preceding acts have been amended), or any other law (other than
Regulation X) which regulates the incurring by Borrower of Indebtedness,
including but not limited to laws relating to common contract carriers or the
sale of electricity, gas, steam, water, or other public utility services.

SECTION 6.20. Insider. Borrower is not, and no Person having "control"
(as that term is defined in 12 U.S.C. Section 375(b)(5) or in regulations
promulgated pursuant thereto) of Borrower is, an "executive officer",
"director", or "principal shareholder" (as those terms are defined in 12
U.S.C. Section 375(b) or in regulations promulgated pursuant thereto) of
Lender, of a bank holding company of which Lender may be a subsidiary, or of
any subsidiary of a bank holding company of which Lender may be a subsidiary,
or of any bank at which Lender maintains a "correspondent account" (as such
term is defined in such statute or regulations), or of any bank which maintains
a correspondent account with Lender.

SECTION 6.21. Subsidiaries. Set forth on EXHIBIT E hereto is a complete
and accurate list of all subsidiaries as of the date hereof, showing as of such
date (as to each such

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subsidiary) the jurisdiction of its incorporation. All of the outstanding
capital stock of all subsidiaries has been validly issued, is fully paid and
non-assessable and is owned by Borrower free and clear of all Liens other than
the security interests under the Collateral Documents.

SECTION 6.22. Fair Labor Standards Act. Borrower has complied with, and
will continue to comply with, the provisions of the Fair Labor Standards Act of
1938, 29 U.S.C. Section 200, et seq., as amended from time to time (the
"FSLA"), including specifically, but without limitation 29 U.S.C. Section
215(a). This representation and warranty, and each re-confirmation hereof,
shall constitute written assurance from Borrower, given as of the date hereof
and as of the date of each re-confirmation that Borrower has complied with the
requirements of the FSLA, in general, and SECTION 15(a)(1), 29 U.S.C. Section
15(a)(1), thereof, in particular.

SECTION 6.23. Casualties. Neither the business nor the properties of
Borrower are affected by any environmental hazard, fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or other casualty (whether or not covered by insurance),
which could have a Material Adverse Effect.

SECTION 6.24. Investment Company Act. Borrower is not an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, and is not controlled by such a company.

SECTION 6.25. Sufficiency of Capital. Borrower is, and after
consummation of this Agreement and after giving effect to all Indebtedness
incurred and Liens created by Borrower in connection herewith will be, Solvent.

SECTION 6.26. Hazardous Substances. Except as disclosed on EXHIBIT F the
land described in the Loan Documents, including, but not limited to, the deed of
trust, is free from "hazardous substances" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., as amended, and the regulations promulgated pursuant
thereto, and no portion of such land is subject to federal, state or local
regulation or liability because of the presence of stored, leaked or spilled
petroleum products, waste materials or debris, "PCB's" or PCB items (as
defined in 40 C.F.R. Section 761.3), underground storage tanks, "asbestos" (as
defined in 40 C.F.R. Section 763.63) or the past or present accumulation,
spillage or leakage of any such substance.

SECTION 6.27. Collateral Documents; Description of Assets. The
Collateral Documents contain a description of all of the assets and properties
Borrower, sufficient to grant to Lender perfected Liens therein pursuant to
applicable law. Upon the filing by Lender of the required documents and
instruments, including, but not limited to, deeds of trust and fixture filings.
Lender will have a perfected first priority Lien in the Collateral and the
properties and assets described in the Collateral Documents. Lender has
obtained an independent survey of the Collateral described in EXHIBIT B hereof
and is relying in part, on such survey.

SECTION 6.28 Corporate Name. Borrower has not, during the preceding
five (5) years, been known as or used any other corporate, fictitious or
tradenames except as disclosed on EXHIBIT G. Except as set forth on EXHIBIT G,
Borrower has not, during the preceding five (5) years, been the surviving
corporation of a merger or consolidation or acquired all or substantially all
of the assets of any Person.

SECTION 6.29. Representations and Warranties. Each Notice of Borrowing
shall constitute, without the necessity of specifically containing a written
statement, a representation

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and warranty by Borrower that no Default or Event of Default exists and that
all representations and warranties contained in this ARTICLE VI or in any other
Loan Document are true and correct on and as of the date the requested Advance
is to be made.

SECTION 6.30. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Borrower herein shall survive delivery of the
Revolving Credit Note and the Term Promissory Note, and the making of the
Advance and Term Loan, respectively, and any investigation at any time made by
or on behalf of Lender shall not diminish Lender's right to rely thereon.

ARTICLE VII

AFFIRMATIVE COVENANTS

So long as Lender has any commitment to make Advances and the Term Loan
hereunder, and until payment in full of the Revolving Credit Note, Term
Promissory Note, and the performance of the Obligation, Borrower agrees that:

SECTION 7.01. FINANCIAL STATEMENTS, Reports and Documents. Borrower
shall deliver to Lender each of the following:

(a) QUARTERLY STATEMENTS. As soon as available, and in any event within
forty-five (45) days after the end of each quarterly fiscal period (except the
last) of each fiscal year of Borrower, copies of the quarterly Form 10-Q
Statements (if applicable), any and all filings with the SEC (if applicable),
copies of the consolidated and consolidating balance sheet of Borrower as of
the end of such quarterly fiscal period, and statements of income and retained
earnings and changes in financial position of Borrower for that quarterly
fiscal period and for the portion of the fiscal year ending with such period,
in each case setting forth in comparative form the figures of the corresponding
period of the preceding fiscal year, all in reasonable detail, and certified by
the chief financial officer of Borrower as being true and correct and as having
been prepared in accordance with Generally Accepted Accounting Principals,
subject to year-end audit adjustments;

(b) ANNUAL STATEMENTS. As soon as available and in any event within
one hundred twenty days (120) days after the close of each fiscal year of
Borrower, copies of the consolidated and consolidating balance sheet of
Borrower as of the close of such fiscal year and statements of income and
retained earnings and changes in financial position of Borrower for such fiscal
year, in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion
thereon (which shall not be qualified by reason of any limitation imposed by
Borrower) of Coopers & Xxxxxxx, LLP or of other independent public
accountants of recognized national standing selected by Borrower and
satisfactory to Lender, to the effect that such consolidated financial
statements have been prepared in accordance with Generally Accepted Accounting
Principles consistently maintained and applied (except for changes in which
such accountants concur) and that the examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances;

(c) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
written report submitted to Borrower by independent accountants any annual,
quarterly or special audit

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made, it being understood and agreed that all audit reports which are furnished
to Lender pursuant to this ARTICLE VII shall be treated as confidential, but
nothing herein contained shall limit or impair Lender's right to disclose such
reports to any appropriate Governmental Authority, or to use such information
to the extent pertinent to an evaluation of the Obligation, or to enforce
compliance with the terms and conditions of this Agreement, or to take any
lawful action which Lender deems necessary to protect its interests under this
Agreement;

(d) OTHER REPORTS. Promptly upon its becoming available, one copy of
each financial statement and any order issued by any Governmental Authority in
any proceeding to which Borrower is a party;

(e) COMPLIANCE CERTIFICATE. Within thirty (30) days after the end of
each fiscal quarter of Borrower hereafter, a certificate executed by the chief
financial officer or chief executive officer of Borrower, stating that a review
of the activities of Borrower during such fiscal quarter has been made under his
supervision and that Borrower has observed, performed and fulfilled each and
every obligation and covenant contained herein and is not in default under any
of the same or, if any such default shall have occurred, specifying the nature
and status thereof;

(f) ACCOUNTANTS CERTIFICATES. Within the period provided in paragraph
(b) above, a certificate of the accountants who render an opinion with respect
to such financial statements, stating that they have reviewed this Agreement and
stating further whether, in making their audit, such accountants have become
aware of any condition or event which would constitute a Default or an Event of
Default under any of the terms or provisions of this Agreement (insofar as any
such terms or provisions pertain to accounting matters) and, if any such
condition or event then exists, specifying the nature and period of existence
thereof; and

(g) OTHER INFORMATION. Such other information concerning the business,
properties or financial condition of Borrower as Lender shall reasonably, from
time to time request.

SECTION 7.02. PAYMENT OF TAXES AND OTHER INDEBTEDNESS. Borrower shall
pay and discharge (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any property belonging
to it, before delinquent, (ii) all lawful claims (including claims for labor,
materials and supplies), which, if unpaid, might give rise to a Lien upon any
of its property, and (iii) all of its other Indebtedness, except as prohibited
hereunder; provided, however, that Borrower shall not be required to pay any
such tax, assessment, charge or levy if and so long as the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings and appropriate accruals and cash reserves therefor
have been established in accordance with Generally Accepted Accounting
Principles.

SECTION 7.03. MAINTENANCE OF EXISTENCE AND RIGHTS. Conduct of Business.
Borrower shall preserve and maintain its corporate existence and all of its
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, and conduct its business in an orderly and efficient manner
consistent with good business practices and in accordance with all valid
regulations and orders of any Governmental Authority.

SECTION 7.04. NOTICE OF DEFAULT. Borrower shall furnish to Lender
immediately upon becoming aware of the existence of any condition or event
which constitutes a Default or would become a Default or an Event of Default,
written notice specifying the nature and period of existence thereof and the
action which Borrower is taking or proposes to take with respect thereto.

SECTION 7.05. OTHER NOTICES. Borrower shall promptly notify Lender of
(i) any material adverse change in its financial condition or its business,
(ii) any default under any material agreement, contract or other instrument to
which it is a party or by which any of its properties are bound, or any
acceleration of the maturity of any Indebtedness owing by Borrower, (iii) any
material adverse claim against or affecting Borrower or any of its properties,
and (iv) the commencement of, and any material determination in, any
litigation with any third party or any proceeding before any Governmental
Authority which could have a Material Adverse Effect or result in an Event of
Default.

SECTION 7.06. COMPLIANCE WITH LOAN DOCUMENTS. Borrower shall promptly
comply with any and all covenants and provisions of the Loan Documents executed
by it.

SECTION 7.07. COMPLIANCE WITH MATERIAL AGREEMENTS. Borrower shall
comply in all material respects with all material agreements, indentures,
mortgages or documents binding on it or affecting its properties or business.

SECTION 7.08. OPERATIONS AND PROPERTIES. Borrower shall act prudently
and in accordance with customary industry standards in managing or operating
its assets, properties, business and investments. Borrower shall keep in good
working order and condition, ordinary wear and tear excepted, all of its assets
and properties which are necessary to the conduct of its business.

SECTION 7.09. BOOKS AND RECORDS; ACCESS. Borrower shall give any
representative of Lender access during all business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in the possession of Borrower and relating to its
affairs, and to inspect any of the properties of Borrower. Borrower shall
maintain complete and accurate books and records of its transactions in
accordance with good accounting practices.

SECTION 7.10. COMPLIANCE WITH LAW. Borrower shall comply with all
applicable laws, rules, regulations, and all orders of any Governmental
Authority applicable to it or any of its property, business operations or
transactions, a breach of which could have a Material Adverse Effect.

SECTION 7.11. INSURANCE. Borrower shall maintain worker's compensation
insurance, liability insurance and insurance on its properties, assets and
business, now owned or hereafter acquired, against such casualties, risks and
contingencies, and in such types and amounts, as are consistent with customary
practices and standards of companies engaged in similar businesses.

SECTION 7.12. AUTHORIZATIONS AND APPROVALS. Borrower shall promptly
obtain, from time to time at its own expense, all such governmental licenses,
authorizations, consents, permits and approvals as may be required to enable it
to comply with its obligations hereunder and under the other Loan Documents.

SECTION 7.13. ERISA COMPLIANCE. Borrower shall (i) at all times, make
prompt payment of all contributions required under all Plans and required to
meet the minimum funding standard set forth in ERISA with respect to its Plans,
(ii) within thirty (30) days after the filing thereof, furnish to Lender copies
for each Lender of each annual report/return (Form 5500 Series), as well as all
schedules and attachments required to be filed with the Department

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of Labor and/or the Internal Revenue Service pursuant to ERISA, and the
regulation promulgated thereunder, in connection with each of its Plans for each
Plan year, (iii) notify Lender immediately of any fact, including, but not
limited to, any Reportable Event arising in connection with any of its Plans,
which might constitute grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan, together with a statement, if requested by Lender, as to
the reason therefor and the action, if any, proposed to be taken with respect
thereto, and (iv) furnish to Lender, upon its request, such additional
information concerning any of its Plans as may be reasonably requested.

SECTION 7.14. FURTHER ASSURANCES. Borrower shall, make, execute or
endorse, and acknowledge and deliver or file or cause the same to be done, all
such vouchers, invoices, notices, certifications and additional agreements,
undertakings, conveyances, deeds of trust, mortgages, transfers, assignments,
financing statements or other assurances, and take any and all such other
action, as Lender may, from time to time, deem reasonably necessary or proper
in connection with any of the Loan Documents, the obligations of Borrower
thereunder, or for better assuring and confirming unto Lender all or any part
of the security for any of such obligations, or for granting to Lender any
security for the Obligation which Lender may request from time to time.

SECTION 7.15. MINIMUM NET WORTH. Borrower shall, as of August 21, 1997
and each date, determined quarterly, thereafter, maintain a minimum Net Worth
of Twenty Five Million Dollars ($25,000,000) plus fifty percent (50%) of
Borrower's coinciding fiscal year earnings.

SECTION 7.16. INDEMNITY BY BORROWER. Borrower shall indemnify, save,
and hold harmless Lender and its directors, officers, agents, attorneys, and
employees (collectively, the "Indemnities" from and against: (i) any and
all claims, demands, actions, or causes of action that are asserted against any
Indemnitee by any Person if the claim, demand, action, or cause of action
directly or indirectly relates to a claim, demand, action, or cause of action
that the Person asserts or may assert against Borrower, any Affiliate of
Borrower or any officer, director or shareholder of Borrower, (ii) any and all
claims, demands, actions or causes of action that are asserted against any
Indemnitee if the claim, demand, action or cause of action directly or
indirectly relates to the Commitments, the use of proceeds of the Advances, or
the relationship of Borrower and Lender under this Agreement or any transaction
contemplated pursuant to this Agreement, (iii) any administrative or
investigative proceeding by any Governmental Authority directly or indirectly
related to a claim, demand, action or cause of action described in clauses (i)
or (ii) above, and (iv) any and all liabilities, losses, costs, or expenses
(including attorneys' fees and disbursements) that any Indemnitee suffers or
incurs as a result of any of the foregoing; provided, however, that Borrower
shall have no obligation under this Section to Lender with respect to any of
the foregoing arising out of the gross negligence or willful misconduct of
Lender or the breach by Lender of this Agreement or from the transfer or
disposition of any the Revolving Credit Note by Lender. If any claim, demand,
action or cause of action is asserted against any Indemnitee, such Indemnitee
shall promptly notify Borrower, but the failure to so promptly notify Borrower
shall not affect Borrower's obligations under this Section unless such failure
materially prejudices Borrower's right to participate in the contest of such
claim, demand, action or cause of action, as hereinafter provided. If requested
by Borrower in writing and so long as no Default or Event of Default shall have
occurred and be continuing, such Indemnitee shall in good faith contest the
validity, applicability and amount of such claim, demand, action or cause of
action and shall permit Borrower to participate in such contest. Any Indemnitee
that proposes to settle or compromise any claim or proceeding for which
Borrower may be liable for payment of indemnity hereunder shall give Borrower
written

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notice of the terms of such proposed settlement or compromise reasonably in
advance of settling or compromising such claim or proceeding and shall obtain
Borrower's concurrence thereto which concurrence shall not be unreasonably
withheld. Each Indemnitee is authorized to employ counsel in enforcing its
rights hereunder and in defending against any claim, demand, action, or cause
of action covered by this Section; provided, however, that each Indemnitee
shall endeavor, but shall not be obligated, in connection with any matter
covered by this Section which also involves other Indemnitees, to use
reasonable efforts to avoid unnecessary duplication of effort by counsel for
all Indemnitees. Any obligation or liability of Borrower to any Indemnitee
under this Section shall survive the expiration or termination of this
Agreement and the repayment of the Obligation.

ARTICLE VIII

NEGATIVE COVENANT

So long as Lender has any commitment to make Advances and the Term Loan
hereunder, and until payment in full of the Revolving Credit Note and the
performance of the Obligation, Borrower agrees that:

SECTION 8.01. LIMITATION ON INDEBTEDNESS. Borrower shall not incur,
create, contract, waive, assume, have outstanding, guarantee or otherwise be or
become, directly or indirectly, liable in respect of any Indebtedness, if such
Indebtedness would cause an Event of Default or a Material Adverse Effect
except (i) Indebtedness arising out of this Agreement, (ii) Indebtedness
secured by the Permitted Liens, (iii) current liabilities for taxes and
assessments incurred in the ordinary course of business, (iv) Indebtedness in
respect of current accounts payable or accrued (other than for borrowed funds
or purchase money obligations) and incurred in the ordinary course of business,
provided that all such liabilities, accounts and claims shall be promptly paid
and discharged when due or in conformity with customary trade terms, and (v)
Indebtedness of Borrower as reflected in the audited consolidated financial
statement of Borrower as of December 31,1996.

SECTION 8.02. NEGATIVE PLEDGE. Borrower shall not create, incur, permit
or suffer to exist any Lien upon any of the Collateral, now owned or hereafter
acquired, except for Permitted Liens.

SECTION 8.03. RESTRICTIONS ON DIVIDENDS. Borrower shall not directly or
indirectly declare or make, or incur any liability to make, any Dividend, if
such Dividend would cause a Material Adverse Effect or Event of Default, or if
Borrower is in Default, without the prior written consent of Lender, which
consent may not be unreasonably withheld.

SECTION 8.04. LIMITATION ON INVESTMENTS. Borrower shall not make or
have outstanding any investments in any Person which would result in a Material
Adverse Effect or Event of Default.

SECTION 8.05. LIMITATION ON SALE OF PROPERTIES. Borrower shall not (i)
sell, assign, convey, exchange, lease or otherwise dispose of any of its
properties, rights, assets or business, whether now owned or hereafter acquired
if such sale, assignment, conveyance, exchange, lease or other disposition
would result in a Material Adverse Effect or Event of Default, or (ii) sell,
assign or discount any Accounts, if such sale, assignment or discount would
result in a Material Adverse Effect or Event of Default.

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SECTION 8.06. Name, fiscal year and Accounting Method. Borrower shall
not change its name, fiscal year or method of accounting except in accordance
with Generally Accepted Accounting Principles; provided, however, Borrower may
change its name if Borrower has given Lender sixty (60) days prior written
notice of such name change and taken such actions as Lender deems necessary to
continue the perfection of the Liens securing payment of the Obligation.

SECTION 8.07. CURRENT RATIO. Borrower shall not permit the ratio of
current assets to current liabilities, as of any date, to be less than one and
one quarter (1.25) (Calculation: Current assets divided by current liabilities)

SECTION 8.08. DEBT TO NET WORTH RATIO. Borrower shall not permit the
ratio of liabilities to Net Worth, as of any date, to be more than one and one
half (1.5) (Calculation: total liabilities divided by Net Worth).

SECTION 8.09. CASH FLOW COVERAGE. Borrower shall not, as of any date,
permit the cash flow coverage to be less than one and one quarter (1.25)
(Calculation: Earnings Before Interest, Taxes, Depreciation and Amortization
divided by current maturities of long term debt plus interest expense).

SECTION 8.10. LIQUIDATION, MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF
SUBSTANTIAL ASSETS. Borrower shall not dissolve or liquidate, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any Person, or sell,
transfer, lease or otherwise dispose of all or any substantial part of its
property or assets or business without the prior written consent of Lender,
which consent may not be reasonably withheld.

SECTION 8.11. LINES OF BUSINESS. Borrower shall not directly or
indirectly, engage in any business other than those in which it is presently
engaged, or substantially alter its method of doing business.

SECTION 8.12. NO AMENDMENTS. Borrower shall not amend its certificate
of incorporation or bylaws.

SECTION 8.13. PURCHASE OF SUBSTANTIAL ASSETS. Borrower shall not
purchase, lease or otherwise acquire all or substantially all of the assets of
any other Person without the prior written consent of Lender, which consent may
be withheld in the sole and absolute discretion of Lender.

ARTICLE

EVENTS OF DEFAULT

SECTION 9.01. EVENTS OF DEFAULT. An "Event of Default" shall exist if
any one or more of the following events (herein collectively called "Events of
Default") shall occur and be continuing:

(a) Borrower shall fail to pay when due any principal of, or interest
on, the revolving Credit Note, Term Promissory Note or shall fail to pay when
due any fee, expense or other payment required hereunder.

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(b) any representation or warranty made under this Agreement, or any of
the other Loan Documents, or in any certificate or statement furnished or made
to Lender pursuant hereto or in connection herewith or with the Advances
hereunder, shall prove to be untrue or inaccurate in any material respect as of
the date on which such representation or warranty is made;

(c) default shall occur in the performance of any of the covenants or
agreements of Borrower hereunder or in any of the other Loan Documents;

(d) default shall occur in the payment of any material Indebtedness of
Borrower (other than the Obligation) or default shall occur in respect of any
note, loan agreement or credit agreement relating to any such Indebtedness and
such default shall continue for more than the period of grace, if any,
specified therein; or any such Indebtedness shall become due before its stated
maturity by acceleration of the maturity thereof or shall become due by its
terms and shall not be promptly paid or extended;

(e) any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the Borrower in accordance with the
respective terms thereof or shall in any way be terminated or become or be
declared ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective liens, security interests, rights, titles,
interests, remedies, powers or privileges intended to be created thereby;

(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of itself or of all or a
substantial part of its assets, (ii) file a voluntary petition in bankruptcy,
admit in writing that it is unable to pay its debts as they become due or
generally not pay its debts as they become become due, (iii) make a general
assignment for the benefit of creditors, (iv) file a petition or answer seeking
reorganization of an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, (v) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding, or (vi)
take corporate action for the purpose of effecting any of the foregoing;

(g) an involuntary petition or complaint shall be filed against
Borrower seeking bankruptcy or reorganization of it or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of it, or all or
substantially all of its assets, and such petition or complaint shall not have
been dismissed within thirty (30) days of the filing thereof; or an order,
order for relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or appointing a receiver, custodian,
trustee, intervenor or liquidator of it, or of all or substantially all of its
assets;

(h) any final judgment(s) for the payment of money in excess of the sum
of Twenty Five Thousand Dollars ($25,000) in the aggregate shall be rendered
against Borrower and such judgment or judgments shall not be satisfied or
discharged at least ten (10) days prior to the date on which any of its assets
could be lawfully sold to satisfy such judgment;

(i) both the following events shall occur: (i) either (x) proceedings
shall have been instituted to terminate, or a notice of termination shall have
been filed with respect to, any Plan (other than a Multi-Employer Pension Plan
as that term is defined in Section 3(37) of ERISA) by Borrower, any member of
the Controlled Group, PBGC or any representative of any thereof, or any such
Plan shall be terminated, in each case under Section 4041 or 4042 of ERISA, or
(y) a Reportable Event, the occurrence of which would cause the imposition of a
lien under Section

4068 of ERISA, shall have occurred with respect to any Plan (other than a
Multi-Employer Pension Plan as that term is defined in Section 3(37) of ERISA)
and be continuing for a period of sixty (60) days; and (ii) the sum of the
estimated liability to PBGC under Section 4062 of ERISA and the currently
payable obligations of Borrower to fund liabilities (in excess of amounts
required to be paid to satisfy the minimum funding standard of Section 412 of
the Code) under the Plan or Plans subject to such event shall exceed ten
percent (10%) of Net Worth at such time;

(j) any or all of the following events shall occur with respect to any
Multi-Employer Pension Plan (as that term is defined in Section 3(37) of ERISA)
to which Borrower contributes or contributed on behalf of its employees: (i)
Borrower incurs a withdrawal liability under Section 4201 of ERISA; or (ii) any
such plan is "in reorganization" as that term as that term is defined in
Section 4241 of ERISA; or (iii) any such Plan is terminated under Section 4041A
of ERISA and Lender determine in good faith that the aggregate liability likely
to be incurred by Borrower as a result of all or any of the events specified in
Subsections (i), (ii) and (iii) above occurring, shall have a Material Adverse
Effect; or

(k) there shall occur any change in the condition (financial or
otherwise) of Borrower which, in the reasonable opinion of Lender, has a
Material Adverse Effect

SECTION 9.02. REMEDIES UPON EVENT OF DEFAULT. If an Event of Default
shall have occurred and be continuing, then Lender may exercise any one or more
of the following rights and remedies, and any other remedies provided in any of
the Loan Documents, as Lender in its sole discretion, may deem necessary or
appropriate: (i) terminate Lender's commitment to lend hereunder, (ii) declare
the principal of, and all interest then accrued on, the Revolving Credit Note,
Term Promissory Note and any other liabilities hereunder to be forthwith due
and payable, whereupon the same shall forthwith become due and payable without
presentment, demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind, all of which Borrower
hereby expressly waives, anything contained herein in the Revolving Credit
Note, or in the Term Promissory Note to the contrary notwithstanding, (iii)
reduce any claim to judgment, and/or (iv) without notice of default or demand,
pursue and enforce any of Lender's rights and remedies under the Loan
Documents, or otherwise provided under or pursuant to any applicable law or
agreement; provided, however, that if any Event of Default specified in SECTION
9.01 (f) and (g) shall occur, the principal of, and all interest on, the
Revolving Credit Note, Term Promissory Note and other liabilities hereunder
shall thereupon become due and payable concurrently therewith, and Lender's
obligations to lend shall immediately terminate hereunder, without any further
action by Lender and without presentment, demand, protest, notice of default,
notice of acceleration or of intention to accelerate or other notice of any
kind, all of which Borrower hereby expressly waives.

SECTION 9.03. PERFORMANCE BY LENDER. Should Borrower fail to perform
any covenant, duty or agreement contained herein or in any of the Loan
Documents, Lender may perform or attempt to perform such covenant, duty or
agreement on behalf of Borrower. In such event, Borrower shall, at the request
of Lender, promptly pay any amount expended by Lender in such performance or
attempted performance to Lender at its principal office in Kingsport, Tennessee
together with interest thereon at the highest lawful rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that Lender does not assume any liability or responsibility for the
performance of any duties of Borrower hereunder or under any of the Loan
Documents or other control over the management and affairs of Borrower.

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ARTICLE X

MISCELLANEOUS

SECTION 10.01. MODIFICATION. All modifications, consents, amendments or
waivers of any provision of any Loan Document, or consent to any departure by
Borrower therefrom, shall be effective only if the same shall be in writing and
concurred in by Lender and then shall be effective only in the specific
instance and for the purpose for which given.

SECTION 10.02. ACCOUNTING TERMS AND REPORTS. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
Generally Accepted Accounting Principles consistently applied on the basis used
by Borrower in prior years. All financial reports furnished by Borrower to
Lender pursuant to this Agreement shall be prepared in such form and such
detail as shall be satisfactory to Lender, shall be prepared on the same basis
as those prepared by Borrower in prior years and shall be the same financial
reports as those furnished to Borrower's officers and directors.

SECTION 10.03. WAIVER. No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right. The
rights of Lender hereunder and under the Loan Documents shall be in addition to
all other rights provided by law and/or equity. No modification or waiver of
any provision of this Agreement, the Revolving Credit Note, the Term Promissory
Note or any Loan Documents, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand.

SECTION 10.04. PAYMENT OF EXPENSES. Borrower agrees to pay all costs
and expenses of Lender (including, without limitation, the reasonable
attorneys' fees of Lender's legal counsel) incurred by Lender in connection
with the preservation and enforcement of and Lender's rights under this
Agreement, the Revolving Credit Note, Term Promissory Note and/or the other
Loan Documents, and all reasonable costs and expenses of Lender (including
without limitation the reasonable fees and expenses of Lenders' legal counsel)
in connection with the negotiation, preparation, execution and delivery of this
Agreement, the Revolving Credit Note, Term Promissory Note and the other Loan
Documents and any and all amendments, modifications and supplements thereof or
thereto.

SECTION 10.05. NOTICES. Except for telephonic notices permitted herein,
any notices or other communications required or permitted to be given by this
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail, or (ii) made by facsimile delivered or transmitted, to the
party to whom such notice of communication is directed, to the address of such
party as follows:

(a) Borrower: King Pharmaceuticals, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000

Attention: President
Facsimile No.: (000) 000-0000

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with copy to: King Pharmaceuticals, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000

Attn: Legal Department
Facsimile No.: (000) 000-0000

(b) Lender: First American National Bank
0000 Xx. Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000

Attention: Xxxxx X. Xxxxxx, Senior Vice President

Facsimile No.: 423/229-0333

Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is mailed or personally
delivered as aforesaid or, if transmitted by facsimile, on the day that such
notice is transmitted as aforesaid; provided, however, that any telephonic or
other notice received by Lender after 11:00 A.M. time on any day from Borrower
pursuant to SECTION 2.02 (with respect to a Notice of Borrowing) shall be
deemed for the purposes of such Section to have been given by Borrower on the
next succeeding Business Day. Any party may change its address for purposes of
this Agreement by giving notice of such change to the other parties pursuant to
this SECTION 10.05.

SECTION 10.06. Governing Law. This Agreement has been prepared, is
being executed and delivered, and is intended to be performed in the State of
Tennessee and the substantive laws of such state (without reference to any
conflict of laws provisions) and the applicable federal laws of the United
States of America shall govern the validity, construction, enforcement and
interpretation of this Agreement and all of the other Loan Documents.

SECTION 10.07. Waiver of Jury Trial; Choice of Forum; Consent to
Service of Process and Jurisdiction. Borrower hereby irrevocably and
unconditionally waives all right to trial by jury in any action, proceeding, or
counterclaim arising out of or related to this Agreement, the Advances or any
other document or instrument to which Borrower and Lender are parties or any of
the transactions contemplated hereby or thereby. Any suit, action or proceeding
against Borrower with respect to this Agreement, the Revolving Credit Note or
any judgment entered by any court in respect thereof, may be brought in the
courts of the State of Tennessee, County of Xxxxxxxx, or in the United States
District Court for the Eastern District of Tennessee, in Greeneville, Tennessee
and Borrower hereby submits to the non-exclusive jurisdiction of such courts
for the purpose of any such suit, action or proceeding. Borrower hereby agrees
that service of all writs, process and summonses in any such suit, action or
proceeding brought in the State of Tennessee may be brought upon the Process
Agent, and Borrower hereby irrevocably appoints the Process Agent, as its true
and lawful attorney-in-fact in the name, place and stead of Borrower to accept
such service of any and all such writs, process and summonses, and agrees that
the failure of Process Agent to give any notice of such service of process to
it shall not impair or affect the validity of such service or of any judgment
based thereon. Borrower hereby irrevocably consents to the service of process
in any suit, action or proceeding in said court by the mailing thereof by
Lender registered or certified mail, postage prepaid, to Borrower's address set
forth in SECTION 10.06 hereof. Borrower hereby irrevocably

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waives any objections which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
or any Revolving Credit Note brought in the said courts, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in any inconvenient forum.

SECTION 10.08. Invalid Provisions. If any provision of any Loan Document
is held to be illegal, invalid unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully severable;
such Loan Document shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part of such Loan Document;
and the remaining provisions of such Loan Document shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision shall be added as part of
such Loan Document a provision mutually agreeable to Borrower and Lender as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable. In the event Borrower and Lender
are unable to agree upon a provision to be added to the Loan Document within a
period of ten (10) Business Days after a provision of the Loan Document is held
to be illegal invalid or unenforceable, then a provision acceptable to Lender
as similar in terms to the illegal, invalid or unenforceable provision as is
possible and be legal, valid and enforceable shall be added automatically to
such Loan Document. In either case, the effective date of the added provision
shall be the date upon which the prior provision was held to be illegal,
invalid or unenforceable.

SECTION 10.09. Maximum Interest Rate. Regardless of any provision
contained in any of the Loan Documents, Lender shall never be entitled to
receive, collect or apply as interest on the Revolving Credit Note and/or Term
Promissory Note any amount in excess of interest calculated at the Maximum
Rate, and, in the event that Lender ever receives, collects or applies as
interest any such excess, the amount which would be excessive interest shall be
deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of the Obligation is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds interest
calculated at the Maximum Rate, Borrower and Lender shall, to the maximum
extent permitted under applicable law, (i) characterize any nonprincipal
payment as an expense, fee or premium rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof; and (iii) amortize, pro rate,
allocate and spread, in equal parts, the total amount of interest throughout
the entire contemplated term of the Revolving Credit Note and/or Term
Promissory Note; provided that, if the Revolving Credit Note and/or Term
Promissory Note are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds interest calculated at the Maximum Rate, Lender
shall refund to Borrower the amount of such excess or credit the amount of such
excess against the principal amount of the Revolving Credit Note and/or Term
Promissory Note, and in such event, Lender shall not be subject to any
penalties provided by any laws for contracting for, charging, taking, reserving
or receiving interest in excess of interest calculated at the Maximum Rate.

SECTION 10.10. Confidentiality. Lender agrees to hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure to (i) legal counsel, accountants, and other
final advisors who are required by Lender to hold such confidential information
in confidence, (ii) regulatory officials, (iii) as required by law or legal
process or in connection with any legal proceeding, and (iv) to another
financial institution in connection with a disposition or proposed disposition
of a Lender's interests hereunder or under the Revolving Credit Note and/or
Term Promissory Note.

27
33

SECTION 10.11. Nonliability of Lender. The relationship between
Borrower and Lender is, and shall at all times remain, solely that of borrower
and lender, and Lender does not undertake nor assume any responsibility or duty
to Borrower to review, inspect, supervise, pass judgment upon, or inform
Borrower of any matter in connection with any phase of Borrower's business,
operations, or condition, financial or otherwise. Borrower shall rely entirely
upon its own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment, or information supplied to Borrower by
Lender in connection with any such matter is for the protection of Lender, and
neither Borrower nor any third party is entitled to rely thereon.

SECTION 10.12. Offset. Borrower hereby grants to Lender the right of
offset, to secure repayment of the Revolving Credit Note, upon any and all
moneys, securities or other property of Borrower and the proceeds therefrom,
now or hereafter held or received by or in transit to Lender, or any of its
agents, from or for the account of Borrower, whether for safe keeping, custody,
pledge, transmission, collection or otherwise, and also upon any and all
deposits (general or special) and credits of Borrower, and any and all
claims of Borrower against Lender at any time existing.

SECTION 10.13 Binding Effect. The Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective
successors, assigns and legal representatives; provided, however, that Borrower
may not, without the prior written consent of Lender, assign any rights,
powers, duties or obligations thereunder. Any assignment in violation of this
Section shall be void.

SECTION 10.14. Entirety. The Loan Documents embody the entire agreement
between the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter hereof and thereof.

SECTION 10.15. Headings. Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Agreement.

SECTION 10.16. Survival. All representations and warranties made by
Borrower herein shall survive delivery of the Revolving Credit Note and Term
Promissory Note, the making of the Advances and Term Loan, respectively, and
the closing of any transactions herein contemplated.

SECTION 10.17. No Third Party Beneficiary. The parties do not intend
the benefits of this Agreement to inure to any third party, nor shall this
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower, or for debts or claims accruing to any such persons against
Borrower. Notwithstanding anything contained herein or in the Revolving Credit
Note, Term Promissory Note or in any other Loan Document, or any conduct or
course of conduct by any or all of the parties hereto, before or after signing
this Agreement nor any other Loan Document shall be construed as creating any
right, claim or cause of action against Lender, or any of their officers,
directors, agents or employees, in favor of any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any property owned by
Borrower, nor to any other person or entity other than Borrower.

SECTION 10.18. Multiple Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same

28
34

agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart.

IN WITNESS WHEREOF, the undersigned have executed, or caused to be
executed, this Agreement as of the day and year first above written.

BORROWER:

KING PHARMACEUTICALS, INC.

By:/s/ Xxxx X. Xxxxxxx
-------------------------------

(SEAL) Name: Xxxx X. Xxxxxxx
----------------------------

Title: Chief Executive Officer
----------------------------

Attest:

/s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx

LENDER:

FIRST AMERICAN NATIONAL BANK

By:/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx,
Senior Vice President

29
00

XXXXX XX XXXXXXXXX

XXXXXX XX XXXXXXXX

Xx this 21st day of August 1996, before me, a Notary Public in and for
said State, appeared Xxxx X. Xxxxxxx, to me personally known, who, being duly
sworn, did say that he is the Chief Executive Officer of King Pharmaceuticals,
Inc., a Tennessee corporation, the corporation named in and which executed the
within instrument, and that said instrument was signed on behalf of said
corporation; and said Xxxx X. Xxxxxxx acknowledged said instrument to be the
free act and deed of said corporation.

/s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
Notary Public

Commission expires:

7/20/99
-------------------------

[SEAL]

XXXXXXX X. XXXXX
NOTARY PUBLIC AT LARGE
XXXXXXXX CO. TENN.

30
36

EXHIBIT A

Revolving Credit Note

$2,975,000 August 21, 1997
Xxxxxxxx County, Tennessee

FOR VALUE RECEIVED, the undersigned, KING PHARMACEUTICALS, INC., a Tennessee
corporation (the "Borrower"), promises to pay to the order of FIRST AMERICAN
NATIONAL BANK (the "Lender"), at its principal office at 4105 Ft. Xxxxx Drive,
Kingsport, Tennessee, or at such other place as the holder from time to time
may designate in writing, the principal sum of TWO MILLION NINE HUNDRED SEVENTY
FIVE THOUSAND DOLLARS ($2,975,000), or the outstanding principal balance
thereof (collectively and separately referred to herein sometimes as the
"Loan") in lawful money of the United States of America and to pay interest on
the unpaid balance hereof in like money at such office on the first day of each
calendar month of each year from the date hereof until the principal hereof
shall have become due and payable on August 20, 2000, or earlier as provided
herein, at the rate of ninety days (90) - plus one and three quarters percent
(1.75%)(computed on the basis of the actual number of days elapsed over a year
of 360 days). "LIBOR" shall mean, for each interest period, the rate per annum
offered to the Lender (at approximately 11:00 A.M. London time, on the date two
Business Days in London prior to the first day of such interest period) by
prime banks in the London Interbank Market for deposits of the lawful money of
the United States of America for a period equal to the length of such interest
period and in an amount of the Loan which have been made by Lender to Borrower
hereunder and are scheduled to be outstanding during such interest period. Each
determination of the LIBOR by Lender shall, in the absence of manifest error,
be conclusive and binding. Lender shall attempt to notify Borrower of its
determination of the LIBOR as soon as practicable following such determination.
In no event shall the interest hereon exceed the maximum rate permitted to be
charged by applicable law or regulation.

This Note and any and all extensions, modifications, renewals or amendments
thereof is secured by a deed of trust executed by Borrower on even date
herewith.

Any default under the Loan and Security Agreement of even date herewith entered
into between Borrower and First American National Bank as Lender ("Loan
Agreement"), as amended from time to time, shall constitute a default under
this Note, in which event, at the option of the holder of this Note, the entire
principal nun evidenced hereby, together with interest thereon, without notice,
except as provided in the Loan Agreement, shall immediately become due and
payable.

The whole of the principal sum and, to the extent permitted by law, any accrued
interest shall bear, after default, interest at the highest lawful rate then in
effect pursuant to applicable law, or at the rate provided herein in the event
no maximum rate is prescribed by applicable law.

31
37

At the option of the Lender hereof, the undersigned shall pay a late charge
equal to five percent (5.0%) of any installment payable hereunder not paid
within fifteen (15) days of the due date thereof.

LIBOR Advances may be prepaid at any time with three (3) prior Business Days'
notice to Lender, provided Borrower shall compensate Lender for any and all
funding losses when any LIBOR Advance is prepaid prior to the end of its
respective Interest Period.

If default is made in the payment of any installment due hereunder, whether
principal or interest, when the same shall become due or mature, or if default
is made in the payment of the indebtedness hereunder on demand or at maturity,
or in the event of default in or breach of any terms, provisions or conditions
of the Loan Agreement or any instrument(s) given to secure this Note, then at
the election of the legal holder hereof, at any time thereafter made and
without demand or notice, the owner and holder of this Note shall have the
right to declare all sums unpaid hereon at once due and payable. In the event
of such default, and the same is placed in the hands of any attorney for
collection, or a suit is filed hereon, or if the proceedings are held in
bankruptcy, receivership, through the reorganization of Borrower, or any surety
of borrower, or other legal or judicial proceedings for the collection hereof,
Borrower agrees to Pay to the owner and holder of this Note all costs of
collection, including reasonable attorneys' fees.

The Borrower and all endorsers and signers hereof, and each of them, expressly
waive presentment for payment, notice of nonpayment, protest, notice of
protest, bringing of suit, and diligence in taking any action to claim the
amounts owing hereunder and are and shall be jointly and severally, directly
and primarily, liable for the amount of all sums owing and to be owing hereon
and agree that this Notice, or any payment hereunder, may be extended from time
to time without affecting such liability.

During the existence of any default or delinquency under the terms of this
Note, the Loan Agreement, any other instrument evidencing indebtedness to
Borrower to Lender, or any instrument executed or to be executed as security
for the payment hereof, Lender or other owner and holder hereof is expressly
authorized to apply all payments made on this Note to the payment of such part
of any delinquency as it may elect.

The remedies of the Lender hereof as provided herein, in the Loan Agreement, or
in any instrument(s) securing this Note, shall be cumulative and concurrent,
and may be pursued singularly, successively or together, at the sole discretion
of the Lender hereof, and may be exercised as often as occasion therefor shall
arise. No act or omission of the Lender, including specifically any failure
to exercise any right, remedy or recourse shall be deemed to be a waiver or
release of the same, such waiver or release to be effected only through a
written document executed by the Lender and then only to the extent
specifically recited therein. A waiver or release with reference to any one
event shall not be construed as continuing, as a bar to, or as a waiver or
release of, any subsequent right, remedy or recourse as to a subsequent event.
Notwithstanding anything herein to the contrary, in no event shall interest
payable hereunder be in excess of the maximum rate allowed by applicable law.

Time is of the essence of this Note.

This Note and the instruments securing it shall be governed by, and construed
under, the laws of the State of Tennessee.

32
38

The provisions hereof shall be binding upon the parties, their successors and
assigns. The provisions hereof are severable such that the invalidity or
unenforceability of any provision hereof shall not affect the validity or
enforceability of the remaining provisions.

This Note has been executed, delivered and accepted at Xxxxxxxx County,
Tennessee, and all funds disbursed to or for the benefit of the undersigned
will be disbursed in Kingsport, Xxxxxxxx County, Tennessee.

IN WITNESS WHEREOF, the undersigned have executed this Note on the day and year
first above written.

BORROWER:

KING PHARMACEUTICALS, INC.

(SEAL) By:
-------------------------------

Attest: Name:
-----------------------------

-------------------------------- Title:
Xxxxxx X. Xxxxxxx, Secretary ----------------------------

33
39

EXHIBIT A2

Term Promissory Note

$1,025,000 August 21, 1997
Xxxxxxxx County, Tennessee

FOR VALUE RECEIVED, KING PHARMACEUTICALS, INC., a Tennessee corporation (the
"Debtor"), hereby unconditionally promises to pay to the order of FIRST
AMERICAN NATIONAL BANK (the "Payee"), at the offices of Payee at 0000 Xx. Xxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000, or such other place as the Payee
or any holder hereof may from time to time designate, the principal sum of ONE
MILLION TWENTY FIVE THOUSAND DOLLARS ($1,025,000) in lawful money of the United
States of America and in immediately available funds, in thirty five (35)
consecutive monthly installments of TWENTY EIGHT THOUSAND FOUR HUNDRED SEVENTY
TWO DOLLARS AND TWENTY TWO CENTS ($28,472.22) and one final installment of
TWENTY EIGHT THOUSAND FOUR HUNDRED SEVENTY TWO DOLLARS AND THIRTY CENTS
($28,472.30) on the first day of each month commencing on September 1,1997.

Debtor hereby further promises to pay interest to the order of Payee on the
unpaid principal balance hereof at the Interest Rate (as hereinafter defined).
Such interest shall be paid in like money at said office or place from the date
hereof, commencing September 1, 1997 and on the first day of each month
thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default or termination or
non-renewal of the Loan and Security Agreement shall be payable upon demand.

For purposes hereof, the term Interest Rate shall mean a rate of ninety days
(90) - LIBOR plus one and three quarters percent (1.75%)(computed on the basis
of the actual number of days elapsed over a year of 360 days). "LIBOR" shall
mean, for each interest period, the rate per annum offered to the Lender tat
approximately 11:00 A.M. London time, on the date two Business Days in London
prior to the first day of such interest period) by prune banks in the London
Interbank Market for deposits of the lawful money of the United States of
America for a period equal to the length of such interest period and in an
amount of the Loan which have been made by Lender to Borrower hereunder and are
scheduled to be outstanding during such interest period. Each determination of
the LIBOR by Lender shall, in the absence of manifest error, be conclusive and
binding. Lender shall attempt to notify Borrower of in determination of the
LIBOR as soon as practicable following such determination. In no event shall
the interest hereon exceed the maximum rate permitted to be charged by
applicable law or regulation. In no event shall the interest charged hereunder
exceed the Maximum Interest Rate.

This Note is issued pursuant to the terms and provisions of the Loan and
Security Agreement to evidence the Term Loan by Payee to Debtor. This Note is
secured by a deed of trust of even date herewith. Unless payment is otherwise
made by Debtor, Payee may charge the amount of any payment due hereunder to any
account of Debtor maintained by Payee.

If any payment of principal or interest is not made when d hereunder, or if any
any Event of Default shall occur for any reason, or if the Loan and Security
Agreement shall be terminated or

34
40

not renewed for any reason whatsoever, then and in any such event, in addition
to all rights and remedies of Payee under the Loan and Security Agreement,
applicable law or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively and concurrently, Payee
may, at its option, declare any or all of Debtor's obligations, liabilities and
indebtedness owing to Payee under the Loan and Security Agreement, including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest
accruing thereafter at the Interest Rate until the indebtedness evidenced by
this Note is paid in full, plus the costs and expenses of collection hereof,
including, but not limited to, attorneys' fees and legal expenses.

Debtor (i) waives diligence, demand, presentment, protest and notice of any
kind, (ii) agrees that it will not be necessary for Payee to first institute;
suit in order to enforce payment of this Note and (iii) consents to any one or
more extension or postponements of time of payment, release surrender or
substitution or collateral security; or forbearance or other indulgence,
without notice or consent. The pleading of any statute of limitations as a
defense to any demand against Debtor is expressly hereby waived by Debtor. Upon
an Event of Default or termination or non-renewal of the Loan and Security
Agreement, Payee shall have the right, but not the obligation to setoff against
this Note all money owed by Payee or Debtor.

Payee shall not be required to resort to any collateral for payment, but may
proceed against Debtor and any guarantors or endorser hereof in such order and
manner as Payee may choose. None of the rights of Payee shall be waived or
diminished by any failure or delay in the exercise thereof.

The validity, interpretation and enforcement of this Note and any dispute
arising in connection herewith shall be governed by the internal laws of the
State of Tennessee without giving effect to principles of conflicts of law.

KING PHARMACEUTICALS, INC.

(SEAL) By:
-----------------------------------

Name:
---------------------------------

Title:
--------------------------------

Attest:

----------------------------------
Xxxxxx X. Xxxxxxx, Secretary

41
EXHIBIT B

Description of Property

PARCEL 1: Situate in the 17th Civil District of Xxxxxxxx County, Tennessee, to
wit:

BEGINNING at an iron pin found on the west right of way of Fifth Street, p.t. of
curve joining Ash Street, thence with said Fifth Street right of way N. 24
degrees, 02 minutes, 25 seconds W. 128.97 minutes to an iron pin found, thence
continuing N. 30 degrees, 07 minutes, 17 seconds W. 550.38' to a P.K. Nail found
on the S. right of way line of Olive Street, thence with Olive Street N. 59
degrees, 13 minutes, 43 seconds E. 376.52' to a point, thence with Olive Street
N. 30 degrees, 46 minutes, 17 seconds W. 16.73' to a point, common corner with
Tract 3, thence with Tract 3 - N. 50 degrees, 52 minutes, 31 seconds E. 10.39'
to a point on the S. right of way line of Norfolk Southern Railroad, thence with
said S. right of way line of railroad the following calls: S. 32 degrees, 19
minutes, 59 seconds E. 417.49' to an iron pin found, S. 57 degrees, 29 minutes,
42 seconds W. 22.31' to an iron pin found, S. 30 degrees, 02 minutes, 17 seconds
E. 171.24' to an iron pin found S. 23 degrees, 37 minutes, 07 seconds E. 215.60'
to a fence post corner on the N. right of way line of Ash Street, thence with
said N. right of way line of Ash Street the following calls: S. 67 degrees, 58
minutes, 25 seconds W. 44.63' to a nail and cap found, S. 71 degrees, 28
minutes, 50 seconds W. 52.31' to a nail and cap found, thence S. 49 degrees, 37
minutes, 18 seconds W. 39.31' to an iron pin set, thence S. 76 degrees, 44
minutes, 26 seconds W. 159.19' to an iron pin found, thence S. 77 degrees, 28
minutes, 36 seconds W. 66.08' to an iron pin found at the P.C. of a curve,
thence with said curve to the right having a radius of 28.78' an arc length of
36.91' to the point of BEGINNING containing 6.707, more or less, and being
Parcel-1.

PARCEL 2: Situate in the 17th Civil District of Xxxxxxxx County, Tennessee, to
wit:

BEGINNING at a point on the E. right of way line of Xxxxxxx Street, common
corner with X.X. Xxxxx, thence leaving Xxxxxxx Street N. 60 degrees, 49 minutes,
41 seconds E. 58.61' to an iron pin found on the W. right of way line of Norfolk
Southern Railroad, thence with said railroad right of way S. 26 degrees, 55
minutes, 28 seconds E. 155.51' to a point, thence with railroad right of way S.
59 degrees, 52 minutes, 31 seconds W. 50.44' to a point on the eastern right of
way line of Olive Street, common corner with Tract 2 as described on page 2 of
these legal descriptions, thence with the E. right of way line of Olive Street
as it becomes the E. right of way line of Xxxxxxx Street N. 29 degrees, 55
minutes, 58 seconds W. 156.24 to the point of BEGINNING containing .195, more or
less, and being Parcel 2.

PARCEL 3: Situate in the 17th Civil District of Xxxxxxxx County, Tennessee, to
wit:

BEGINNING at an iron pin found on the north right of way line of Ash Street at
its intersection with the east right of way line of Childress Alley, thence with
said east right of way line of Childress Alley the following calls: N. 23
degrees, 27 minutes, 35 seconds W., 260.00' to a point, N. 16 degrees, 30
minutes, 02 seconds W. 17.28' to a point, N. 31 degrees, 10 minutes, 25 seconds
W. 406 56' to an in iron pin set on the S. right of way line of Olive Street,
thence with said Olive Street N. 58 degrees, 51 minutes, 35 seconds E. 76.00 to
a point, thence leaving Olive Street S. 30 degrees, 16 minutes, 25 seconds E.
81.03 to a point, thence N. 58 degrees, 50 minutes, 54 seconds E. 7.50 to a
point, thence N. 30 16 minutes, 25 seconds W. 81.03 to a point on the S. right
of way line of Olive Street thence with said Olive Street N. 58 degrees, 51
minutes, 35 seconds E 83.50' to an iron pin found in the W. right of way line of
Fifth Street thence with said W. right of way line of Fifth Street the following
calls: S. 30 degrees, 16 minutes, 25 seconds E. 411.01' to a P.K Nail found, S.
32 degrees, 24 minutes, 57 seconds E. 16.99' to a drill hole found, S. 23
degrees, 37 minutes, 57 seconds E;. 244.76' to a drill hole found, thence on a
curve to the right having a radius of 27.89' an arc length of 42.89' to a drill

hole found on the N. right of way of Ash Street, thence said of way line of Ash
Street S. 64 degrees, 33 minutes, 25 seconds W. 138.33' to the point of
BEGINNING containing 2.589, more or less.

PARCEL 4: Situate in the 17th Civil District of Xxxxxxxx County, Tennessee, to
wit:

BEGINNING at an iron pin found on the W. right of way line of Xxxxxxx Street,
common corner with Xxxxx Xxxxxxxxx thence with said Xxxxxxx Street S. 30
degrees, 17 minutes, 05 seconds E. 37.38' to an iron pin found, common corner
with Xxx XxXxxxx thence with XxXxxxx line S. 59 degrees, 02 minutes, 23 seconds
W. 165.17 feet to an iron pin found in the line of Xxxxxx Xxxx, thence with
Xxxx N. 29 degrees, 52 minutes, 46 seconds W. 8.30' to an iron pin, common
corner with Xxxxx Xxxxxxxxx (2nd Tract), thence with said Xxxxx Xxxxxxxxx (2nd
Tract) N. 30 degrees, 09 minutes, 05 seconds W. 28.92' to an iron pin found
common corner with Xxxxx Xxxxxxxxx; thence with Xxxxx Xxxxxxxxx N. 58 degrees,
58 minutes, 58 seconds E. 165.04' to the point of BEGINNING containing 0.162,
more or less.

PARCEL 5: Situate in the 17th Civil District of Xxxxxxxx County, Tennessee, to
wit:

BEGINNING at iron pin found on the W. right of way line of Xxxxxxx Street,
common corner with Xxx XxXxxxx, thence with Xxxxxxx Street the following calls:
S. 30 degrees, 29 minutes 53 seconds E. 37.20' to a point, S. 30 degrees, 29
minutes, 53 seconds E. 45.00' to an iron pin found, S. 29 degrees, 03 minutes
09 seconds E. 42.12' to a point on the N. right of way line of Olive Street,
thence with said Olive Street the following calls: S. 58 degrees, 25 minutes,
52 seconds W. 52.65' to a point, S. 59 degrees, 14 minutes, 42 seconds W.
36.00' to an iron pin found, S. 59 degrees, 20 minutes, 53 seconds W. 39.18' to
an iron pin found, S. 59 degrees, 08 minutes, 09 seconds W. 37.04' to an iron
pin found common corner with Xxx Xxxxxxxxx, thence with Xxxxxxxxx, N. 30
degrees, 09 minutes, 16 seconds W. 87.16' to an iron pin found, thence with
Xxxxxxxxx and Xxxxxx Xxxx N. 29 degrees, 52 minutes, 46 seconds W. 36.83' to a
point in the line of Xxxx and common corner with Xxx XxXxxxx, thence with
XxXxxxx N. 58 degrees, 52 minutes, 30 seconds E. 165.01' to the point of
BEGINNING containing 0.513, more or less.

Being the same property conveyed to RSR ACQUISITIONS n/k/a KING PHARMACEUTICALS,
INC., by deeds dated SEPTEMBER 20, 1996, NOVEMBER 27, 1996 and DECEMBER 23, 1993
and recorded in Deed Books 386, 390 and 343, pages 674, 185 and 270,
respectively In the Register's Office for Xxxxxxxx County, at Bristol,
Tennessee.

THE ABOVE parcels are all shown on survey of King Pharmaceuticals, Inc. by Cross
Land Surveying and Planning, Xxxxxx Xxxxxx Xxxxx, XXX #0000, 000 Xxxxxxxxxx
Xxxxx, Xxxxxxx, XX 00000, dated May 23, 1997 to which reference is hereby made.

EXHIBIT C

Litigation

NONE

EXHIBIT D

Contributions to Multi-Employer Pension Pan

NONE

EXHIBIT E

Subsidiaries

1. Monarch Pharmaceuticals, Inc.
State of Incorporation: Tennessee
Ownership: Borrower owns 100%

2. King Pharmaceuticals of Nevada, Inc.
State of Incorporation: Nevada
Ownership: Borrower owns 100%

EXHIBIT F

Environmental Matters

The following is a list of all known hazardous or toxic waste storage or dump
sites on any premises owned or leased by the Company or any of its subsidiaries
and a description of the nature of the substances located thereon and the type
of facility:

The following hazardous waste substances are temporarily stored periodically at
King:

Waste Components
----- ----------

Ignitable Liquid: Spent Analytical Solvent Methanol, Acetonitrile, Water
Flammable Liquid: Spent Analytical Solvent Methanol, Acetonitrile, Water, Acetone
Waste Combustible Liquid (Analysis in process 2/20/97)
NOS PET-NAPHTHA

Waste is held temporarily in a temperature controlled, concrete building.
Accumulated waste is picked up for removal to a certified disposal site.

The following is a list of all surveys, audits and reports initiated by or
supplied to the Company or any of its subsidiaries at any time during the past
five (5) years regarding environmental concerns with respect to any real or
personal property owned, leased, occupied, or operated by the Company:

Industrial Hygiene Audit dated 2/5/93
Tennessee Department of Environment and Conservation report dated 6/22/95

Exhibit G

Corporate Names/Tradenames

Other Corporate Names: RSR Acquisition Corp.

Other Tradesnames: 1. Monarch Pharmaceuticals, Inc.
2. Royal Vet

Exhibit H

Permitted Liens

1. UCC-1 from Borrower to General Electric Capital Corp. Recorded May 29, 1997
in Book 398, page 839, in the Register of Deeds Office for Xxxxxxxx County, at
Bristol, Tennessee.

2. Deed of Trust in the amount of $1,750,000.00 from Borrower to Xxxx X. Xxxxx,
Xx., Trustee, securing The United Company, recorded March 18, 1997 in Book 395,
page 105, of the Register's Office for Xxxxxxxx County, at Bristol, Tennessee;
provided this Deed of Trust is properly made junior and subordinate, prior to or
contemporaneously with the execution of the Agreement, to all Deeds of Trust
filed by Lender pursuant to the Agreement.

3. Any liens upon manufacturing equipment purchased or leased by Borrower.

TERM PROMISSORY NOTE

August 21, 1997
$1,025,000 Xxxxxxxx County, Tennessee

FOR VALUE RECEIVED, KING PHARMACEUTICALS, INC., a Tennessee corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of FIRST
AMERICAN NATIONAL BANK (the "Payee"), at the offices of Payee at 0000 Xx. Xxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000, or such other place as the Payee
or any holder hereof may from time to time designate, the principal sum of ONE
MILLION TWENTY FIVE THOUSAND DOLLARS ($1,025,000) in lawful money of the United
States of America and in immediately available funds, in thirty five (35)
consecutive monthly installments of TWENTY EIGHT THOUSAND FOUR HUNDRED SEVENTY
TWO DOLLARS AND TWENTY TWO CENTS ($28,472.22) and one final installment of
TWENTY EIGHT THOUSAND FOUR HUNDRED SEVENTY TWO DOLLARS AND THIRTY CENTS
($28,472.30) on the first day of each month commencing on September 1,1997.

Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate (as hereinafter
defined). Such interest shall be paid in like money at said office or place from
the date hereof, commencing September 1, 1997 and on the first day of each month
thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default or termination or
non-renewal of the Loan and Security Agreement shall be payable upon demand.

For purposes hereof, the term Interest Rate shall mean a rate of
ninety days (90) - LIBOR plus one and three quarters percent (1.75%)(computed on
the basis of the actual number of days elapsed over a year of 360 days). "LIBOR"
shall mean, for each interest period, the rate per annum offered to the Lender
(at approximately 11:00 A.M. London time, on the date two Business Days in
London prior to the first day of such interest period) by prime banks in the
London Interbank Market for deposits of the lawful money of the United States of
America for a period equal to the length of such interest period and in an
amount of the Loan which have been made by Lender to Borrower hereunder and are
scheduled to be outstanding during such interest period. Each determination of
the LIBOR by Lender shall, in the absence of manifest error, be conclusive and
binding. Lender shall attempt to notify Borrower of its determination of the
LIBOR as soon as practicable following such determination. In no event shall the
interest hereon exceed the maximum rate permitted to be charged by applicable
law or regulation. In no event shall the interest charged hereunder exceed the
Maximum Interest Rate.

This Note is issued pursuant to the terms and provisions of the Loan
Security Agreement to evidence the Term Loan by Payee to Debtor. This Note is
secured by a deed of trust of even date herewith. Unless payment is otherwise
made by Debtor, Payee may charge the amount of any payment due hereunder to any
account of Debtor maintained by Payee.

If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan and
Security Agreement shall be terminated or not renewed for any reason whatsoever,
then and in any such event, in addition to all rights and remedies of Payee
under the Loan and Security Agreement, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Loan and Security Agreement, including, without limitation, all
amounts owing under this Note, to be due and payable, whereupon the then unpaid
balance hereof, together with all interest accrued thereon, shall forthwith
become due and payable, together with interest accruing thereafter at the
Interest Rate until the indebtedness evidenced by this Note is paid in full,
plus the costs and expenses of collection hereof, including, but not limited to,
attorneys' fees and legal expenses.

LIBOR Advances may be prepaid at any time with three (3) prior
Business Days' notice to Lender, provided Borrower shall compensate Lender for
any and all funding losses when any LIBOR Advance is prepaid prior to the end of
its respective Interest Period.

Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consents to
any one or more extension or postponements of time of payment, release
surrender or substitution or collateral security, or forbearance or other
indulgence, without notice or consent. The pleading of any statute of
limitations as a defense to any demand against Debtor is expressly hereby
waived by Debtor. Upon an Event of Default or termination or non-renewal of the
Loan and Security Agreement, Payee shall have the right, but not the obligation
to setoff against this Note all money owed by Payee or Debtor.

Payee shall not be required to resort to any collateral for payment,
but may proceed against Debtor and any guarantors or endorser hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.

The validity, interpretation and enforcement of this Note and any
dispute arising in connection herewith shall be governed by the internal laws of
the State of Tennessee without giving effect to principles of conflicts of law.

KING PHARMACEUTICALS, INC.

(SEAL) By: /s/ Xxxx X. Xxxxxxx
---------------------------------

Name: Xxxx X. Xxxxxxx
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Title: Chief Executive Officer
-------------------------------

Attest:

/s/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx, Secretary

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Table of Contents

1 EXHIBIT 10.10 LOAN AND SECURITY AGREEMENT BY AND BETWEEN KING PHARMACEUTICALS, INC., AS BORROWER

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