10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended May 31, 2009
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number: 001-14608

SCHIFF NUTRITION INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware	87-0563574
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2002 South 5070 West Salt Lake City, Utah	84104-4726
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(801) 975-5000

Securities registered pursuant to Section 12(b) of the Act:

Class A Common Stock, par value $.01 per share

(Title of Class)

New York Stock Exchange

(Name of Exchange)

Securities registered pursuant to Section 12(g) of the Act:

None

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes q No ý

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes q No q

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  q

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

 Large accelerated filer q                                                                                                         0;   Accelerated filer q

 Non-accelerated filer q (Do not check if a smaller reporting company)                              Smaller reporting company ý

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $65,397,342 as of November 30, 2008, the last day of the registrant's second fiscal quarter, based upon the closing price on the New York Stock Exchange of $5.57 for shares of the registrant’s Class A common stock on November 28, 2008.

As of August 13, 2009 the registrant had outstanding 12,562,823 shares of Class A common stock and 14,973,148 shares of Class B common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for its 2009 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission no later than 120 days after the end of the registrant’s fiscal year ended May 31, 2009, are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

PART I

ITEM 1.   BUSINESS

ITEM 1A.   RISK FACTORS

ITEM 1B.   UNRESOLVED STAFF COMMENTS

ITEM 2.   PROPERTIES

ITEM 3.   LEGAL PROCEEDINGS

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

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

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.   CONTROLS AND PROCEDURES

PART III

ITEM 9B.   OTHER INFORMATION

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.   EXECUTIVE COMPENSATION

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES  

SIGNATURES

SCHIFF NUTRITION INTERNATIONAL, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES

2.   AVAILABLE-FOR-SALE SECURITIES

3.   RECEIVABLES, NET

4.   INVENTORIES

5.   PROPERTY AND EQUIPMENT, NET

6.   GOODWILL AND INTANGIBLE ASSETS, NET

7.   ACCRUED EXPENSES

8.   INCOME TAXES

9.   CASH DIVIDEND

10.   ACCUMULATED OTHER COMPREHENSIVE LOSS

11.   EARNINGS PER SHARE

12.   STOCK-BASED COMPENSATION PLANS

13.   COMMITMENTS AND CONTINGENCIES

14.   RELATED PARTY TRANSACTIONS

15.   QUARTERLY RESULTS (UNAUDITED)

16.   SUBSEQUENT EVENT  

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS

EXHIBIT – 4.3LOAN AGREEMENT

EXHIBIT – 10.28 SECURITY AGREEMENT

EXHIBIT – 10.29 CONTINUING AND UNCONDITIONAL GUARANTY – SCHIFF NUTRITION INTERNATIONAL, INC.

EXHIBIT – 10.30 CONTINUING AND UNCONDITIONAL GUARANTY – WNG HOLDINGS (INTERNATIONAL) LTD.

EXHIBIT – 10.31 CONTINUING AND UNCONDITIONAL GUARANTY – COPPAL RESEARCH, INC.

EXHIBIT – 21.1 SUBSIDIARIES OF SCHIFF NUTRITION INTERNATIONAL, INC.

EXHIBIT – 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

EXHIBIT – 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT.

EXHIBIT – 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT.

EXHIBIT – 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT.

PART I

Note on Forward-Looking Statements

Certain statements made in this Annual Report on Form 10-K, including statements under the captions “Business,” “Risk Factors,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management’s beliefs and assumptions, current expectations, estimates and projections.  Statements that are not historical facts, including without limitation statements which are preceded by, followed by or include the words “believes,” “anticipates,” “plans,” “expects,” “estimates,” “may,” “should,” “intends,” or similar expressions, are forward-looking statements.  While we believe these assumptions, expectations, estimates and projections are reasonable, such statements are subject to risks and uncertainties, certain of which are beyond our control, and therefore, actual results may differ materially.  The fact that some of the risks may be the same or similar to past reports we have filed with the Securities and Exchange Commission (“SEC”) means only that the risks are present in multiple periods.  We believe that many of the risks detailed here are part of doing business in the industry in which we operate and compete and will likely be present in all periods reported.  The fact that certain risks are endemic to the industry does not lessen their significance.  Forward-looking statements only speak as of the date hereof and we do not undertake and expressly disclaim any obligation to update or release any revisions to any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.  Important factors that may cause these forward-looking statements to be false or materially different from our current expectations include, but are not limited to, the factors discussed in Items 1, 1A, 3, 7 and 7A of this Annual Report.  Industry data used throughout this report was obtained from industry publications and internal company estimates.  While we believe such information to be reliable, its accuracy has not been independently verified and cannot be guaranteed.

You should carefully consider the risks described in this Annual Report on Form 10-K, including those set forth in “Item 1A - Risk Factors” below.  Any of these risks could have a material adverse effect on our results of operations and financial condition.

ITEM 1. BUSINESS

General

Schiff Nutrition International, Inc. (“we,” “us,” or “our”) develops, manufactures, markets and distributes branded and private label vitamins, nutritional supplements and nutrition bars in the United States and throughout the world.  We offer a broad range of capsules, tablets and nutrition bars.  Our portfolio of recognized brands, including Schiff®, Move Free®, MegaRed® and Tiger’s Milk®, is marketed primarily through the mass market (including club) and, to a lesser extent, health food store distribution channels.

Our principal executive offices are located at 2002 South 5070 West, Salt Lake City, Utah 84104 and our telephone number is (801) 975-5000.  We were incorporated in Delaware in 1996.  Our corporate internet web site address is www.schiffnutrition.com.  We have included our internet web sites here and elsewhere only as an inactive textual reference.  The information contained on the internet web sites is not incorporated by reference into this Annual Report on Form 10-K.  We file our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments thereto with the SEC.  Electronic copies of our periodic reports and current reports, and any amendments to those reports, are available free of charge by accessing our corporate internet web site at www.schiffnutrition.com, which provides a link to www.sec.gov, the web site maintained by the SEC.  The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800- 732-0330.

Recent Developments

In July 2009, our Board of Directors approved a $0.50 per share special cash dividend, payable on August 28, 2009 to shareholders of record of Class A and Class B common stock at the close of business on August 14, 2009.  In connection with the declaration of the special dividend, our Board of Directors approved dividend equivalent rights, allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  In aggregate, at August 14, 2009, the record date, we had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 27.7 million shares of outstanding Class A and Class B common stock, approximately 1.3 million shares of Class A common stock underlying outstanding stock options, and approximately 1.0 million shares of Class A common stock underlying outstanding restricted stock units.  The aggregate amount of the special dividend is approximately $15.0 million, presuming 100% vesting of shares underlying equity awards; $7.5 million for holders of ClassA common stock, including $1.1 million for ClassA common stock underlying equity awards, and $7.5 million for the holder of ClassB common stock.

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The special dividend will be funded from cash and cash equivalents.  Approximately $14.4 million of the distribution will occur on August 28, 2009.  With respect to outstanding stock options and restricted stock units that are unvested as of August 14, 2009, or for which the issuance of shares underlying restricted stock units has been deferred, the $0.50 per share dividend will not be distributed until after such equity awards vest or the deferred shares are issued.

In August 2009, we entered into, through our wholly-owned direct operating subsidiary Schiff Nutrition Group, Inc. ("SNG"), a new $80.0 million revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent.  The New Credit Facility, which replaces our previous $25.0 million credit facility which expired on June 30, 2009, contains customary terms and conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions.  SNG's obligations under the New Credit Facility are guaranteed by us and SNG's domestic subsidiaries and secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially all of our domestic assets.  Borrowings under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate.  The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions.

Industry Overview

According to the “Nutrition Business Journal,” the market for vitamins, minerals and supplements in the United States was estimated to be approximately $25.2 billion in 2008.  We believe that the market has reached its present size due to a number of factors, including:

·   increased awareness of the health benefits of dietary supplements, especially as reports and medical research indicating a correlation between consumption of specific nutrients and better health continue to heighten public knowledge of the benefits of dietary supplements for health;

·   a growing population of older Americans, with increased levels of education and discretionary income, who are more likely to consume dietary supplements and nutritional products, with an increasing interest in more proactively managing one’s own health needs;

·   successful new product introductions in part due to new scientific findings; and

·   a trend towards preventative measures and healthy living due, in part, to increasing health care costs, dissatisfaction with existing health care systems, and increasing acceptance of alternative/preventative care.

In recent years, nutritional supplement companies, analysts, publications and other industry sources have referenced a slower growth rate, particularly in terms of sales dollar growth, in the nutritional supplement industry.  We believe that the slower growth rate is due in part to, among other factors, increased competition, including increasing competition from pharmaceutical and food companies, increased market and pricing competition, including from private label products, the general economic slowdown in the U.S., the lack of industry-wide “blockbuster” products, negative publicity regarding certain nutritional supplement ingredients and companies, and the general maturing of the industry.

Although specific data from the fragmented international markets is not readily available, we believe similar demographics, events and other trends affect the nutritional supplement market internationally.

Brands, Products and Distribution

We market a broad line of specialty supplements, vitamins and minerals under the Schiff brand, which has been available to consumers for over 70 years.  The Schiff brand emphasizes high quality and natural ingredients, primarily consisting of tablet, capsule and softgel product forms.

Our Schiff brand specialty supplements are designed to provide consumers with targeted support for their wellness efforts.  Our specialty supplements include joint care products marketed under the Schiff brand, including our Move Free and Glucosamine products.  Our Move Free product is one of the leading joint care products in the mass market channel.  Move Free net sales were $71.3 million, $82.6 million and $83.8 million, respectively, for fiscal 2009, 2008 and 2007 and represented approximately 37%, 47% and 48%, respectively, of total net sales for fiscal 2009, 2008 and 2007.  Our concentration in this brand and the joint care category is significant.  We cannot assure you that Move Free or other of our products currently experiencing strong popularity will maintain sales levels over time.  A significant decrease in Move Free or joint care category sales would have a material adverse effect on our results of operations and financial condition.  Other specialty supplement products include:

·   specialty products for men and women, such as Prostate Health and Folic Acid;

·   other specialty products, such as Melatonin Plus, Niacin and Lutein; and

·   omega-3 products, such as Fish Oil and MegaRed.

Our Schiff brand vitamin products are designed to provide consumers with essential vitamins and minerals as supplements to healthy diet and exercise.  Schiff brand vitamin products include:

·   multivitamins, such as Single Day;

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·   individual vitamins, such as Vitamin B, Vitamin C and Vitamin D; and

·   minerals, such as Calcium and Iron.

The Schiff brand is marketed primarily in the mass market retail channel, with additional limited distribution in health food stores.  Our products are sold domestically in leading retail outlets in all 50 states.  Our mass market customers include:

·   warehouse clubs, such as Costco, Sam’s Club and BJ’s;

·   mass merchandisers, such as Wal-Mart and Target;

·   drug stores, such as Walgreens, CVS and Rite Aid; and

·   supermarkets, such as Fred Meyer, Giant, Kroger, Publix, Safeway, Stop & Shop, H-E-B and Raley’s.

We also manufacture and distribute private label products for certain retail customers where we sell our branded products.  Private label products are sold to key retailers for distribution under their store brand names.  Private label products include specialty supplements, vitamins and minerals, such as joint care products, Vitamin B and Calcium.  We service the health food market primarily through sales to leading health food retailers and distributors.

Our largest customers are Costco and Wal-Mart and our concentration in these two customers is significant.  Combined, these two customers accounted for approximately 76%, 74% and 69%, respectively, of total net sales for fiscal 2009, 2008 and 2007.  Retail customers in our industry generally do not enter into long-term supply contracts with their suppliers, particularly for branded products.  Consequently, we do not have supply contracts with either Costco or Wal-Mart and therefore cannot assure you that either Costco or Wal-Mart will continue to be significant customers in the future.  The loss of either Costco or Wal-Mart as a customer, or a significant reduction in purchase volume by Costco or Wal-Mart, would have a material adverse effect on our results of operations and financial condition.

We also export certain Schiff products, particularly in the joint care category, to various international markets.  In certain countries where we have an existing relationship with a retailer, such as Costco, we sell our products directly to the retailer.  We sell to independent distributors in countries where we do not have direct relationships with retailers.  See Note 1 of the Notes to Consolidated Financial Statements for domestic and international net sales amounts.  See “Item1– Business – Government Regulation” and “Item 1A – Risk Factors” for additional information relating to our export business.

We also market two lines of nutrition bar products under the Tiger’s Milk and Fi-Bar® brands.  The Tiger’s Milk product line includes several nutrition bars that supply protein, vitamins and other essential nutrients with fewer calories than a traditional candy bar.  The Fi-Bar product line is comprised of snack bars that are free of hydrogenated oils and trans fat, and are made with wholesome ingredients such as grains, oats, nuts and fruit, and coated with white, semi-sweet or milk chocolate.  The Tiger’s Milk and Fi-Bar brands are intended to provide consumers with a healthy alternative to traditional snack foods and candy bars and are sold primarily through warehouse clubs, mass market retailers and convenience stores, with additional limited distribution in health food stores.

We believe our business, which consists of the aggregation of the foregoing product-based operating segments, represents our only reportable segment.  See Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operation,” and the notes to our consolidated financial statements in this Annual Report, for more information concerning reportable segments and the geographic areas and channels in which we conduct our business.

Sales and Marketing

Our sales force consists of dedicated sales professionals who are assigned to specific accounts, classes of trade and/or geographic territories.  These sales professionals work directly with retailers and distributors to increase knowledge of our products and general nutritional supplement benefits, solicit orders for our products, maximize our shelf presence and provide related product sales assistance.  We also utilize brokers to sell our products in certain accounts and classes of trade.

We market our products using a mix of trade and consumer promotions; television, internet, newspaper and print media advertising; and consumer education efforts.  Our advertising and marketing expenditures, excluding sales incentives reflected as reductions in net sales or increases in cost of goods sold, were approximately $20.4 million, $18.0 million and $19.4 million, respectively, for fiscal 2009, 2008 and 2007.  Classification of promotional costs as a sales reduction or increase in cost of goods sold is required when the promotion effectively represents a price reduction or free goods.

During fiscal 2009, we maintained our focus on competitively supporting our core brands, particularly relating to our Schiff Move Free brand and other joint care products.  Additionally, we allocated significant trade consumer and advertising in support of expanded distribution of MegaRed.  We continued to employ television, internet, magazine and other media in fiscal 2009, along with several targeted public relations and sampling campaigns.  

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Another key component of our marketing strategy is to educate consumers about our innovative and beneficial nutritional supplement products.  We participate in consumer education at conferences and trade and consumer shows.  Our web sites, including www.schiffvitamins.com, www.movefreeadvanced.com, www.schiffmegared.com and www.tigersmilk.com also provide additional educational information to consumers and customers.

Product Research and Development

We are committed to research and development to create safe and efficacious new products, develop product line extensions for existing products, and develop more effective and efficient means of processing ingredients for use in products.  New product development and process improvements are important to the nutritional supplement industry to create new market opportunities, meet consumer demand and strengthen relationships with customers.

We maintain an extensive research library and employ a variety of industry relationships to identify new research and development projects offering health and wellness benefits.  To support our research and development efforts, we maintain a staff of scientific and technical personnel, invest in formulation, processing and packaging development, perform product quality and stability studies, invest in product efficacy and safety studies, and conduct consumer market research to sample consumer opinions on product concepts, product design, packaging, advertising and marketing campaigns.  For research and development initiatives, we conduct research and development in our own facility and with third parties.  Product research and development expenses were approximately $4.3 million, $4.3 million and $3.7 million, respectively, for fiscal 2009, 2008 and 2007.

Manufacturing and Product Quality

We manufacture the majority of our products in a capsule and tablet manufacturing facility in Salt Lake City, Utah, which includes our main distribution center and primary administrative offices and also contains our nutrition bar manufacturing operations.  Our Salt Lake City capsule and tablet facility is designed and operated to meet the current Good Manufacturing Practices as promulgated by the US FDA in 21CFR Part III.  We participate in the United States Pharmacopeia (“USP”) Dietary Supplement Verification Program, pursuant to which our manufacturing facility has been certified as being compliant with good manufacturing practices (“GMPs”) promulgated by USP.  We are also registered with NSF International (“NSF”) as being certified compliant with NSF GMPs as set forth in NSF/ANSI Standard 173-2003, Dietary Supplements, Section 8.

Our manufacturing process generally consists of the following operations: (i) sourcing ingredients for products, (ii) testing and warehousing raw ingredients, (iii) measuring ingredients for inclusion in such products, (iv) granulating, blending and grinding ingredients into a mixture with a homogeneous consistency, (v) encapsulating, tableting, pouring, pouching, bagging or boxing the blended mixture into the appropriate dosage form using either automatic or semiautomatic equipment, and (vi) testing finished products prior to distribution.

Our bottling and packaging, counting, check weighing and filling operations are automated to promote accuracy and compliance with weights and measures regulations.  We have invested in production line flexibility to accommodate various filling sizes, weights or counts of product and final shipped unit configurations to fulfill customer and ultimate consumer needs.  The distribution center features a high-rise racked warehouse and a fully automated “order-pick” system using optical readers that interpret bar coded labels on each shipping container.

We maintain and operate a Manufacturing Resource Planning (“MRP”) system that is integrated with distribution, warehousing and quality control, which provides real-time lot and quality tracking of raw materials, work in progress and finished goods.  We manufactured approximately 90% of our branded products in fiscal 2009, based on net sales.  By manufacturing the majority of our own products, we believe that we maintain better control over product quality and availability, while also reducing production costs.  We also have a working relationship with numerous outside manufacturers, including softgel and tablet manufacturers and packagers, and utilize these outside sources from time to time.  Manufacturing backlogs, to the extent they may occasionally exist, do not have a material impact on delivery time to the customer.

Our quality management systems are detailed and comprehensive, and include a supplier selection and certification process, raw material verification, analytical testing, weight deviation measurement, facility and process audits, and other procedures.  The quality management systems also include a professionally equipped and staffed laboratory, enabling analysis of raw materials and finished goods for compliance to specifications.  Our products are also subject to extensive shelf life stability testing through which we determine the effects of aging on our products.  Outside laboratories are used routinely to evaluate our internal test laboratory performance and to supplement our internal testing procedures and capabilities.

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We employ a purchasing staff that works with marketing, product development and quality control personnel to source raw materials for our products.  Raw materials are sourced principally from China and the United States.  We seek to mitigate the risk of a shortage of raw materials through our relationships with our principal suppliers, including identification and qualification of alternative suppliers for the same, or similar, raw materials where available.

We have a long-term supply and license agreement with a third-party supplier for a key ingredient used in our Move Free Advanced product.  While we have a contract in place providing for the continuing supply of this ingredient, we cannot assure you that the supplier will continue to supply this ingredient in the quantities or on the terms we require, or at all.  See “Item 1 – Business – Intellectual Property.”  We do not have a long-term supply agreement in place with the third-party supplier of the key ingredient used in our MegaRed product, and we have recently experienced delays and shortages in supply. We cannot assure you that the supplier will continue to supply this ingredient in the quantities or on the terms we require, or at all.  Our supplier’s failure to deliver will impact MegaRed sales and may damage our reputation with our customers which could have a material adverse effect on our results of operations and financial condition. We cannot guarantee that we will be able to secure an alternate supplier to provide the ingredient on terms acceptable to us, or at all.

Competition

The market for the sale of nutritional supplements is highly fragmented and competitive.  We believe that competition is based principally upon price, quality and efficacy of products, customer service, brand name and marketing support, and new products.

Our competition includes numerous nutritional supplement companies that are highly fragmented in terms of geographic market coverage, distribution channels and product categories.  In addition, large pharmaceutical companies and packaged food and beverage companies compete with us in the nutritional supplement market.  These companies and certain nutritional supplement companies have broader product lines and/or larger sales volumes than us and have greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities.  Private label products of our customers, which in recent years have significantly increased in certain nutrition categories (including the joint care category), compete directly with our products.  In several product categories, private label items are the market share leaders.  Increased competition from such companies and from private label pressures, particularly relating to the joint care category, could have a material adverse effect on our results of operations and financial condition.

Many companies within the industry are privately-held.  Therefore, we are unable to assess the size of all of our competitors or where we rank in comparison to such privately-held competitors with respect to sales to retailers.  As the nutritional supplement industry continues to evolve, we believe retailers will align themselves with suppliers who are financially stable, market a broad portfolio of products, provide exceptional quality assurance and offer superior customer service.  We believe that we compete favorably with other nutritional supplement companies because of our financial stability, brand names, customer service, competitive pricing, sales and marketing support and quality of our product lines.

Government Regulation

The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of our products are subject to the laws and regulations of federal governmental agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the U.S.  Department of Agriculture, the U.S. Consumer Products Safety Commission, the Environmental Protection Agency and the Postal Service, and also various agencies of the states, localities and countries in which we operate and sell our products.

The FDA regulates foods and dietary supplements through the Food, Drug and Cosmetic Act (“FDCA”) and amendments thereto, including the Dietary Supplement Health and Education Act of 1994, as amended (“DSHEA”), which is intended to promote access to safe, quality dietary supplements and information about dietary supplements.  DSHEA establishes a statutory class of dietary supplements, including vitamins, minerals, herbs, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, extracts or combinations of such dietary ingredients.  Generally, under DSHEA, dietary ingredients on the market before October 15, 1994 may be used without further notification to the FDA.  However, dietary ingredients not marketed prior to October 15, 1994 may be “new dietary ingredients” under DSHEA and may require a submission to the FDA at least 75 days prior to marketing such ingredient evidencing a history of use or other evidence of safety to establish that the ingredient will reasonably be expected to be safe.  We cannot assure you that the FDA will accept the evidence of safety for any new dietary ingredients that we may want to market, and the FDA’s refusal to accept such evidence could prevent the marketing of such dietary ingredients.  In addition, increased FDA enforcement could lead the FDA to challenge dietary ingredients already on the market as “illegal” under the FDCA because of the failure to file a new dietary ingredient notification.

DSHEA permits statements of “nutritional support” for dietary supplements that may describe how particular dietary ingredients affect the structure, function or general well-being of the body or describe the mechanism of action by which dietary ingredients affect the foregoing.  These statements of nutritional support, or “structure/function claims,” may not make a health claim or disease claim, meaning that a statement may not claim to diagnose, treat, prevent, cure or mitigate an illness or disease unless the claim was authorized by the FDA.  A structure/function claim in advertising or on a product label must have substantiation that the claim is truthful and not misleading, and have a disclaimer that the statement has not been evaluated by the FDA and that the product is not intended to diagnose, treat, cure or prevent any disease.  We cannot assure you that a regulatory agency, court or other third party will not deem one or more of our product claims or labels to be impermissible and take adverse action against us.

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In addition, DSHEA provides that certain "third-party literature," such as a reprint of a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used "in connection with the sale of a dietary supplement to consumers" without the literature being subject to the same regulation as labeling.  Such literature must not be false or misleading; the literature may not "promote" a particular manufacturer or brand of dietary supplement; and a balanced view of the available scientific information on the subject matter must be presented.  We cannot assure you that all third-party literature that we would like to disseminate in connection with our products will satisfy each of these requirements, and failure to satisfy all requirements could prevent use of the literature or subject us to adverse actions by regulatory agencies or other third parties.

In June 2007, the FDA published final GMPs specifically for the dietary supplement industry.  The effective compliance date for companies like ours with fewer than 500 employees was June 22, 2009.  These GMPs are more detailed than the GMPs previously applicable to us and result in increased expenses, changes to our processes or products and/or implementation of additional recordkeeping and administrative procedures.  Among other things, these GMPs: (i) require identity testing on all incoming dietary ingredients, (ii) call for a "scientifically valid system" for ensuring finished products meet all specifications, (iii) include requirements related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures, and (iv) require extensive recordkeeping.  We do not currently expect the incremental cost of ongoing compliance efforts to be material.  While we believe we are currently in compliance with the GMPs, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects at all times.  Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMPs.

In December 2006, Congress passed legislation requiring companies that manufacture or distribute over-the-counter products (“OTC”) or dietary supplements to report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping procedures for all alleged adverse events (serious and non-serious).  The legislation requires manufacturers and distributors of OTC or dietary supplements to report to the FDA any serious adverse event reports received, even if the party making the report provides no medical or other information to the manufacturer or distributor.  There is a risk that consumers, the press or government regulators could misinterpret reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to consumer confusion, additional regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation, among other things.  Any of the foregoing could have a material adverse effect on our results of operations and financial condition.

Although most of our products are classified as dietary supplements, some of our products are conventional foods, which are also subject to the Nutrition Labeling and Education Act of 1990 (“NLEA”).  The NLEA also prohibits health claims being made for a food without prior FDA approval and establishes requirements for ingredient and nutrition labeling.

The FTC exercises jurisdiction over the advertising of nutritional and dietary supplements under the Federal Trade Commission Act.  In November 1998, the FTC published an advertising guideline for the dietary supplement industry entitled “Dietary Supplements: An Advertising Guide for Industry.”  These guidelines reiterate many of the policies regarding dietary supplements the FTC has periodically announced over the years, particularly with respect to the substantiation of claims made in advertising of dietary supplement products.  In the past several years, the FTC has instituted several enforcement actions against dietary supplement companies alleging false and misleading advertising of certain products.  These enforcement actions have resulted in consent decrees and/or the payment of fines by certain of the companies involved.  We entered into a consent decree with the FTC effective November 2000 governing diet and weight loss claims and certain disease, safety and comparative health benefit claims.

The National Advertising Division ("NAD") of the Council of Better Business Bureaus oversees an industry-sponsored self-regulatory system that permits competitors to resolve disputes over advertising claims.  The NAD also has its own advertising monitoring program, and initiates its own challenges to advertising that it has reviewed.  The NAD has no enforcement authority of its own, but may refer matters that the NAD views as violating FTC rules, regulations or guidance to the FTC for further action.  In February 2009, we revised our MegaRed packaging, advertising, promotional materials and website to comply with the NAD’s recommendations arising from a competitive challenge.  We cannot assure you that in the future the NAD will not deem one or more of our advertising claims to be impermissible.

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Federal agencies, primarily the FDA and FTC, have a variety of procedures and enforcement remedies available to them, including initiating investigations, issuing warning letters and cease and desist orders, requiring reformulation of products, requiring corrective labeling or advertising, requiring consumer redress (for example, requiring that a company offer to repurchase products previously sold to consumers), seeking injunctive relief or product seizures, and imposing civil penalties or commencing criminal prosecution.  In addition, certain state agencies have similar authority.  These federal and state agencies have in the past used these remedies in regulating participants in the dietary supplement industry.

Our international activities are subject to regulation in each country in which we sell or distribute our products.  In markets outside the United States, before commencing operations or marketing our products, we may be required to obtain approvals, licenses or certifications from a country’s ministry of health or comparable agency.  Approvals or licensing may be conditioned on reformulation of products or may be unavailable with respect to certain products or product ingredients.  We must also comply with product labeling and packaging regulations that vary from country to country.  Furthermore, the regulations of these countries may conflict with those in the United States and with each other, sometimes causing higher costs and expenses, product reformulations, and delay.  In countries in which we do not have direct relationships with retailers, independent distributors generally have responsibility for compliance with applicable foreign laws and regulations.  These distributors are independent contractors over whom we have limited control.

As a result of our efforts to comply with applicable statutes and regulations, from time to time we have reformulated, eliminated or relabeled certain of our products and revised certain aspects of our sales, marketing and advertising programs.  We cannot assure you that we will not have to make such changes or revisions in the future, which could have a material adverse effect on our results of operations and financial condition.

We may be subject to additional laws or regulations by the FDA or other federal, state, county, local or foreign regulatory authorities, the repeal of laws or regulations which we consider favorable, such as DSHEA, or more stringent interpretations of current laws or regulations, from time to time in the future.  We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations, legal proceedings or administrative orders, when and if promulgated or initiated, would have on our business in the future.  Such changes could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, additional recordkeeping requirements, expanded documentation of the properties of certain products, new or different labeling, additional scientific substantiation, additional personnel, or new or additional processes, procedures or requirements.  Any or all of such changes or requirements and the related costs to comply with such changes or requirements could have a material adverse affect on our results of operations and financial condition.

Intellectual Property

We own, or have filed for, over 50 trademarks registered with the United States Patent and Trademark Office for our Schiff and Tiger’s Milk brands and certain of our products (including Move Free and MegaRed) and slogans.  We also license rights for names material to our business, including Move Free, and for the use of our brand names, including Schiff and Tiger’s Milk, in certain countries outside of North America.  However, the protection available in foreign jurisdictions may not be as extensive as the protection available to us in the United States.

We rely on common law trademark rights to protect our unregistered trademarks.  Common law trademark rights do not provide us with the same level of protection as afforded by a United States federal registration of a trademark.  In addition, common law trademark rights are limited to the geographic area in which the trademark is actually used.

Our Move Free Advanced product contains a key ingredient, the rights for which we license from a third-party supplier pursuant to a long-term supply and license agreement.  The term of the agreement extends through May 29, 2014, with automatic one-year extensions unless terminated by us or by the supplier upon our breach of the agreement and failure to cure the breach within a prescribed time period.  Our supplier has patents and patents pending relating to the key ingredient, and has granted us non-exclusive rights to market and sell the ingredient for joint care purposes in certain territories and classes of trade.  However, our supplier is currently in litigation with third parties alleging patent infringement in connection with the sale of the key ingredient by third parties in products similar to our Move Free Advanced product.  We cannot assure you that our supplier will prevail in such litigation or be successful in preventing third parties from selling the key ingredient in their competing products at a lower cost.  This could have a material adverse effect on our results of operations and financial condition.

Employees

At May 31, 2009, we employed approximately 465 persons, of whom approximately 190 were in management, sales, purchasing, logistics and administration and approximately 275 were in manufacturing operations.  In addition, we utilize temporary employees in some of our manufacturing operations.  We are not party to any collective bargaining arrangements and believe that our relationship with our employees is good.

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ITEM 1A. RISK FACTORS

A significant portion of our total net sales are dependent upon our Move Free product and the joint care category, and a significant decrease in sales of these products would have a material adverse effect on our results of operations and financial condition.  Certain products and product lines (particularly in the joint care category) account for a significant amount of our total net sales.  Net sales of our Schiff Move Free brand were approximately 37%, 47% and 48%, respectively, of total net sales for fiscal 2009, 2008 and 2007.  We cannot assure you that Move Free or other of our products currently experiencing strong popularity will maintain sales or margin levels over time.  A significant decrease in Move Free or joint care category sales would have a material adverse effect on our results of operations and financial condition.

Two of our customers account for a substantial portion of our net sales, and the loss of one or both of these customers would have a material adverse effect on our results of operations and financial condition.  Our largest customers are Costco and Wal-Mart.  Combined, these two customers accounted for approximately 76%, 74% and 69%, respectively, of total net sales for fiscal 2009, 2008 and 2007.  Our concentration in these customers has generally increased in recent years.  We do not have supply contracts with either Costco or Wal-Mart and therefore cannot assure you that either Costco or Wal-Mart will continue to be significant customers in the future.  The loss of either Costco or Wal-Mart as a customer, or a significant reduction in purchase volume by Costco or Wal-Mart, would have a material adverse effect on our results of operations and financial condition.

Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our results of operations and financial condition.  We believe sales of our products are highly dependent on consumer perception of the safety, quality and efficacy of our products as well as similar or other nutritional supplement products distributed and sold by other companies.  Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, national media attention, and other publicity regarding our products and other nutritional supplements, including publicity regarding the legality, safety or quality of particular ingredients or products or the nutritional supplement market in general.  From time to time, there is unfavorable publicity, scientific research, litigation, regulatory proceedings and other media attention regarding our industry.  There has recently been unfavorable publicity regarding FDA action against nutrition companies based on adverse events alleged to be caused by products sold by these companies.  In recent years, there has also been unfavorable publicity regarding items imported from China, where we source a large amount of our raw materials.  There can be no assurance that future publicity, scientific research or findings, litigation, regulatory proceedings, or media attention will be favorable to the nutritional supplement market or any particular product or ingredient, or consistent with earlier favorable publicity, research, findings, litigation, proceedings or media attention.  Adverse publicity, media attention, research, findings, litigation, proceedings or other reports, whether or not accurate, could have a material adverse effect on our results of operations and financial condition and may lead to increased scrutiny of our operations by federal, state or other regulatory agencies, requiring further management attention and potential legal fees and other expenses.  In addition, adverse publicity, reports or other media attention regarding the safety, quality, or efficacy of our products or ingredients or nutritional supplement products or ingredients in general, or associating the consumption of our products or ingredients or nutritional supplement products or ingredients in general with illness or other adverse effects, whether or not scientifically supported or accurate, could have a material adverse effect on our results of operations and financial condition.

We operate in a highly competitive industry, in which increased competition and pricing pressures could have a material adverse effect on our results of operations and financial condition.  The market for the sale of nutritional supplements is highly competitive.  Many of our principal competitors have greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities.  Additional national or international companies may enter or increase their presence (through acquisition or organic growth) in our industry.  Private label products of our customers, the number of which in recent years has significantly increased in certain nutrition categories (including joint care), also create significant pricing pressure and competition with our products.  Because nutritional supplements can be purchased in various channels of distribution, we also compete with products sold outside of the mass market retail channel, including health food stores, direct sales, direct mail and internet distribution channels.  Increased competition from competitors, including expansion of private label products, or increased pricing pressure, could have a material adverse effect on our results of operations and financial condition.

Among other factors, competition among manufacturers, distributors and retailers of nutritional supplements is based upon price.  Because of the high degree of price competition, we generally have not been able to pass on increases in raw material prices to our customers.  If one or more of our competitors significantly reduce their prices in order to gain market share (particularly relating to the joint care category), or if raw material prices increase and we are unable to pass along the increased cost to our customers (particularly relating to the joint care category), our results of operations and financial condition could be materially adversely affected.

Increases in prices of raw materials could adversely affect our results of operations and financial condition.  Raw materials account for a significant portion of our manufacturing costs.  We have encountered material fluctuations in the pricing of key raw materials in the past, particularly relating to joint care category products.  In recent years, we experienced margin volatility due to several factors, including significant raw material pricing increases in the joint care category.  Beginning in late fiscal 2008 and continuing into fiscal 2009, the prices of raw materials (particularly those sourced from China, including many joint care category ingredients) increased and significantly impacted our profit margins.  Historically, we generally have not been able to pass along raw material price increases.  Significant increases in raw material prices, particularly relating to the joint care category, could have a material adverse effect on our results of operations and financial condition.

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We are dependent on third-party suppliers.  We acquire all of our raw materials for the manufacture of our products from third parties.  A considerable portion of our raw materials relates to our joint care category, which accounts for a significant amount of our total net sales.  We cannot assure you that suppliers will provide the raw materials we need in the quantities requested, at a price we are willing to pay or that meet our quality standards and labeling requirements.  This could cause product shortages and back orders, damaging our reputation and resulting in a loss of net sales and profitability.

We typically do not enter into long-term contracts with our suppliers.  However, we have a long-term supply and license agreement with a third-party supplier for a key ingredient used in our Move Free Advanced product.  While the contract provides for the continuing supply of this ingredient, we cannot assure you that the supplier will continue to supply this ingredient in the quantities or on the terms we require, or at all.  See “Item 1 – Business – Intellectual Property” and “Item 1A – Risk Factors – Risks Associated with Intellectual Property Rights and Proprietary Techniques.”  We do not have a long-term supply agreement in place with the third-party supplier of the key ingredient used in our MegaRed product, and we have recently experienced delays and shortages in supply.  We cannot assure you that the supplier will continue to supply this ingredient in the quantities or on the terms we require, or at all.  Our supplier’s failure to deliver will impact MegaRed sales and may damage our reputation with our customers, which could have a material adverse effect on our results of operations and financial condition. We cannot guarantee that we will be able to secure an alternate supplier to provide the ingredient on terms acceptable to us, or at all.

In addition, from time to time, we enter into forward purchase commitments regarding certain raw materials, primarily relating to the joint care category.  We cannot assure you that the suppliers will supply the raw materials in accordance with the terms of the forward purchase commitments, or at all.  For certain ingredients, we do not have alternate suppliers.  Any significant failure to supply or changes in the material terms of supply by the Move Free Advanced key ingredient supplier or our other raw materials suppliers, including the supplier of the key ingredient for our MegaRed product, could have a material adverse effect on our results of operations and financial condition.

We are subject to potential delays in the delivery of raw materials caused by events beyond our control, including, among other factors, strikes or labor disputes, transportation interruptions, capacity issues at supplier factories, weather-related events, natural disasters or other catastrophic events, and changes in government regulations.  Any significant delay in or disruption of the supply of raw materials could, among other things, substantially increase the cost of such materials, require reformulation or repackaging of products, require the qualification of new suppliers, or result in our inability to meet customer demands for certain products.  The occurrence of any of the foregoing, particularly with respect to raw materials needed for our joint care products, could have a material adverse effect on our results of operations and financial condition.

We acquire a significant amount of key ingredients for our products from foreign suppliers, and may be negatively affected by the risks associated with international trade and importation issues.  We acquire a significant amount of key ingredients for a number of our products (particularly joint care products) from suppliers outside of the United States, particularly China.  Accordingly, the acquisition of these ingredients is subject to the risks generally associated with importing raw materials, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, nonconformity to specifications or laws and regulations, tariffs, trade disputes and foreign currency fluctuations.  While we have a supplier certification program and periodically audit and inspect our suppliers’ facilities both in the United States and internationally, we cannot assure you that raw materials received from suppliers outside of the United States will conform to all specifications, laws and regulations.  There has recently been quality and safety issues with certain items imported from China, where we source a large amount of our raw materials.  We may incur additional expenses and experience shipment delays due to preventative measures adopted by the Chinese and U.S. governments, our suppliers and our company.

In addition, the discovery of Bovine Spongiform Encephalopathy, commonly referred to as “mad cow disease,” in a country from which we obtain a significant amount of our raw materials (particularly related to the joint care category) derived from bovine sources could prevent us from purchasing such raw materials in the required quantities, at an acceptable price or at all.  The occurrence of any of the foregoing, particularly with respect to raw materials needed for our joint care products, could have a material adverse effect on our results of operations and financial condition.

Our inability or failure to protect our intellectual property and proprietary techniques or our infringement of others' intellectual property could have a materially adverse effect on our results of operations and financial condition.  Although the nutritional supplement industry has historically been characterized by products with naturally occurring ingredients in capsule or tablet form, it has become more common for suppliers and competitors to apply for patents or develop proprietary technologies and processes.  Although we make efforts not to infringe the intellectual property rights of others, there can be no assurance that third parties will not assert intellectual property infringement claims against us or our intellectual property licensors.  Such claims of intellectual property infringement may require us to enter into costly royalty or license agreements, which we may be unable to obtain on terms acceptable to us or at all.  These claims could also be costly, could cause reputational injury and could divert the attention of management and key personnel.  To the extent that these developments prevent us from, or increase the cost of, offering or supplying competitive products or our licensed proprietary ingredient in the marketplace, or result in litigation or threatened litigation against us related to alleged or actual infringement of third-party rights, these developments could have a material adverse effect on our results of operations and financial condition.

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We protect our intellectual property related to investments in research and development by relying on trade secret laws and confidentiality agreements with third parties who have access to information about our research and development activities.  When we license our trademarks, proprietary ingredients or other intellectual property from a third party, we typically have contractual rights to require the licensor to adequately protect our intellectual property interests.  Nevertheless, we cannot guarantee that such measures will be sufficient to protect our interests.  Our Move Free Advanced product contains a key ingredient, the rights for which we license from a third-party supplier pursuant to a long-term supply and license agreement.  Our supplier has patents and patents pending relating to the key ingredient, and has granted us non-exclusive rights to market and sell the ingredient for joint care purposes in certain territories and classes of trade.  However, our supplier is currently in litigation with third parties alleging patent infringement in connection with the sale of the key ingredient by third parties in products similar to our Move Free Advanced product.  We cannot assure you that our supplier will prevail in such litigation or be successful in preventing third parties from selling the key ingredient in their competing products.  This could have a material adverse effect on our results of operations and financial condition.  See “Item 1 – Business – Manufacturing and Product Quality” and — “Intellectual Property.”

In addition, we own, or have filed for, over 50 trademarks registered with the United States Patent and Trademark Office for our Schiff and Tiger's Milk brands and certain of our products (including Move Free) and slogans, and have rights to use names material to our business in certain countries outside of North America.  Our policy is to pursue registrations for certain trademarks associated with our key products (though we continue to rely on common law trademark rights to protect our unregistered marks) and to protect our trademarks against infringement.  However, there can be no assurance that infringing products could not be marketed without our knowledge or consent.  Further, to the extent we rely upon foreign or common law protections for our marks, we may not be provided with as extensive protection as is afforded by a United States federal registration.  If we are unable to effectively protect our trademark rights, it could have a material adverse effect on our results of operations and financial condition.  See "Item 1 – Business – Intellectual Property."

Our international sales expose us to certain risks associated with international commerce which could adversely affect our business.  Our international sales efforts are comprised of selling products, particularly our joint care products, from the United States on an export basis to retail customers or distributors abroad.  Operating in international markets exposes us to certain risks, including, among others, difficulty in understanding and complying with foreign regulations, changes in or interpretations of foreign regulations that may further limit our ability to sell certain products or ingredients in certain countries, the potential imposition of trade or foreign exchange restrictions or increased tariffs, difficulties in enforcement of contractual obligations, difficulty in collecting international accounts receivable, potentially longer payment cycles, and political instability.  We are often required to reformulate our products before commencing distribution in a given country.  We must comply with various and changing local labeling, customs and other regulations.  Trademark rights are often difficult to obtain and enforce in countries outside the United States.  There is also no assurance that we will be able to obtain and retain the necessary permits and approvals required for our international efforts.  The importance of these and other risks relating to exporting goods to foreign countries increases as our export business grows and expands.  We are attempting to increase our distribution of joint care products in international markets.  Our inability to successfully launch and maintain sales (especially in the joint care category) outside of the United States while maintaining the integrity of the products sold and complying with local regulations could have a material adverse effect on our results of operations and financial condition.

Our failure to appropriately respond to changing consumer preferences and demand for new products or our failure to develop and/or sustain new product launches could adversely affect our business.  We believe our ability to grow in existing markets is partially dependent upon our ability to introduce new and innovative products and product enhancements.  The development and commercialization process, particularly relating to innovative products, is both time-consuming and costly and involves a high degree of business risk.  Although we seek to introduce additional products each year, the success of new products or product enhancements is subject to a number of variables, including developing products that will appeal to customers, accurately anticipate consumer needs, be successfully commercialized in a timely manner, be priced competitively, be differentiated from those of our competitors, and comply with applicable regulations.  The inability to successfully implement or maintain marketing and spending programs, a consistent supply of raw material, competitive claims or strategic initiatives in support of our branded products or product enhancements could have a material adverse effect on our results of operations and financial condition.  We cannot assure you that our efforts to develop and introduce new products or existing product innovations will be successful, that customers will accept new products, or, if accepted, that customers will continue to sell the new products.  The failure to successfully launch, gain distribution or maintain distribution for new product offerings or product enhancements could have a material adverse effect on our results of operations and financial condition.

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If we experience material product liability claims, FDA action or other litigation, it could have a material adverse effect on our results of operations and financial condition.  As a manufacturer and distributor of products designed to be ingested, we face an inherent risk of exposure to product liability claims, FDA action and litigation if our products are alleged to have caused significant loss or injury.  In addition, the manufacture and sale of our products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.  Our products consist of vitamins, minerals, herbs, and other ingredients that are classified as dietary supplements or foods, and generally are not subject to pre-market regulatory approval in the United States.  Some of our products contain ingredients that do not have long histories of human consumption, and may not have the effects intended.  Previously unknown adverse reactions resulting from human consumption of these, other of our ingredients, or combinations of ingredients could occur.  We have been, and in the future may be, subject to various product liability claims, including, among others, that our products caused injury or illness, that our products include inadequate instructions for use, or that our products include inadequate warnings concerning possible side effects or interactions with other substances.  Recently the FDA has taken a more aggressive approach to enforcement.  A product liability claim or FDA action against us could result in increased costs, could adversely affect our reputation with our customers and consumers, and could have a material adverse effect on our results of operations and financial condition.

We are party to various lawsuits that arise in the ordinary course of business and may become party to others.  While none of the lawsuits in which we are involved as of the date of this filing are reasonably believed to be material, it is possible that future litigation could arise, or that developments could occur in existing litigation, that could have a material adverse effect on our results of operations and financial condition.

We may be unable to obtain sufficient insurance coverage to cover losses we may incur.  We maintain insurance relating to the operation of our business, including, among other coverages, property, general and product liability, workers’ compensation, and directors’ and officers’ liability policies.  However, our insurance coverage is subject to large individual claim deductibles for certain policies, individual claim and aggregate policy limits, exclusions, and other terms and conditions.  In addition, our current product liability coverage excludes claims relating to certain categories of products and products that contain certain ingredients.  Certain damages in litigation, such as punitive damages, also are generally not covered by insurance.  We cannot assure you that our insurance will be sufficient to cover our losses, that future insurance coverage will not contain additional exclusions or limitations, that we will be able to continue to obtain insurance coverage, or that insurance coverage will be available at an economically reasonable cost.  In the event that we do not have adequate or any insurance, product liability claims, litigation or other losses could have a material adverse effect on our results of operations and financial condition.

Failure to comply with existing or new regulations, both in the U.S. and abroad, or an adverse action regarding product formulation, claims or advertising could have a material adverse effect on our results of operations and financial condition.  Our business operations, including the formulation, manufacturing, packaging, labeling, advertising, distribution and sale of our products, are subject to regulation by various foreign, federal, state and local government entities and agencies, particularly the FDA and FTC in the United States.  See “Item 1 - Business - Government Regulation.”  From time to time we may be subject to challenges to our marketing, advertising or product claims in litigation or governmental, administrative or other regulatory proceedings.  Failure to comply with applicable regulations or withstand such challenges could result in changes in product labeling, packaging, or advertising, product reformulations, discontinuation of our product by retailers, loss of market acceptance of the product by consumers, additional recordkeeping requirements, injunctions, product withdrawals, recalls, product seizures, fines or criminal prosecution.  Any of these actions could have a material adverse effect on our results of operations and financial condition.  As a result of our efforts to comply with applicable statutes and regulations, from time to time we have reformulated, eliminated or relabeled certain of our products and revised certain aspects of our sales, marketing and advertising programs.  We cannot assure you that we will not have to make such changes or revisions in the future, which could have a material adverse effect on our results of operations and financial condition.

In June 2007, the FDA published extensive GMPs for dietary supplements.  See “Item 1 - Business - Government Regulation.”  The effective compliance date for companies like ours with fewer than 500 employees was June 22, 2009.  While we do not currently expect the incremental cost of compliance efforts to be material, we cannot assure you that, in complying with the new GMP requirements, we will not incur substantial costs that may have a material adverse effect on our results of operations and financial condition, or that our operations or those of our suppliers will be in compliance in all respects at all times.  Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMPs.

In markets outside the United States, before commencing operations or marketing our products, we may be required to obtain approvals, licenses or certifications from a country’s ministry of health or comparable agency.  Approvals or licensing may be conditioned on reformulation of products or may be unavailable with respect to certain products or product ingredients.  We must also comply with product labeling and packaging regulations that vary from country to country.  Furthermore, the regulations of these countries may conflict with those in the United States and with each other.  The cost of complying with these various and potentially conflicting regulations can be substantial and could have a material adverse affect on our results of operations and financial condition.

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We may also be subject to additional laws or regulations administered by federal, state or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable, such as DSHEA, or more stringent interpretations of current laws or regulations.  Additional or more stringent legislation and regulations regarding the nutritional supplement industry have been considered from time to time.  We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future.  Any or all of these requirements and the related costs to comply with such requirements could have a material adverse effect on our results of operations and financial condition.

If we experience product recalls or a significant amount of product returns, we may incur significant and unexpected costs, and our business reputation could be adversely affected.  Manufacturers and distributors of products in our industry are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as ingredient contamination, packaging safety and inadequate or inaccurate labeling disclosure.  If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.  In addition, a product recall may require significant management attention.  We acquire all of our raw materials for the manufacture of our products from third parties.  Although we have procedures in place for testing raw materials used in our products, we cannot assure you that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls or lawsuits.  There can be no assurance that we would be able to recover these expenses from our suppliers.  Additionally, if one of our significant brands were subject to recall, the image of that brand and our company could be harmed.  A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition.  Additionally, product recalls may lead to increased scrutiny of our operations by federal, state or other regulatory agencies, requiring further management attention and potential legal fees and other expenses.

We are dependent on a single manufacturing facility, and any material disruptions could adversely affect our business.  We manufacture most of our products at our manufacturing facility in Salt Lake City, Utah.  Accordingly, we are highly dependent on the uninterrupted and efficient operation of our manufacturing facility.  Power failures, the breakdown, failure or substandard performance of equipment, the improper installation or operation of equipment, workforce disruptions, natural or other disasters, or the failure to comply with laws or regulations or the requirements or directives of government agencies, including the FDA, could disrupt our operations and have a material adverse effect on our results of operations and financial condition.  While we do carry business interruption insurance, we cannot assure you that our coverage will be sufficient to cover losses from these types of business disruptions or that this insurance will continue to be available to us at an acceptable price, if at all.

If we are unable to consummate successful strategic transactions in the future, our business could be adversely affected.  An element of our strategy includes expanding our product offerings, gaining shelf space, enhancing business development and gaining access to new skills and other resources through strategic acquisitions, investments or other transactions when attractive opportunities arise.  We cannot assure you that attractive transaction opportunities will be available to us, that we will be able to obtain financing for or otherwise consummate any transactions or that any transactions which are consummated will prove to be successful.

If we lose key personnel or are unable to attract and fill key positions, our business could be adversely affected.  Our continued success will depend largely on the efforts and abilities of our executive officers and certain other key employees.  The loss or limitation of the services of any of our key management employees, or the inability to attract additional qualified personnel could have a material adverse effect on our results of operations and financial condition.

Interruptions to our information technology systems could adversely affect our business.  Our success is dependent on the accuracy, reliability and proper use of sophisticated and dependable information processing systems and management information technology.  Our information technology systems are designed and selected in order to facilitate order entry and customer billing, maintain customer records, accurately track purchases, manage accounting, finance and manufacturing operations, generate reports, and provide customer service and technical support.  Although off-site data back-up is maintained, a significant interruption in these systems could have a material adverse effect on our results of operations and financial condition.

We are controlled by a principal stockholder.  WHF owns all of our outstanding shares of Class B common stock, representing over 90% of the aggregate voting power of all outstanding shares of our common stock.  Two of our directors also serve on the board of directors of WHF.  WHF is in a position to exercise control over us and to determine the outcome of all matters required to be submitted to stockholders for approval (except as otherwise provided by law or by our amended and restated certificate of incorporation or amended and restated bylaws) and otherwise to direct and control our operations.  Accordingly, we cannot engage in any strategic transactions without the approval of WHF.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

We do not have any unresolved comments from the SEC staff.

ITEM 2. PROPERTIES

At May 31, 2009, we leased the following facility:

Location	Function	Approximate Square Feet	Expiration Date of Lease
Salt Lake City, UT	Company Headquarters, Manufacturing & Production, Warehouse & Distribution	418,000	March 2013

We believe that this facility is adequate to meet our current needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are involved in claims, legal actions and governmental proceedings that arise from our business operations.  Although ultimate liability cannot be determined at the present time, based on available information, we do not believe the resolution of these matters will have a material adverse effect on our results of operations and financial condition.  However, it is possible that future litigation could arise, or that developments could occur in existing litigation, that could have a material adverse effect on our results of operations and financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to the vote of security holders during the fiscal 2009 fourth quarter.

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PART II

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

Our Class A common stock is traded on the New York Stock Exchange under the symbol “WNI.”  The high and low closing prices of our Class A common stock for each quarter of fiscal 2009 and 2008 are set forth below:

Fiscal Year Ended May 31, 2009:	High		Low
First Quarter	$	6.82	$	5.31
Second Quarter		6.98		4.96
Third Quarter		6.04		3.65
Fourth Quarter		5.04		3.62

Fiscal Year Ended May 31, 2008:	High		Low
First Quarter	$	7.65	$	5.29
Second Quarter		5.99		5.14
Third Quarter		6.35		5.11
Fourth Quarter		6.32		5.21

There is no active trading market for our Class B common stock, which is owned entirely by WHF.

In July 2009, our Board of Directors approved a $0.50 per share special cash dividend, payable on August 28, 2009 to shareholders of record of Class A and Class B common stock at the close of business on August 14, 2009.  In connection with the declaration of the special dividend, our Board of Directors approved dividend equivalent rights, allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  In aggregate, at August 14, 2009, the record date, we had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 27.6 million shares of outstanding Class A and Class B common stock, approximately 1.3 million shares of Class A common stock underlying outstanding stock options, and approximately 1.0 million shares of Class A common stock underlying outstanding restricted stock units.  The aggregate amount of the special dividend is approximately $15.0 million, presuming 100% vesting of shares underlying equity awards; $7.5 million for holders of Class A common stock, including $1.1 million for Class A common stock underlying equity awards, and $7.5 million for the holder of Class B common stock.

This special dividend will be funded from cash and cash equivalents.  Approximately $14.4 million of the distribution will occur on August 28, 2009.  With respect to outstanding stock options and restricted stock units that are unvested as of August 14, 2009, or for which the issuance of shares underlying restricted stock units has been deferred, the $0.50 per share dividend will not be distributed until after such equity awards vest or the deferred shares are issued.

In July 2007, our Board of Directors approved a $1.50 per share special cash dividend, which was paid on August 13, 2007 to shareholders of record of Class A and Class B common stock at the close of business on July 31, 2007.  In connection with the declaration of the special dividend, our Board of Directors approved certain dividend equivalent rights, allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  In aggregate, at July 31, 2007, the record date, we had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 26.6 million shares of outstanding Class A and Class B common stock, approximately 1.8 million shares of Class A common stock underlying outstanding stock options, and approximately 1.5 million shares of Class A common stock underlying outstanding restricted stock units.  The aggregate amount of the special dividend was approximately $44.9 million, presuming 100% vesting of shares underlying equity awards; $22.4 million for holders of Class A common stock, including $4.9 million for Class A common stock underlying certain equity awards, and $22.5 million for the holder of Class B common stock.  Substantially all of the stock options and restricted stock units had vested as of May 31, 2009.  

This special dividend was funded from cash and liquidation of available-for-sale securities.  Approximately $43.9 million of the distribution has occurred as of May 31, 2009.  The remaining amount will be distributed upon vesting of the stock options or upon issuance of the shares underlying restricted stock units.

Our Board of Directors will determine dividend policy in the future based upon, among other factors, our results of operations, financial condition, contractual restrictions and other factors deemed relevant at the time.  In addition, our credit facility contains certain customary financial covenants that may limit our ability to pay dividends on our common stock.  See Note 13 of Notes to Consolidated Financial Statements.  We can give no assurance that we will pay dividends in the future.

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The closing price of our Class A common stock on August 13, 2009 was $5.65.  The approximate number of stockholders of record of our Class A common stock on August 13, 2009 was 274.  WHF owns all of the 14,973,148 outstanding shares of our Class B common stock.

The following table presents information about our Class A common stock that may be issued upon the exercise of options, warrants and rights under existing equity compensation plans at May 31, 2009:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	2,267,899(1)	$2.82(1)	1,825,433
Equity compensation plans not approved by security holders	—	—	—
Total	2,267,899	$2.82	1,825,433

(1)The number of securities to be issued upon exercise of outstanding options, warrants and rights includes 996,632 shares of restricted stock units, which are excluded in determining the weighted-average exercise price of outstanding options, warrants and rights.

The following table presents information regarding repurchases of our Class A common stock during the fiscal 2009 fourth quarter:

Period	Total number of shares purchased(1)	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
March 1 - March 31	—	—	—	—
April 1 - April 31	—	—	—	—
May 1 - May 28	34,260	$4.63	—	—
Total	34,260	$4.63	—	—

(1)Repurchase of these shares was to satisfy employee tax withholding obligations due upon issuance of shares underlying vested restricted stock units. 

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

	Fiscal Year Ended May 31,
	2009			2008			2007			2006			2005
Operating Statement Data (1) and (2):	(in thousands, except per share data)
Net sales	$	190,691		$	176,914		$	172,656		$	178,372		$	173,095
Cost of goods sold		123,861			102,491			103,959			119,303			113,351
Gross profit		66,830			74,423			68,697			59,069			59,744
Operating expenses		51,644			58,090			51,415			46,693			44,981
Reimbursement of import costs		—			(31	)		(394	)		(2,665	)		—
Total operating expenses		51,644			58,059			51,021			44,028			44,981
Income from operations		15,186			16,364			17,676			15,041			14,763
Other income (expense):
Interest, net		765			1,917			2,943			1,840			179
Foreign currency translation gain		—			—			—			1,613			—
Other, net		(4	)		13			(8	)		(135	)		(135	)
Total other income (expense), net		761			1,930			2,935			3,318			44
Income from continuing operations before income taxes		15,947			18,294			20,611			18,359			14,807
Income tax expense		5,617			6,992			8,175			2,393			2,751
Income from continuing operations		10,330			11,302			12,436			15,966			12,056
Loss from discontinued operations, net of income taxes (1) and (2)		—			—			—			(127	)		(5,487	)
Net income	$	10,330		$	11,302		$	12,436		$	15,839		$	6,569
Weighted average shares outstanding:
Basic		27,333			26,636			26,532			26,274			25,817
Diluted		28,638			28,000			27,343			26,999			26,418
Net income per share:
Basic	$	0.38		$	0.42		$	0.47		$	0.60		$	0.25
Diluted	$	0.36		$	0.40		$	0.45		$	0.59		$	0.25
Cash dividends declared per common share	$	—		$	1.50		$	—		$	—		$	—

	At May 31,
	2009		2008		2007		2006		2005
Balance Sheet Data (1) and (2):	(in thousands)
Cash and cash equivalents	$	52,648	$	45,979	$	34,463	$	24,899	$	11,358
Working capital		92,215		81,481		104,869		90,516		66,012
Total assets		130,197		124,486		145,079		131,615		128,266
Total debt		—		—		—		—		3,020
Total stockholders’ equity		109,693		99,487		124,095		107,507		89,835

(1)Effective March 1, 2005, we sold certain assets of our Active Nutrition Unit relating to our Weider branded business.  In accordance with SFAS No. 144, fiscal year 2005 has been restated to reflect the Weider branded business operating results as discontinued operations.

(2)Effective May 1, 2005, we sold our Haleko Unit.  In accordance with SFAS No. 144, fiscal year 2005 has been restated to reflect the Haleko Unit operating results as discontinued operations.  

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K.

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Overview

Schiff Nutrition International, Inc. develops, manufactures, markets and distributes branded and private label vitamins, nutritional supplements and nutrition bars in the United States and throughout the world.  We offer a broad range of capsules, tablets and nutrition bars.  Our portfolio of recognized brands, including Schiff, Move Free, MegaRed and Tiger’s Milk, is marketed primarily through the mass market (including club) and, to a lesser extent, health food store distribution channels.

During fiscal 2007, 2008 and 2009, we provided selling and marketing support intended both to defend our overall Move Free business against competition, including private label, and ultimately to increase our market share in the joint care product category.  The introduction of Move Free Advanced into substantially all of our significant retail accounts, which began during the second half of fiscal 2006, was substantially completed in the fiscal 2007 second quarter.  In December 2007, we announced the fiscal 2008 third quarter introduction of smaller tablets for our existing Move Free items as well as the launch of a Move Free line extension.  During fiscal 2008 and 2009, we also increased the distribution of our joint care products in international markets which we will continue in fiscal 2010.  During the latter part of fiscal 2008, we introduced MegaRed, an omega-3 krill oil product, into Costco.  During fiscal 2009, we continued the introduction of MegaRed into certain other retail accounts.  In the latter part of fiscal 2009, we initiated a national marketing campaign to support MegaRed growth.  During fiscal 2010, subject to sufficient supply of raw materials, we will introduce MegaRed into new retail accounts and continue significant marketing to support both the new and existing distribution of this product.  Subject to competitive joint care category pricing pressures, including private label, the success of incremental private label and new product sales, including MegaRed, and the ability to increase our distribution in international markets, among other factors, we believe fiscal 2010 net sales, as compared to fiscal 2009 net sales, will modestly increase.

Our financial results for fiscal 2008 were impacted by the declaration of a $1.50 per share special cash dividend in July 2007.  In connection with the declaration of the special dividend, our Board of Directors approved certain dividend equivalent rights allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  As a result, we recognized approximately $4.9 million in non-cash compensation expense during fiscal 2008, together with a corresponding increase in additional paid-in-capital.  Fiscal 2008 operating results were also unfavorably impacted by approximately $1.4 million in merger and acquisition related costs.  Our fiscal 2007 operating results were favorably impacted by litigation related settlements resulting in the reversal of approximately $0.6 million in contingent liabilities and the recognition of approximately $1.0 million in reimbursements of certain previously paid insurance premiums and other expenses incurred in prior fiscal years.  In addition, results for fiscal 2007 were also favorably impacted by approximately $0.4 million in reimbursement of import costs from certain suppliers.  These reimbursements, resulting primarily from the favorable outcome of litigation between one of our suppliers and the U.S. Government, represent refunds of previously paid tariffs on imported raw materials.

Our gross profit and operating margins for fiscal 2009 were negatively impacted by incremental private label business awarded in the latter part of fiscal 2008.  The incremental business coupled with increased volume from existing business resulted in a significant change in sales mix for fiscal 2009, compared to fiscal 2008 and 2007.  The significant increase in lower-margin private label sales coupled with higher raw material costs resulted in overall lower gross profit and operating margins for fiscal 2009, as compared to fiscal 2008 and 2007.

Factors affecting our historical results, including the previous implementation of strategic initiatives as well as continuing refinement of our growth and business strategies, are ongoing considerations and processes.  While the focus of these considerations is to improve future profitability, we cannot assure you that our decisions relating to these initiatives will not adversely impact our results of operations and financial condition.

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Results of Operations

Fiscal 2009 Compared to Fiscal 2008

The following tables show comparative results for selected items as reported and as a percentage of net sales for fiscal 2009 and 2008, (dollars in thousands):

	2009					2008
Net sales	$	190,691		100.0	%	$	176,914		100.0	%
Cost of goods sold		123,861		65.0			102,491		57.9
Gross profit		66,830		35.0			74,423		42.1
Operating expenses:
Selling and marketing		33,702		17.6			31,366		17.7
General and administrative		13,669		7.2			22,475		12.7
Research and development		4,273		2.2			4,249		2.4
Reimbursement of import costs		—		—			(31	)	—
Total operating expenses		51,644		27.0			58,059		32.8
Income from operations		15,186		8.0			16,364		9.3
Other income, net		761		0.4			1,930		1.1
Income tax expense		(5,617	)	(3.0	)		(6,992	)	(4.0	)
Income from continuing operations	$	10,330		5.4	%	$	11,302		6.4	%

Net Sales.  Net sales increased approximately 7.8% to $190.7 million for fiscal 2009, from $176.9 million for fiscal 2008, primarily due to a significant increase in private label sales, partially offset by a decrease in branded net sales.

Aggregate branded net sales decreased approximately 5.3% to $131.8 million for fiscal 2009, from $139.2 million for fiscal 2008, primarily due to an approximate $3.3 million decrease in sales volume, an approximate $1.4 million increase in sales returns and an approximate $2.7 million increase in promotional incentives classified as sales price reductions.  Classification of certain promotional costs as a sales reduction is required when the promotion effectively represents a price reduction.  We are utilizing more price-discount like promotions in the joint care category to defend our market share against both branded and private label competition.  The decrease in sales volume resulted from a reduction in our joint care category volume, significantly offset by incremental MegaRed new product sales.  Move Free net sales were $71.3 million and $82.6 million, respectively, for fiscal 2009 and 2008.  The decrease in Move Free net sales, as well as decreases in other joint care category sales, primarily resulted from decreases in sales volume due to adjustments to customer inventory levels, private label volume growth due to significant price discounting, and the impact of uncertain economic conditions.

Private label sales increased approximately 56.2% to $58.9 million for fiscal 2009, from $37.7 million for the fiscal 2008, primarily due to incremental business awarded in the latter part of fiscal 2008 together with an increase in customer promotional activity on existing business.

Gross Profit.  Gross profit decreased approximately 10.2% to $66.8 million for fiscal 2009, from $74.4 million for fiscal 2008.  Gross profit, as a percentage of net sales, decreased to 35.0% for fiscal 2009, from 42.1% for fiscal 2008, primarily due to the reduction in branded joint care category sales, the significant increase in lower margin private label sales, higher raw material costs and incremental promotional incentives.  Since certain of our warehousing and distribution costs are included in general and administrative expenses, our gross profit may not be comparable to other entities who may include these expenses as a component of costs of goods sold.

Operating Expenses.  Operating expenses decreased approximately 11.1% to $51.6 million for fiscal 2009, from $58.1 million for fiscal 2008.  Operating expenses, as a percentage of net sales, were 27.0% and 32.8%, respectively, for fiscal 2009 and 2008.  The decrease in operating expenses resulted primarily from a substantial decrease in general and administrative expenses, partially offset by a moderate increase in selling and marketing expenses.

Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, moderately increased to approximately $33.7 million for fiscal 2009, from $31.4 million for fiscal 2008.  An increase in promotional and freight costs was partially offset by an approximate $1.0 million reduction in management incentive program costs and the fiscal 2008 recognition of approximately $0.5 million in incremental compensation expenses for the special dividend.  The special dividend compensation expense represents a non-cash charge for dividend equivalent rights received by holders of certain equity awards, including stock options and restricted stock units.  The increase in promotional costs resulted from additional price discounting in joint care category products due to competitive pressure, including private label, and incremental advertising in support of MegaRed.  Freight costs increased due to higher sales volumes and increases in fuel costs.

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General and administrative expenses decreased to approximately $13.7 million for fiscal 2009, from approximately $22.5 million for fiscal 2008, primarily due to the fiscal 2008 recognition of approximately $4.4 million in incremental compensation expense for the special dividend and approximately $1.4 million in merger and acquisition related costs, together with an approximate $4.5 million year over year reduction in management incentive program costs.

Research and development costs remained relatively constant at approximately $4.3 million for fiscal 2009 and 2008.

Other Income, net.  Other income, net, was $0.8 million for fiscal 2009, compared to $1.9 million for fiscal 2008.  The decrease was primarily due to a reduction in interest income resulting from lower yields on investments.

Income Tax Expense.  Income tax expense was $5.6 million for fiscal 2009, compared to $7.0 million for fiscal 2008.  The effective tax rate was 35.2% and 38.2%, respectively, for fiscal 2009 and 2008.  The decrease in the effective tax rate primarily resulted from an increase in certain tax credits.

Results of Operations

Fiscal 2008 Compared to Fiscal 2007

The following tables show comparative results for selected items as reported and as a percentage of net sales for fiscal 2008 and 2007, (dollars in thousands):

	2008					2007
Net sales	$	176,914		100.0	%	$	172,656		100.0	%
Cost of goods sold		102,491		57.9			103,959		60.2
Gross profit		74,423		42.1			68,697		39.8
Operating expenses:
Selling and marketing		31,366		17.7			32,031		18.6
General and administrative		22,475		12.7			15,698		9.1
Research and development		4,249		2.4			3,686		2.1
Reimbursement of import costs		(31	)	—			(394	)	(0.2	)
Total operating expenses		58,059		32.8			51,021		29.6
Income from operations		16,364		9.3			17,676		10.2
Other income, net		1,930		1.1			2,935		1.7
Income tax expense		(6,992	)	(4.0	)		(8,175	)	(4.7	)
Income from continuing operations	$	11,302		6.4	%	$	12,436		7.2	%

Net Sales.  Net sales increased approximately 2.5% to $176.9 million for fiscal 2008, from $172.7 million for fiscal 2007, primarily due to an increase in branded and private label sales volume and a decrease in product returns, substantially offset by an increase in sales price reductions related to incremental promotional incentives.  Classification of certain promotional costs as a sales reduction is required when the promotion effectively represents a price reduction.

Aggregate branded net sales increased approximately 2.3% to $139.2 million for fiscal 2008, from $136.1 million for fiscal 2007.  An approximate $9.2 million, or 5.1% increase in sales volume, primarily in our joint care category business, and an approximate $1.0 million reduction in sales returns, were partially offset by an approximate $7.1 million increase in promotional incentives classified as sales price reductions.  We are utilizing more price-discount like promotions in the joint care category to defend our market share against both branded and private label competition.  Move Free net sales were $82.6 million and $83.8 million, respectively, for fiscal 2008 and fiscal 2007.  The decrease primarily resulted from incremental promotional activity due to competitive joint care product category pricing pressures, which more than off-set an approximate $3.9 million, or 3.4%, increase in sales volume.

Private label sales increased approximately 3.0% to $37.7 million for fiscal 2008, from $36.6 million for the fiscal 2007, primarily due to incremental business awarded in the latter part of fiscal 2008.

Gross Profit.  Gross profit increased approximately 8.3% to $74.4 million for fiscal 2008, from $68.7 million for fiscal 2007.  Gross profit, as a percentage of net sales, increased to 42.1% for fiscal 2008, from 39.8% for fiscal 2007, primarily due to an approximate $12.0 million decrease in joint care product raw material costs, partially offset by the $7.1 million increase in sales price reductions related to incremental promotional incentives.  Since certain of our warehousing and distribution costs are included in general and administrative expenses, our gross profit may not be comparable to other entities who may include these expenses as a component of costs of goods sold.

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Operating Expenses.  Operating expenses increased approximately 13.8% to $58.1 million for fiscal 2008, from $51.0 million for fiscal 2007.  Operating expenses, as a percentage of net sales, were 32.8% and 29.6%, respectively, for fiscal 2008 and 2007.  The increase in operating expenses resulted primarily from a substantial increase in general and administrative expenses.  In addition, fiscal 2007 includes approximately $0.4 million in reimbursement from certain suppliers of previously recognized import costs as compared to less than $0.1 million in similar reimbursement for fiscal 2008.

Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, moderately decreased to approximately $31.4 million for fiscal 2008, from $32.0 million for fiscal 2007.  A decrease in advertising costs, primarily resulting from a decision to shift certain television advertising to promotional incentives reflected as sales price reductions, was partially offset by the fiscal 2008 recognition of approximately $0.5 million in incremental compensation expenses for the special dividend and an increase in freight costs due to the sales volume increase and increasing fuel costs.  The special dividend compensation expense represents a non-cash charge for dividend equivalent rights received by holders of certain equity awards, including stock options and restricted stock units.

General and administrative expenses increased to approximately $22.5 million for fiscal 2008, from approximately $15.7 million for fiscal 2007, primarily due to the fiscal 2008 recognition of approximately $4.4 million in incremental compensation expense for the special dividend and approximately $1.4 million in merger and acquisition related costs, together with the favorable impact of certain unusual items in the comparable prior year period.  Unusual items recognized during fiscal 2007 include litigation related settlements resulting in the reversal of approximately $0.6 million in contingent liabilities and the recognition of approximately $1.0 million in reimbursements of certain previously paid insurance premiums and other expenses incurred in prior fiscal years.

Research and development costs increased to approximately $4.3 million for fiscal 2008, from $3.7 million for fiscal 2007, primarily due to an increase in personnel related costs, expenses associated with product research, and product testing related to the registration of products in international markets.

Other Income, net.  Other income, net, was $1.9 million for fiscal 2008, compared to $2.9 million for fiscal 2007.  The decrease was primarily due to a reduction in interest income resulting from an overall lower average balance of cash and available-for-sale securities resulting from payment of the special dividend.

Income Tax Expense.  Income tax expense was $7.0 million for fiscal 2008, compared to $8.2 million for fiscal 2007.  The effective tax rate was 38.2% and 39.7%, respectively, for fiscal 2008 and 2007.  The fiscal 2007 tax rate was impacted by certain unusual items, including the recapture of certain previously recognized tax losses, final adjustments to certain tax gains and valuation allowances relating to the fiscal 2006 sale of our Haleko unit, and the reduction of certain contingent tax liabilities.

Liquidity and Capital Resources

Working capital increased approximately $10.7 million to $92.2 million at May 31, 2009, from $81.5 million at May 31, 2008, primarily due to positive financial results.  An approximate $7.6 million increase in cash and cash equivalents and available-for-sale securities reflects, among other factors, the impact of year-to-date earnings, partially offset by the payment of approximately $1.2 million in dividends resulting from the vesting of certain restricted stock units, and the payment of approximately $1.7 million in individual income taxes resulting from withholding and effectively reacquiring shares of Class A common stock issued in exchange for fully vested restricted stock units and stock options exercised.  Receivables decreased approximately $1.8 million, which includes a $0.3 million decrease in refundable income taxes and a $0.8 million increase in allowances for potential sales returns related to new products.  The $0.5 million decrease in prepaid expenses was primarily due to a decrease in prepaid insurance.  Accrued expenses decreased approximately $1.7 million primarily due to a decrease in accrued management annual incentive costs, partially offset by an increase in accrued promotional costs.

As a result of current negative liquidity and uncertainty in financial credit markets, we have continued to liquidate our investments in ARS and other variable rate debt securities.  Proceeds from the sale of these available-for-sale securities were invested in money market accounts, certificates of deposit, United States Treasury Bills and high-quality commercial paper.  At May 31, 2009, we held approximately $4.9 million in available-for-sale securities; consisting of approximately $4.3 million in certificates of deposit and approximately $0.6 million in debt securities, including $0.5 million in illiquid ARS which are fully insured, state agency issued securities.  Although we have experienced failed auctions with these ARS, and will therefore not be able to access our funds invested in these ARS until future auctions of these investments are successful, the securities are called by the issuer or the securities mature; we believe that we will ultimately be able to successfully liquidate these investments.  However, we believe the unsuccessful liquidation of some, or all, of these securities over the next twelve months will not significantly impact our liquidity needs.

On June 30, 2004, we entered into, through our wholly-owned direct operating subsidiary Schiff Nutrition Group, Inc. (“SNG”), a $25.0 million revolving credit facility (the “Credit Facility”) with KeyBank National Association, as Agent.  In August 2006, we extended the maturity of the Credit Facility from June 30, 2007 to June 30, 2009.  The Credit Facility contained customary terms and conditions, including, among others, financial covenants that limited our ability to pay dividends on our common stock and certain other restrictions.  SNG's obligations under the Credit Facility were guaranteed by us and secured by a first priority security interest on all of the capital stock of SNG.  The Credit Facility, which expired on June 30, 2009, was available to fund our normal working capital and capital expenditure requirements, with additional availability to fund certain permitted strategic transactions.  At May 31, 2009, there were no amounts outstanding and $25.0 million was available for borrowing under the Credit Facility.

21

On August 18, 2009, we entered into, through SNG, a new $80.0 million revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent.  The New Credit Facility, which replaces our previous $25.0 million credit facility which expired on June 30, 2009, contains customary terms and conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions.  SNG's obligations under the New Credit Facility are guaranteed by us and SNG's domestic subsidiaries and secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially all of our domestic assets.  Borrowings under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate.  The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions. At the inception of the New Credit Facility, no borrowings were outstanding.

We believe that our cash and cash equivalents, cash flows from operations and the financing sources discussed above will be sufficient to meet our normal cash operating requirements during the next twelve months.  However, we continue to review opportunities to acquire or invest in companies, product rights and other investments that are compatible with or complimentary to our existing business.  We could use cash and financing sources discussed herein, or financing sources that subsequently become available, to fund acquisitions or investments.  In addition, we may consider issuing additional debt or equity securities in the future to fund potential acquisitions or growth, or to refinance existing debt.  If a material acquisition, divestiture or investment is completed, our operating results and financial condition could change materially in future periods.  However, no assurance can be given that additional funds will be available on satisfactory terms, or at all, to fund such activities.

Our Board of Directors will determine dividend policy in the future based upon, among other factors, results of operations, financial condition, contractual restrictions and other factors deemed relevant at the time.  In addition, our Credit Facility contains certain customary financial covenants that may limit our ability to pay dividends on our common stock.  We can give no assurance that we will pay dividends in the future.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.  For information relating to certain contractual cash obligations see below.

Contractual Obligations

A summary of our outstanding contractual obligations at May 31, 2009 is as follows (in thousands):

Contractual Cash Obligations(1)	Total Amounts Committed		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating leases	$	8,959	$	2,385	$	4,648	$	1,926	$	—
Purchase obligations(2)		20,917		20,917		—		—		—
Total obligations	$	29,876	$	23,302	$	4,648	$	1,926	$	—

(1) Unrecognized income tax benefits totaling approximately $0.2 million are excluded since we are unable to estimate the period of settlement, if any.

(2) Purchase obligations consist primarily of open purchase orders for goods and services, including primarily raw materials, packaging and outsourced contract manufacturing commitments.

22

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements, we make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.  We periodically evaluate our estimates and judgments related to the valuation of available-for-sale securities, inventories and intangible assets, allowances for doubtful accounts, sales returns and discounts, uncertainties related to certain tax benefits, valuation of deferred tax assets, valuation of share-based payments and recoverability of long-lived assets.  Note 1 of Notes to the Consolidated Financial Statements describes the accounting policies governing each of these matters.  Our estimates are based on historical experience and on our future expectations that are believed to be reasonable.  The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from our current estimates and those differences may be material.

We believe the following accounting policies affect some of our more significant estimates and judgments used in preparation of our consolidated financial statements:

·   We provide for valuation adjustments for changes in the fair values of our available-for-sale securities.  Fair values are based upon quoted market prices and/or other considerations, including fair values determined by financial institutions, current credit rating of the debt securities, insurance provisions and discounted cash flow analysis as deemed appropriate.  Changes in valuation adjustments for declines in the fair values of our available-for-sales securities did not significantly impact net income for fiscal 2009, 2008 or 2007.  At May 31, 2009, unrealized losses resulting from fair market adjustments to our available-for-sale securities totaled approximately $179.  At May 31, 2008 and 2007, there were no unrealized losses resulting from fair market adjustments to our available-for-sale securities.

·   We provide for inventory valuation adjustments for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, market conditions and/or liquidation value.  For fiscal 2009, 2008 and 2007, respectively, inventory valuation adjustments resulted in a decrease in our gross profit and operating income of approximately $0.2 million, $0.9 million and $0.9 million.  If actual demand and/or market conditions are less favorable than those projected by management, additional inventory write-downs would be required.

·   We maintain allowances for doubtful accounts, sales returns and discounts for estimated losses resulting from customer exposures, including among others, product returns, inability to make payments and expected utilization of offered discounts.  Changes in our allowances for doubtful accounts, sales returns and discounts resulted in a decrease in our gross profit and operating income of approximately $0.8 million for fiscal 2009.  Changes in these allowances did not significantly impact our gross profit and operating income for fiscal 2008 and 2007.  At May 31, 2009 and 2008, respectively, our allowances for doubtful accounts, sales returns and discounts amounted to approximately $2.3 million and $1.5 million.  Actual results may differ from our current estimates, resulting in adjustment of the respective allowance(s).

·   We currently have deferred tax assets resulting from temporary differences between financial and income tax reporting.  These deferred tax assets are subject to periodic recoverability assessments.  The realization of these deferred tax assets is primarily dependent on future operating results.  Changes in these valuation allowances did not significantly impact net income for fiscal 2009 and 2008.  For fiscal 2007, changes in these valuation allowances resulted in an increase in net income of approximately $0.7 million.  At May 31, 2009 and 2008, deferred tax asset valuation allowances were not significant.

·   We recognize tax benefits relative to certain tax positions in which we may be uncertain as to whether that tax position will ultimately be sustained as filed in our tax return.  The recognition or derecognition of these tax benefits is subject to periodic evaluation of the sustainability of the tax position based upon changes in facts, circumstances or available information.  Changes in the recognition of these tax benefits did not significantly impact net income for fiscal 2009, 2008 and 2007.

·   We recognize compensation expense for certain performance based equity instrument (share-based payments) or cash awards over the performance period based on a periodic assessment of the probability that the performance criteria will be achieved.  Our periodic assessment of the probability that the performance criteria will be achieved considers such factors as historical financial results and future financial expectations, including an analysis of sales trends and operating margins; as well as changes in the nutritional supplements industry and competitive environment.  For fiscal 2009, 2008 and 2007, respectively, we recognized compensation expense related to these awards of approximately zero, $3.4 million and $3.4 million.  At May 31, 2009, there was no unrecognized compensation expense since the earned value of the award was zero based upon our assessment of the probability that the performance criteria will be achieved was less than possible.

23

·   We have certain intangible assets, primarily consisting of goodwill, which are tested for impairment at least annually.  We did not recognize any intangible asset impairment losses for fiscal 2009, 2008 or 2007.  The determination of whether or not goodwill is impaired involves significant judgment.  Changes in strategy or market conditions could significantly impact our judgment and require adjustment to the recorded goodwill balance.  

Impact of Inflation

Inflation affects the cost of raw materials, goods and services we use.  Historically, the overall impact of inflation has been modest.  However, from time to time, including fiscal 2009, the impact can be significant.  We seek to mitigate the adverse effects of inflation primarily through improved productivity, strategic buying initiatives, and cost containment programs.  However, the nutritional supplement industry competitive environment limits our ability to always recover higher costs resulting from inflation by raising the prices of our products.  See further discussion of raw material pricing matters in the “General” and “Results of Operations” sections above.

Seasonality

Our business is not inherently seasonal; however, we experience fluctuations in sales resulting from timing of marketing and promotional activities, customer buying patterns and consumer spending patterns.  In addition, as a result of changes in product sales mix, competitive conditions, raw material pricing pressures and other factors, as discussed above, we experience fluctuations in gross profit and operating margins on a quarter-to-quarter basis.

Recently Issued Accounting Standards

See Note 1 of Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion involves forward-looking statements of market risk which assume that certain adverse market conditions may occur.  Actual future market conditions may differ materially from such assumptions.  Accordingly, the forward-looking statements should not be considered our projections of future events or losses.

Our cash flows and net earnings may be subject to fluctuations resulting from changes in interest rates.  Our current policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there is no underlying exposure.  We do not use financial instruments for trading purposes.  We measure market risk, related to our holdings of financial instruments, based on changes in interest rates utilizing a sensitivity analysis.  Our Credit Facility, under which borrowings bear interest at floating rates, had no amounts outstanding at May 31, 2009.  Interest income earned on our short-term investments is impacted by changes in interest rate.  We do not believe that a hypothetical 10% change in interest rates would have a material effect on our pretax earnings or cash flows.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data and the report of Deloitte & Touche LLP, our independent registered public accountants, are on the following pages F-1 through F-20 and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

24

As required by Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter covered by this report.  Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management's Report on Internal Control over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

·   Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

·   Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

·   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.  Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.  Internal control over financial reporting also can be circumvented by collusion or improper management override.  Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk.  Management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Management has used the framework set forth in the report entitled “Internal Control-Integrated Framework” published by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission to evaluate the effectiveness of its internal control over financial reporting.  Management has concluded that its internal control over financial reporting was effective as of the end of the most recent fiscal year.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

The foregoing has been approved by our management, including our Chief Executive Officer and Chief Financial Officer, who have been involved with the assessment and analysis of our internal controls over financial reporting.

25

PART III

ITEM 9B. OTHER INFORMATION

On August 18, 2009, we entered into, through SNG, a new $80.0 million revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent.  The New Credit Facility, which replaces our previous $25.0 million credit facility which expired on June 30, 2009, contains customary terms and conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions.  SNG's obligations under the New Credit Facility are guaranteed by us and SNG's domestic subsidiaries and secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially all of our domestic assets.  Borrowings under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate.  The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions.  At the inception of the New Credit Facility, no borrowings were outstanding.  The foregoing description of the New Credit Facility, including the Loan Agreement and the related security agreements and guarantees, is qualified in its entirety by reference to the documents attached hereto as Exhibits and incorporated herein by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

See our 2009 Definitive Proxy Statement, incorporated by reference in Part III of this Annual Report on Form 10-K, under the headings “Board of Directors and Corporate Governance Information,” “Nominees for Election to our Board of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.”  Information regarding our Code of Business Conduct and Ethics is also incorporated by reference to our 2009 Definitive Proxy Statement under the heading “Board of Directors and Corporate Governance Information.”

We have filed the certifications of our Chief Executive Officer and Chief Financial Officer required pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 as exhibits to this Annual Report on Form 10-K.

On December 5, 2008, we submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.

ITEM 11. EXECUTIVE COMPENSATION

See our 2009 Definitive Proxy Statement, incorporated by reference in Part III of this Annual Report on Form 10-K, under the headings “Board of Directors and Corporate Governance Information,” “Executive Compensation” and “Certain Relationships and Related Transactions.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

See the information set forth under Item 5 herein and in our 2009 Definitive Proxy Statement, incorporated by reference in Part III of this Annual Report on Form 10-K, under the heading “Stock Ownership of Beneficial Owners, Directors and Management.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

See our 2009 Definitive Proxy Statement, incorporated by reference in Part III of this Annual Report on Form 10-K, under the heading “Certain Relationships and Related Transactions.”

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

See our 2009 Definitive Proxy Statement, incorporated by reference in Part III of this Annual Report on Form 10-K, under the heading “Fees Paid to Independent Public Accountants.”

26

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)   Documents filed as part of this report

1)   Financial Statements

See “Item 8. Financial Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K.

2)   Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts.  All other schedules have been omitted because they are not required, not applicable, or the information is otherwise set forth in the financial statements or notes thereto.

3)   Exhibits

3.1.	Amended and Restated Certificate of Incorporation of Schiff Nutrition International, Inc. (1)
3.2.	Amended and Restated Bylaws of Weider Nutrition International, Inc. (2)
4.1.	Revolving Credit Agreement dated as of June 30, 2004 between Schiff Nutrition Group, Inc. and KeyBank National Association. (3)
4.2.	Form of specimen Class A common stock certificate. (4)
4.3.	Loan Agreement dated as of August 18, 2009 between Schiff Nutrition Group, Inc. and U.S. Bank National Association. (21)
10.1.	Build-To-Suit Lease Agreement dated March 20, 1996, between SCI Development Services Incorporated and Weider Nutrition Group, Inc. (2)
10.2.	1997 Equity Participation Plan of Weider Nutrition International, Inc. (5)*
10.3.	Form of Tax Sharing Agreement by and among Weider Nutrition International, Inc. and its subsidiaries and Weider Health and Fitness and its subsidiaries.  (5)
10.4.	License Agreement dated as of December 1, 1996 between Mariz Gestao E Investmentos Limitada and Weider Nutrition Group, Inc. (5)
10.5.	Amendments No. 1, 2 and 3 to 1997 Equity Participation Plan of Weider Nutrition International, Inc. (6)*
10.6.	Consulting Agreement dated as of February 1, 2004 between Weider Nutrition Group, Inc. and Gustin Foods, LLC. (7)
10.7.	Schiff Nutrition International, Inc. 2004 Incentive Award Plan. (8)*
10.8.	Amendment effective as of March 1, 2005 to License Agreement between Mariz Gestao E Investmentos Limitada and Weider Nutrition Group, Inc. (9)
10.9.	Stock and Asset Purchase Agreement effective as of March 1, 2005 among Weider Nutrition International, Inc., Weider Nutrition Group, Inc. and Weider Global Nutrition, LLC. (9)
10.10.	Promissory Note of Weider Global Nutrition, LLC payable to Weider Nutrition Group, Inc. (9)
10.11.	Guarantee by Weider Health and Fitness in favor of Weider Nutrition International, Inc. and Weider Nutrition Group, Inc. (9)
10.12.	Share Sale and Transfer Agreement dated June 17, 2005 among Weider Nutrition GmbH, Haleko Management GmbH, Atlantic Grupa d.o.o., Hopen Investments BV and Svalbard Investments GmbH. (10)
10.13.	Form of Indemnification Agreement between Weider Nutrition Group, Inc. and certain of its executives and directors. (11)*
10.14.	Form of Restricted Stock Unit Award Grant Notice, Restricted Stock Unit Award Agreement and Deferral Election between Schiff Nutrition International, Inc. and certain of its executives. (12)*
10.15.	Amendment No. 1 to the Schiff Nutrition International, Inc. 2004 Incentive Award Plan. (13)*
10.16.	Amended and Restated License and Product Supply Agreement dated as of October 13, 2006 between Unigen Pharmaceuticals, Inc. and Schiff Nutrition Group, Inc. (14)
10.17.	Form of Director Restricted Stock Unit Agreement and Deferral Election. (15)*
10.18.	Form of Director Restricted Stock Agreement. (15)*
10.19.	Employment and Change in Control Agreement dated as of June 1, 2007 between Schiff Nutrition Group, Inc. and Bruce J. Wood (19)*
10.20.	Form of Amended and Restated Agreement between Schiff Nutrition Group, Inc. and certain of its executives. (19)*
10.21.	License Agreement dated as of September 19, 2007 between Mariz Gestao E Investimentos Limitada and Schiff Nutrition Group, Inc. (16)
10.22.	Amendment No. 2 to the Schiff Nutrition International, Inc. 2004 Incentive Award Plan. (17)*
10.23.	Form of Performance Award Grant Notice, Performance Award Agreement and Deferral Election. (18)*
10.24.	Amendment No. 3 to the Schiff Nutrition International, Inc. 2004 Incentive Award Plan. (19)*
10.25.	Amendment No. 4 to the 1997 Equity Participation Plan of Weider Nutrition International Inc. (19)*
10.26.	Consulting Agreement dated as of November 3, 2008 between Schiff Nutrition Group, Inc. and Daniel A. Thomson. (19)*
10.27.	Second Amended and Restated License and Product Supply Agreement dated as of May 29, 2009 between Unigen Pharmaceuticals, Inc. and Schiff Nutrition Group, Inc.        (20)
10.28.	Security Agreement dated as of August 18, 2009 among Schiff Nutrition Group, Inc., Schiff Nutrition International, Inc., WNG Holdings (International) Ltd., Coppal       Research, Inc. and U.S. Bank National Association. (21)
10.29.	Continuing and Unconditional Guaranty dated as of August 18, 2009 by Schiff Nutrition International, Inc. in favor of U.S. Bank National Association. (21)
10.30.	Continuing and Unconditional Guaranty dated as of August 18, 2009 by WNG Holdings (International) Ltd. in favor of U.S. Bank National Association. (21)
10.31.	Continuing and Unconditional Guaranty dated as of August 18, 2009 by Coppal Research, Inc. in favor of U.S. Bank National Association. (21)
21.1.	Subsidiaries of Schiff Nutrition International, Inc. (21)
23.1.	Consent of Independent Registered Public Accounting Firm. (21)
31.1.	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (21)
31.2.	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (21)
32.1.	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (22)

27

(1)	Previously filed in the Company's Quarterly Report on Form 10-Q filed on January 17, 2006 and incorporated herein by reference.
(2)	Previously filed in the Company's Registration Statement on Form S-1/A (File No. 333-12929) filed on October 16, 1996 and incorporated herein by reference.
(3)	Previously filed in the Company's Current Report on Form 8-K filed on July 8, 2004 and incorporated herein by reference.
(4)	Previously filed in the Company’s Annual Report on Form 10-K filed on August 29, 2006 and incorporated herein by reference.
(5)	Previously filed in the Company’s Registration Statement on Form S-1/A (File No. 333-12929) filed on March 20, 1997 and incorporated herein by reference.
(6)	Previously filed in the Company's Quarterly Report on Form 10-Q filed on January 14, 2002 and incorporated herein by reference.
(7)	Previously filed in the Company's Quarterly Report on Form 10-Q filed on April 14, 2004 and incorporated herein by reference.
(8)	Previously filed in the Company's Definitive Proxy Statement on Form 14A filed on September 28, 2004 and incorporated herein by reference.
(9)	Previously filed in the Company's Current Report on Form 8-K filed on April 4, 2005 and incorporated herein by reference.
(10)	Previously filed in the Company's Current Report on Form 8-K filed on June 23, 2005 and incorporated herein by reference.
(11)	Previously filed in the Company's Current Report on Form 8-K filed on August 10, 2005 and incorporated herein by reference.
(12)	Previously filed in the Company’s Current Report on Form 8-K filed on March 23, 2006 and incorporated herein by reference.
(13)	Previously filed in the Company’s Definitive Proxy Statement on Form 14A filed on September 27, 2006 and incorporated herein by reference.
(14)	Previously filed in the Company’s Quarterly Report on Form 10-Q filed on October 16, 2006 and incorporated herein by reference.
(15)	Previously filed in the Company’s Current Report on Form 8-K filed on October 30, 2006 and incorporated herein by reference.
(16)	Previously filed in the Company’s Current Report on Form 8-K filed on September 25, 2007 and incorporated herein by reference.
(17)	Previously filed in the Company’s Definitive Proxy Statement on Form 14A filed on September 27, 2007 and incorporated herein by reference.
(18)	Previously filed in the Company’s Current Report on Form 8-K filed on December 18, 2008 and incorporated herein by reference.
(19)	Previously filed in the Company’s Quarterly Report on Form 10-Q filed on January 9, 2009 and incorporated herein by reference.
(20)	Previously filed in the Company’s Current Report on Form 8-K filed on June 4, 2009 and incorporated herein by reference.
(21)	Filed herewith.
(22)	Furnished herewith.
*	Management contract.

28

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Schiff Nutrition International, Inc.
By:	/s/ Bruce J. Wood
	Bruce J. Wood
Dated: August 20, 2009	Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Eric Weider	Chairman of the Board	August 20, 2009
Eric Weider	and Director
/s/ Bruce J. Wood	Chief Executive Officer,	August 20, 2009
Bruce J. Wood	President and Director
	(Principal Executive Officer)
/s/ Joseph W. Baty	Executive Vice President and	August 20, 2009
Joseph W. Baty	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)
/s/ Ronald L. Corey	Director	August 20, 2009
Ronald L. Corey
/s/ Michael Hyatt	Director	August 20, 2009
Michael Hyatt
/s/ Eugene B. Jones	Director	August 20, 2009
Eugene B. Jones
/s/ Roger H. Kimmel	Director	August 20, 2009
Roger H. Kimmel
/s/ George F. Lengvari	Vice Chairman of the Board	August 20, 2009
George F. Lengvari	and Director
/s/ Brian P. McDermott	Director	August 20, 2009
Brian P. McDermott
/s/ H.F. Powell	Director	August 20, 2009
H. F. Powell

  29

SCHIFF NUTRITION INTERNATIONAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F - 2
Consolidated Balance Sheets at May 31, 2009 and 2008	F - 3
Consolidated Statements of Income, Years Ended May 31, 2009, 2008 and 2007	F - 4
Consolidated Statements of Stockholders’ Equity, Years Ended May 31, 2009, 2008 and 2007	F - 5
Consolidated Statements of Cash Flows, Years Ended May 31, 2009, 2008 and 2007	F - 6
Notes to Consolidated Financial Statements	F - 7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Schiff Nutrition International, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Schiff Nutrition International, Inc. and subsidiaries (collectively, the “Company”) as of May 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended May 31, 2009.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Schiff Nutrition International, Inc. and subsidiaries at May 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Salt Lake City, Utah

August 18, 2009

F-2

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MAY 31, 2009 AND 2008

(dollars in thousands, except share data)

ASSETS
	2009			2008
Current assets:
Cash and cash equivalents	$	52,648		$	45,979
Available-for-sale securities		4,241			3,298
Receivables, net		20,716			22,536
Inventories		30,024			29,233
Prepaid expenses and other		1,434			1,948
Deferred taxes, net		2,186			1,761
Total current assets		111,249			104,755
Property and equipment, net		13,920			13,567
Other assets:
Goodwill		4,346			4,346
Available-for-sale securities		621			1,265
Deposits and other assets		61			12
Deferred taxes, net		—			541
Total other assets		5,028			6,164
Total assets	$	130,197		$	124,486
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,553		$	11,075
Accrued expenses		9,481			11,153
Dividends payable		—			1,046
Total current liabilities		19,034			23,274
Long-term liabilities:
Dividends payable		1,022			1,201
Deferred taxes, net		245			—
Other		203			524
Total long-term liabilities		1,470			1,725
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.01 per share; shares authorized-10,000,000; no shares issued and outstanding		—			—
Class A common stock, par value $.01 per share; shares authorized - 50,000,000; shares issued and outstanding -12,660,932 (2009) and 11,782,390 (2008)		126			118
Class B common stock, par value $.01 per share; shares authorized - 25,000,000; shares issued and outstanding -14,973,148		150			150
Additional paid-in capital		89,367			89,393
Accumulated other comprehensive loss		(106	)		—
Retained earnings		20,156			9,826
Total stockholders’ equity		109,693			99,487
Total liabilities and stockholders’ equity	$	130,197		$	124,486

See notes to consolidated financial statements.

F-3

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED MAY 31, 2009, 2008 AND 2007

(dollars in thousands, except share data)

	2009			2008			2007
Net sales	$	190,691		$	176,914		$	172,656
Cost of goods sold		123,861			102,491			103,959
Gross profit		66,830			74,423			68,697
Operating expenses:
Selling and marketing		33,702			31,366			32,031
General and administrative		13,669			22,475			15,698
Research and development		4,273			4,249			3,686
Reimbursement of import costs		—			(31	)		(394	)
Total operating expenses		51,644			58,059			51,021
Income from operations		15,186			16,364			17,676
Other income (expense):
Interest income		888			2,045			3,118
Interest expense		(123	)		(128	)		(175	)
Other, net		(4	)		13			(8	)
Total other income, net		761			1,930			2,935
Income before income taxes		15,947			18,294			20,611
Income tax expense		5,617			6,992			8,175
Net income	$	10,330		$	11,302		$	12,436
Weighted average shares outstanding:
Basic		27,332,659			26,636,315			26,531,682
Diluted		28,637,848			27,999,755			27,343,264
Net income per share:
Basic	$	0.38		$	0.42		$	0.47
Diluted	$	0.36		$	0.40		$	0.45

See notes to consolidated financial statements.

F-4

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED MAY 31, 2009, 2008 AND 2007

(in thousands)

												Accum.
	Common Stock								Add’l			Other
	Class A						Class B		Paid-In			Comp.			Retained
	Shares			Amount			Amount		Capital			Loss			Earnings			Total
Balance at June 1, 2006		11,606		$	116		$	150	$	88,488		$	—		$	18,753		$	107,507
Comprehensive income:
Net income		—			—			—		—			—			12,436			12,436
Other comprehensive income		—			—			—		—			—			—			—
Total comprehensive income																			12,436
Cancellation of restricted stock		(2	)		—			—		—			—			—			—
Stock options exercised		84			—			—		292			—			—			292
Excess tax benefit from equity instruments		—			—			—		136			—			—			136
Stock received for payment of income taxes on stock-based compensation		(24	)		—			—		(170	)		—			—			(170	)
Stock-based compensation		—			—			—		3,894			—			—			3,894
Balance at May 31, 2007		11,664			116			150		92,640			—			31,189			124,095
Comprehensive income:
Net income		—			—			—		—			—			11,302			11,302
Other comprehensive income		—			—			—		—			—			—			—
Total comprehensive income																			11,302
Stock options exercised		77			1			—		259			—			—			260
Excess tax benefit from equity instruments		—			—			—		407			—			—			407
Stock received for payment of income taxes on stock-based compensation		(23	)		—			—		(120	)		—			—			(120	)
Special cash dividend		—			—			—		(12,340	)		—			(32,577	)		(44,917	)
Special dividend stock-based compensation expense		—			—			—		4,857			—			—			4,857
Restricted shares issued		64			1			—		(1	)		—			—			—
Stock-based compensation		—			—			—		3,691			—			—			3,691
Adoption of FIN 48		—			—			—		—			—			(88	)		(88	)
Balance at May 31, 2008		11,782			118			150		89,393			—			9,826			99,487
Comprehensive income:
Net income		—			—			—		—			—			10,330			10,330
Available-for-sales debt securities valuation adjustment, net of income taxes		—			—			—		—			(106	)		—			(106	)
Total comprehensive income																			10,224
Stock options exercised		533			5			—		1,567			—			—			1,572
Common stock surrendered for cashless options exercised		(188	)		(2	)		—		(1,187	)		—			—			(1,189	)
Excess tax benefit from equity instruments		—			—			—		654			—			—			654
Stock received for payment of income taxes on stock-based compensation		(304	)		(3	)		—		(1,687	)		—			—			(1,690	)
Restricted shares issued		862			8			—		(8	)		—			—			—
Cancellation of restricted stock		(24	)		—			—		—			—			—			—
Stock-based compensation		—			—			—		613			—			—			613
Special dividend stock-based compensation expense		—			—			—		22			—			—			22
Balance at May 31, 2009		12,661		$	126		$	150	$	89,367		$	(106	)	$	20,156		$	109,693

See notes to consolidated financial statements.

F-5

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MAY 31, 2009, 2008 AND 2007

(dollars in thousands)

	2009			2008			2007
Cash flows from operating activities:
Net income	$	10,330		$	11,302		$	12,436
Adjustments to reconcile net income to net cash provided by operating activities:
Changes in provision for bad debts		—			—			(54	)
Deferred taxes		50			65			(706	)
Depreciation and amortization		3,083			3,475			3,331
Amortization of financing fees		12			15			39
Loss on disposition of property and equipment		2			—			8
Stock-based compensation		635			8,548			3,894
Excess tax benefit from equity instruments		(654	)		(407	)		(136	)
Other		5			(3	)		1
Changes in operating assets and liabilities:
Receivables		1,495			(2,835	)		2,353
Inventories		(791	)		(5,535	)		(183	)
Prepaid expenses and other		514			203			293
Deposits and other assets		(61	)		78			10
Accounts payable		(1,529	)		3,672			(2,746	)
Accrued expenses		(1,672	)		611			(930	)
Income taxes		979			(3,691	)		1,323
Other long-term liabilities		63			47			—
Net cash provided by operating activities		12,461			15,545			18,933
Cash flows from investing activities:
Purchase of property and equipment		(3,434	)		(3,200	)		(4,351	)
Proceeds from disposition of property and equipment		1			35			19
Purchase of available-for-sale securities		(5,995	)		(33,590	)		(42,189	)
Proceeds from sale of available-for-sale securities		5,517			74,844			36,492
Collection of notes receivable		—			—			400
Net cash provided by (used in) investing activities		(3,911	)		38,089			(9,629	)
Cash flows from financing activities:
Proceeds from debt		1,338			1,350			1,996
Payments on debt		(1,338	)		(1,350	)		(1,996	)
Dividends paid		(1,225	)		(42,670	)		—
Proceeds from stock options exercised		383			260			292
Purchase and retirement of common stock		(1,690	)		(120	)		(170	)
Excess tax benefit from equity instruments		654			407			136
Net cash provided by (used in) financing activities		(1,878	)		(42,123	)		258
Effect of exchange rate changes on cash		(3	)		5			2
Increase in cash and cash equivalents		6,669			11,516			9,564
Cash and cash equivalents, beginning of year		45,979			34,463			24,899
Cash and cash equivalents, end of year	$	52,648		$	45,979		$	34,463

See notes to consolidated financial statements.

F-6

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share data)

1.   SIGNIFICANT ACCOUNTING POLICIES

Description of Business –We develop, manufacture, market and distribute branded and private label vitamins, nutritional supplements and nutrition bars in the United States and throughout the world.  We offer a broad range of capsules, tablets and nutrition bars.  Our portfolio of recognized brands, including Schiff, Move Free, MegaRed and Tiger’s Milk, is marketed primarily through the mass market (including club) and, to a lesser extent, health food store distribution channels.

Principles of Consolidation –Our consolidated financial statements include the accounts of Schiff Nutrition International, Inc. and its wholly-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated.  We are a majority-owned subsidiary of Weider Health and Fitness (“WHF”).

Use of Estimates and Assumptions in Preparing Financial Statements –In preparing our consolidated financial statements, we make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.  We periodically evaluate our estimates and judgments related to the valuation of available-for-sale securities, inventories and intangible assets, allowances for doubtful accounts, sales returns and discounts, uncertainties related to certain tax benefits, valuation of deferred tax assets, valuation of share-based payments and recoverability of long-lived assets.  Our estimates are based on historical experience and on our future expectations that are believed to be reasonable.  The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from our current estimates and those differences may be material.

Cash Equivalents –Cash equivalents include highly liquid investments with a remaining maturity at date of acquisition of three months or less.

Available-for-Sale Securities –Available-for-sale securities, consisting of equity and debt securities, are carried at their fair value based upon the quoted market prices or other valuation methods at period end.  Accordingly, unrealized gains and losses, net of income taxes, are computed on the basis of specific identification and included in accumulated other comprehensive income in stockholders’ equity until realized.  We periodically evaluate whether any declines in the fair values of our available-for-sale securities are other-than temporary.  This evaluation consists of a review of qualitative and quantitative factors, including available quoted market prices; recent financial results and operating trends of the company that issued the securities; other publicly available information; implied values from any recent financing by the company that issued the security; or other conditions that indicate the value of our investments.

Receivables –Receivables are reported at estimated net realizable values.  Accordingly, we estimate allowances for doubtful accounts, sales returns and discounts.  The allowance for doubtful accounts is estimated by reviewing delinquency status, determined by classifying, or aging, individual invoices in terms of the length of the period past due, and analyzing historical account write-off rates relative to receivable balances.  Receivables are written off when determined to be uncollectible.  The allowance for sales returns is estimated by reviewing open sales return authorizations granted to customer and analyzing historical return rates relative to sales.  Allowances for cash discounts are estimated by reviewing customer payment terms and historical remittances.  Accounts with credit balances are reported as current liabilities in the balance sheet.

Inventories –Inventories, primarily consisting of direct materials, direct labor and manufacturing overhead, are stated at the lower of cost (on a first-in, first-out basis) or market value.

Property and Equipment –Property and equipment are stated at cost less accumulated depreciation.  Depreciation expense was $3,083 (2009), $3,475 (2008) and $3,331 (2007), computed using the straight-line method over the estimated useful lives of 2 to 10 years for furniture and equipment and 3 to 16 years for leasehold improvements.  Leasehold improvements are depreciated over the shorter of their useful life or of the lease term.

Intangible Assets –Goodwill and other intangible assets with indefinite lives are tested for impairment, at least annually during the fourth quarter of each fiscal year, rather than amortized.  Other intangibles with definite lives are amortized using the straight-line method over estimated useful lives of 2 to 5 years.

Long-Lived Assets –We evaluate the carrying value of long-lived assets based upon current and anticipated undiscounted cash flows, and recognize an impairment when such estimated cash flows will be less than the carrying value of the asset.  This evaluation is performed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Measurement of the amount of impairment, if any, is based upon the difference between carrying value and fair value.

F-7

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

Income Taxes –We record deferred income tax liabilities and assets for temporary differences in the basis of assets and liabilities as reported for financial statement purposes and income tax purposes.  Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  

Capital Structure –We have two classes of common stock outstanding.  Both classes of common stock generally have identical rights and privileges, with the exception of voting and conversion, or transfer rights.  Each holder of Class A or Class B common stock is entitled to share ratably in any dividends, liquidating distributions or consideration resulting from certain business combinations.  However, each holder of Class A common stock is entitled to one vote for each share held while each holder of Class B common stock is entitled to ten votes for each share held.  The holders of the Class A common stock and Class B common stock vote together as a single class.  Class A common stock cannot be converted into any other securities of the Company, while Class B common stock holders have the right to convert their shares into Class A common stock on a one-to-one basis.  In addition, generally, any shares of Class B common stock that are transferred will automatically convert into shares of Class A common stock on a one-to-one basis.

Operating Segments –We believe our business, which consists of the aggregation of several product based operating segments, represents our only reportable segment.

Revenue Recognition –Sales are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and, (4) collectibility is reasonably assured.  Although we utilize a variety of shipping terms, our primary shipping terms are “FOB Destination.”

Net sales represent products at gross sales price, less estimated returns and allowances for which provisions are made at the time of sale and less certain other discounts, allowances and sales incentives.  We utilize various types of sales incentives and promotions in marketing our products; including, price reductions, coupons, rebate offers, slotting fees and free product.  Generally, the cost of these sales incentives and promotions, with the exception of free product, are accounted for as a direct reduction of sales.  The cost of free product is classified as cost of goods sold.

Sales by Geographic Area –Total domestic and international, primarily Asia and Mexico, net sales amounted to $181,966 and $8,725, respectively, for fiscal 2009; $168,979 and $7,935, respectively, for fiscal 2008; and $167,422 and $5,234, respectively, for fiscal 2007.  Net sales are attributed to the country in which our customer is located.

Advertising Costs –Advertising costs, including cooperative advertising payments to retailers, are charged to expense in the period that the advertising first takes place.  Cooperative advertising payments to retailers are generally accounted for as an operating expense; however, the portion of the cost in excess of the estimated fair value of the benefit received is classified as a direct reduction of sales.  Total advertising costs, included in selling and marketing expenses, were $14,514, $12,669 and $13,828, respectively, for fiscal 2009, 2008 and 2007.

Costs of Goods Sold and Shipping and Handling Costs –Costs of goods sold include expenses incurred to acquire and produce inventory for sales, including product costs, purchasing costs, freight-in, import costs, internal transfer costs, quality assurance costs and certain warehousing, or handling, costs associated with the receiving or manufacturing of goods for sale.

Shipping and certain warehousing, or handling, costs which are not associated with the receiving or manufacturing of goods for sale are excluded from costs of goods sold.  Shipping costs, included in selling and marketing expenses, were $5,774, $4,833 and $4,423, respectively, for fiscal 2009, 2008 and 2007.  Handling costs, included in general and administrative expenses, were $3,130, $2,716 and $2,663, respectively, for fiscal 2009, 2008 and 2007.

Concentration of Credit Risk and Significant Customers and Products –Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale securities and accounts receivable.

Generally, our cash and cash equivalents, which may include money market accounts, certificates of deposit, United States Treasury Bills with maturities of three months or less, and high-quality commercial paper exceed Federal Deposit Insurance Corporation limits on insurable amounts; thus exposing us to certain credit risk.  We minimize our risk by investing in or through major financial institutions.  We have not experienced any realized losses on our cash equivalents and available-for-sale securities.

F-8

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

At May 31, 2009, we held approximately $4,862 in available-for-sale securities; consisting of approximately $4,241 in certificates of deposit and approximately $621 in debt securities, including $483 in illiquid auction rate securities (“ARS”) which are fully insured state agency issued securities.  In determining the fair value of our available-for-sale securities at May 31, 2009, we have taken into consideration quoted market prices and/or other considerations, including fair values determined by the financial institutions, current credit rating of the debt securities, insurance provisions, discounted cash flow analysis, as deemed appropriate, and our current liquidity position.  Although we believe the remaining debt securities will ultimately be liquidated at or near our cost basis, any impairment in the value of these securities could adversely impact our results of operations and financial condition.

With respect to accounts receivable, we perform ongoing credit evaluations of our customers and monitor collections from customers continuously.  We maintain an allowance for doubtful accounts which is based upon historical experience as well as specific customer collection issues.  Historically, bad debt expense has not been significant and has been within expectations and allowances established.  However, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.  If the financial condition of one or more of our customers were to deteriorate, additional allowances may be required.

The combined net sales to our two largest customers are significant.  At May 31, 2009 and May 31, 2008, respectively, amounts due from Customer A represented approximately 46% and 53%, and amounts due from Customer B represented approximately 24% and 24%, of total trade accounts receivable.  For fiscal 2009, 2008 and 2007, respectively, Customer A accounted for approximately 44%, 39% and 35% and Customer B accounted for approximately 32%, 35% and 34% of total net sales.  Of total net sales, our Schiff® Move Free® brand accounted for approximately 37%, 47% and 48%, respectively, for fiscal 2009, 2008 and 2007.

Stock-Based Compensation For equity-classified awards, compensation expense is recognized over the requisite service period based on the computed fair value on the grant date of the award.  For liability-classified awards, fluctuations in the fair value of the liability, which is remeasured at each reporting period until the award is settled, are recorded as increases or decreases in compensation cost either immediately or over the remaining service period depending on the vested status of the award.

Net Income Per Share Basic net income per share is computed using the weighted average number of common shares outstanding during the period.  Diluted net income per share is computed using the weighted average number of common shares and potentially diluted common shares outstanding during the period.  Potentially dilutive common shares consist of common stock options, restricted stock and restricted stock units (“Common Stock Equivalents”).

Fair Value Measurements The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Financial assets are marked to bid prices and financial liabilities are marked to offer prices.  Fair value measurements do not include transaction costs.  We adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” on June 1, 2008.  This statement defines fair value, establishes a framework to measure fair value, and expands disclosures about fair value measurements.  SFAS No. 157 establishes a fair value hierarchy used to prioritize the quality and reliability of the information used to determine fair values.  Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data. 

In February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008.  We are currently reviewing the requirements of FSP No. FAS 157-2, and at this point in time, have not determined what impact, if any, FSP No. FAS 157-2 will have on our results of operations and financial condition.

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.”  This statement clarifies that determining fair value in an inactive or dislocated market depends on facts and circumstances and requires significant management judgment.  This statement specifies that it is acceptable to use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs to determine fair value when markets are not active and relevant observable inputs are not available.  The application of these clarifications did not have a material impact on our results of operations or financial condition.

F-9

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.”  FSP No. FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased.  It also includes guidance on identifying circumstances that indicate a transaction is not orderly.  FSP No. FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively.  We do not believe the adoption of this FSP will have a material impact on our results of operations or financial condition.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.”  FSP No. FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments of debt and equity securities in the financial statements.  This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities.  FSP No. FAS 115-2 and FAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009.  We do not believe the adoption of this FSP will have a material impact on our results of operations or financial condition.

We adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” effective June 1, 2008, and elected not to establish a fair value for our financial instruments and certain other items under this statement.  Therefore, our adoption of this statement did not impact our consolidated financial statements for the year ended May 31, 2009.

Financial Instruments –Our financial instruments, including primarily cash and cash equivalents, accounts receivable and accounts payable, when valued using market interest rates, would not be materially different from the amounts presented in the consolidated financial statements.

Foreign Currency Translation –We consider the local currency as the functional currency for our foreign operations.  Assets and liabilities are translated at period-end exchange rates and all statements of income amounts are translated using average monthly rates.  

Hedging Activities –We account for hedging activities in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  Derivatives are recognized as either assets or liabilities in the balance sheet and measured at fair value.  At May 31, 2009 and 2008, we were not party to any derivatives.

Reimbursement of Import Costs –Our operating results for fiscal 2008 and 2007 were favorably impacted by $31 and $394, respectively, in reimbursement of import costs from certain suppliers.  These reimbursements, resulting primarily from the favorable outcome of litigation between one of our suppliers and the U.S. Government, represent refunds of previously paid tariffs on imported raw materials.

Recently Issued Accounting Standards –In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN No. 48”), which establishes guidelines for recognizing, measuring and disclosing uncertainties relating to tax benefits reflected in an enterprise’s financial statements.  FIN No. 48 establishes a “more-likely-than-not” recognition threshold that must be met before a tax benefit, relative to a tax position in which the enterprise may be uncertain as to whether it will ultimately be sustained as filed in its tax return, can be recognized in the financial statements.  We were required to apply the provisions of FIN No. 48 on June 1, 2007.  The cumulative effect of adopting FIN No. 48 resulted in a decrease in retained earnings of approximately $88.  The total amount of unrecognized tax benefits at June 1, 2007 was $473, which includes unrecognized tax benefits of $88 that, if recognized, would favorably affect the effective tax rate.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” that requires all business combinations completed after the effective date to be accounted for by applying the acquisition method (previously referred to as the purchase method).  SFAS No. 141 (R) requires that the acquirer be identified and that the acquirer recognize the fair values of the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree at the acquisition date.  In the case of a bargain purchase, the acquirer is required to reevaluate the measurements of the recognized assets and liabilities at the acquisition date and recognize a gain on that date if an excess remains.  SFAS No. 141(R) becomes effective for fiscal periods beginning after December 15, 2008.  This accounting standard will be applied to acquisitions occurring after May 31, 2009, and will also require us to expense any costs related to such acquisitions.

F-10

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

In May 2009, the FASB issued SFAS 165, “Subsequent Events” which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements.  SFAS No. 165 distinguishes events requiring recognition in the financial statements and those that may require disclosure in the financial statements.  Furthermore, SFAS No. 165 requires disclosure of the date through which subsequent events were evaluated.  SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles,” (“Codification”), which supersedes all existing accounting standard documents and will become the single source of authoritative non-governmental U.S. GAAP.  All other accounting literature not included in the Codification will be considered non-authoritative.  The Codification was implemented on July 1, 2009 and will be effective for interim and annual periods ending after September 15, 2009.  We expect to conform our consolidated financial statements and related notes to the new Codification for the quarter ending November 30, 2009.

2.   AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities at fair value consist of the following at May 31:

	2009		2008
Certificates of deposit	$	4,241	$	—
Federal, state and municipal debt securities		483		3,764
Corporate debt securities		138		799
		4,862		4,563
Less long-term portion		621		1,265
Total	$	4,241	$	3,298

Available-for-sale securities include ARS, long-term variable rate bonds tied to short-term interest rates that are reset through a “dutch auction” process which occurs every 7 to 35 days, and other variable rate debt and equity securities.  Despite the underlying long-term contractual maturity of ARS, there generally was a ready liquid market for these securities based on the interest reset mechanism.  However, as a result of negative liquidity and uncertainty in financial credit markets, we experienced “failed” auctions associated with our ARS.  In the case of a failed auction, the ARS become illiquid long-term bonds (until a future auction is successful, the security is called prior to the contractual maturity date by the issuer, or the securities mature) and the rates are reset in accordance with terms in the prospectus/offering circular.  At May 31, 2009, total available-for-sale securities included $621 in debt securities, including illiquid ARS, valued below cost which are included in long-term assets.  The ARS consist primarily of fully insured, state agency issued securities.

Available-for-sale securities were measured at fair value at May 31, 2009, using: 

Quoted prices in active markets for identical assets (Level 1)	$	4,379
Significant other observable inputs (Level 2)		—
Significant unobservable inputs (Level 3)		483
Total	$	4,862

F-11

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

A reconciliation of the beginning and ending balances of available-for-sale securities measured at fair value using significant unobservable inputs (Level 3) follows: 

Beginning balance	$	1,265
Total losses (all unrealized and included in accumulated other comprehensive loss)		(17	)
Sales		(465	)
Transfers out		(300	)
Ending balance	$	483

At May 31, 2009, contractual maturities of debt securities are as follows: 

Less than one year	$	—
One to five years		—
Over five years		621
Total	$	621

At May 31, 2009, unrealized losses of approximately $179, net of income tax benefits of $73, were included in accumulated other comprehensive loss in the accompanying consolidated financial statements.  The amount of unrealized losses, net of income taxes, for fiscal 2009 was approximately $106.  The amount of unrealized gains or losses for fiscal 2008 was not significant.  

3.   RECEIVABLES, NET

Receivables, net, consist of the following at May 31:

	2009			2008
Trade accounts	$	21,341		$	21,938
Refundable income taxes		1,644			1,969
Other		66			162
		23,051			24,069
Less allowances for doubtful accounts, sales returns and discounts		(2,335	)		(1,533	)
Total	$	20,716		$	22,536

4.   INVENTORIES

Inventories consist of the following at May 31:

	2009		2008
Raw materials	$	12,021	$	9,458
Work in process		1,270		1,897
Finished goods		16,733		17,878
Total	$	30,024	$	29,233

F-12

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

5.   PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following at May 31:

	2009			2008
Furniture and equipment	$	35,647		$	34,203
Leasehold improvements		11,890			11,822
Construction in progress		1,962			672
		49,499			46,697
Less accumulated depreciation and amortization		(35,579	)		(33,130	)
Total	$	13,920		$	13,567

Purchase of property and equipment included in accounts payable amounted to $68, $63 and $624, respectively, for fiscal 2009, 2008 and 2007.

6.   GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and intangible assets, net, consist of the following at May 31:

	2009							2008
	Gross Carrying Amount		Accumul. Amortiz.			Net Book Value		Gross Carrying Amount		Accumul. Amortiz.			Net Book Value
Goodwill	$	4,346	$	—		$	4,346	$	4,346	$	—		$	4,346
Intangible assets - patents and trademarks	$	700	$	(700	)	$	—	$	2,090	$	(2,090	)	$	—

Estimated amortization expense, assuming no changes in our intangible assets, is zero for all future fiscal years.

7.   ACCRUED EXPENSES

Accrued expenses consist of the following at May 31:

	2009		2008
Accrued personnel related costs	$	1,652	$	4,011
Accrued promotional costs		6,225		5,117
Other		1,604		2,025
Total	$	9,481	$	11,153

F-13

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

8.   INCOME TAXES

The components of income tax expense for fiscal 2009, 2008 and 2007, are as follows:

	2009		2008		2007
Federal:
Current	$	4,936	$	6,246	$	8,097
Deferred		48		58		(178	)
Change in valuation allowance		—		—		(654	)
State and local:
Current		631		681		784
Deferred		2		7		126
Change in valuation allowance		—		—		—
Total	$	5,617	$	6,992	$	8,175

Income tax expense (benefit) differs from a calculated income tax at the Federal statutory rate as follows:

	2009			2008			2007
Computed Federal income tax expense at the statutory rate of 35%	$	5,581		$	6,403		$	7,214
Change in valuation allowance		—			—			(654	)
State income tax expense		632			688			910
Tax exempt interest		(28	)		(292	)		(504	)
Other		(568	)		193			1,209
Total	$	5,617		$	6,992		$	8,175

During fiscal 2007, we recognized approximately $757 in incremental net tax liabilities resulting from the impact of recapturing certain previously recognized tax losses, partially offset by further adjustment of the IRS Code Section 987 gain and valuation allowances, and the reduction of certain contingent tax liabilities.

Net cash income tax payments amounted to $4,524, $10,574 and $7,553, respectively, for fiscal 2009, 2008 and 2007.

Deferred income taxes, net, consist of the following at May 31:

	2009						2008
	Current			Long-Term			Current			Long-Term
Assets:
Accounts receivable allowances	$	666		$	—		$	464		$	—
Inventories adjustment		903			—			834			74
Accrued vacation, bonuses, dividends and other		1,115			1,993			1,176			2,101
Total		2,684			1,993			2,474			2,175
Liabilities:
Basis differences in fixed and intangible assets		—			(2,186	)		—			(1,603	)
Prepaid insurance		(298	)		—			(511	)		—
Other		(200	)		(52	)		(202	)		(31	)
Total		(498	)		(2,238	)		(713	)		(1,634	)
Deferred income taxes, net	$	2,186		$	(245	)	$	1,761		$	541

At May 31, 2009, we have no net operating loss, capital loss or tax credit carryforwards.  The amount of the deferred tax assets considered realizable, could be reduced or increased in the near-term if facts, including the amount of taxable income, differs from our estimates.

F-14

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

We adopted the provisions of FIN No. 48 on June 1, 2007.  A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) is as follows:

Balance at June 1, 2007	$	444
Additions based on tax positions related to the current year		37
Additions for tax positions of prior years		—
Balance at May 31, 2008		481
Additions based on tax positions related to the current year		54
Additions based on tax positions related to prior years		45
Reductions for tax positions of prior years		(384	)
Balance at May 31, 2009	$	196

Approximately $184 of the total unrecognized tax benefits as of May 31, 2009, if recognized, would affect the effective tax rate.  During fiscal 2009, unrecognized tax benefits for certain timing differences related to the fiscal 2005 disposition of the Weider branded business decreased by approximately $384 due to the lapse of applicable statute of limitations.  We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense.  During fiscal 2009, we recognized a decrease of $36 in interest and penalties and we had $7 in interest and penalties accrued at May 31, 2009.  The total unrecognized tax benefit accrued (including interest and penalties) was $203 and $524, respectively, at May 31, 2009 and 2008.  We do not anticipate that unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.  We file income tax returns in the U.S. federal jurisdiction, and in various state and local jurisdictions.  We are no longer subject to U.S. federal income tax examinations for years prior to fiscal 2006, and we are no longer subject to state and local income tax examinations for years prior to fiscal 2005.

9.   CASH DIVIDEND

In July 2007, our Board of Directors approved a $1.50 per share special cash dividend, which was paid on August 13, 2007 to shareholders of record of Class A and Class B common stock at the close of business on July 31, 2007.  In connection with the declaration of the special dividend, our Board of Directors approved certain dividend equivalent rights, allowing holders of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  In aggregate, at July 31, 2007, the record date, the Company had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 26.6 million shares of outstanding Class A and Class B common stock, approximately 1.8 million shares of Class A common stock underlying outstanding stock options, and approximately 1.5 million shares of Class A common stock underlying outstanding restricted stock units.  The aggregate amount of the special dividend was approximately $44,917, presuming 100% vesting of shares underlying equity awards; $22,457 for holders of Class A common stock, including $4,883 for Class A common stock underlying certain equity awards, and $22,460 for the holder of Class B common stock.  Substantially all of the stock options and restricted stock units had vested as of May 31, 2009.  At May 31, 2008, we had unpaid dividends of $2,247.

In connection with the dividends paid or payable on the dividend equivalent rights received by holders (employees and directors) of stock options and certain restricted stock units, we recognized non-cash compensation expense and corresponding increase in additional paid-in capital of $22 and $4,857, respectively, during fiscal 2009 and 2008; and cash compensation expense of $63 during fiscal 2008.

10.   ACCUMULATED OTHER COMPREHENSIVE LOSS

For fiscal 2009, the components of accumulated other comprehensive loss are as follows:

	Pre-tax Loss		Tax Expense		Net Loss
Available-for-sale debt securities valuation adjustment:
Unrealized gains	$	179	$	73	$	106
Reclassification adjustment for realized loss (gain)		—		—		—
Net unrealized loss	$	179	$	73	$	106

We had no accumulated other comprehensive income or loss for fiscal 2008.  

F-15

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

11.   EARNINGS PER SHARE

The reconciliation of numerators and denominators basic and diluted earnings per share computations for fiscal 2009, 2008 and 2007, are as follows:

	2009		2008		2007
Income available to common shareholders (numerator):
Net income	$	10,330	$	11,302	$	12,436
Adjustments		—		—		—
Income on which basic and diluted earnings per share are calculated	$	10,330	$	11,302	$	12,436
Weighted-average number of common shares outstanding (denominator):
Basic		27,332,659		26,636,315		26,531,682
Add-incremental shares from restricted stock		17,904		5,024		49,912
Add-incremental shares from restricted stock units		759,207		676,461		—
Add-incremental shares from stock options		528,078		681,955		761,670
Diluted		28,637,848		27,999,755		27,343,264

Options to purchase 254,000 shares of Class A common stock at prices ranges from $4.61 to $7.05 per share were outstanding during fiscal 2009 but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.

12.   STOCK-BASED COMPENSATION PLANS

Our 1997 Equity Participation Plan, as amended (the “1997 Plan”), provided for the granting of stock options, stock appreciation rights, restricted or deferred stock and other awards (“Awards”) to officers, directors and key employees responsible for the direction and management of our company and to non-employee consultants.  Such Awards were granted at fair value as of the date of grant.  Under the 1997 Plan, a total of 3,500,000 shares of Class A common stock (or the equivalent in other equity securities) were reserved for issuance.

On October 26, 2004, our stockholders adopted the Schiff Nutrition International, Inc. 2004 Incentive Award Plan, as amended, (the “2004 Plan”).  Our 2004 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards to officers, directors, employees and consultants of our company and its subsidiaries.

Shares available for grant include 3,200,000 shares of Class A common stock reserved for issuance under the 2004 Plan, plus the number of shares of Class A common stock that as of the date of adoption of the 2004 Plan were, or thereafter would otherwise become, available for issuance under the 1997 Plan.

Stock options granted under the 1997 Plan and 2004 Plan primarily become exercisable after one to five years from the date of grant in equal, ratable amounts on each successive anniversary date.  Stock options expire no later than eight years after the date of grant under the 1997 Plan and no later than ten years after the date of grant under the 2004 Plan.

The fair value of options granted was estimated at the date of grant using a Binomial Option pricing model with the following weighted average assumptions for fiscal 2009, 2008 and 2007, respectively.

	2009		2008		2007
Expected volatility	32.80	%	48.92	%	49.57	%
Expected term	2.00	years	3.67	years	4.00	years
Risk-free interest rate	0.90	%	4.46	%	4.57	%
Dividend yield	0.00	%	0.00	%	0.00	%

Expected volatility is based on historical volatility of our stock.  The expected term, which represents the period of time that options granted are expected to be outstanding, is based on historical data and other factors; including, exercise behavior patterns of differing groups of employees.  The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of the grant.

F-16

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

Information relating to stock options issued under the 1997 Plan and 2004 Plan is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Options outstanding, June 1, 2006	1,900,585		$	2.78
Granted	10,000			7.01
Exercised	(83,934	)		3.49
Canceled, forfeited and/or expired	—			—
Options outstanding, May 31, 2007	1,826,651			2.77
Granted	45,000			5.97
Exercised	(77,167	)		3.38
Canceled, forfeited and/or expired	(5,000	)		3.00
Options outstanding, May 31, 2008	1,789,484			2.84
Granted	15,000			4.68
Exercised	(533,217	)		2.95
Canceled, forfeited and/or expired	—			—
Options outstanding, May 31, 2009	1,271,267		$	2.82	2.76	$	2,690
Exercisable options, May 31, 2009	1,267,934		$	2.81	2.74	$	2,690

The weighted average grant-date fair value of options granted was $0.91, $2.90 and $3.06, respectively, for fiscal 2009, 2008 and 2007.  The total intrinsic value of options exercised was $1,772, $183 and $242, respectively, for fiscal 2009, 2008 and 2007.  We received $383, $260 and $292, respectively, for stock options exercised during fiscal 2009, 2008 and 2007.  In addition, 188,024 shares of common stock valued at $1,189 (the aggregate exercise price) were surrendered as a result of 403,350 stock options exercised in cashless transactions during fiscal 2009.

Effective August 16, 2002, we issued 640,000 restricted shares of Class A common stock to certain officers and employees.  The aggregate value of the restricted shares at issuance was $1,038, which we are expensing on a straight-line basis over the accompanying five-year vesting period.  During fiscal 2008, 2007 and 2006, respectively, 83,800, 86,200 and 106,200 restricted shares vested.  Concurrent with the annual vesting during fiscal 2008, 2007 and 2006, respectively, we reacquired (and ultimately retired) 22,676, 23,443 and 29,813 shares from certain employees in connection with the payment of individual income taxes.  As a result of the termination of certain employees, 2,400 and 28,000, respectively, of these restricted shares were cancelled during fiscal 2007 and 2006.  As of May 31, 2009, of the 640,000 restricted shares originally issued, 528,800 shares vested, of which 103,338 shares were reacquired (and retired), and 111,200 shares were cancelled.

During fiscal 2009, 2008 and 2007, respectively, we granted 113,146, 114,157 and 32,360 restricted shares and restricted stock units to employee or non-employee directors at an average grant date fair value of $5.11, $5.74 and $6.18 per share.  The shares generally vest over three years.  Unvested shares totaled 182,146, 133,144 and 32,360, respectively, at May 31, 2009, 2008 and 2007.

Stock-based compensation expense for stock options, restricted stock units and restricted shares amounted to $365, $327 and $473, respectively, and the related tax benefit was approximately $145, $125 and $189, respectively, for fiscal 2009, 2008 and 2007.  At May 31, 2009, total unrecognized compensation cost related to these non-vested share-based compensation awards was approximately $707, which is expected to be recognized over a weighted average period of 2.1 years.

On March 17, 2006, the Compensation Committee of our Board of Directors, pursuant to our 2004 Plan, approved the adoption of a long term incentive plan involving the grant of performance based restricted stock units (the “Units”).  On March 20, 2006, a total of 1,437,200 Units were issued to certain officers and employees.  Each Unit represents the right to receive one share of the Company’s Class A common stock, subject to certain performance based vesting requirements.  The Units vest based on the Company’s performance in relation to certain specified pre-established performance criteria targets over a performance period beginning on January 1, 2006 and expiring on May 31, 2008.  The performance criteria upon which the Units vest is based upon a “Business Value Created” formula, which is comprised of two performance criteria components: operating earnings and return on net capital.  Based upon the amount of Business Value Credited in accordance with the formula, the Units were vested in full at May 31, 2008.  The grant date fair value of each Unit was $5.11.  We recognize compensation expense over the performance period based on a periodic assessment of the probability that the performance criteria will be achieved.  For fiscal 2008 and 2007, respectively, we recognized compensation expense of $3,364 and $3,421, and the related tax benefit was approximately $1,286 and $1,364.

F-17

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

On December 12, 2008, the Compensation Committee of our Board of Directors, pursuant to our 2004 Incentive Award Plan, approved the grant of long term incentive performance awards (“Performance Awards”) to certain officers and employees.  The Performance Awards were granted based on a target award value of $5,525, but will be earned based on the Company’s cumulative performance against three pre-established financial performance targets over a performance period commencing October 1, 2008 and ending on May 31, 2011, as follows: (i) 50% of the award opportunity will be based on cumulative net sales for the performance period; (ii) 35% of the award opportunity will be based on cumulative operating income for the performance period; and (iii) 15% of the award opportunity will be based on cumulative net cash flow for the performance period; provided, however, that no amount will be earned or payable if cumulative operating income for the performance period does not meet or exceed a pre-established threshold amount.  In the event that the cumulative operating income threshold is met, participants can earn from 17.5% of the target award value for the Company’s threshold performance against the cumulative operating income goal (and failure to meet the thresholds for the other two financial goals) and up to 150% of the target award value for maximum Company performance against all three financial goals.

The earned value of the Performance Awards will vest on May 31, 2011 subject to continued service by the participant(s) through that date.  The vested portion of the earned value of the Performance Awards will be paid in a combination of cash and shares of the Company’s Class A common stock.  Two-thirds of the earned value will be delivered to participants in cash (subject to any applicable plan limitations, less applicable taxes), and the remaining balance will be paid in shares, based on the closing price of the Company’s common stock on the day preceding the date of the Committee’s certification of the Company’s performance.  No dividends will be paid or accrued with respect to shares granted in payment of the Performance Awards until such shares are issued.

Recognition of compensation expense and accrual of the corresponding liability related to the Performance Awards is based on the periodic assessment of the probability that the performance criteria will be achieved.  Based on our probability assessment, we determined that the fair value of the Performance Awards was zero at May 31, 2009.  Thus, for the year ended May 31, 2009, we did not recognize any compensation expense.

Also, on December 12, 2008, the Compensation Committee of our Board of Directors granted 240,500 restricted stock units (the “New Units”) to certain employees not participating in the Performance Awards program.  Each New Unit represents the right to receive one share of the Company’s Class A common stock upon vesting.  The aggregate value of the New Units at the grant date was approximately $1,332, which will be expensed over the vesting (service) period.  The New Units cliff vest on May 31, 2011, assuming the holder is still employed.  Any dividends paid between the grant date and vesting will be payable to the holder upon vesting of the New Units.  For the year ended May 31, 2009, we recognized approximately $248 in compensation expense.

13.   COMMITMENTS AND CONTINGENCIES

Leases –We lease warehouse and office facilities, manufacturing and production facilities, transportation equipment and other equipment under operating lease agreements expiring through 2013.  At May 31, 2009, future minimum payments of $8,959 under these non-cancelable operating leases are due as follows: $2,385 (2010), $2,337 (2011), $2,311 (2012), and $1,926 (2013).  Rental expense was $2,500, $2,584 and $2,413, respectively, for fiscal 2009, 2008 and 2007.

Purchase Commitments –We are committed to future purchases primarily for inventory related items, including raw materials, packaging and outsourced contract manufacturing, under open purchase orders for specified quantities with fixed price provisions aggregating $20,917 at May 31, 2009.

Credit Facility –On June 30, 2004, we entered into, through our wholly-owned direct operating subsidiary Schiff Nutrition Group, Inc. (“SNG”), a $25,000 revolving credit facility (the “Credit Facility”) with KeyBank National Association, as Agent.  In August 2006, we extended the maturity of the Credit Facility from June 30, 2007 to June 30, 2009.  The Credit Facility contained customary terms and conditions, including, among others, financial covenants that limited our ability to pay dividends on our common stock and certain other restrictions.  SNG's obligations under the Credit Facility were guaranteed by us and secured by a first priority security interest on all of the capital stock of SNG.  The Credit Facility, which expired on June 30, 2009, was available to fund our normal working capital and capital expenditure requirements, with additional availability to fund certain permitted strategic transactions.  At May 31, 2009, there were no amounts outstanding and $25,000 was available for borrowing under the Credit Facility.

F-18

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

On August 18, 2009, we entered into, through SNG, a new $80,000 revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent.  The New Credit Facility, which replaces our previous $25,000 credit facility which expired on June 30, 2009, contains customary terms and conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions.  Our obligations under the New Credit Facility are secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially all of our domestic assets.  Borrowings under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate.  The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions.

Cash interest payments amounted to $111, $113 and $136, respectively, for fiscal 2009, 2008 and 2007.

Litigation –From time to time, we are involved in claims, legal actions and governmental proceedings that arise from our business operations.  Although ultimate liability cannot be determined at the present time, based on available information, we do not believe the resolution of these matters will have a material adverse effect on our results of operations and financial condition.  However, it is possible that future litigation could arise, or that developments could occur in existing litigation, that could have a material adverse effect on our results of operations and financial condition.

Royalties –Pursuant to an agreement with WHF and certain other parties, Mariz Gestao E Investimentos Limitada (“Mariz”) obtained the exclusive international rights to use the trademarks and brand names used by WHF and its affiliates on or prior to December 1996.  Mariz is a company incorporated under the laws of Portugal and owned by a trust of which the family members of a director are included among the beneficiaries.  Pursuant to a sublicense agreement with Mariz dated as of December 1, 1996, we obtained the exclusive international worldwide rights to use these trademarks and brand names outside the United States, Canada, Mexico, Spain and Portugal (for which countries we have the rights outside of the Mariz sublicense), except in Japan.  (see discussion below) Certain terms of the sublicense were amended and the rights under the sublicense to the Weider name and certain related trademarks were transferred as of March 1, 2005 in connection with the sale of our Weider branded business to Weider Global Nutrition, LLC (“WGN”), a wholly owned subsidiary of WHF.

Under the terms of the amended sublicense agreement, we are required to make annual royalty payments to Mariz on sales of products covered by the agreement in countries other than those listed above.  The royalty payments, as amended, are equal to (i) 4% of sales up to $7,000 (ii) 3.5% of sales greater than $7,000 and less than $14,000; (iii) 3.0% of sales greater than $14,000 and less than $21,000; and (iv) 2.5% of sales over $21,000.  The sublicense agreement includes an irrevocable buy-out option, exercisable by us after February 28, 2009, for a purchase price equal to the greater of $2,000 or 6.5 times the aggregate royalties paid by us in the royalty year immediately preceding the date of the exercise of the option.  

On September 19, 2007, we entered into a license agreement with Mariz providing for non-exclusive rights to use the Schiff and Move Free trademarks in connection with the sale of joint care products to Costco Wholesale Corporation (“Costco”) in Japan.  The initial term of the license agreement is for three years following the launch of our product into Japan.  We may renew the license agreement for two successive three-year terms if certain minimum sales levels are achieved during the third and sixth years following the product launch.  The license agreement provides that we pay royalties equal to 5% of joint care product sales to Costco in Japan with guaranteed minimum annual royalties ranging from $100 to $225 for each year the agreement is in effect.  Each party has certain termination rights, and depending on which party terminates and the reason for the termination, we may continue to owe the guaranteed minimum royalties for a period following termination of the license agreement.

Royalty expense, related to the Mariz licensing agreements, amounted to $423, $286 and $135, respectively, for fiscal 2009, 2008 and 2007.  In addition, during fiscal 2007, we also reimbursed Mariz approximately $108 for certain costs and expenses incurred by Mariz at our request in connection with certain litigation and the acceleration of obtaining certain intellectual property rights in the United Kingdom relating to the Move Free trademark.

Retirement Plan –We sponsor a contributory 401(k) savings plan covering all employees who have met minimum age and service requirements.  We make discretionary contributions of 50% of the employee’s contributions up to the first six percent (seven percent effective January 1, 2008) of the employee’s compensation.  Contribution expense amounted to $536, $457 and $423, respectively, for fiscal 2009, 2008 and 2007.

F-19

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(dollars in thousands, except share data)

Other Taxes –We have recorded liabilities for certain non-income tax uncertainties totaling approximately $129 at May 31, 2009 and 2008.

14.   RELATED PARTY TRANSACTIONS

Significant related party transactions, not otherwise disclosed, are summarized below.

We provide contract manufacturing services to WGN.  For fiscal 2009, 2008 and 2007, respectively, net sales to WGN were $1,280, $1,308 and $2,175, with a gross profit of $116, $120 and $204.  In addition, we received $418, $465 and $559 (reflected as a reduction in operating expenses), respectively, for certain general and administrative, research and development, and logistics services provided to WGN during fiscal 2009, 2008 and 2007.  At May 31, 2009 and 2008, respectively, net receivables due from WGN totaled $104 and $377.

15.   QUARTERLY RESULTS (UNAUDITED)

Quarterly results (unaudited) for fiscal 2009 and 2008 are as follows:

	Quarter Ended
	Aug. 31		Nov. 30		Feb. 28		May 31
2009:
Net sales	$	47,790	$	47,293	$	49,872	$	45,736
Gross profit		17,878		17,603		17,309		14,040
Income from operations		5,020		4,462		5,211		493
Income tax expense		2,050		1,810		1,712		45
Net income		3,249		2,912		3,616		553
Basic net income per share		0.12		0.11		0.13		0.02
Diluted net income per share		0.11		0.10		0.13		0.02

	Quarter Ended
	Aug. 31		Nov. 30		Feb. 29		May 31
2008:
Net sales	$	40,727	$	39,535	$	46,208	$	50,444
Gross profit		16,421		16,561		20,414		21,027
Income from operations		1,852		4,127		6,143		4,242
Income tax expense		1,002		1,725		2,524		1,741
Net income		1,648		2,803		4,043		2,808
Basic net income per share		0.06		0.11		0.15		0.10
Diluted net income per share		0.06		0.10		0.14		0.10

16.   SUBSEQUENT EVENT

In July 2009, our Board of Directors approved a $0.50 per share special cash dividend, payable on August 28, 2009 to shareholders of record of Class A and Class B common stock at the close of business on August 14, 2009.  In connection with the declaration of the special dividend, our Board of Directors approved dividend equivalent rights, allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units.  In aggregate, at August 14, 2009, the record date, we had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 27.6 million shares of outstanding Class A and Class B common stock, approximately 1.3 million shares of Class A common stock underlying outstanding stock options, and approximately 1.0 million shares of Class A common stock underlying outstanding restricted stock units.  The aggregate amount of the special dividend is approximately $14,945, presuming 100% vesting of shares underlying equity awards; $7,458 for holders of Class A common stock, including $1,123 for Class A common stock underlying equity awards, and $7,487 for the holder of Class B common stock.

The special dividend will be funded from cash and cash equivalents.  Approximately $14,405 of the distribution will occur on August 28, 2009.  With respect to outstanding stock options and restricted stock units that are unvested as of August 14, 2009, or for which the issuance of shares underlying restricted stock units has been deferred, the $0.50 per share dividend will not be distributed until after such equity awards vest or the deferred shares are issued.

F-20

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

VALUATION OF QUALIFYING ACCOUNTS

YEARS ENDED MAY 31, 2009, 2008 AND 2007

(in thousands)

Description	Balance at Beginning of Year		Reductions Charged to Costs / Expenses			Additions Charged to Net Sales		Reductions due to Divestiture		Deductions / Write-offs			Balance at End of Year
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
2007	$	431	$	(54	)	$	—	$	—	$	3		$	380
2008	$	380	$	—		$	—	$	—	$	(59	)	$	321
2009	$	321	$	—		$	132	$	—	$	(3	)	$	450
ALLOWANCE FOR SALES RETURNS AND DISCOUNTS:
2007	$	2,889	$	—		$	6,993	$	—	$	(8,101	)	$	1,781
2008	$	1,781	$	—		$	7,069	$	—	$	(7,638	)	$	1,212
2009	$	1,212	$	—		$	9,353	$	—	$	(8,680	)	$	1,885
DEFERRED TAXES VALUATION ALLOWANCE:
2007	$	654	$	(654	)	$	—	$	—	$	—		$	—
2008	$	—	$	—		$	—	$	—	$	—		$	—
2009	$	—	$	—		$	—	$	—	$	—		$	—

EX-4.3

LOAN AGREEMENT

by and among

SCHIFF NUTRITION GROUP, INC.

as Borrower

and the Lenders from time to time party hereto, including

U.S. BANK NATIONAL ASSOCIATION,

in its capacity as a Lender and as administrative agent for the Lenders,

the “Agent”

Dated as of August 18, 2009

		TABLE OF CONTENTS	Page
Section 1. DEFINITIONS.			1
	1.01	Definitions	1
	1.02	Accounting Terms and Determinations	15
Section 2. THE LOANS.			16
	2.01	Revolving Credit Commitment.	16
	2.02	Discretionary Swing Line Facility	17
	2.03	[Reserved]	17
	2.04	Letter of Credit Commitment.	17
	2.05	[Reserved].	20
	2.06	[Reserved].	20
	2.07	Method of Borrowing – Revolving Credit Loans; Swing Line Loans.	20
	2.08	Notes.	22
	2.09	Duration of Interest Periods and Selection of Interest Rates.	22
	2.10	Interest Rates and Interest Payments.	23
	2.11	Computation of Interest	24
	2.12	Fees.	24
	2.13	Method of Making Interest and Other Payments	24
	2.14	Voluntary Prepayments.	24
	2.15	[Reserved].	25
	2.16	General Provisions as to Payments	25
	2.17	Funding Losses	25
	2.18	Basis for Determining Interest Rate Inadequate or Unfair	25
	2.19	Illegality	26
	2.20	Increased Cost.	26
	2.21	ABR Loans Substituted for Affected LIBOR Loans	27
	2.22	Capital Adequacy	27
	2.23	Survival of Indemnities	27
	2.24	Discretion of Lenders as to Manner of Funding	27
	2.25	Swing Line Loan Settlement After Default	28
	2.26	Sharing of Payments	28
	2.27	Designation of Alternate Lending Offices.	28
	2.28	Replacement of Lenders	29
	2.29	Interest Rate Protection	29
	2.30	Incremental Facility	29
Section 3. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.			30
	3.01	Initial Loans and Letters of Credit	30
	3.02	All Loans	32
	3.03	All Letters of Credit	32
Section 4. REPRESENTATIONS AND WARRANTIES.			33
	4.01	Corporate Existence and Power	33
	4.02	Corporate Authorization	33
	4.03	Binding Effect	33
	4.04	Financial Statements	34
	4.05	Litigation	34
	4.06	Pension and Welfare Plans	34
	4.07	Tax Returns and Payment	34
	4.08	Subsidiaries	35
	4.09	Compliance With Other Instruments; None Burdensome	35
	4.10	Other Debt, Guarantees and Capitalized Leases	35
	4.11	Labor Matters	36
	4.12	Title to Property	36

i

	4.13	Regulation U	36
	4.14	Multi-Employer Pension Plan Amendments Act of 1980	36
	4.15	Investment Company Act of 1940; Public Utility Holding Company Act of 2005	36
	4.16	Patents, Trademarks, Copyrights, Licenses, Etc	36
	4.17	Environmental and Safety and Health Matters	37
	4.18	Investments	37
	4.19	No Default	37
	4.20	Government Contracts	37
	4.21	Purchase and Other Commitments and Outstanding Bids	37
	4.22	Real Property	38
	4.23	Disclosure	38
Section 5. COVENANTS.			38
	5.01	Affirmative Covenants of Borrower	38
	5.02	Negative Covenants of Borrower	44
	5.03	Use of Proceeds	47
Section 6. EVENTS OF DEFAULT.			47
Section 7. AGENT.			50
	7.01	Appointment	50
	7.02	Powers	50
	7.03	General Immunity	50
	7.04	No Responsibility for Loans, Recitals, etc	50
	7.05	Right to Indemnity	51
	7.06	Action Upon Instructions of Required Lenders	51
	7.07	Employment of Agents and Counsel	51
	7.08	Reliance on Documents; Counsel	51
	7.09	May Treat Payee as Owner	52
	7.10	Agent’s Reimbursement	52
	7.11	Rights as a Lender	52
	7.12	Independent Credit Decision	52
	7.13	Resignation of Agent	52
	7.14	Delivery of Documents	52
	7.15	Duration of Agency	53
Section 8. GENERAL.			53
	8.01	No Waiver	53
	8.02	Right of Setoff	53
	8.03	Cost and Expenses	53
	8.04	Environmental Indemnity	54
	8.05	General Indemnity	54
	8.06	Authority to Act	55
	8.07	Notices	55
	8.08	Consent to Jurisdiction; Waiver of Jury Trial	55
	8.09	Governing Law	55
	8.10	Amendments and Waivers	55
	8.11	References; Headings for Convenience	55
	8.12	Successors and Assigns.	56
	8.13	Defaulting Lender.	57
	8.14	NO ORAL AGREEMENTS:  ENTIRE AGREEMENT	59
	8.15	Severability	59
	8.16	Counterparts	59
	8.17	Resurrection of the Borrower’s Obligations	59
	8.18	Subsidiary Reference	59

ii

	8.19	Independence of Covenants	59
	8.20	Confidentiality	60
	8.21	Effect of Breach of Representation or Warranty	60
	8.22	USA PATRIOT ACT NOTIFICATION	60
Schedules
SCHEDULE 1.01(a)		Commitments of Lenders
SCHEDULE 1.01(b)		Schedule of Trust Deed Properties
SCHEDULE 2.04		Notice Of Authorized Individuals
SCHEDULE 4.05		Litigation
SCHEDULE 4.08		Subsidiaries
SCHEDULE 4.10		Other Debt, Guarantees and Capitalized Leases
SCHEDULE 4.12		Existing Liens
SCHEDULE 4.16		Patents, Trademarks, Copyrights and Licenses
SCHEDULE 4.17		Environmental and Health and Safety Matters
SCHEDULE 4.18		Existing Investments
SCHEDULE 4.20		Government Contracts
SCHEDULE 4.22		Real Property
SCHEDULE 5.01(l)		Insurance
SCHEDULE 5.01(q)		Post-Closing Items
SCHEDULE 5.02(f)		Existing Affiliate Transactions and Arrangements
SCHEDULE 5.02(k)		Borrower Investment Policy
SCHEDULE 5.02(m)		Anticipated Subsidiaries
SCHEDULE 5.02(n)		Existing Debt
Exhibits
EXHIBIT A		[RESERVED]	A-1
EXHIBIT B		REVOLVING CREDIT NOTE(S)	B-1
EXHIBIT C		SWING LINE NOTE	C-1
EXHIBIT D		[RESERVED]	D-1
EXHIBIT E		[RESERVED]	E-1
EXHIBIT F		FORM OF CONTINUING REIMBURSEMENT AGREEMENT FOR STANDBY LETTERS OF CREDIT	F-1
EXHIBIT G		FORM OF APPLICATION AND AGREEMENT FOR STANDBY LETTER OF CREDIT	G-1
EXHIBIT H		[RESERVED]	H-1
EXHIBIT I		LETTER OF CREDIT REQUEST	I-1
EXHIBIT J		COMPLIANCE CERTIFICATE	J-1
EXHIBIT K		ASSIGNMENT AND ASSUMPTION AGREEMENT	K-1
EXHIBIT L		JOINDER FOR INCREMENTAL FACILITY	L-1

iii

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”) is made and entered into as of the 18th day of August, 2009, by and among SCHIFF NUTRITION GROUP, INC., a Utah corporation (“Borrower”), and the Lenders from time to time party hereto, including U.S. BANK NATIONAL ASSOCIATION, in its capacity as a Lender and as administrative agent for the Lenders under this Agreement (in such capacity, the “Agent”).

WITNESSETH:

WHEREAS, Borrower has applied for a revolving credit facility from the Lenders in the aggregate amount of up to $80,000,000 (including a swingline subfacility thereunder from U.S. Bank National Association in the principal amount of up to $10,000,000 and a letter of credit subfacility thereunder from U.S. Bank National Association in the principal amount of up to $10,000,000); and

WHEREAS, the Lenders are willing to make the revolving credit facility available to Borrower upon, and subject to, the terms, provisions and conditions of this Agreement as hereinafter set forth,

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, the Lenders and the Agent hereby mutually covenant and agree as follows:

Section 1.                      DEFINITIONS.

1.01Definitions.  In addition to the terms defined elsewhere in this Agreement or in any Exhibit or Schedule hereto, when used in this Agreement, the following terms shall have the following meanings (such meanings shall be equally applicable to the singular and plural forms of the terms used, as the context requires):

ABR Loan shall mean any Loan or any portion of any Loan bearing interest based on the Adjusted Base Rate.

Acquisition shall mean any transaction or series of related transactions, consummated on or after the date of this Agreement, by which Borrower or any Subsidiary directly or indirectly (a) acquires all or substantially all of the assets comprising one or more business units of any other Person, whether through purchase of assets, merger or otherwise or (b) acquires (in one transaction or as the most recent transaction in a series of transactions) at least (i) a majority (in number of votes) of the stock and/or other securities of a corporation having ordinary voting power for the election of directors (other than stock and/or other securities having such power only by reason of the happening of a contingency), (ii) a majority (by percentage of voting power) of the outstanding partnership interests of a partnership or (iii) a majority of the ownership interests in any organization or entity other than a corporation or partnership.

Adjusted Base Rate shall mean on any day the Base Rate plus the Applicable ABR Margin in effect on such day.  The Adjusted Base Rate shall be adjusted automatically on and as of the effective date of any change in the Base Rate and/or the Applicable ABR Margin.

Adjusted Daily LIBOR Rate shall mean with respect to each day the rate determined by dividing the Daily LIBOR Rate in effect on such day by 1.00 minus the LIBOR Reserve Percentage.

Affiliate shall mean any Person (a) which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with Borrower or any Subsidiary, (b) which directly or indirectly through one or more intermediaries beneficially owns or holds or has the power to direct the voting power of Five Percent (5.0%) or

1

more of any class of capital stock or other equity interests of Borrower or any Subsidiary, (c) which has Five Percent (5.0%) or more of any class of its capital stock or other equity interests beneficially owned or held, directly or indirectly, by Borrower or any Subsidiary or (d) who is a director, officer, manager or employee of Borrower or any Subsidiary.  For purposes of this definition, “control” shall mean the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

Agent shall mean U.S. Bank National Association in its capacity as agent for the Lenders under this Agreement and certain of the other Transaction Documents and its successors in such capacity.

Applicable ABR Margin, Applicable LIBOR Margin, Applicable Unused Commitment Fee Rate and Applicable Standby Letter of Credit Commitment Fee Rate shall respectively mean the per annum rate shown in the applicable column below based on the applicable Consolidated Total Leverage Ratio:

If Consolidated Total Leverage Ratio is, then	Applicable ABR Margin is	Applicable LIBOR Margin is	Applicable Unused   Commitment Fee Rate is	Applicable Standby Letter of Credit Commitment Fee Rate is
≥2.50 to 1.00	1.75%	3.75%	0.50%	3.75%
≥2.00 to 1.00 but <2.50 to 1.00	1.50%	3.50%	0.40%	3.50%
≥1.50 to 1.00 but <2.00 to 1.00	1.25%	3.25%	0.35%	3.25%
≥1.00 to 1.00 but <1.50 to 1.00	0.75%	2.75%	.025%	2.75%
<1.00 to 1.00	0.50%	2.50%	0.25%	2.50%

The determination of the Applicable ABR Margin, the Applicable LIBOR Margin, the Applicable Unused Commitment Fee Rate and the Applicable Standby Letter of Credit Commitment Fee Rate as of any date shall be based on the Consolidated Total Leverage Ratio as of the end of the most recently ended fiscal quarter of Borrower for which financial statements of Borrower and its Subsidiaries have been delivered to the Agent pursuant to Section 5.01(a), and shall be effective for purposes of determining the Applicable ABR Margin, the Applicable LIBOR Margin, the Applicable Unused Commitment Fee Rate and the Applicable Standby Letter of Credit Commitment Fee Rate from and after the first day of the first month immediately following the date on which such delivery of financial statements is required until the first day of the first month immediately following the next such date on which delivery of financial statements of Borrower and its Subsidiaries is so required.  For example, the Consolidated Total Leverage Ratio as of the end of the fiscal quarter of Borrower ending August 31, 2009, will be determined from the financial statements of Borrower and its Subsidiaries as of and for the fiscal quarter of Borrower ending August 31,

2

2009 (which are required to be delivered to the Agent on or before October 15, 2009), and will be used in determining the Applicable ABR Margin, the Applicable LIBOR Margin, the Applicable Unused Commitment Fee Rate and the Applicable Standby Letter of Credit Commitment Fee Rate from and after November 1, 2009.  Until November 1, 2009, the Applicable ABR Margin shall be 0.50%; the Applicable LIBOR Margin shall be 2.50%; the Applicable Unused Commitment Fee Rate shall be 0.25%; and the Applicable Standby Letter of Credit Commitment Fee Rate shall be 2.50%.

Attorneys’ Fees shall mean (a) the reasonable value of the services (and costs, charges and expenses related thereto) of the attorneys and all paralegals employed by the Agent (including, without limitation, attorneys and paralegals who are employees of the Agent or are employees of any affiliate of the Agent) from time to time in connection with the negotiation, preparation, execution and/or administration of this Agreement and/or any of the other Transaction Documents and (b) the reasonable value of the services (and costs, charges and expenses related thereto) of the attorneys and all paralegals employed by the Agent or any of the Lenders (including, without limitation, attorneys and paralegals who are employees of the Agent or any of the Lenders or are employees of any affiliate of the Agent or any of the Lenders) (i) in connection with the preparation, negotiation or execution of any amendment, modification, extension, renewal and/or restatement of this Agreement or any of the other Transaction Documents that has been requested by Borrower, (ii) in connection with the preparation, negotiation or execution of any waiver, consent or forbearance with respect to this Agreement or any of the other Transaction Documents, (iii) in connection with the enforcement of this Agreement and/or any of the other Transaction Documents, (iv) in connection with any Default or Event of Default under this Agreement, (v) to represent the Agent or any of the Lenders in any litigation, contest, dispute, suit or proceeding, or to commence, defend or intervene in any litigation, contest, dispute, suit or proceeding, or to file any petition, complaint, answer, motion or other pleading or to take any other action in or with respect to any litigation, contest, dispute, suit or proceeding (whether instituted by the Agent, any of the Lenders, Borrower or any other Person and whether in bankruptcy or otherwise) in any way or respect relating to this Agreement or any of the other Transaction Documents, Borrower, any other Obligor, any Subsidiary, or any Collateral (but excluding any such fees, costs, charges and/or expenses incurred with respect to a dispute between the Agent and any one or more of the Lenders or with respect to disputes solely between one or more of the Lenders), (vi) to assert and protect the Agent’s and the Lenders’ rights in any bankruptcy or insolvency proceeding, (vii) to protect, collect, lease, sell, take possession of or liquidate any Collateral, (viii) to attempt to enforce any security interest in or other Lien upon any Collateral or to give any advice with respect to such enforcement and/or (ix) to enforce any of the rights and/or remedies of the Agent or any of the Lenders to collect any of the Borrower’s Obligations.

Authorized Person shall mean each of the individuals listed in Schedule 2.04.

Base Rate shall mean as of any date of determination the higher of (a) the Prime Rate, (b) the Fed Funds Rate plus One-Half of One Percent (0.5%), and (c) the Adjusted Daily LIBOR Rate in effect and reset each Eurodollar Business Day plus Two Percent (2.0%).

Borrower shall mean the Borrower identified in cover page to this Agreement, the preamble to this Agreement and the signature pages to this Agreement.

Borrower’s Obligations shall mean any and all present and future Debt (principal, interest, fees, collection costs and expenses, Attorneys’ Fees and other amounts), liabilities and obligations (including, without limitation, letter of credit reimbursement obligations and indemnity obligations) of Borrower to the Agent and/or any one or more of the Lenders evidenced by or arising under or in respect of this Agreement, the Notes, the Letter of Credit Applications and/or any of the other Transaction Documents.

Capital Expenditure shall mean any expenditure to purchase or otherwise acquire a fixed asset (other than a Capitalized Lease Obligation or an Intangible Capital Expenditure) which, in accordance with GAAP, is required to be capitalized on the balance sheet of the Person making the same.

Capitalized Lease shall mean any lease of Property, whether real and/or personal, by a Person as lessee which in accordance with GAAP is required to be capitalized on the balance sheet of such Person.

3

Capitalized Lease Obligations of any Person shall mean, as of the date of any determination thereof, the amount at which the aggregate rental obligations due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a balance sheet of such Person in accordance with GAAP.

Code shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time.  References to sections of the Code shall be construed to also refer to any successor sections.

Collateral shall mean any Property of Borrower or a Guarantor which now or at any time hereafter secures the payment or performance of any of the Borrower’s Obligations.

Commitments shall mean, collectively, the Revolving Credit Commitments, which are identified by Lender on the attached Schedule 1.01(a).

Consolidated EBITDA shall mean, for the period in question, the sum of (a) Consolidated Net Income during such period plus (b) to the extent deducted in determining such Consolidated Net Income, the sum of (i) Consolidated Interest Expense during such period, plus (ii) all provisions for any federal, state, local and/or foreign income taxes made by Borrower and its Subsidiaries during such period (whether paid or deferred), plus (iii) all depreciation and amortization expenses of Borrower and its Subsidiaries during such period, plus (iv) all non-cash stock compensation expenses of Borrower and its Subsidiaries during such period, plus (v) all other non-cash expenses of Borrower and its Subsidiaries during such period, plus (vi) any extraordinary losses during such period plus (vii) any losses from the sale or other disposition of Property other than in the ordinary course of business during such period, plus (viii) any expenses as approved by the Agent related to an acquisition or potential acquisition, minus (c) to the extent added in determining such Consolidated Net Income, the sum of (i) any extraordinary gains during such period plus (ii) any gains from the sale or other disposition of Property other than in the ordinary course of business during such period, all determined on a consolidated basis and in accordance with GAAP.

Consolidated EBITDAR shall mean, for the period in question, the sum of (a) Consolidated EBITDA during such period plus (b) to the extent deducted in determining such Consolidated EBITDA, Consolidated Operating Lease Expense during such period, all determined on a consolidated basis and in accordance with GAAP.

Consolidated Fixed Charge Coverage Ratio shall mean, for the period in question, the ratio of (a) Consolidated EBITDAR during such period, minus (i) maintenance capital expenditures assumed for purposes of this ratio calculation to be 50% of depreciation expense, prorated evenly for the measurement periods required, minus (ii) all federal, state, local and/or foreign income taxes paid or payable by Borrower and its Subsidiaries paid in cash during such period, to (b) Consolidated Fixed Charges during such period, all determined on a trailing four-quarter basis, on a consolidated basis and in accordance with GAAP.

Consolidated Fixed Charges shall mean, for the period in question, the sum of (a) the aggregate amount of all principal payments required to be made by Borrower and its Subsidiaries on all Debt during such period (including the principal portion of payments in respect of Capitalized Leases), plus (b) all obligations for interest paid or payable by Borrower and its Subsidiaries on all Debt in cash during such period (including, without limitation, the interest portion of Capitalized Lease Obligations paid or payable in cash and the interest portion of any deferred payment obligation paid or payable in cash during such period), plus (c) Consolidated Operating Lease Expense during such period, all determined on a consolidated basis and in accordance with GAAP.

Consolidated Total Funded Debt shall mean the sum of, without duplication, (a) all obligations of the Borrower and the Subsidiaries for borrowed money, including, but not limited to the Total Revolving Credits Outstanding, plus (b) all obligations, contingent or otherwise, of Borrower and the Subsidiaries in respect of bankers acceptances or as an account party in respect of letters of credit and letters of guaranty, plus (c) all Capitalized Lease Obligations; plus (d) all Guarantees by Borrower and the Subsidiaries for the foregoing, all determined on a consolidated basis and in accordance with GAAP.

4

Consolidated Interest Expense shall mean, for the period in question, without duplication, all gross interest expense of Borrower and its Subsidiaries on all Debt (including, without limitation, all commissions, discounts and/or related amortization and other fees and charges owed by Borrower and its Subsidiaries with respect to letters of credit, the net costs associated with any interest rate swap, interest rate cap or other interest rate hedge obligations of Borrower and its Subsidiaries, capitalized interest expense, the interest portion of Capitalized Lease Obligations and the interest portion of any deferred payment obligation) for such period, all determined on a consolidated basis and in accordance with GAAP.

Consolidated Liquidity shall mean all cash, cash-equivalents, investment securities not constituting Restricted Investments and the lesser of (a) unused availability under the Commitments or (b) the amount that, when added to the numerator of the Consolidated Total Leverage Ratio, would result in the maximum Consolidated Total Leverage set forth in Section 5.01(o)(ii).

Consolidated Net Income shall mean the after-tax net income (or loss) of Borrower and its Subsidiaries for the period in question, determined on a consolidated basis and in accordance with GAAP.

Consolidated Operating Lease Expense shall mean, for the period in question, the aggregate amount of all Operating Lease Expenses of Borrower and its Subsidiaries during such period, all determined on a consolidated basis and in accordance with GAAP.

Consolidated Total Leverage Ratio shall mean, as of the last day of any fiscal quarter of Borrower, the ratio of (a) Consolidated Total Funded Debt as of such day to (b) Consolidated EBITDA for the four (4) consecutive fiscal quarter period of Borrower ending on such day.

Copyright Security Agreement shall mean that certain Copyright Security Agreement (as contemplated by the Security Agreement) executed by Borrower, or as applicable, a Guarantor.

Daily LIBOR Rate shall mean, with respect to any date of determination, the average offered rate for the deposits in United States dollar for delivery of such deposits on a one-month basis, which appears on Renters Screen LIBOR01 Page (or any successor thereto) as of 11:00 a.m., London time (or such other time as of which such rate appears), or the rate for such deposits determined by Agent at such time based on such other published service of general application as shall be selected by Agent for such purpose.

Debt of any Person shall mean, as of the date of determination thereof, the sum of, without duplication, (a) all indebtedness of such Person for borrowed money (including, without limitation, all of Borrower’s Obligations (other than obligations for interest rate swaps, interest rate caps, interest rate collars or interest rate hedges) hereunder), plus (b) all Debt of such Person which has been incurred in connection with the purchase or other acquisition of Property (other than unsecured trade accounts payable incurred in the ordinary course of business), plus (c) all Capitalized Lease Obligations of such Person, plus (d) the aggregate undrawn face amount of all letters of credit issued for the account and/or upon the application of such Person together with all unreimbursed drawings with respect thereto plus (e) all Guarantees by such Person of Debt of others.

Default shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

Defaulting Lender shall mean any Lender with respect to which a Lender Default is in effect.

Defined Contribution Plan shall mean a “pension plan” as such term is defined in Section 3(34) of ERISA and Section 414(i) of the Code.

Distribution in respect of any corporation or other entity shall mean: (a) dividends or other distributions on or in respect of any of the capital stock or other equity interests of such corporation or

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other entity other than stock dividends or stock splits; and (b) the redemption, repurchase or other acquisition of any capital stock or other equity interests of such corporation or other entity or of any warrants, rights or other options to purchase any such capital stock or other equity interests.

Domestic Business Day shall mean any day except a Saturday, Sunday or legal holiday observed by the Agent or any Lender.

Domestic Subsidiary shall mean any Subsidiary that is incorporated or organized in or under the laws of the United States, any state thereof or the District of Columbia.

Eligible Institution means any commercial bank, trust company, banking association, insurance company, financial institution, mutual fund or pension or accredited investor as defined in SEC Regulation D.

Environmental Claim shall mean any administrative, regulatory or judicial action, judgment, order, consent decree, suit, demand, demand letter, claim, Lien, notice of noncompliance or violation, investigation or other proceeding arising (a) pursuant to any Environmental Law or governmental or regulatory approval issued under any such Environmental Law, (b) from the presence, use, generation, storage, treatment, release, threatened release, disposal, remediation or other existence of any Hazardous Substance, (c) from any removal, remedial, corrective or other response action pursuant to an Environmental Law or the order of any governmental or regulatory authority or agency, (d) from any third party seeking damages, contribution, indemnification, cost recovery, compensation, injunctive or other relief in connection with a Hazardous Substance or arising from alleged injury or threat of injury to health, safety, natural resources or the environment or (e) from any Lien against any Property owned, leased or operated by Borrower or any Subsidiary in favor of any governmental or regulatory authority or agency in connection with a release, threatened release or disposal of a Hazardous Substance.

Environmental Law shall mean any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions related to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time.  References to sections of ERISA shall be construed to also refer to any successor sections.

ERISA Affiliate shall mean any corporation, trade or business that is, along with Borrower or any Subsidiary, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.

Eurodollar Business Day shall mean any Domestic Business Day on which commercial lenders are open for international business (including dealings in dollar deposits) in London.

Event of Default shall have the meaning ascribed thereto in Section 6.

Excluded Subsidiaries shall mean Weider Nutrition (WNI) Limited, Weider Nutrition BV, Weider Nutrition Italia, and Weider Nutrition GmbH.

Fed Funds Rate shall mean a rate per annum equal to U.S. Bank’s quoted rate as of the opening of business by U.S. Bank on each Domestic Business Day for purchasing overnight federal funds in the national market, which rate shall fluctuate as and when said quoted rate shall change.

Foreign Subsidiary shall mean a Subsidiary organized under the laws of a jurisdiction which is not located in the United States.

GAAP shall mean, at any time, generally accepted accounting principles at such time in the United States.

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Guarantee by any Person shall mean any obligation (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), contingent or otherwise, of such Person guaranteeing, or in effect guaranteeing, any Debt, liability, dividend or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person:  (a) to purchase such Debt or obligation or any Property constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Debt or obligation, (ii) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Debt or obligation, (iii) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner of such Debt or obligation of the ability of the primary obligor to make payment of the Debt or obligation or (iv) otherwise to assure the owner of the Debt or obligation of the primary obligor against loss in respect thereof.  For the purposes of all computations made under this Agreement, a Guarantee in respect of any Debt for borrowed money shall be deemed to be Debt equal to the then outstanding principal amount of such Debt for borrowed money which has been guaranteed or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited, and a Guarantee in respect of any other obligation or liability or any dividend shall be deemed to be Debt equal to the maximum aggregate amount of such obligation, liability or dividend or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited.  Guarantee when used as a verb shall have a correlative meaning.

Guaranties shall mean those certain guaranties of Borrower’s Obligations dated as of the date hereof executed respectively by a Guarantor other than a Subsidiary of Borrower in existence as of the date hereof as the same may from time to time be amended, and Guaranty shall mean any of them; except where the context shall otherwise require, each of “Guaranties” and “Guaranty” shall include Subsidiary Guaranties or Subsidiary Guaranty, as applicable.

Guarantor shall mean Parent and each Subsidiary of Borrower (other than the Excluded Subsidiaries), as to all of Borrower’s Obligations which as of such date such Guarantor has executed and delivered to Agent for the ratable benefit of each of the Lenders (i) its unlimited continuing guaranty in form and substance acceptable to Agent and the Lenders; and (ii) with respect to each Guarantor, its Guarantor Security Agreement in form and substance acceptable to Agent and the Lenders.

Hazardous Substance shall mean any hazardous or toxic material, substance or waste, pollutant or contaminant which is regulated under any Environmental Law or any other statute, law, ordinance, rule or regulation of any federal, state, local, foreign or other body, instrumentality, agency, authority or official having jurisdiction over any of the Property owned, leased or operated by Borrower or any Subsidiary or its use, including, without limitation, any material, substance or waste which is: (a) defined as a hazardous substance under Section 311 of the federal Water Pollution Control Act (33 U.S.C. §§1317), as amended; (b) regulated as a hazardous waste under Section 1004 or Section 3001 of the federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (42 U.S.C. §§6901 et seq.), as amended; (c) defined as a hazardous substance under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§9601 et seq.), as amended; or (d) defined or regulated as a hazardous substance or hazardous waste under any rules or regulations promulgated under any of the foregoing statutes.

Incremental Facility or Incremental Facilities shall have the meanings given in Section 2.30.

Intangible Capital Expenditures shall mean any expenditure to purchase or otherwise acquire an asset that is not classified by GAAP as a “fixed asset”, but is required to be capitalized on the balance sheet of the Person making the same.

Interest Period shall mean:

(a)           with respect to each Revolving Credit LIBOR Loan:

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(i)           initially, the period commencing on the date of such Loan and ending 1, 2, 3 or 6 months thereafter (or such other period agreed upon in writing by Borrower and each Lender), as Borrower may elect in the applicable Notice of Revolving Credit Borrowing; and

(ii)           thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such Loan and ending 1, 2, 3 or 6 months thereafter (or such other period agreed upon in writing by Borrower and each Lender), as Borrower may elect pursuant to Section 2.07(a);

provided that:

(iii)           subject to clauses (iv) and (v) below, any Interest Period which would otherwise end on a day which is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Eurodollar Business Day;

(iv)           subject to clause (v) below, any Interest Period which begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurodollar Business Day of a calendar month; and

(v)           no Interest Period shall extend beyond the last day of the Revolving Credit Period; and

Investment shall mean any investment by Borrower or any Subsidiary in any Person, whether payment therefor is made in cash or capital stock of Borrower or any Subsidiary, and whether such investment is by acquisition of stock or Debt, or by loan, advance, transfer of Property out of the ordinary course of business, capital contribution, equity or profit sharing interest or extension of credit on terms other than those normal in the ordinary course of business or otherwise.

Lender shall mean each Lender listed on the signature pages hereof, and its successors and permitted assigns; and Lenders shall mean all of the Lenders.

Lender Default shall mean (i) the failure of a Lender to fund its portion of any Loans pursuant to the terms of this Agreement or to fund its portion of any unreimbursed payment under Section 2.04(e) herein, (ii) failure of a Lender to pay Agent or any other Lender an amount owed pursuant to the terms of this Agreement, when due, or (iii) a Lender has been deemed insolvent or has become subject to a bankruptcy, receivership or insolvency proceedings, or to a receiver, trustee, or similar official.

Letter of Credit and Letters of Credit shall have the meanings ascribed thereto in Section 2.04(a).

Letter of Credit Application shall mean, collectively, the Continuing Reimbursement Agreement for Standby Letters of Credit in the form of Exhibit F attached hereto and incorporated herein by reference and an Application and Agreement for Standby Letter of Credit in the form of Exhibit G attached hereto and incorporated herein by reference (or such other forms as may then be U.S. Bank’s standard form of application and agreement for irrevocable standby letter of credit), in each case executed by Borrower, as account party, and delivered to U.S. Bank pursuant to Section 2.04, as the same may from time to time be amended, modified, extended, renewed or restated.

Letter of Credit Commitment Fee shall have the meaning ascribed thereto in Section 2.04(d).

Letter of Credit Issuance Fee shall have the meaning ascribed thereto in Section 2.04(d).

Letter of Credit Request shall have the meaning ascribed thereto in Section 2.04(a).

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LIBOR Base Rate shall mean, with respect to the applicable Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is available or (b) if the LIBOR Index Rate is not available, the average of the respective rates per annum of interest at which deposits in dollars are offered to U.S. Bank in the London interbank market by two (2) Eurodollar dealers of recognized standing, selected by U.S. Bank in its sole discretion, at or about 11:00 a.m. (London time) on the date two (2) Eurodollar Business Days before the first day of such Interest Period, for delivery on the first day of the applicable Interest Period for a number of days comparable to the number of days in such Interest Period and in an amount approximately equal to the principal amount of the LIBOR Loan to which such Interest Period is to apply.

LIBOR Index Rate shall mean, with respect to the applicable Interest Period, a rate per annum equal to the British Bankers’ Association interest settlement rates for U.S. Dollar deposits for such Interest Period as of 11:00 a.m. (London time) on the day two (2) Eurodollar Business Days before the first day of such Interest Period as published by Bloomberg Financial Services, Dow Jones Market Service, Reuters or any other service from time to time used by U.S. Bank.

LIBOR Loan shall mean any Loan or portion of any Loan bearing interest based on the LIBOR Rate.

LIBOR Rate shall mean (a) the quotient of the (i) LIBOR Base Rate divided by (ii) one minus the applicable LIBOR Reserve Percentage plus (b) the Applicable LIBOR Margin.  The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage and/or the Applicable LIBOR Margin.

LIBOR Reserve Percentage shall mean for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by The Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special or marginal reserves) for a member bank of the Federal Reserve System with respect to “Eurocurrency liabilities” as defined in Regulation D or with respect to any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR Loans is determined, whether or not any of the Lenders has any Eurocurrency liabilities subject to such reserve requirement at such time.  LIBOR Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without the benefit of any credits for proration, exceptions or offsets which may be available from time to time to any of the Lenders.  The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage.

Lien shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on common law, statute or contract, including, without limitation, any security interest, mortgage, deed of trust, pledge, hypothecation, judgment lien or other lien or encumbrance of any kind or nature whatsoever, any conditional sale or trust receipt, any lease, consignment or bailment for security purposes and any Capitalized Lease.  The term “Lien” shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property.

Loan shall mean each Revolving Credit Loan and each Swing Line Loan and Loans shall mean any or all of the foregoing.

Material Adverse Effect shall mean (a) a material adverse effect on the Properties, assets, liabilities, business, operations, prospects, income or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole, (b) material impairment of Borrower’s or any other Obligor’s ability to perform any of its obligations under this Agreement, any of the Notes, any of the Letter of Credit Applications or any of the other Transaction Documents or (c) material impairment of the enforceability

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of the rights of, or benefits available to, the Agent or any of the Lenders under this Agreement, any of the Notes, any of the Letter of Credit Applications or any of the other Transaction Documents.

Moody’s shall mean Moody’s Investors Service.

Multi-Employer Plan shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any Subsidiary or any ERISA Affiliate or to which Borrower, any Subsidiary or any ERISA Affiliate has contributed in the past or currently contributes.

Note shall mean each Revolving Credit Note and Notes shall mean all of the foregoing.

Notice of Revolving Credit Borrowing shall have the meaning ascribed thereto in Section 2.07(a).

Notice of Swing Line Borrowing shall have the meaning ascribed thereto in Section 2.07(b).

Obligor shall mean Borrower, each Guarantor and each other Person who is or shall at any time hereafter become primarily or secondarily liable on any of the Borrower’s Obligations or who grants the Agent for the ratable benefit of the Lenders a Lien upon any of the Property of such Person as security for any of the Borrower’s Obligations or any Guarantee thereof.

Occupational Safety and Health Laws shall mean the Occupational Safety and Health Act of 1970, as amended, and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety, as now or at any time hereafter in effect.

Operating Lease shall mean any lease of Property for a term not less than one year, whether real and/or personal, by a Person as lessee which is not a Capitalized Lease.

Operating Lease Expenses shall mean with respect to any Person, for the period in question, the aggregate amount of rental and other expenses incurred by such Person in respect of Operating Leases during such period, all determined in accordance with GAAP.

Parent shall mean Schiff Nutrition International, Inc. a Delaware corporation.

Patent and Trademark Security Agreement shall mean that certain Patent and Trademark Security Agreement (as contemplated by the Security Agreement) executed by Borrower or, as applicable, a Guarantor.

PBGC shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

Pension Plan shall mean a “pension plan,” as such term is defined in Section 3(2) of ERISA, which is established or maintained by Borrower, any Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.

Permitted Acquisitions shall mean any Acquisition in which the target company is in the same line of business as Borrower with a positive EBITDA, as such calculation may be adjusted with approval of Agent, on a trailing four-quarter basis, the Acquisition is non-hostile, and either (a) in the event Total Revolving Credit Outstandings exceed Zero dollars ($0.00) or in the event a Loan is needed to fund the Acquisition, the cash portion of the purchase price for the Acquisition does not exceed $25,000,000 or (b) in the event Total Revolving Credits Outstanding equal Zero dollars ($0.00) and no Loan is needed to fund the Acquisition, the cash portion of the Acquisition does not exceed $50,000,000.  

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Furthermore, in either circumstance of (a) or (b) set forth above, (i) the purchase price of the Acquisition, when added to all previous Permitted Acquisitions, shall not aggregate to an amount greater than $50,000,000, (ii) after giving effect to the Acquisition, the Consolidated Total Leverage Ratio shall not be greater than 2.50 to 1.00, (iii) no later than ten (10) days prior to the consummation of the Acquisition, Borrower has provided Agent with pro forma financial statements giving effect to the Acquisition, which demonstrate compliance with the foregoing Consolidated Total Leverage Ratio of 2.50 to 1.00 and continued compliance with the covenants set forth in Section 5.02(o), (iv) the Borrower or a Subsidiary is the surviving entity, and (v) the Acquisition would not otherwise result in an Event of Default.

Permitted Distribution shall mean a Distribution made if (i) after giving effect thereto, the Consolidated Total Leverage Ratio does not exceed 1.00 to 1.00, (ii) no later than ten Domestic Business Days prior to the Distribution, Borrower has provided to Agent with pro forma financial statements giving effect to the Distribution which demonstrates compliance with the foregoing Consolidated Total Leverage Ratio of no greater than 1.00 to 1.00 and continued compliance with the covenants set forth in Section 5.02(o), and (iii) the Distribution would not otherwise result in an Event of Default.

Permitted Liens shall mean any of the following:

(a)           Liens on Property of a Subsidiary to secure obligations of such Subsidiary to Borrower;

(b)           Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 5.01(d) and/or 5.01(e);

(c)           Liens (other than any Liens imposed by ERISA) incidental to the conduct of business or the ownership of Properties and assets (including Liens in connection with worker’s compensation, unemployment insurance and other like laws, warehousemen’s and attorneys’ liens and statutory landlords’ liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money or the purchase or other acquisition of Property; provided in each case the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings being diligently conducted and for which adequate reserves in accordance with GAAP have been established;

(d)           minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary or desirable for the conduct of the activities of Borrower and its Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair the use of such real properties in the operation of the business of Borrower and its Subsidiaries;

(e)           Liens existing as of the date of this Agreement and listed on Schedule 4.12 attached hereto;

(f)           Liens in respect of Capitalized Leases;

(g)           Liens in respect of judgments with respect to which no Event of Default would exist pursuant to Section 6.18 provided the Borrower or Subsidiary against which any such pending non-appealed unsatisfied judgment is entered maintains a reserve, bond or other surety in form and substance reasonably satisfactory to the Required Lenders in the amount of each such judgment;

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(h)           leases (of real or personal property), subleases or licenses granted to others which do not interfere in any material respect with the business of Borrower and its Subsidiaries taken as a whole;

(i)           Liens in favor of the Agent and the Lenders;

(j)           other Liens not described in this definition of Permitted Liens in an amount not to exceed $10,000,000 in the aggregate;

(k)           extensions and renewals of the foregoing Permitted Liens, provided that the aggregate amount of such extended or renewed Liens is not increased and such extended or renewed Liens are on terms and conditions no more restrictive than the terms and conditions of the Liens being extended or renewed; and

(l)           such other Liens as the Required Lenders may approve in writing.

Person shall mean any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, association, corporation, institution, entity or government (whether national, federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

Prime Rate shall mean the interest rate announced from time to time by U.S. Bank as its “prime rate” on commercial loans (which rate shall fluctuate as and when said prime rate shall change).  Borrower acknowledges that such “prime rate” is a reference rate and does not necessarily represent the lowest or best rate offered by U.S. Bank or any other Lender to its customers.

Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Properties shall mean the plural of Property.  For purposes of this Agreement, Borrower and each Subsidiary shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

Pro Rata Share shall mean for the item at issue, with respect to each Lender, a percentage, the numerator of which is the portion of such item owned or held by such Lender and the denominator of which is the total amount of such item owned or held by all of the Lenders.

Regulation D shall mean Regulation D of the Board of Governors of the Federal Reserve System, as from time to time amended.

Regulatory Change shall have the meaning ascribed thereto in Section 2.21.

Reportable Event shall have the meaning given to such term in ERISA.

Required Lenders shall mean:

(a) except as provided in (b), Lenders having more than Fifty Percent (50.0%) of the aggregate amount of Loans (other than Swing Line Loans) then outstanding or, if no Loans are then outstanding, then more than Fifty Percent (50.0%) of the total Revolving Credit Commitments of all of the Lenders; provided, however, that if there are three or fewer Lenders, Required Lenders shall mean all of the Lenders, and

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(b) all of the Lenders with respect to any amendment or waiver that (a) reduces the principal amount of or rate of interest on any Loan or any fees under this Agreement, (b) postpones the date fixed for any payment of principal of or interest on any Loan or any fees under this Agreement, (c) changes the definition of “Required Lenders” or other provisions in this Agreement that make reference to the rights of Required Lenders, (d) voluntarily releases or subordinates any Collateral (except as may be expressly contemplated by the Transaction Documents), (e) voluntarily releases any Obligor, (f) amends Section 2.26, (k) amends Section 2.28, or (g) amends Section 8.10.

Responsible Officer, with respect to Borrower or any of its Subsidiaries, means any individual holding the following one or more of the following offices: president, chief executive officer, chief operational officer, or chief financial officer.

Restricted Investment shall mean any Investment, or any expenditure or any incurrence of any liability to make any expenditure for an Investment, other than:

(a)           loans and/or advances by any Subsidiary to Borrower which are subordinated in writing to the payment of the Borrower’s Obligations in form and substance satisfactory to the Required Lenders;

(b)           direct obligations of the United States of America or any instrumentality or agency thereof, the payment of which is unconditionally guaranteed by the United States of America or any instrumentality or agency thereof (all of which Investments must mature within thirty-six (36) months from the time of acquisition thereof);

(c)           Investments in readily marketable commercial paper which, at the time of acquisition thereof by Borrower or any Subsidiary, is rated A-1 or better by S&P and P-1 or better by Moody’s and which matures within 270 days from the date of acquisition thereof, provided that the issuer of such commercial paper shall, at the time of acquisition of such commercial paper, have a senior long-term debt rating of at least A by S&P and Moody’s;

(d)           negotiable certificates of deposit or negotiable bankers acceptances issued by any Lender or any other bank or trust company organized under the laws of the United States of America or any state thereof, which bank or trust company (other than the Lenders to which such restrictions shall not apply) is a member of both the Federal Deposit Insurance Corporation and the Federal Reserve System and has a Fitch Rating of “B” or better (all of which Investments must mature within thirty-six (36) months from the time of acquisition thereof);

(e)           repurchase agreements, which shall be collateralized for at least 102% of face value, issued by any Lender or any other bank or trust company organized under the laws of the United States or any state thereof, which bank or trust company (other than the Lenders to which such restrictions shall not apply) is a member of both the Federal Deposit Insurance Corporation and the Federal Reserve System and has a Fitch Rating of “B” or better (all of which Investments must mature within thirty-six (36) months from the time of acquisition thereof);

(f)           Investments existing as of the date hereof as described in Schedule 4.18 attached hereto, and any future retained earnings in respect thereof;

(g)           Investments of the type described on Schedule 5.02(k) attached hereto;

(h)           Permitted Acquisitions;

(i)           loans and advances to employees of Borrower made in the ordinary course of business not to exceed $100,000 in any individual case and $500,000 in the aggregate; and

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(j)           such other Investments as the Required Lenders may approve in writing.

Revolving Credit ABR Loan shall mean any Revolving Credit Loan bearing interest based on the Adjusted Base Rate.

Revolving Credit Commitment shall mean, subject to any reduction of the Revolving Credit Commitments pursuant to Section 2.01 and to any assignments of the Revolving Credit Commitments by the Lenders to the extent permitted by Section 8.12, with respect to each Lender, its then Pro Rata Share of an aggregate maximum principal amount equal to $80,000,000.

Revolving Credit LIBOR Loan shall mean any Revolving Credit Loan bearing interest based on the LIBOR Rate.

Revolving Credit Loan and Revolving Credit Loans shall have the meanings ascribed thereto in Section 2.01.

Revolving Credit Notes shall have the meaning ascribed thereto in Section 2.08(a).

Revolving Credit Period shall mean the period commencing on the date of this Agreement and ending on the Revolving Maturity Date.

Revolving Maturity Date shall mean August 18, 2012.

S&P shall mean Standard and Poor’s Ratings Group.

Security Agreement shall mean that certain Security Agreement dated the date hereof and executed by Borrower, Parent and each subsidiary of Borrower in existence as of the date hereof (other than Excluded Subsidiaries), together with any subsidiary created or acquired subsequent to the date of this Agreement, which pursuant to Section 5.02(m), has executed a joinder thereto, in favor of the Agent for the benefit of each of the Lenders, as the same may from time to time be amended, modified, extended, renewed or restated.

Subsidiary shall mean any corporation or other entity of which more than Fifty Percent (50%) of the issued and outstanding capital stock or other equity interests entitled to vote for the election of directors or persons performing similar functions (other than by reason of default in the payment of dividends or other distributions) is at the time owned directly or indirectly by Borrower and/or any Subsidiary.

Subsidiary Guaranties shall mean those certain guaranties of Borrower’s Obligations dated as of the date hereof executed respectively by Borrower’s Subsidiaries in existence as of the date hereof (other than the Excluded Subsidiaries) and the guaranties of any subsequently created or acquired Subsidiary of Borrower executed and delivered to Agent hereafter pursuant to Section 5.02(m), all as the same may from time to time be amended, and Subsidiary Guaranty shall mean any of them.

Swing Line Facility shall mean $5,000,000.

Swing Line Loan and Swing Line Loans shall have the meanings ascribed thereto in Section 2.02.

Swing Line Note shall have the meaning ascribed thereto in Section 2.08(b).

Tangible Net Worth shall meanthe sum of the following: capital, capital surplus and retained earning, less the sum of the value on the Borrower’s books of all intangible assets including but not limited to: goodwill, patents, franchises, trademarks, copyrights and the write-up in the book value of any assets resulting therefrom after acquisition.

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Total Revolving Credit Outstandings shall mean, as of any date, the sum of (a) the aggregate principal amount of all Revolving Credit Loans outstanding as of such date, plus (b) the aggregate principal amount of all Swing Line Loans outstanding as of such date plus (c) the aggregate undrawn face amount of all Letters of Credit outstanding as of such date plus all unreimbursed drawings with respect thereto.

Transaction Documents shall mean this Agreement, the Notes, the Letter of Credit Applications, the Security Agreement, The Copyright Security Agreement, Patent and Trademark Security Agreement, the Trust Deeds, the Subsidiary Guaranties, the Guaranties, the subordination agreements signed on behalf of Agent or Lenders and any and all other agreements, documents and instruments heretofore, now or hereafter delivered to the Agent or any of the Lenders with respect to or in connection with or pursuant to this Agreement, any Loans made hereunder, any Letters of Credit issued hereunder, any of the other Borrower’s Obligations and/or any Guarantee of any or all of the Borrower’s Obligations, and executed by or on behalf of Borrower and/or any other Obligor, including, without limitation, any agreement, document or instrument heretofore, now or hereafter executed by Borrower with or in favor of the Agent or any Lender (or any affiliate of any Lender) providing for any interest rate swap, interest rate cap, interest rate collar or other interest rate hedge, all as the same may from time to time be amended, modified, extended, renewed or restated.

Trust Deeds shall mean the trust deeds or mortgages executed in favor of Agent encumbering the real property listed on Schedule 1.01(b) attached hereto and incorporated herein.

United States shall mean the United States of America.

U.S. Bank shall mean U.S. Bank National Association, in its individual corporate capacity as a Lender hereunder and not as Agent hereunder.

Unused Commitment Amount shall have the meaning ascribed thereto in Section 2.12.

Unused Commitment Fee shall have the meaning ascribed thereto in Section 2.12.

Voting Stock shall mean, with respect to any corporation, any shares of stock of such corporation whose holders are entitled under ordinary circumstances to vote for the election of directors of such corporation (irrespective of whether at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

Welfare Plan shall mean a “welfare plan” as such term is defined in Section 3(1) of ERISA, which is established or maintained by Borrower, any Subsidiary or any ERISA Affiliate, other than a Multi-Employer Plan.

1.02Accounting Terms and Determinations.  Except as otherwise specified in this Agreement, all accounting terms used in this Agreement shall be interpreted, all accounting determinations under this Agreement shall be made and all financial statements required to be delivered under this Agreement shall be prepared in accordance with GAAP as in effect from time to time, applied on consistent basis (except for changes approved by the Required Lenders and by Borrower’s independent certified public accountants).

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Section 2.                      THE LOANS.

2.01Revolving Credit Commitment.

 Subject to the terms and conditions set forth in this Agreement and so long as no Default or Event of Default has occurred and is continuing, during the Revolving Credit Period, each Lender severally agrees to make such loans to Borrower (individually, an “Revolving Credit Loan” and collectively, the “Revolving Credit Loans”) as Borrower may from time to time request pursuant to Section 2.07.  Each Revolving Credit Loan under this Section 2.01 which is a Revolving Credit LIBOR Loan shall be for an aggregate principal amount of at least $1,000,000 or any larger multiple of $100,000.  Each Revolving Credit Loan under this Section 2.01 which is a Revolving Credit ABR Loan shall be for an aggregate principal amount of at least $100,000 or any larger multiple of $25,000.

The aggregate principal amount of Revolving Credit Loans that each Lender shall be required to have outstanding under this Agreement as of any date shall not exceed the product of (i) a percentage equal to such Lender’s Pro Rata Share of the total Revolving Credit Commitments of all of the Lenders multiplied by (ii) the sum of (A) the total Revolving Credit Commitments of all of the Lenders as of such date, minus (B) the aggregate principal amount of Swing Line Loans outstanding as of such date minus (C) the aggregate undrawn face amount of all Letters of Credit outstanding as of such date plus all unreimbursed drawings with respect thereto; provided, however, that in no event shall (i) the Total  Revolving Credit Outstandings as of any date exceed the total Revolving Credit Commitments of all of the Lenders as of such date or (ii) the sum of (A) the aggregate principal amount of all outstanding Revolving Credit Loans made by any Lender plus (B) such Lender’s Pro Rata Share of the aggregate outstanding Swing Line Loans plus (B) such Lender’s Pro Rata Share of the aggregate undrawn face amount of all outstanding Letters of Credit plus all unreimbursed drawings with respect thereto exceed the amount of such Lender’s Revolving Credit Commitment.  Each Revolving Credit Loan under this Section 2.01 shall be made from the several Lenders ratably in proportion to their respective Pro Rata Shares.  Within the foregoing limits, Borrower may borrow under this Section 2.01, prepay under Section 2.14 and reborrow at any time during the Revolving Credit Period under this Section 2.01.  All  Revolving Credit Loans not paid prior to the last day of the Revolving Credit Period, together with all accrued and unpaid interest thereon and all fees and other amounts owing by Borrower to the Agent and/or the Lenders with respect thereto, shall be due and payable on the last day of the Revolving Credit Period.  The failure of any Lender to make any Revolving Credit Loan required under this Agreement shall not release any other Lender from its obligation to make Revolving Credit Loans as provided herein.

If the total Revolving Credit Commitments of all of the Lenders on any date should be less than the Total Revolving Credit Outstandings on such date, whether as a result of Borrower’s election to decrease the amount of the Revolving Credit Commitments of the Lenders pursuant to following paragraph or otherwise, Borrower shall be automatically required (without demand or notice of any kind by the Agent or any Lender, all of which are hereby expressly waived by Borrower) to immediately repay the Revolving Credit Loans and/or the Swing Line Loans and/or surrender for cancellation the outstanding Letters of Credit, in either case in an amount sufficient to reduce the amount of the Total Revolving Credit Outstandings to an amount equal to or less than the total Revolving Credit Commitments of all of the Lenders.

Borrower may, upon three (3) Domestic Business Days’ prior written notice to the Agent and each Lender, terminate entirely at any time, or proportionately reduce from time to time on a pro rata basis among the Lenders based on their respective Pro Rata Shares by an aggregate amount of $500,000 or any larger multiple of $25,000 the unused portions of the Revolving Credit Commitments; provided, however, that (i) at no time shall the Revolving Credit Commitments be reduced to a figure less than the Total Revolving Credit Outstandings, (ii) at no time shall the Revolving Credit Commitments be reduced to a figure not less than $25,000,000 and (iii) any such termination or reduction shall be permanent and Borrower shall have no right to thereafter reinstate or increase, as the case may be, the Revolving Credit Commitment of any Lender.

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2.02Discretionary Swing Line Facility.  Subject to the terms and conditions set forth in this Agreement and so long as no Default or Event of Default has occurred and is continuing (provided, however, that U.S. Bank shall have no liability to any other Lender for making a Swing Line Loan to Borrower after the occurrence or during the continuance of any Default or Event of Default unless U.S. Bank has previously received notice in writing from Borrower or any other Lender of the occurrence of such Default or Event of Default), during the Revolving Credit Period, U.S. Bank, in its sole discretion, may make such loans to Borrower (individually, a “Swing Line Loan” and collectively, the “Swing Line Loans”) as Borrower may from time to time request or otherwise authorize pursuant to Section 2.07.  Each Swing Line Loan under this Section 2.02, if permitted, shall be for an aggregate principal amount of at least $100,000 or any larger multiple of $10,000.  The aggregate principal amount of Swing Line Loans which U.S. Bank may permit to have outstanding under this Agreement as of any date shall not exceed the amount of the Swing Line Facility as of such date; provided, however, that in no event shall the Total Revolving Credit Outstandings on any given day exceed the total Revolving Credit Commitments of all of the Lender(s) on such day.  Within the foregoing limits and subject to U.S. Bank’s discretion, Borrower may borrow under this Section 2.02, prepay under Section 2.14 and reborrow at any time during the Revolving Credit Period under this Section 2.02.  All Swing Line Loans not paid prior to the last day of the Revolving Credit Period, together with all accrued and unpaid interest thereon and all fees and other amounts owing by Borrower to U.S. Bank with respect thereto, shall be due and payable on the last day of the Revolving Credit Period.

2.03[Reserved]

2.04Letter of Credit Commitment.

(a)Subject to the terms and conditions of this Agreement and so long as no Default or Event of Default has occurred and is continuing (provided, however, that U.S. Bank shall have no liability to any other Lender for issuing a Letter of Credit after the occurrence or during the continuance of any Default or Event of Default unless U.S. Bank has previously received notice in writing from Borrower or any other Lender of the occurrence of such Default or Event of Default), during the Revolving Credit Period, U.S. Bank hereby agrees to issue irrevocable standby letters of credit for the account of Borrower (individually, a “Letter of Credit” and collectively, the “Letters of Credit”) in an amount and for the term specifically requested by Borrower by notice in writing to U.S. Bank in the form of Exhibit I attached hereto and incorporated herein by reference (a “Letter of Credit Request”) at least five (5) Domestic Business Days prior to the requested issuance thereof; provided, however, that:

(i)Borrower shall have executed and delivered to U.S. Bank a Letter of Credit Application with respect to such Letter of Credit;

(ii)the term of any such Letter of Credit shall not extend beyond the earlier of (A) the date one (1) year after the date of issuance thereof or (B) the last day of the Revolving Credit Period;

(iii)any Letter of Credit may only be utilized to guaranty the payment of obligations of Borrower or a Subsidiary to third parties;

(iv)after giving effect to the issuance of the requested Letter of Credit, the sum of the aggregate undrawn face amount of all outstanding Letters of Credit does not exceed $10,000,000;

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(v)after giving effect to the issuance of the requested Letter of Credit, the sum of the aggregate undrawn face amount of all outstanding Letters of Credit plus all unreimbursed drawings with respect thereto must not exceed the lesser of the difference between (1) the total Revolving Credit Commitments of all of the Lenders at such time and (2) the sum of the outstanding principal amount of all Revolving Credit Loans and the outstanding principal amount of all Swing Line Loans at such time; and

(vi)the text of any such Letter of Credit is provided to U.S. Bank no less than five (5) Domestic Business Days prior to the requested issuance date, which text must be acceptable to U.S. Bank in its sole and absolute discretion.

(b)The payment of drafts under each Letter of Credit shall be made in accordance with the terms thereof and, in that connection, U.S. Bank shall be entitled to honor any drafts and accept any documents presented to it by the beneficiary of such Letter of Credit in accordance with the terms of such Letter of Credit and believed in good faith by U.S. Bank to be genuine.  U.S. Bank shall not have any duty to inquire as to the accuracy or authenticity of any draft or other drawing document that may be presented to it other than the duties contemplated by the applicable Letter of Credit Application.  If U.S. Bank shall have received documents that in its good faith judgment constitute all of the documents that are required to be presented before payment or acceptance of a draft under a Letter of Credit, it shall be entitled to pay or accept such draft provided such documents conform on their face to the requirements of such Letter of Credit in all material respects.

(c)In the event of any payment by U.S. Bank of a draft presented under a Letter of Credit, Borrower agrees to pay to U.S. Bank in immediately available funds at the time of such drawing an amount equal to the sum of such drawing plus U.S. Bank’s customary published negotiation, processing and other fees related thereto.  Borrower hereby authorizes U.S. Bank to charge or cause to be charged each Borrower’s bank accounts at U.S. Bank to the extent there are balances of immediately available funds therein, in an amount equal to the sum of such drawing plus U.S. Bank’s customary published negotiation, processing and other fees related thereto (and U.S. Bank agrees to give such Borrower prompt written notice of any amount so charged to any Lender account of Borrower at U.S. Bank), and Borrower agrees to pay the amount of any such drawing (and/or U.S. Bank’s customary published negotiation, processing and other fees related thereto) not so charged prior to the close of business of U.S. Bank on the day of such drawing.  In the event any payment under a Letter of Credit is made by U.S. Bank prior to receipt of payment from Borrower, such payment by U.S. Bank shall constitute a request by Borrower for a Revolving Credit Loan under Section 2.01 above (and the Lenders will make such Revolving Credit Loan to Borrower regardless of whether any Default or Event of Default under this Agreement has occurred and is continuing and regardless of whether such  Revolving Credit Loan would otherwise be permitted under the requirements of Sections 2.01 of this Agreement) and the proceeds of such Revolving Credit Loan shall be paid directly to U.S. Bank and applied by U.S. Bank to the payment of any amounts owed by Borrower to U.S. Bank under this Section 2.04.

(d)Borrower hereby further agrees to pay to the order of U.S. Bank:

(i)with respect to each Letter of Credit, (whether standby or commercial) an issuance fee and, if applicable, annual renewal fee in an amount equal to One-Eighth of One Percent (1/8%), calculated on an actual day, 360-day year basis (the “Letter of Credit Issuance Fees”), which Letter of Credit Issuance Fees shall be due and payable on the date of issuance of each such Letter of Credit and, if applicable, on each annual renewal of any such Letter of Credit;

(ii)with respect to each Letter of Credit which is a standby Letter of Credit, a nonrefundable commitment fee at a rate per annum equal to Applicable Standby Letter of Credit Commitment Fee Rate (calculated on an actual day, 360-day year basis) on the face amount of each such Letter of Credit (“Letter of Credit Commitment Fee”), which Letter of Credit Commitment Fee shall be due and payable quarterly in arrears; and

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(iii)with respect to each Letter of Credit, such other fees as may be charged by U.S. Bank from time to time in accordance with U.S. Bank’s published schedule of fees in effect from time to time, which fees shall be due and payable on demand by U.S. Bank.

(e)Upon the issuance of a Letter of Credit by U.S. Bank, an undivided participation interest therein (including, without limitation, an undivided participation interest in the reimbursement risk relating to such Letter of Credit, in all payments made by U.S. Bank in connection with such Letter of Credit and in all collateral for such Letter of Credit) shall automatically be granted by U.S. Bank to and accepted by each of the other Lenders in an amount equal to each such other Lender’s Pro Rata Share (based on such other Lender’s Revolving Credit Commitments) of the face amount of such Letter of Credit.  If U.S. Bank shall make payment on any draft presented or accepted under a Letter of Credit, U.S. Bank shall give notice of such payment to the other Lenders, and each of the other Lenders hereby authorizes and requests U.S. Bank to advance for their respective accounts, pursuant to the terms hereof, their respective shares of any such payment based upon their respective Pro Rata Shares of such Letter of Credit.  If such drawing is not paid by Borrower in immediately available funds prior to the close of business of U.S. Bank on the date of such drawing, U.S. Bank shall promptly so notify the other Lenders and each of the other Lenders agrees to immediately reimburse U.S. Bank in immediately available funds for its Pro Rata Share of the amount of such drawing, plus interest calculated on its Pro Rata Share of such amount at a rate per annum equal to the Fed Funds Rate calculated from the date of such payment by U.S. Bank to but excluding the date of reimbursement by such other Lender and on an actual-day, 360-day year basis.  Each of the other Lenders will be entitled to its Pro Rata Share of any Letter of Credit Commitment Fees paid by Borrower, but such other Lenders shall have no right to share in any Letter of Credit Issuance Fees or any other fees paid by Borrower to U.S. Bank in connection with any of the Letters of Credit.

(f)Notwithstanding any provision contained in this Agreement or any of the Letter of Credit Applications to the contrary:  (i) if any of the Letters of Credit remain outstanding on the Revolving Maturity Date, Borrower shall, on or before 12:00 noon (Salt Lake City time) on the Revolving Maturity Date, (A) surrender the originals of the applicable Letter(s) of Credit to U.S. Bank for cancellation or (B) provide U.S. Bank with cash collateral (or other collateral acceptable to each Lender in its sole and absolute discretion) in an amount at least equal to One Hundred Five Percent (105%) of the aggregate undrawn face amount of all Letter(s) of Credit which remain outstanding at such time plus all unreimbursed drawings with respect thereto and execute and deliver to U.S. Bank such agreements as the Required Lenders may require to grant U.S. Bank a first priority perfected security interest in such cash or other collateral; and (ii) upon the occurrence of any Event of Default under this Agreement (including, without limitation, Borrower’s failure to comply with the requirements of clause (i) above), at U.S. Bank’s option (and with the consent of the Required Lenders) and without demand or further notice to Borrower, an amount equal to the aggregate undrawn face amount of all Letter(s) of Credit then outstanding plus all unreimbursed drawings with respect thereto shall be deemed (as between Borrower and the Agent and the Lenders) to have been paid or disbursed by U.S. Bank under such Letter(s) of Credit) (notwithstanding that such amounts may not in fact have been so paid or disbursed by U.S. Bank), and a Revolving Credit Loan to Borrower in such amount to have been made and accepted by Borrower, which Revolving Credit Loan shall be immediately due and payable.  Any such collateral and/or any amounts received by U.S. Bank in payment of the Revolving Credit Loan made pursuant to this Section 2.04(f) shall be held by U.S. Bank in a separate account at U.S. Bank appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and retained by U.S. Bank as collateral security for the payment of the Borrower’s Obligations.  Cash amounts delivered to U.S. Bank pursuant to the foregoing requirements of this Section 2.04(f) shall be invested, at the request and for the account of Borrower, in investments of a type and nature and with a term acceptable to the Required Lenders.  Such amounts, including in

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the case of cash amounts invested in the manner set forth above, shall not be used by U.S. Bank to pay any amounts drawn or paid under or pursuant to any Letter of Credit, but may be applied to reimburse U.S. Bank for drawings or payments under or pursuant to such Letters of Credit which U.S. Bank has paid, or if no such reimbursement is required to the payment of such of the other Borrower’s Obligations as the Required Lenders shall determine.  Any amounts remaining in any cash collateral account established pursuant to this Section 2.04(f) after the payment in full of all of the Borrower’s Obligations and the expiration or cancellation of all of the Letters of Credit shall be returned to Borrower (after deduction of U.S. Bank reasonable expenses, if any).

2.05[Reserved].

2.06[Reserved].

2.07Method of Borrowing – Revolving Credit Loans; Swing Line Loans.

(a)Borrower shall give notice (a “Notice of Revolving Credit Borrowing”), which, in the instance of a Revolving Credit LIBOR Loan, must be in writing) to the Agent by 12:00 noon (Salt Lake City time) on the Domestic Business Day of each Revolving Credit ABR Loan to be made to Borrower, and by 12:00 noon (Salt Lake City Time) at least three (3) Eurodollar Business Days before each Revolving Credit LIBOR Loan to be made to Borrower, specifying:

(i)the date of such Revolving Credit Loan, which shall be a Domestic Business Day in the case of a Revolving Credit ABR Loan and a Eurodollar Business Day in the case of a Revolving Credit LIBOR Loan,

(ii)the aggregate principal amount of such Revolving Credit Loan,

(iii)whether such Revolving Credit Loan is to be a Revolving Credit ABR Loan or a Revolving Credit LIBOR Loan,

(iv)in the case of a Revolving Credit LIBOR Loan, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.

(b)Borrower shall give notice (a “Notice of Swing Line Borrowing”) to U.S. Bank by 12:00 noon (Salt Lake City time) on the Domestic Business Day of each Swing Line Loan, specifying:

(i)the date of such Swing Line Loan, which shall be a Domestic Business Day, and

(ii)the principal amount of such Swing Line Loan.

(c)Upon receipt of a Notice of Revolving Credit Borrowing given to it, the Agent shall notify each Lender by 12:00 noon (Salt Lake City time) on the date of receipt of such Notice of Revolving Credit Borrowing by the Agent (which must be a Domestic Business Day) of the contents thereof and of such Lender’s Pro Rata Share of such Revolving Credit Loan.  A Notice of Borrowing shall not be revocable by Borrower.

(d)Not later than 2:00 p.m. (Salt Lake City time) on the date of each Revolving Credit Loan, each Lender shall make available its Pro Rata Share of such Revolving Credit Loan, in immediately available funds in Salt Lake City, Utah, to the Agent at its address specified in or pursuant to Section 8.07.  Unless the Agent determines that any applicable condition specified in Section 3 has not been satisfied, the Agent will make the funds so received from the Lenders available to Borrower by 3:00 p.m. (Salt Lake City time) by crediting such funds to a demand deposit account of Borrower at U.S. Bank specified by Borrower (or such other account mutually agreed upon in writing between the Agent and  

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Borrower). The Agent shall not be required to make any amount available to Borrower hereunder except to the extent the Agent shall have received such amounts from the Lenders as set forth herein, provided, however, that unless the Agent shall have been notified by a Lender prior to the time a Revolving Credit Loan is to be made hereunder that such Lender does not intend to make its Pro Rata Share of such Revolving Credit Loan available to the Agent, the Agent may assume that such Lender has made such Pro Rata Share available to the Agent prior to such time, and the Agent may in reliance upon such assumption make available to Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Agent by such Lender and the Agent has made such amount available to Borrower, the Agent shall be entitled to receive such amount from such Lender forthwith upon its demand, together with interest thereon in respect of each day during the period from and including the date such amount was made available to Borrower to but excluding the date the Agent recovers such amount from such Lender at a rate per annum equal to the Fed Funds Rate.

(e)Unless U.S. Bank determines that any applicable condition specified in Section 3 has not been satisfied, U.S. Bank will make the proceeds of each Swing Line Loan available to Borrower by 3:00 p.m. (Salt Lake City time) by crediting such funds to a demand deposit account at U.S. Bank specified by Borrower (or such other account mutually agreed upon in writing between U.S. Bank and Borrower). Borrower and U.S. Bank anticipate that through a treasury management services agreement and related agreements, Borrower will request and authorize U.S. Bank (A) to apply any collected balances (after funding advances) in excess of a mutually predetermined amount (the “Target Balance”) remaining at the end of any day in Borrower’s designated operating account to the repayment of the principal balance of Borrower’s Obligations outstanding as Swing Line Loans under the Swing Line Note and (B) in U.S. Bank’s sole and absolute discretion, to make a Swing Line Loan to Borrower hereunder on any Domestic Business Day where at the end of the prior Domestic Business Day, Borrower shall have an overdraft (negative ledger balance) or a balance otherwise less than the Target Balance in such operating account (a “Deficiency Amount”) with U.S. Bank after crediting all deposits received in immediately available funds and debiting all withdrawals made and checks presented against such operating account and honored by U.S. Bank as of such date, which Swing Line Loan shall be in the amount of the Deficiency Amount, without any other request or authorization therefore from Borrower and without notice to Borrower.  A Notice of Swing Line Borrowing shall not be required in connection with a Swing Line Loan made to cover any Deficiency Amount in Borrower’s operating account as set forth in the preceding sentence.

(f)If any Lender makes a new Revolving Credit Loan to Borrower hereunder on a day on which Borrower is required to or has elected to repay all or any part of an outstanding Revolving Credit Loan to Borrower from such Lender, such Lender shall apply the proceeds of its new Revolving Credit Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Agent as provided in subsection (d) of this Section, or remitted by Borrower to the Agent as provided in Section 2.16, as the case may be.

(g)If U.S. Bank makes a new Swing Line Loan to Borrower hereunder on a day on which Borrower is required to or has elected to repay all or any part of an outstanding Swing Line Loan to Borrower from U.S. Bank, U.S. Bank shall apply the proceeds of its new Swing Line Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by U.S. Bank to Borrower as provided in subsection (e) of this Section, or remitted by Borrower to U.S. Bank as provided in Section 2.16, as the case may be.

(h)Borrower hereby irrevocably authorizes the Agent to rely on telephonic, telegraphic, telecopy, telex or written instructions of any person identifying himself or herself as an Authorized Person listed on Schedule 2.04 attached hereto with respect to any request to make a

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Revolving Credit Loan, a Swing Line Loan or a repayment hereunder, and on any signature which the Agent believes to be genuine, and Borrower shall be bound thereby in the same manner as if such individual were actually authorized or such signature were genuine.  Borrower also agrees that each Authorized Person is authorized to execute notices, documentation and agreements in the name of Borrower, with such notice, document and agreement to be binding on Borrower whether such Authorized Person is an officer, or, if applicable, a manger of such Borrower.  Borrower also hereby agrees to defend and indemnify the Agent and each Lender and hold the Agent and each Lender harmless from and against any and all claims, demands, damages, liabilities, losses, costs and expenses (including, without limitation, Attorneys’ Fees and expenses) relating to or arising out of or in connection with the acceptance of instructions purportedly given by any Authorized Person for making Revolving Credit Loans, Swing Line Loans or repayments hereunder.

2.08Notes.

(a)The Revolving Credit Loans of each Lender to Borrower shall be evidenced, respectively, by a Revolving Credit Note of Borrower payable to the order of such Lender in principal amounts equal to the amount of such Lender’s Revolving Credit Commitment, each shall be in substantially the form of Exhibit B attached hereto and incorporated herein by reference with appropriate insertions (the “Revolving Credit Note” and, collectively, as the same may from time to time be amended, modified, extended, renewed, restated or replaced (including, without limitation, any Revolving Credit Note issued in full or partial replacement as a result of an assignment by a Lender), the “Revolving Credit Notes”).

(b)The Swing Line Loans of U.S. Bank to Borrower shall be evidenced by a Swing Line Note of Borrower payable to the order of U.S. Bank in a principal amount equal to the amount of the Swing Line Commitment, which Swing Line Note shall be in substantially the form of Exhibit C attached hereto and incorporated herein by reference (with appropriate insertions) (as the same may from time to time be amended, modified extended, renewed or restated, the “Swing Line Note”).

(c)Each Lender shall record in its books and records the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal and/or interest made by Borrower with respect thereto; provided, however, that the obligation of Borrower to repay each Loan made to Borrower under this Agreement shall be absolute and unconditional, notwithstanding any failure of such Lender to make any such recordation or any mistake by such Lender in connection with any such recordation.  The books and records of each Lender showing the account between such Lender and Borrower shall be, to the extent they are made in accordance with the terms of the Transaction Documents, conclusive evidence of the items set forth therein in the absence of demonstrable error.

2.09Duration of Interest Periods and Selection of Interest Rates.

  The duration of the initial Interest Period for each Revolving Credit LIBOR Loan shall be as specified in the applicable Notice of Revolving Credit Borrowing.  Borrower shall elect the duration of each subsequent Interest Period applicable to such Revolving Credit LIBOR Loan and the interest rate to be applicable during such subsequent Interest Period (and Borrower shall have the option (i) in the case of any Revolving Credit ABR Loan, to elect that such Revolving Credit Loan become a Revolving Credit LIBOR Loan and the Interest Period to be applicable thereto, and (ii) in the case of any Revolving Credit LIBOR Loan, to elect that such Revolving Credit LIBOR Loan become a Revolving Credit ABR Loan), by giving notice of such election to the Agent by 12:00 noon (Salt Lake City time) on the Domestic Business Day of, in the case of the election of the Adjusted Base Rate, and by 12:00 noon (Salt Lake City time) at least three (3) Eurodollar Business Days before, in the case of the election of the LIBOR Rate, the end of the immediately preceding Interest Period applicable thereto, if any; provided, however, that notwithstanding the foregoing, in addition to and without limiting the rights and remedies of the Agent and the Lenders under

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Section 6 hereof, so long as any Default or Event of Default under this Agreement has occurred and is continuing, Borrower shall not be permitted to renew any Revolving Credit LIBOR Loan as a Revolving Credit LIBOR Loan or to convert any Revolving Credit ABR Loan into a Revolving Credit LIBOR Loan.  Upon receipt of any such notice given by Borrower to the Agent under this Section 2.09, the Agent shall notify each Lender by 1:00 p.m. (Salt Lake City time) on the date of receipt of such notice (which must be a Domestic Business Day) of the contents thereof.  If the Agent does not receive a notice of election for a Revolving Credit LIBOR Loan pursuant to this Section 2.09 within the applicable time limits specified herein, Borrower shall be deemed to have elected to pay such Revolving Credit LIBOR Loan in whole pursuant to Section 2.14 on the last day of the current Interest Period with respect thereto and to reborrow the principal amount of such Revolving Credit LIBOR Loan on such date as a Revolving Credit ABR Loan.

2.10Interest Rates and Interest Payments.

(a)Revolving Credit ABR Loan.  So long as no Event of Default has occurred and is continuing, each Revolving Credit ABR Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Revolving Credit Loan is made or converted until it becomes due or converted, at a rate per annum equal to the Adjusted Base Rate.  So long as any Event of Default has occurred and is continuing, each Revolving Credit ABR Loan shall thereafter accrue interest at a rate per annum equal to Three Percent (3%) over and above the Adjusted Base Rate until such time as the Event of Default is waived by the Required Lenders or a cure is permitted by the Required Lenders.  Such interest shall be payable monthly in arrears on the first (1st) day of each month, so long as such Revolving Credit ABR Loan is outstanding, and at the maturity (or upon the acceleration) of the Revolving Credit Notes.  From and after the Maturity Date (or upon acceleration of the outstanding principal), each Revolving Credit ABR Loan shall bear interest, payable on demand, for each day until paid, at a rate per annum equal to Three Percent (3%) over and above the Adjusted Base Rate.

(b)Revolving Credit LIBOR Loan.  So long as no Event of Default has occurred and is continuing, each Revolving Credit LIBOR Loan shall bear interest on the outstanding principal amount thereof for each Interest Period applicable thereto at a rate per annum equal to the applicable LIBOR Rate.  So long as any Event of Default has occurred and is continuing, each Revolving Credit LIBOR Loan shall thereafter bear interest at a rate per annum equal to Three Percent (3%) over and above the applicable LIBOR Rate until such time as the Event of Default is waived by the Required Lenders or a cure is permitted by the Required Lenders.  Interest shall be payable for each Interest Period on the last day thereof, unless the duration of such Interest Period exceeds three (3) months, in which case such interest shall be payable at the end of the first three (3) months of such Interest Period and on the last day of such Interest Period, and at the Maturity Date (whether by reason of acceleration or otherwise).  From and after the Maturity Date (or upon an acceleration of the outstanding principal), each Revolving Credit LIBOR Loan shall bear interest, payable on demand, for each day until paid, at a rate per annum equal to Three Percent (3%) over and above the higher of (i) the LIBOR Rate for the immediately preceding Interest Period applicable to such Revolving Credit LIBOR Loan or (ii) the Adjusted Base Rate.

(c)Swing Line Loan.  So long as no Event of Default has occurred and is continuing, each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Swing Line Loan is made until it becomes due, at a rate per annum equal to the Adjusted Base Rate.  So long as any Event of Default has occurred and is continuing, each Swing Line Loan shall, unless otherwise agreed to in writing by each of the Lenders, bear interest on the outstanding principal amount thereof, for each day from the date such Swing Line Loan is made and continuing during the Event of Default Period, at a rate per annum equal to Three Percent (3%) over and above the Adjusted Base Rate.  Such interest shall be payable monthly in arrears on the first (1st) day of each month, commencing on the first such date after such Swing Line Loan is made, and at the maturity of the Swing Line Note (whether by reason of acceleration or otherwise).  From and after the maturity of the Swing Line Note, whether by reason of acceleration or otherwise, each Swing Line Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to Three Percent (3%) over and above the Adjusted Base Rate.

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(d)The Agent shall determine each interest rate applicable to the Loans hereunder and its determination thereof shall be conclusive in the absence of demonstrable error.

2.11Computation of Interest.  Interest on ABR Loans shall be computed on the basis of a year of 365 days and paid for the actual number of days elapsed (including the first day but excluding the last day).  Interest on LIBOR Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof.

2.12Fees.

(a)On the first Domestic Business Day of each calendar quarter, and on the Revolving Maturity Date, Borrower shall pay to the Agent for the account of each Lender in accordance with its Pro Rata Share a nonrefundable fee (the “Unused Commitment Fee”) equal to the Unused Commitment Amount for the immediately preceding calendar quarter (or portion thereof) at the Applicable Unused Commitment Fee Rate, calculated on a daily basis.  As used in this Agreement, the “Unused Commitment Amount” means the sum of the difference on each day in the immediately preceding quarter (or, in the case of the fee payable on the Revolving Maturity Date, on each day after the end of the prior quarter through the Revolving Maturity Date) between (a) the aggregate amount of the Revolving Credit Commitments and (b) the aggregate principal amount of all Loans and Letters of Credit outstanding, calculated on an actual day, 360-day year basis.

(b)Borrower agrees to pay the Agent certain fees in the amounts set forth in a letter agreement between Borrower and the Agent dated April 20, 2009, as the same may from time to time be amended, modified, extended, renewed or restated as mutually agreed.  All obligations of Borrower under such letter agreement shall survive the execution of this Agreement.

2.13Method of Making Interest and Other Payments.    Borrower agrees to authorize the Agent in writing to debit a designated account at Agent for all interest and other payments under this Agreement. The Agent may, at its option, deem interest and other amounts payable by Borrower under this Agreement (other than the principal balance of the Revolving Credit Loans and the Swing Line Loans) to be paid by causing the Lenders to make a Revolving Credit ABR Loan to Borrower in such amount(s).  The Agent agrees to give Borrower prompt written notice of any Revolving Credit ABR Loan made by the Lenders under this Section 2.13.

2.14Voluntary Prepayments.

(a)Borrower may, upon notice to U.S. Bank specifying that it is paying the Swing Line Loans, prepay without penalty or premium the Swing Line Loans in whole at any time or in part from time to time, by paying the principal amount to be paid, which notice must be received by 12:00 noon Salt Lake City time on such prepayment date.

(b)Borrower may, upon notice to the Agent specifying that it is paying the Revolving Credit ABR Loans, pay without penalty or premium the Revolving Credit ABR Loans in whole at any time or in part from time to time, by paying the principal amount to be paid, which notice must be received by 12:00 noon Salt Lake City time on such prepayment date.  Each such optional payment shall be applied to pay the Revolving Credit ABR Loans of the several Lenders in proportion to their respective Pro Rata Shares.

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(c)Borrower may, upon at least three (3) Eurodollar Business Day’s notice to the Agent (which notice must be received by 12:00 noon (Salt Lake City time) on such day) specifying that it is paying the Revolving Credit LIBOR Loans, pay the Revolving Credit LIBOR Loans to which a given Interest Period applies, in whole, or in part in amounts aggregating $250,000 or any larger multiple of $25,000, by paying the principal amount to be paid together with all accrued and unpaid interest thereon to and including the date of payment and any funding losses and other amounts payable under Section 2.17; provided, however, that in no event may Borrower make a partial payment of Revolving Credit LIBOR Loans which results in the total outstanding Revolving Credit LIBOR Loans with respect to which a given Interest Period applies being less than $1,000,000.  Each such optional payment shall be applied to pay the Revolving Credit LIBOR Loans of the several Lenders in proportion to their respective Pro Rata Shares.

(d)Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Lender of the contents thereof and of such Lender’s Pro Rata Share of such payment and such notice shall not thereafter be revocable by Borrower.

2.15[Reserved].

2.16General Provisions as to Payments.  Borrower shall make each payment of principal of, and interest on, the Loans and of fees and all other amounts payable by Borrower as applicable, under this Agreement, not later than 12:00 noon (Salt Lake City time) on the date when due and payable, in immediately available funds in Salt Lake City, Utah, to the Agent at its address referred to in Section 8.07.  All payments received by the Agent after 12:00 noon (Salt Lake City time) shall be deemed to have been received by the Agent on the next succeeding Domestic Business Day.  The Agent will distribute to each Lender in immediately available funds its Pro Rata Share of each such payment received by the Agent for the account of the Lenders by 2:00 p.m. (Salt Lake City time) on the day of receipt of such payment by the Agent if such payment is received by the Agent from Borrower by 12:00 noon (Salt Lake City time) on such day or by 12:00 noon (Salt Lake City time) on the next succeeding Domestic Business Day if such payment is received by the Agent from Borrower after 12:00 noon (Salt Lake City time) on such day.  Any such payment owed by the Agent to any Lender which is not paid within the applicable time period shall bear interest (payable by the Agent) until paid at the Fed Funds Rate.  Whenever any payment of principal of, or interest on, the Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day.  If the date for any payment of principal is extended by operation of law or otherwise, interest thereon, at the then applicable rate, shall be payable for such extended time.

2.17Funding Losses.  Notwithstanding any provision contained in this Agreement to the contrary, (a) if Borrower makes any payment of principal with respect to any LIBOR Loan (pursuant to Sections 2 or 6 or otherwise) on any day other than the last day of the Interest Period applicable thereto, or if Borrower fails to borrow or pay any LIBOR Loan after notice has been given by Borrower as applicable to the Agent in accordance with Section 2.07, 2.09, 2.14 or otherwise, Borrower shall reimburse each Lender on demand for any resulting losses and expenses incurred by it, including, without limitation, any losses incurred in obtaining, liquidating or employing deposits from third parties and any loss of margin for the period after any such payment, provided that such Lender shall have delivered to Borrower, a certificate setting forth in reasonable detail the calculation of the amount of such losses and expenses, which calculation shall be conclusive in the absence of demonstrable error.

2.18Basis for Determining Interest Rate Inadequate or Unfair.  If with respect to any Interest Period:

(a)deposits in dollars (in the applicable amounts) are not being offered to any Lender in the relevant market for such Interest Period, or

(b)any Lender determines that the LIBOR Rate as determined pursuant to the definition thereof will not adequately and fairly reflect the cost to such Lender of maintaining or funding the LIBOR Loans for such Interest Period, such Lender shall forthwith give notice thereof to Borrower, which notice shall set forth in detail the basis for 

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such notice, whereupon until such Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, (i) the LIBOR Rate shall not be available to Borrower as an interest rate option on any Loans made by such Lender, all of the then outstanding Revolving Credit LIBOR Loans made by such Lender shall automatically convert to Revolving Credit ABR Loans on the last day of the then current Interest Period applicable to each such Revolving Credit LIBOR Loan.  Interest accrued on each such LIBOR Loan prior to any such conversion shall be due and payable on the date of such conversion together with any funding losses and other amounts due under Section 2.17.

2.19Illegality.  If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental or regulatory authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such governmental or regulatory authority, central bank or comparable agency shall make it unlawful or impossible for any Lender to make, maintain or fund its LIBOR Loans to Borrower, such Lender shall forthwith give notice thereof to Borrower.  Upon receipt of such notice, Borrower shall convert all then outstanding LIBOR Loans from such Lender on either (a) the last day of the then current Interest Period applicable to such LIBOR Loan if such Lender may lawfully continue to maintain and fund such LIBOR Loan to such day or (b) immediately if such Lender may not lawfully continue to fund and maintain such LIBOR Loan to such day, to a ABR Loan of the same type (i.e., a Revolving Credit ABR Loan) in an equal principal amount.  Interest accrued on each such LIBOR Loan prior to any such conversion shall be due and payable on the date of such conversion together with any funding losses and other amounts due under Section 2.17.

2.20Increased Cost.

(a)If (i) Regulation D or (ii) after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental or regulatory authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such governmental or regulatory authority, central bank or comparable agency (a “Regulatory Change”):

(A)           shall subject any Lender to any tax, duty or other charge with respect to its LIBOR Loans, its Notes or its obligation to make LIBOR Loans, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its LIBOR Loans or any other amounts due under this Agreement in respect of its LIBOR Loans or its obligation to make LIBOR Loans (except for taxes on or changes in the rate of tax on the overall net income of such Lender); or

(B)           shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit, capital or similar requirement against assets of, deposits with or for the account of, or credit extended or committed to be extended by, any Lender or shall, with respect to any Lender impose, modify or deem applicable any other condition affecting such Lender’s LIBOR Loans, such Lender’s Notes or such Lender’s obligation to make LIBOR Loans;

and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D, to impose a cost on or increase the cost to) such Lender of making or maintaining any LIBOR Loan, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under any of its Notes with respect thereto, by an amount deemed by such Lender to be material, and if such Lender is not otherwise fully compensated for such increase in cost or reduction in amount received or receivable by virtue of the

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inclusion of the reference to “LIBOR Reserve Percentage” in the calculation of the LIBOR Rate, then upon notice by such Lender to Borrower, which notice shall set forth such Lender’s supporting calculations in reasonable detail and the details of the Regulatory Change, Borrower shall pay such Lender, as additional interest, such additional amount or amounts as will compensate such Lender for such increased cost or reduction.  The determination by any Lender under this Section of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of demonstrable error.  In determining such amount or amounts, the Lenders may use any reasonable averaging and attribution methods.

(b)If any Lender demands compensation under Section 2.20(a) above, Borrower may at any time, upon at least three (3) Eurodollar Business Day’s prior notice to such Lender, convert its then outstanding LIBOR Loans to ABR Loans of the same type (i.e., a Revolving Credit ABR Loan) in an equal principal amount.  Interest accrued on each such LIBOR Loan prior to any such conversion shall be due and payable on the date of such conversion together with any funding losses and other amounts due under Section 2.17 and this Section 2.20.

2.21ABR Loans Substituted for Affected LIBOR Loans.  If notice has been given by a Lender pursuant to Sections 2.18 or 2.19 or by Borrower pursuant to Section 2.20 requiring LIBOR Loans of any Lender to be repaid, then, unless and until such Lender notifies Borrower that the circumstances giving rise to such repayment no longer apply, all Loans which would otherwise be made by such Lender to Borrower as LIBOR Loans shall be made instead as ABR Loans.  Such Lender shall promptly notify Borrower if and when the circumstances giving rise to such repayment no longer apply.

2.22Capital Adequacy.  If, after the date of this Agreement, any Lender shall have determined in good faith that the adoption of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental or regulatory authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or will have the effect of reducing the rate of return on such Lender’s capital in respect of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s policies with respect to capital adequacy), then from time to time Borrower shall pay to such Lender upon demand such additional amount or amounts as will compensate such Lender for such reduction.  All determinations made in good faith by such Lender of the additional amount or amounts required to compensate such Lender in respect of the foregoing shall be conclusive in the absence of demonstrable error.  In determining such amount or amounts, such Lender may use any reasonable averaging and attribution methods.

2.23Survival of Indemnities.  All indemnities and all provisions relating to reimbursement to the Lenders of amounts sufficient to protect the yield to the Lenders with respect to the Loans, including, without limitation, Sections 2.17, 2.18, 2.19, 2.20 and 2.22 of this Agreement, shall survive the payment of the Notes and the other Borrower’s Obligations and the Maturity Date.  The Agent and the Lenders agree to include any funding losses owed by Borrower under Section 2.17 in connection with any prepayment of any LIBOR Loans in any payoff letter requested by Borrower.

2.24Discretion of Lenders as to Manner of Funding.  Notwithstanding any provision contained in this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its LIBOR Loans in any manner it elects, it being understood, however, that for purposes of this Agreement all determinations hereunder (including, without limitation, the determination of each Lender’s funding losses and expenses under Section 2.17) shall be made as if such Lender had actually funded and maintained each LIBOR Loan through the purchase of deposits having a maturity corresponding to the maturity of the applicable Interest Period relating to the applicable LIBOR Loan and bearing an interest rate equal to the applicable LIBOR Base Rate.

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2.25Swing Line Loan Settlement After Default.  Upon the occurrence of any Event of Default, unless otherwise requested by U.S. Bank, the Agent shall promptly notify the other Lenders in writing of the aggregate principal amount of all Swing Line Loans from U.S. Bank then outstanding, and each of the other Lenders hereby irrevocably agrees to immediately purchase from U.S. Bank with immediately available funds its ratable share of the amount of all such Swing Line Loans (based on such Lender’s Pro Rata Share of the Revolving Credit Commitments), plus accrued and unpaid interest calculated on such Pro Rata Share of such principal amount at a rate per annum equal to the Adjusted Base Rate.  Following such advance by each Lender to U.S. Bank of its Pro Rata Share of any such Swing Line Loans pursuant to the preceding sentence, each such Lender shall thereafter receive its Pro Rata Share of all principal payments, interest payments, fees and other amounts due with respect to such Swing Line Loans as and when paid by Borrower to U.S. Bank hereunder.  Such Swing Line Loans shall thereafter be evidenced by the Revolving Credit Notes of each of the Lender(s).  U.S. Bank agrees that it will not make any Swing Line Loan to Borrower after U.S. Bank has received notice in writing from Borrower or any other Lender that a Default or Event of Default has occurred and is continuing without the prior written consent of the Required Lenders.

2.26Sharing of Payments.  The Lenders agree among themselves that, in the event that any Lender shall directly or indirectly obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, banker’s lien or counterclaim, through the realization, collection, sale or liquidation of any collateral or otherwise) on account of or in respect of any of the Loans or any of the other Borrower’s Obligations, in excess of its Pro Rata Share of all such payments, such Lenders shall immediately purchase from the other Lenders participations in the Loans or other Borrower’s Obligations owed to such other Lenders in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that the Lenders share such payment ratably in accordance with their respective Pro Rata Shares of the outstanding Loans and other Borrower’s Obligations.  The Lenders further agree among themselves that if any such excess payment to a Lender shall be rescinded or must otherwise be restored, the other Lenders which shall have shared the benefit of such payment shall, by repurchase of participation theretofore sold, or otherwise, return its share of that benefit to the Lender whose payment shall have been rescinded or otherwise restored.  Borrower agrees that any Lenders so purchasing a participation in the Loans or other Borrower’s Obligations to the other Lenders may exercise all rights of setoff, banker’s lien and/or counterclaim as fully as if such Lenders were a holder of such Loan or Borrower’s Obligations in the amount of such participation.  If under any applicable bankruptcy, insolvency or other similar law any Lender receives a secured claim in lieu of a setoff to which this Section 2.26 would apply, such Lenders shall, to the extent practicable, exercise their rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.26 to share in the benefits of any recovery of such secured claim.

2.27Designation of Alternate Lending Offices.

(a)Notwithstanding anything in this Agreement to the contrary, no Lender shall be entitled to compensation under Sections 2.17, 2.18, 2.19, 2.20 or 2.22 for any amounts incurred or accruing more than 180 days prior to the giving of notice to the Borrower by such Lender of its entitlement to additional costs or other reimbursements of the types described in such Sections.

(b)Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 2.17, 2.18, 2.19, 2.20 or 2.22 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event or to assign its rights and obligations hereunder to another of its offices, branches or affiliates if it would eliminate or reduce further the amounts payable under Sections 2.17, 2.18, 2.19, 2.20 or 2.22, provided that such designation or assignment is made only if the Lender and its lending office would suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section.  The Agent agrees that no assignment fee shall be payable to it

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pursuant to Section 8.12(c) in connection with such designation or assignment.  Nothing in this Section shall affect or postpone any of the obligations of Borrower or the right of any Lender provided in Sections 2.17, 2.18, 2.19, 2.20 or 2.22.

(c)Notwithstanding any other provision of this Section 2.27, each Lender agrees that such Lender shall not exercise any of its rights under Section 2.17, 2.18, 2.19, 2.20 or 2.22 with respect to Borrower if it shall not at the time be the general policy or practice of such Lender to exercise its rights under provisions in other credit agreements similar to Section 2.17, 2.18, 2.19, 2.20 or 2.22 against other Borrower in substantially similar circumstances.

2.28Replacement of Lenders.  If (i) any Lender (or its holding company, if any), requests compensation under Section 2.17, 2.18, 2.19, 2.20 or 2.22 and Borrower is required to pay an additional amount to any Lender or any governmental authority for the account of any Lender pursuant to Section 2.17, 2.18, 2.19, 2.20 or 2.22 in excess of amounts being charged generally by the Lenders, (ii) any Lender shall give any notice to the Borrower or the Agent pursuant to Section 2.17, 2.18, 2.19, 2.20 or 2.22, (iii) if a Lender becomes a Defaulting Lender, or (iv) in the case of a refusal by a Lender to consent to a proposed change, waiver or termination with respect to this Agreement which has been approved by the Required Lenders, then, in each such case, provided that no Event of Default shall then exist and be continuing, during the 120-day period after the receipt of such request, Borrower, at the sole cost, expense and effort of Borrower, may, upon notice to the Agent, require such Lender to assign (in accordance with and subject to the restrictions contained in Section 8.12) all of its rights and obligations under the Transaction Documents to any other Lender (or affiliate thereof), or to any other Eligible Institution identified by the Borrower if such other Lender (or affiliated thereof) or such Eligible Institution agrees to assume all of the obligations of such Lender for consideration equal to the outstanding principal amount of such Lender’s Loans and all unreimbursed sums paid by such Lender under this Agreement and the other Transaction Documents, together with interest thereon to the date of such transfer and all other amounts payable under the Transaction Documents to such Lender on or prior to the date of such transfer (including any fees accrued hereunder and any amounts which would be payable under Section 2.17, 2.18, 2.19, 2.20 or 2.22 as if all of such Lender’s Loans were being prepaid in full on such date).  In the event of a transfer to any other Eligible Institution, subject to the satisfaction of the conditions of Section 8.12, such Eligible Institution shall be a “Lender” for all purposes hereunder.  Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements of Borrower contained in Section 8.04 and Section 8.05 (without duplication of any payments made to such Lender by Borrower or such other Eligible Institution) shall survive for the benefit of any Lender replaced under this Section 2.28 with respect to the time prior to such replacement.  In connection with any transfer pursuant to this Section 2.28, Borrower shall be obligated to pay the assignment fee referred to in Section 8.12.

2.29Interest Rate Protection.  No later than ninety (90) days following the closing of any Permitted Acquisition that results in the Total Revolving Credit Outstandings to exceed $50,000,000, the Borrower shall deliver to the Agent an executed hedging agreement providing for interest rate protection in a notional amount and for a period acceptable to Borrower and Agent and with a counterparty acceptable to the Agent and in form and substance acceptable to the Agent and Borrower.

2.30Incremental Facility.  Subject to the terms and conditions set forth in this Agreement, upon the request of the Borrower and so long as no Default or Event of Default then exists hereunder or would be created by the extension of such additional commitments or the making of such additional Loans, Borrower may request, without obligation: (i) one or more increases in the Revolving Credit Commitments of one or more of the Lenders or (ii) an additional Revolving Credit Commitment from any Eligible Institution which may hereafter become a Lender and a party to this Agreement, or (iii) any combination of (i) and (ii) above, such that the aggregate Revolving Credit Commitments of all of the Lenders (including any Eligible Institution which may hereafter become a Lender pursuant to this Section) may be increased to $125,000,000 (such increases of the Revolving Credit

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Commitment(s), and/or any such new Revolving Credit Commitment are hereinafter referred to as the “Incremental Facilities” or each as an “Incremental Facility”), providedthat(a) any such requested Incremental Facility shall have been approved by the Agent, such approval not to be unreasonably withheld, (b) the amount of a Lender’s Revolving Credit Commitment may not be increased without the prior written consent of such Lender, (c) the principal amount of any such Incremental Facility requested by Borrower shall not be less than $10,000,000, (d) the aggregate principal amount of all such Incremental Facilities shall not exceed $45,000,000 in the aggregate, and (e) each Incremental Facility shall bear interest at the interest rates applicable hereunder to the other Revolving Credit Loans of the Lenders to the Borrower (with such interest payable on the dates set forth herein for interest on the other Revolving Credit Loans), shall mature and be payable at the end of the Revolving Credit Period, and shall have other terms applicable to such Incremental Facility the same as those applicable to the other Revolving Credit Loans hereunder.  The Incremental Facilities do not need to be funded by the Lenders in accordance with their respective Pro Rata Shares provided they otherwise comply with the terms of this Section, and the definitions of “Revolving Credit Commitments,” “Notes,” “Pro Rata Shares” and other similar provisions of this Agreement shall be amended as necessary to accommodate each such Incremental Facility as shall be described in writing by the Agent to the Borrower and the Lenders.  In the event the Lenders, in their discretion, decline to provide the full amount of any Incremental Facility requested by Borrower, the Agent may obtain commitments from one or more other Eligible Institutions willing to provide such requested Incremental Facility and may have such new Eligible Institutions become parties to this Agreement as Lenders hereunder (with Revolving Credit Commitments in the amount or amounts agreed to by Borrower, Agent and such Eligible Institutions) by having such other Eligible Institutions execute a Joinder Agreement in the form of Exhibit L attached hereto and incorporated herein by this reference.  With respect to each Incremental Facility, Borrower covenants and agrees to execute and deliver to the Agent and the Lenders such additional Notes or amended and restated Notes payable to the respective orders of each of the Lenders participating therein as may be necessary to evidence such Incremental Facility, together with such other resolutions, documents and agreements as may be required by the Agent or any of the Lenders in connection therewith, including, but not limited to any required amendments to this Agreement and any opinions of counsel which Agent and the Lenders may require with respect thereto.  All Collateral shall secure all of Borrower’s Obligations, including, without limitation, any such Borrower’s Obligations incurred as a part of any such Incremental Facility.

Section 3.                      PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.

3.01Initial Loans and Letters of Credit.  Notwithstanding any provision contained in this Agreement to the contrary, none of the Lenders shall have any obligation to make the initial Loan(s) under this Agreement and U.S. Bank shall have no obligation to issue the initial Letter(s) of Credit under this Agreement unless the Agent shall have first received:

(a)this Agreement and the Notes, each duly executed by Borrower;

(b)the Security Agreement duly executed by Borrower and the Guarantors (in form and substance satisfactory to the Agent and each Lender) and other documents as the Agent or any Lender may require in connection therewith, each duly executed by Borrower and Guarantors;

(c)the Copyright Security Agreement (which must be in form and substance satisfactory to the Agent and each Lender) duly executed by Borrower or one or more of the Guarantors as applicable;

(d)the Patent and Trademark Security Agreement (which must be in form and substance satisfactory to the Agent and each Lender) duly executed by Borrower or one or more of the Guarantors as applicable;

(e)the Guaranties and the Subsidiary Guaranties (each of which must be in form and substance satisfactory to Agent) each duly executed by each respective Guarantor;

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(f)the Trust Deeds executed by the fee or leaseholder owners with respect thereto (which must be in a form and substance satisfactory to Agent, together with, if applicable, a lessor’s consent and estoppel);

(g)ALTA lenders title insurance policies insuring the first priority position of each of the Trust Deeds subject only to those exceptions deemed acceptable by Lenders;

(h)completion by Agent of its review of all material licenses, contracts and contingent liabilities of Borrower and Guarantors;

(i)a copy of resolutions of the Board of Directors of each Obligor, duly adopted, which authorize the execution, delivery and performance of the Transaction Documents to be executed by such Obligor, certified by the secretary of such Obligor;

(j)a copy of the Certificate of Incorporation (or Organization) of each Obligor, including any amendments thereto, certified by the state of Obligor’s organization;

(k)a copy of the Bylaws of each Obligor, including any amendments thereto, certified by the secretary of such Obligor;

(l)an incumbency certificate, executed by the secretary of each Obligor, which shall identify by name and title and bear the signatures of all of the officers of such Obligor executing any of the Transaction Documents;

(m)certificates of corporate good standing of each Obligor issued by each state in which the failure of such Obligor to be qualified to do business would have a Material Adverse Effect;

(n)an opinion of Stoel Rives, counsel to Borrower and Guarantors, in form and substance satisfactory to the Agent and each Lender;

(o)evidence satisfactory to Agent and the Lenders that following the initial advance of any Loans hereunder and after payment of all obligations to be paid as of the date hereof or otherwise in connection with the closing of all of the transactions described herein and in the other agreements being executed in connection herewith as of the date hereof, that Borrower shall have a Consolidated Total Leverage Ratio determined on a pro forma basis on the date hereof of not more than 3.00 to 1.0;

(p)the Notice of Revolving Credit Borrowing required by Section 2.07(a);

(q)if such Loan is a Swing Line Loan, the Notice of Swing Line Borrowing required by Section 2.07(b);

(r)evidence of the proper filing of UCC-1 financing statements perfecting first priority security interests in favor of Lender in all of the Collateral;

(s)UCC-3 termination statements or UCC-3 amendment statements (as determined by the Agent) for all UCC-1 financing statements filed of record against Borrower or any other Obligor other than UCC-1 financing statements relating to Permitted Liens;

(t)evidence satisfactory to the Agent and each Lender that the insurance required by this Agreement and the other Transaction Documents is in full force and effect together with loss payable endorsements in form and substance satisfactory to the Agent and each Lender, duly executed by the insurance company;

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(u)copies of all financial statements and other Exhibits and Schedules required by this Agreement and the other Transaction Documents;

(v)payment of all of Agent’s fees and expenses, including, without limitation, all legal fees and expenses incurred to the date of this Agreement (subject to a limit of $35,000 on the portion of those fees and expenses that consists of attorneys’ fees and syndication expenses);

(w)a letter of direction from Borrower with respect to the disbursement of the proceeds of the initial Loans under this Agreement;

(x)a letter from KeyBank N.A. identifying the full amount of principal, interest, fees and costs necessary to repay all indebtedness, if any, then owed to KeyBank N.A. and a statement that any commitment by KeyBank N.A. to extend credit to Borrower has been terminated;

(y)such other agreements, documents, instruments and certificates as the Agent or any Lender may reasonably request.

3.02All Loans.  Notwithstanding any provision contained in this Agreement to the contrary, none of the Lenders shall have any obligation to make any Loan under this Agreement unless:

(a)if such Loan is a Revolving Credit Loan, the Agent shall have received a Notice of Revolving Credit Borrowing for such Loan as required by Section 2.07(a);

(b)if such Loan is a Swing Line Loan, U.S. Bank shall have received a Notice of Swing Line Borrowing for such Loan as required by Section 2.07(b);

(c)both immediately before and immediately after giving effect to such Loan, no Default or Event of Default under this Agreement shall have occurred and be continuing;

(d)no event having a Material Adverse Effect shall have occurred since the date of this Agreement and be continuing; and

(e)all of the representations and warranties of Borrower and/or any other Obligor contained in this Agreement and/or in any of the other Transaction Documents shall be true and correct in all material respects on and as of the date of such Loan as if made on and as of the date of such Loan (and for purposes of this Section 3.02(e), the representations and warranties made by Borrower in Section 4.04 shall be deemed to refer to the most recent financial statements of Borrower delivered to the Lenders pursuant to Section 5.01(a)).

Each request for a Loan by Borrower under this Agreement shall be deemed to be a representation and warranty by Borrower on the date of such Loan as to the facts specified in clauses (c), (d) and (e) of this Section 3.02.

3.03All Letters of Credit.  Notwithstanding any provision contained in this Agreement to the contrary, U.S. Bank shall have no obligation to issue any Letter of Credit under this Agreement unless:

(a)U.S. Bank shall have received a Letter of Credit Request for such Letter of Credit as required by Section 2.04(a);

(b)U.S. Bank shall have received a Letter of Credit Application for such Letter of Credit as required by Section 2.04(a), duly executed by Borrower as account party;

(c)Borrower shall have complied with all of the procedures and requirements set forth in Section 2.04;

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(d)both immediately before and immediately after the issuance of such Letter of Credit, no Default or Event of Default under this Agreement shall have occurred and be continuing;

(e)no event resulting in a Material Adverse Effect shall have occurred since the date of this Agreement and be continuing;

(f)all of the representations and warranties of Borrower and/or any other Obligor contained in this Agreement and/or in any of the other Transaction Documents shall be true and correct in all material respects on and as of the date of the issuance of such Letter of Credit as if made on and as of the date of the issuance of such Letter of Credit (and for purposes of this Section 3.03(f), the representations and warranties made by Borrower in Section 4.04 shall be deemed to refer to the most recent financial statements of Borrower delivered to the Lenders pursuant to Section 5.01(a)); and

(g)U.S. Bank shall have received such other documents, certificates and agreements as it may reasonably request.

Each request for the issuance of a Letter of Credit by Borrower under this Agreement shall be deemed to be a representation and warranty by Borrower on the date of the issuance of such Letter of Credit as to the facts specified in clauses (d), (e) and (f) of this Section 3.03.

Section 4.                      REPRESENTATIONS AND WARRANTIES.

Borrower hereby represents and warrants to the Agent and each Lender that:

4.01Corporate Existence and Power.  Borrower and each Guarantor: (a) is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate powers required to carry on its business as now conducted; (c) has all requisite governmental and regulatory licenses, authorizations, consents and approvals required to carry on its business as now conducted, except such licenses, authorizations, consents and approvals the failure to have could not reasonably be expected to have a Material Adverse Effect; and (d) is qualified to transact business as a foreign corporation in, and is in good standing under the laws of, all jurisdictions in which it is required by applicable law to maintain such qualification and good standing except for those states in which the failure to qualify or maintain good standing could not reasonably be expected to have a Material Adverse Effect.

4.02Corporate Authorization.  The execution, delivery and performance by Borrower of this Agreement and the other Transaction Documents to which it is a party are within the corporate powers of Borrower and have been duly authorized by all necessary corporate action.  The execution, delivery and performance by each Guarantor of the Transaction Documents to which it is a party are within the corporate powers of such Guarantor and have been duly authorized by all necessary corporate action.

4.03Binding Effect.  This Agreement and the other Transaction Documents to which Borrower is a party have been or will be, as applicable, duly executed and delivered by Borrower and constitute the legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as such enforceability may be limited by (a) bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  The Transaction Documents to which each Guarantor is a party have been or will be, as applicable, duly executed and delivered by such Guarantor and constitute the legal, valid and binding obligations of such Guarantor, enforceable in accordance with their respective terms, except as such enforceability may be limited by (a) bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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4.04Financial Statements.  Borrower has furnished the Agent and each Lender with the following financial statements, identified by the chief financial officer of Borrower:  (a) consolidated balance sheets and statements of income, retained earnings and cash flows of consolidated balance sheets and statements of income, stockholders’ equity and cash flows of Borrower and its Subsidiaries as of and for the fiscal year ended May 31, 2008 and each of the three fiscal years prior thereto, all certified by Borrower’s independent certified public accountants, which financial statements have been prepared in accordance with GAAP consistently applied; and (b) unaudited consolidated balance sheets and statements of income, stockholders’ equity and cash flows of Borrower and its Subsidiaries as of and for the fiscal quarter ended February 28, 2009, certified by the chief financial officer of Borrower as being true, correct and complete in all material respects and that such financial statements have been prepared in accordance with GAAP consistently applied, certified as being true, correct and complete in all material respects by the chief financial officer of Borrower.  Borrower further represents and warrants to the Agent and each Lender that (a) to the best of Borrower’s knowledge said balance sheets and its accompanying notes fairly present the condition of Borrower and its Subsidiaries as of the dates thereof, (b) there has been no material adverse change in the condition or operation, financial or otherwise, of Borrower and its Subsidiaries from the condition or operation, financial or otherwise, of Borrower and its Subsidiaries as of February 28, 2009, and (c) neither Borrower nor any of its Subsidiaries had any direct or contingent liabilities which were not disclosed on said financial statements or the notes thereto (to the extent such disclosure is required by GAAP).

4.05Litigation.  Except as disclosed on Schedule 4.05 attached hereto, there is no action or proceeding pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any Subsidiary before any court, arbitrator or any governmental, regulatory or administrative body, agency, instrumentality, authority or official which, if determined adversely against Borrower or such Subsidiary, could reasonably be expected to have a Material Adverse Effect.  Neither Borrower nor any Subsidiary is in default with respect to any order, writ, injunction, decision or decree of any court, arbitrator or any governmental, regulatory or administrative body, agency, instrumentality, authority or official, a default under which could reasonably be expected to have a Material Adverse Effect.  There are no outstanding judgments against Borrower or any Subsidiary.

4.06Pension and Welfare Plans.  Each Pension Plan and Welfare Plan complies in all material respects with ERISA and all other applicable statutes and governmental and regulatory rules and regulations; no Reportable Event has occurred and is continuing with respect to any Pension Plan; neither Borrower nor any Subsidiary nor any ERISA Affiliate has withdrawn from any Multi-Employer Plan in a “complete withdrawal” or a “partial withdrawal” as defined in Sections 4203 or 4205 of ERISA, respectively; neither Borrower nor any Subsidiary nor any ERISA Affiliate has entered into an agreement pursuant to Section 4204 of ERISA; neither Borrower nor any Subsidiary nor any ERISA Affiliate has in the past contributed to or currently contributes to a Multi-Employer Plan; neither Borrower nor any Subsidiary nor any ERISA Affiliate has any withdrawal liability with respect to a Multi-Employer Plan; no steps have been instituted by Borrower or any Subsidiary or any ERISA Affiliate to terminate any Pension Plan (other than a Defined Contribution Plan); no condition exists or event or transaction has occurred in connection with any Pension Plan, Multi-Employer Plan or Welfare Plan which could result in the incurrence by Borrower or any Subsidiary or any ERISA Affiliate of any material liability, fine or penalty; and neither Borrower nor any Subsidiary nor any ERISA Affiliate is a “contributing sponsor” as defined in Section 4001(a)(13) of ERISA of a “single-employer plan” as defined in Section 4001(a)(15) of ERISA which has two or more contributing sponsors at least two of whom are not under common control.  Except as disclosed on the consolidated financial statements of Borrower and its Subsidiaries delivered by Borrower to the Agent and each Lender, neither Borrower nor any Subsidiary nor any ERISA Affiliate has any unfunded liability with respect to any Welfare Plan.

4.07Tax Returns and Payment.  Borrower and each Subsidiary has filed all federal, state, local and other income and other tax returns which are required to be filed and has paid all taxes which have become due and payable pursuant to such returns and all other taxes, assessments, fees and other governmental charges upon Borrower or such

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Subsidiary, as the case may be, and upon its Properties, income and franchises which have become due and payable by Borrower or such Subsidiary, as the case may be, except those wherein the amount, applicability or validity are being contested by Borrower or such Subsidiary, as the case may be, by appropriate proceedings being diligently conducted in good faith and in respect of which adequate reserves in accordance with GAAP have been established.  There is no asserted or assessed (or to the knowledge of Borrower, proposed) tax deficiency against Borrower or any Subsidiary which, if determined adversely against Borrower or any Subsidiary, could reasonably be expected to have a Material Adverse Effect.

4.08Subsidiaries.  Borrower has no Subsidiaries other than as identified on Schedule 4.08 attached hereto, as the same may from time to time be amended, modified or supplemented as provided herein.  Schedule 4.08 attached hereto correctly sets forth, for each Subsidiary, the jurisdiction of organization, the number of shares of each class of common and preferred stock (or other ownership interests) authorized for such Subsidiary, the number of outstanding and the percentage of the outstanding shares of each such class owned, directly or indirectly, by Borrower or one or more of its Subsidiaries.  All of the issued and outstanding capital stock of each Subsidiary is duly authorized, validly issued and fully paid and nonassessable.  Except as disclosed on Schedule 4.08 attached hereto, neither Borrower nor any Subsidiary, individually or collectively, owns or holds, directly or indirectly, any capital stock or equity security of, or any equity interest in, any corporation or business other than Borrower’s Subsidiaries.  Borrower may at any time amend, modify or supplement Schedule 4.08 by notifying the Agent and each Lender in writing of any changes thereto, including any formation, acquisition, merger or liquidation of any Subsidiary or any change in the capitalization of any Subsidiary, in each case, in accordance with the terms of this Agreement, and thereby the representations and warranties contained in this Section 4.08 shall be amended accordingly so long as such amendment, modification or supplement is made within thirty (30) days after the occurrence of any such changes in the facts stated therein and that such changes reflect transactions that are permitted under this Agreement.

4.09Compliance With Other Instruments; None Burdensome.  Neither Borrower nor any Subsidiary is a party to any contract, agreement, document or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect and which is not disclosed on Borrower’s financial statements heretofore submitted to the Agent and each Lender; none of the execution and delivery by Borrower of the Transaction Documents, the consummation of the transactions therein contemplated or the compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Borrower, or any of the provisions of the Certificate of Incorporation or Bylaws of Borrower or any of the provisions of any indenture, agreement, document, instrument or undertaking to which Borrower is a party or subject, or by which Borrower or any Property of Borrower is bound, or conflict with or constitute a default thereunder or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, agreement, document, instrument or undertaking (other than in favor of the Agent pursuant to the Transaction Documents).  No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental, regulatory, administrative or public body or authority, or any subdivision thereof, or any other Person is required to authorize, or is required in connection with, the execution, delivery or performance of, or the legality, validity, binding effect or enforceability of, any of the Transaction Documents.

4.10Other Debt, Guarantees and Capitalized Leases.  Except as disclosed on Schedule 4.10 attached hereto, neither Borrower nor any Subsidiary is a borrower, guarantor or obligor with respect to, or a lessee under, any Debt other than the Borrower’s Obligations.  Borrower may at any time amend, modify or supplement Schedule 4.10 by notifying the Agent and each Lender in writing of any changes thereto, and thereby the representations and warranties contained in this Section 4.10 shall be amended accordingly so long as such amendment, modification or supplement is made within thirty (30) days after the occurrence of any such changes in the facts stated therein and that such changes reflect transactions that are permitted under this Agreement.

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4.11Labor Matters.  Neither Borrower nor any Subsidiary is a party to any labor dispute which could reasonably be expected to have a Material Adverse Effect.  There are no strikes or walkouts relating to any labor contract to which Borrower or any Subsidiary is subject.  Hours worked and payments made to the employees of Borrower and its Subsidiaries have not been in violation of (a) the Fair Labor Standards Act or (b) any other applicable law dealing with such matters, the violation of which could reasonably be expected to have in the case of clauses (a) and (b) a Material Adverse Effect.  All payments due from Borrower or any Subsidiary, or for which any claim may be made against any of them, in respect of wages, employee health and welfare insurance and/or other benefits have been paid or accrued as a liability on their respective books.

4.12Title to Property.  Borrower and each Subsidiary is the sole owner of, or has the legal right to use and occupy, all Property it claims to own or which is necessary for Borrower or such Subsidiary to conduct its business, and all of such Property is free and clear of all Liens other than Permitted Liens other than as set forth in Schedule 4.12.  Borrower and each Subsidiary enjoy peaceful and undisturbed possession in all material respects under all leases under which it is operating as a lessee.

4.13Regulation U.  Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of The Board of Governors of the Federal Reserve System, as amended) and no part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately (a) to purchase or carry margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock, or to refund or repay indebtedness originally incurred for such purpose or (b) for any purpose which entails a violation of, or which is inconsistent with, the provisions of any of the Regulations of The Board of Governors of the Federal Reserve System, including, without limitation, Regulations U, T or X thereof, as amended.  If requested by the Agent or any Lender, Borrower shall furnish to the Agent and each Lender a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U.

4.14Multi-Employer Pension Plan Amendments Act of 1980.  Borrower and each Subsidiary are in compliance with the Multi-Employer Pension Plan Amendments Act of 1980, as amended (“MEPPAA”), and have no liability for pension contributions pursuant to MEPPAA.

4.15Investment Company Act of 1940; Public Utility Holding Company Act of 2005.  Borrower is not an “investment company” as that term is defined in, and is not otherwise subject to regulation under, the Investment Company Act of 1940, as amended.  Borrower is not a “holding company” as that term is defined in, and is not otherwise subject to regulation under, the Public Utility Holding Company Act of 2005.

4.16Patents, Trademarks, Copyrights, Licenses, Etc.  Except as disclosed on Schedule 4.16 attached hereto, neither Borrower nor any Subsidiary has any patents, patent applications, patent rights, trademarks, trademark applications, trademark rights, copyrights, licenses or other intellectual property which are material to the business of Borrower or such Subsidiary.  Borrower may at any time amend, modify or supplement Schedule 4.16 by notifying the Agent and each Lender in writing of any changes thereto, and thereby the representations and warranties contained in the first sentence of this Section 4.16 shall be amended accordingly so long as such amendment, modification or supplement is made within thirty (30) days after the occurrence of any such changes in the facts stated therein and that such changes reflect transactions that are permitted under this Agreement.  Borrower and each Subsidiary possess all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, licenses and other intellectual property necessary to conduct its business without conflict with any patent, patent right, trademark, trademark right, trade name, copyright, license or other intellectual property of any other Person, except where the failure to possess the same could not reasonably be expected to have a Material Adverse Effect.

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4.17Environmental and Safety and Health Matters.  Except as disclosed on Schedule 4.17 attached hereto:  (i) the operations of Borrower and each Subsidiary comply with all applicable Environmental Laws and all applicable Occupational Safety and Health Laws, the violation or noncompliance with which could reasonably be expected to have a Material Adverse Effect; (ii) none of the operations of Borrower or any Subsidiary are subject to any Environmental Claim or any judicial, governmental, regulatory or administrative proceeding alleging the violation of any Occupational Safety and Health Law, which, if determined adversely against Borrower or any Subsidiary, could reasonably be expected to have a Material Adverse Effect; (iii) none of the operations of Borrower or any Subsidiary is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to any Release of Hazardous Substances or any unsafe or unhealthful condition at any premises owned, leased or operated by Borrower or such Subsidiary, which, if determined adversely to the Borrower or the Subsidiary, could reasonably be expected to have a Material Adverse Effect; (iv) Borrower nor any Subsidiary has filed any notice under any Environmental Law or Occupational Safety and Health Law indicating or reporting (A) any past or present spillage, leakage or Release into the environment of, or treatment, storage or disposal of, any Hazardous Substance or (B) any unsafe or unhealthful condition at any premises owned, leased or operated by the Borrower or such Subsidiary; and (v) Borrower nor any Subsidiary has any material contingent liability in connection with (A) any spillage, disposal or Release into the environment of, or otherwise with respect to, any Hazardous Substances or (B) any unsafe or unhealthful condition at any premises owned, leased or operated by Borrower or such Subsidiary.

4.18Investments.  Neither Borrower nor any Subsidiary has any Restricted Investments except as disclosed on Schedule 4.18.

4.19No Default.  No Default or Event of Default under this Agreement has occurred and is continuing.  There is no existing default or event of default under or with respect to any indenture, contract, agreement, lease or other instrument to which Borrower or any Subsidiary is a party or by which any Property of Borrower or any Subsidiary is bound or affected, a default under which could reasonably be expected to have a Material Adverse Effect.  Borrower and each Subsidiary has and is in full compliance with and in good standing with respect to all governmental and/or regulatory permits, licenses, certificates, consents and franchises necessary to continue to conduct its business as previously conducted by it and to own or lease and operate its Properties as now owned or leased by it, the failure to have or noncompliance with which could reasonably be expected to have a Material Adverse Effect, and, to the best of Borrower’s knowledge, none of said permits, certificates, consents or franchises contain any term, provision, condition or limitation more burdensome than such as are generally applicable to Persons engaged in the same or similar business as Borrower or such Subsidiary, as the case may be.  Borrower nor any Subsidiary is in violation of any applicable statute, law, rule, regulation or ordinance of the United States of America, of any state, city, town, municipality, county or of any other jurisdiction, or of any agency thereof, a violation of which could reasonably be expected to have a Material Adverse Effect.

4.20Government Contracts.  Except as disclosed on Schedule 4.20 attached hereto, Borrower nor any Subsidiary is a party to or bound by any supply or purchase agreements with the federal government or any state or local government or any agency thereof, the termination or cancellation of which could reasonably be expected to have a Material Adverse Effect.

4.21Purchase and Other Commitments and Outstanding Bids.  No material purchase or other commitment of Borrower or any Subsidiary is in excess of the normal, ordinary and usual requirements of its business, or was made at any price in excess of the then current market price, or, to the best of Borrower’s knowledge, contains terms and conditions more onerous than those usual and customary in the applicable industry.  There is no material outstanding bid, sales proposal, contract or unfilled order of Borrower or any Subsidiary which (a) will, or could if accepted, require Borrower or any such Subsidiary to supply goods or services at a cost to Borrower or any Subsidiary in excess of the revenues to be received therefor or (b) quotes prices which do not include a markup over reasonably estimated costs consistent with past markups on similar business based on market conditions current at that time.

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4.22Real Property.  Schedule 4.22 attached hereto sets forth a true, correct and complete list of all real property owned or leased by Borrower or any Subsidiary (and, for each parcel of real property, stating whether it is owned or leased and whether it is a manufacturing facility, a distribution facility or a sales office and, if it is leased facility, forth the basic terms of the lease (i.e. name and address of landlord, term of lease and amount of rent and other payments), Borrower may at any time amend, modify or supplement Schedule 4.22 by notifying the Agent and each Lender in writing of any changes thereto, and thereby the representations and warranties contained in the first sentence of this Section 4.22 shall be amended accordingly so long as such amendment, modification or supplement is made within thirty (30) days after the occurrence of any such changes in the facts stated therein and that such changes reflect transactions that are permitted under this Agreement.

4.23Disclosure

.  Neither this Agreement nor any of the Exhibits or Schedules hereto nor any certificate or other data furnished to the Agent or any of the Lenders in writing by or on behalf of Borrower or any Subsidiary in connection with the transactions contemplated by this Agreement contains any untrue or incorrect statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.  To the best knowledge of Borrower, there is no fact peculiar to Borrower or any of its Subsidiaries which presently has a Material Adverse Effect or in the future (so far as Borrower can now foresee) could reasonably be expected to have a Material Adverse Effect, which has not heretofore been disclosed in writing by Borrower to the Agent and each Lender.

Section 5.                      COVENANTS.

5.01Affirmative Covenants of Borrower.  Borrower covenants and agrees to the following, so long as (i) any Lender has any obligation to make any Loan under this Agreement, (ii) U.S. Bank has any obligation to issue any Letter of Credit under this Agreement, (iii) any Letter of Credit remains outstanding and/or (iv) any of the Borrower’s Obligations remain unpaid:

(a)Information.  Borrower will deliver or cause to be delivered to the Agent or, if instructed to do so by the Agent, directly to each Lender:

(i)as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, consolidated and consolidating balance sheets of Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated and consolidating statements of income, stockholders’ equity and cash flows for such fiscal year, setting forth in each case, in comparative form, the figures for the previous fiscal year, all such financial statements to be prepared in accordance with GAAP consistently applied and audited by and accompanied by the unqualified opinion of an independent certified public accountants selected by Borrower and reasonably acceptable to the Required Lenders;

(ii)as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of each fiscal year of Borrower, the consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal quarter and the related consolidated statements of income, stockholders’ equity and cash flows for such fiscal quarter and for the portion of Borrower’s fiscal year ended at the end of such fiscal quarter (and the consolidated statements of income, stockholders’ equity and cash flows of Borrower and its Subsidiaries for such fiscal quarter and for the portion of Borrower’s fiscal year ended at the end of such fiscal quarter), setting forth in each case in comparative form, the figures for the corresponding fiscal quarter and the corresponding portion of Borrower’s previous fiscal year;

(iii)simultaneously with the delivery of each set of financial statements referred to in Section 5.01(a)(i) above and simultaneously with the delivery of each set of financial statements referred to in Sections 5.01(a)(ii) above with respect to the last fiscal quarter of Borrower, a certificate of the President or the chief financial officer of Borrower in the form attached hereto as Exhibit J and incorporated herein by reference, accompanied by supporting financial work sheets where appropriate, (A)

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evidencing Borrower’s compliance with the financial covenants contained in Section 5.01(o) of this Agreement, (B) stating whether there exists on the date of such certificate any Default or Event of Default and, if any Default or Event of Default then exists, setting forth the details thereof and the action which Borrower is taking or proposes to take with respect thereto and (C) certifying that all of the representations and warranties of Borrower and/or any other Obligor contained in this Agreement and/or in any of the other Transaction Documents are true and correct in all material respects on and as of the date of such certificate as if made on and as of the date of such certificate;

(iv)promptly upon receipt thereof, any reports (including, without limitation, any management letters) submitted to Borrower or any Subsidiary (other than reports previously delivered pursuant to Sections 5.01(a)(i) and (ii) above) by independent accountants in connection with any annual, interim or special audit made by them of the books of Borrower or Subsidiary;

(v)No later than 75 days after the end of each fiscal year, pro forma consolidated financial statements for the next fiscal year-end (including at least a consolidated income statement and a consolidated balance sheet); and

(vi)with reasonable promptness, such further information regarding the business, affairs and financial condition of Borrower or any Subsidiary as the Agent or any Lender may from time to time reasonably request.

Each Lender is hereby authorized to deliver a copy of any financial statement or other information made available by Borrower, any Subsidiary or any other Obligor to any regulatory authority having jurisdiction over such Lender, pursuant to any request therefor by any such regulatory agency.

(b)Payment of Debt.  Borrower will, and it will cause each Subsidiary to, (i) pay and discharge any and all Debt payable by Borrower or such Subsidiary, as the case may be, and any interest or premium thereon, when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in accordance with the agreement, document or instrument relating to such Debt (provided, however, that the payment of any such Debt consisting of trade accounts payable shall be made within the limits and subject to the other conditions set forth in Section 5.01(e) below) and (ii) perform, observe and discharge in all material respects all covenants, conditions and obligations which are imposed upon Borrower or such Subsidiary, as the case may be, by any and all agreements, documents, instruments and indentures evidencing, securing or otherwise relating to such Debt.

(c)Maintenance of Books and Records; Consultations and Inspections.  Borrower will, and it will cause each Subsidiary to, maintain books and records sufficient to permit the preparation of financial statements in accordance with GAAP and in which true, correct and complete entries shall be made of all dealings and transactions in relation to its business.  Borrower will, and it will cause each Subsidiary to, permit the Agent and each Lender (and any Person appointed by the Agent or any Lender to whom Borrower do not reasonably object) to discuss the affairs, finances and accounts of Borrower and each Subsidiary with the officers of Borrower and each Subsidiary, and, upon reasonable oral or written notice to Borrower, all at such reasonable times and as often as the Agent or any Lender may from time to time reasonably request.  Borrower will also permit, and will cause each Subsidiary to permit, inspection of its Properties, books and records by the Agent and each Lender, upon reasonable oral or written notice to Borrower, during normal business hours and at other reasonable times.  Borrower will reimburse the Agent and each Lender upon demand for all reasonable costs and expenses incurred by the Agent or any Lender in connection with one (1) such inspection conducted each year prior to the occurrence of any Default or Event of Default under this Agreement, and Borrower will reimburse the Agent and each Lender upon demand for all reasonable costs and expenses incurred by the Agent or any Lender in connection with any such inspection conducted by the Agent or any Lender while any Default or Event of Default under this Agreement has occurred and is continuing.  Borrower irrevocably

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authorizes the Agent and each Lender to, upon oral or written notice to Borrower, communicate directly with Borrower’s independent public accountants and irrevocably authorizes and directs such accountants to disclose to the Agent and each Lender any and all information with respect to the business and financial condition of Borrower and its Subsidiaries as the Agent or any Lender may from time to time reasonably request in writing.

(d)Payment of Taxes.  Borrower will, and Borrower will cause each Subsidiary to, duly file all federal, state and local income tax returns and all other tax returns and reports of Borrower or such Subsidiary, as the case may be, which are required to be filed and duly pay and discharge promptly all taxes, assessments and other governmental charges imposed upon it or any of its Property; provided, however, that neither Borrower, nor any Subsidiary shall be required to pay any such tax, assessment or other governmental charge the payment of which is being contested in good faith and by appropriate proceedings being diligently conducted and for which adequate reserves in accordance with GAAP have been provided, except that Borrower or such Subsidiary, as the case may be, shall pay or cause to be paid all such taxes, assessments and governmental charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor, unless such foreclosure is stayed by the filing of an appropriate bond in a manner reasonably satisfactory to the Required Lenders.

(e)Payment of Claims.  Borrower will, and it will cause each Subsidiary to, promptly pay and discharge (i) all trade accounts payable in accordance with its usual and customary business practices as in effect on the date of this Agreement (but in no event later than sixty (60) days after the due date thereof) and (ii) all claims for work, labor or materials which if unpaid does or could reasonably be expected to become a Lien upon any of its Property; provided, however, that no Borrower nor any Subsidiary shall be required to pay any such account payable or claim the payment of which is being contested in good faith and by appropriate proceedings being diligently conducted and for which adequate reserves in accordance with GAAP have been provided, except that such Borrower or such Subsidiary, as the case may be, shall pay or cause to be paid all such accounts payable and claims forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor, unless such foreclosure is stayed by the filing of an appropriate bond in a manner reasonably satisfactory to the Required Lenders.

(f)Corporate Existence.  Borrower will, and it will cause each Subsidiary to, do all things necessary to (i) preserve and keep in full force and effect at all times its corporate existence and all permits, licenses, franchises and other rights material to its business, and (ii) be duly qualified to do business and be in good standing in all jurisdictions where the nature of its business or its ownership of Property requires such qualification except for those jurisdictions in which the failure to qualify or be in good standing could not reasonably be expected to have a Material Adverse Effect.

(g)Maintenance of Property.  Borrower will, and it will cause each Subsidiary to, at all times, preserve and maintain all of the Property used or useful in the conduct of its business in good condition, working order and repair, ordinary wear and tear excepted.

(h)Compliance with Laws, Regulations, Etc.  Borrower will, and it will cause each Subsidiary to, (i) comply with any and all laws, ordinances and governmental and regulatory rules and regulations to which Borrower or such Subsidiary, as the case may be, is subject (including, without limitation, all Occupational Safety and Health Laws and all Environmental Laws), the violation of which or failure to comply with which could reasonably be expected to have a Material Adverse Effect and (ii) obtain any and all licenses, permits, franchises and other governmental and regulatory authorizations necessary to the ownership of its Properties or to the conduct of its business, the failure to obtain which license, permit, franchise and/or other governmental or regulatory authorization could reasonably be expected to have a Material Adverse Effect.

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(i)Environmental Matters.  Borrower will give the Agent prompt written notice of (i) any Environmental Claim or any other action or investigation with respect to the existence or potential existence of any Hazardous Substances instituted or threatened with respect to Borrower or any Subsidiary or any of the Properties or facilities owned, leased or operated by Borrower or any Subsidiary which, if determined adversely to Borrower or any Subsidiary, could reasonably be expected to have a Material Adverse Effect and (ii) any condition or occurrence on any of the Properties or facilities owned, leased or operated by Borrower or any Subsidiary which constitutes a violation in any material respect of any Environmental Laws or which gives rise to a reporting obligation or requires removal or remediation under any Environmental Laws.  Within thirty (30) days after the giving of any such notice, Borrower shall deliver to the Agent (in sufficient quantities for distribution to each Lender) Borrower’s plan with respect to any removal or remediation required by any Environmental Law or any other applicable law, rule or regulation and Borrower agrees to complete any such removal and/or remediation within the time required thereby.  Borrower shall promptly provide the Agent (in sufficient quantities for distribution to each Lender) with copies of all documentation relating thereto, and such other information with respect to environmental matters as the Agent or any Lender may reasonably request from time to time.

(j)ERISA Compliance.  If Borrower, any Subsidiary or any ERISA Affiliate shall have any Pension Plan, Borrower, such Subsidiary or such ERISA Affiliate, as the case may be, shall comply in all material respects with all requirements of ERISA relating to such Pension Plan.  Without limiting the generality of the foregoing, Borrower will not, and it will not cause or permit any Subsidiary or any ERISA Affiliate to:

(i)permit any Pension Plan maintained by Borrower, any Subsidiary or any ERISA Affiliate to engage in any nonexempt “prohibited transaction,” as such term is defined in Section 4975 of the Code;

(ii)permit any Pension Plan maintained by Borrower, any Subsidiary or any ERISA Affiliate to incur any “accumulated funding deficiency”, as such term is defined in Section 302 of ERISA, 29 U.S.C. § 1082, whether or not waived;

(iii)terminate any Pension Plan in a manner which could result in the imposition of a Lien on any Property of Borrower, any Subsidiary or any ERISA Affiliate pursuant to Section 4068 of ERISA, 29 U.S.C. § 1368; or

(iv)take any action which would constitute a complete or partial withdrawal from a Multi-Employer Plan within the meaning of Sections 4203 or 4205 of Title IV of ERISA.

Notwithstanding any provision contained in this Section 5.01(j) to the contrary, an act by Borrower or any Subsidiary shall not be deemed to constitute a violation of this Section 5.01(j) unless said action, individually or cumulatively with other acts of Borrower and its Subsidiaries, has or could reasonably be expected to have a Material Adverse Effect.

(k)Notices.  Borrower will notify the Agent in writing of any of the following within five (5) Domestic Business Days after Borrower or any officer of Borrower has actual knowledge thereof, describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto:

(i)the occurrence of any Default or Event of Default under this Agreement;

(ii)the occurrence of any default or event of default by Borrower, any other Obligor or any Subsidiary under any note, indenture, loan agreement, mortgage, deed of trust, security agreement, lease or other similar agreement, document or instrument in an amount equal to or greater than $500,000 to which Borrower, any other Obligor or any Subsidiary, as the case may be, is a party or by which it is bound or to which it is subject;

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(iii)the institution of any litigation, arbitration proceeding or governmental or regulatory proceeding affecting Borrower, any other Obligor or any Subsidiary, whether or not considered to be covered by insurance, in which the prayer or claim for relief seeks recovery of an amount in excess of $1,000,000 (or, if no dollar amount is specified in the prayer or claim for relief, in which there is a reasonable likelihood of recovery of an amount in excess of $1,000,000) or any form of equitable relief which, if granted, could reasonably be expected to have a Material Adverse Effect;

(iv)the entry of any judgment or decree against Borrower, any other Obligor or any Subsidiary in an amount in excess of $500,000;

(v)the occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan (other than a Defined Contribution Plan) by Borrower, any ERISA Affiliate or any Subsidiary; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a “complete withdrawal” or a “partial withdrawal” as defined in Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary from any Multi-Employer Plan; or the incurrence of any material increase in the contingent liability of Borrower or any Subsidiary with respect to any “employee welfare benefit plan” as defined in Section 3(1) of ERISA which covers retired employees and their beneficiaries;

(vi)the occurrence of any event which could reasonably be expected to have a Material Adverse Effect;

(vii)any change in the name of Borrower, any other Obligor or any Subsidiary;

(viii)any proposed opening, closing or other change of any place of business of Borrower or any Subsidiary;

(ix)any material change in Borrower’s or any Subsidiary’s line(s) of business; and

(x)the occurrence of such other events as the Agent or any Lender may from time to time reasonably specify in written communication to Borrower.

(l)Insurance.  Borrower will, and it will cause each Subsidiary to, insure all of its Property of the character usually insured by Persons engaged in the same or similar businesses similarly situated, against loss or damage of the kind customarily insured against by such Persons, unless higher limits or coverage are reasonably required in writing by the Required Lenders (in which event Borrower and/or the applicable Subsidiary will have thirty (30) days after written request by the Required Lenders to obtain such additional insurance), and carry liability insurance and other insurance of a kind and in an amount generally carried by Persons engaged in the same or similar businesses similarly situated, unless higher limits or coverage are reasonably required in writing by the Required Lenders (in which event Borrower and/or the applicable Subsidiary will have thirty (30) days after written request by the Required Lenders to obtain such additional insurance).  All such insurance shall be consistent with the coverages set forth on Schedule 5.01(l) hereto.  All insurance required by this Section 5.01(1) shall be with insurers rated A-X or better by A.M Best Company, Inc. (or accorded a similar rating by another nationally or internationally recognized insurance rating agency of similar standing if A.M. Best Company, Inc. is not then in the business of rating insurers or rating foreign insurers) or such

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other insurers as may from time to time be reasonably acceptable to the Required Lenders.  All such insurance may be subject to reasonable deductible amounts.  Simultaneously with each delivery of financial statements under Section 5.01(a)(i), Borrower shall deliver to the Agent a certificate of an officer of Borrower specifying the details of all insurance then in effect and certifying that all of the premiums therefor which are then due and payable have been paid in full.  Borrower shall also deliver to the Agent certificate(s) of insurance in form and substance acceptable to the Agent with respect to the foregoing policies stating without limitation (i) that Agent is the named party under a standard mortgagee endorsement (and an equivalent endorsement with respect to personal property collateral) with such endorsements referenced in and attached to the certificate, (ii) that the Agent has been named through endorsement as an additional insured under all liability policies with a copy of that endorsement referenced in and attached to the certificate (including coverage for the Agent’s sole negligence and stating that the Agent’s status as an additional insured shall be primary and non-contributory), (iii) that Borrower has been permitted by endorsement to enter into a waiver of subrogation with a copy of that endorsement referenced in and attached to the certificate, and (iv) that the insurer has agreed by endorsement to send to the Agent thirty (30) notice of cancellation for any reason, except for at least ten (10) days notice in the event of non-payment of premium, with a copy of that endorsement referenced in and attached to the certificate.  UNLESS BORROWER PROVIDES EVIDENCE OF THE INSURANCE COVERAGE REQUIRED UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, THE AGENT MAY PURCHASE INSURANCE AT BORROWER’S EXPENSE TO PROTECT THE AGENT’S INTEREST IN THE COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT BORROWER’S INTERESTS.  THE COVERAGE THAT THE AGENT PURCHASES MAY NOT PAY ANY CLAIM THAT BORROWER MAY MAKE OR ANY CLAIM THAT IS MADE AGAINST BORROWER IN CONNECTION WITH THE COLLATERAL.  BORROWER MAY LATER CANCEL ANY INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING EVIDENCE THAT BORROWER HAVE OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, BORROWER WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES THE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO THE BORROWER’S OBLIGATIONS.  THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE BORROWER MAY BE ABLE TO OBTAIN ON ITS OWN.

(m)Further Assurances.  Borrower will execute and deliver to the Agent, at any time and from time to time, any and all further agreements, documents and instruments, and take any and all further actions which may be required under applicable law, or which the Agent or any Lender may from time to time reasonably request, in order to effectuate the transactions contemplated by this Agreement and the other Transaction Documents.

(n)Accountant.  Borrower will give the Agent and each of the Lenders prompt notice of any change of Borrower’s independent certified public accountants and a statement of the reasons for such change.  Borrower shall at all times utilize independent certified public accountants reasonably acceptable to the Agent.

(o)Financial Covenants.

(i)Minimum Consolidated Fixed Charge Coverage Ratio.  Borrower will have a Consolidated Fixed Charge Coverage Ratio of at least 1.50 to 1.0 for the four (4) consecutive fiscal quarter period of Borrower as of the last day of each fiscal quarter of Borrower thereafter, commencing with the four (4) consecutive fiscal quarter period ending August 31, 2009.

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(ii)Maximum Consolidated Total Leverage Ratio.  Borrower will have and maintain a Consolidated Total Leverage Ratio of not more 3.00 to 1.00 for the four (4) consecutive fiscal quarter period of Borrower as of the last day of each fiscal quarter of Borrower thereafter, commencing with the four (4) consecutive fiscal quarter period ending August 31, 2009.

(iii)Tangible Net Worth.  Maintain a minimum Tangible Net Worth, measured as of the last day of each fiscal quarter, of not less than the sum of (i) $69,000,000, plus 50% of cumulative quarterly net income subsequent to Closing, with no deduction for any quarterly net loss, plus (iii) 100% of the net cash proceeds from the issuance of equity securities subsequent to Closing if such proceeds from the issuance of equity securities are not intended and used to fund Acquisitions (subject to Section 5.02(l)).

(iv)           Liquidity.  Maintain a Consolidated Liquidity of at least $20,000,000.

(p)Ownership of Subsidiaries.  Borrower will at all times be the sole legal, beneficial and record owner of all of the issued and outstanding shares of each class of capital stock, each class of membership interests or each class of other equity interests of each Subsidiary.

(q)Borrower will execute or deliver, or cause to be executed or delivered, as applicable, to the Agent and each Lender each of the items listed on Schedule 5.01(q) attached hereto (collectively, the “Post-Closing Items”) on or before the applicable due date listed after each such Post-Closing Item, each of which Post-Closing Items must be in form, substance and content reasonably satisfactory to the Agent.

5.02Negative Covenants of Borrower.  Borrower covenants and agrees to the following, so long as (i) any Lender has any obligation to make any Loan under this Agreement, (ii) U.S. Bank has any obligation to issue any Letters of Credit under this Agreement, (iii) any Letter of Credit remains outstanding and/or (iv) any of the Borrower’s Obligations remain unpaid:

(a)Limitation on Debt.  Borrower will not, and it will not cause or permit any Subsidiary to, incur or be obligated on any Debt other than:

(i)the Borrower’s Obligations;

(ii)unsecured trade accounts payable and other normal accruals incurred in the ordinary course of business which are not more than sixty (60) days past due (provided, however, that Borrower nor any Subsidiary shall be required to pay any such account payable or other accrual the payment of which is being contested in good faith and by appropriate proceedings being diligently conducted and for which adequate reserves in accordance with GAAP have been provided, except that Borrower or such Subsidiary, as the case may be, shall pay or cause to be paid all such accounts payable and accruals forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor, unless such foreclosure is stayed by the filing of an appropriate bond in a manner reasonably satisfactory to the Required Lenders);

(iii)Debt either existing as of the date of this Agreement listed on Schedule 4.10 attached hereto (and without giving effect to any amendment to Schedule 4.10 made by Borrower after the date of this Agreement as permitted by Section 4.10 of this Agreement) or as otherwise consented to in writing by the Required Lenders;

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(iv)refundings, renewals or replacements of any Debt permitted under clauses (i) through (iii) above and any amendments to any of the foregoing, provided that any such refundings, renewals or replacements or amendment shall not increase the then outstanding principal amount of such Debt; and

(v)other Debt not otherwise permitted by this Section 5.02(a) in an amount not to exceed $5,000,000 in the aggregate at any one time outstanding for Borrower and all of its Subsidiaries on a combined basis.

(b)Limitation on Liens.  Borrower will not, and will not cause or permit any Subsidiary to, create, incur or assume, or suffer to be incurred or to exist, any Lien on any of its Property, whether now owned or hereafter acquired, or upon any income or profits therefrom, except for Permitted Liens.

(c)Consolidation, Merger, Sale of Property, Etc.

(i)Except for Permitted Acquisitions, Borrower will not, and it will not cause or permit any Subsidiary to, directly or indirectly merge or consolidate with or into any other Person or permit any other Person to merge into or with or consolidate with it; provided, however, that so long as no Default or Event of Default exists immediately before or immediately after giving effect to such merger or such consolidation, any wholly-owned Subsidiary may merge or consolidate with or into Borrower (provided that Borrower shall be the continuing or surviving corporation) or any other wholly-owned Subsidiary.

(ii)Borrower will not, and will not cause or permit any Subsidiary to, (A) sell, assign, lease, transfer, abandon or otherwise dispose of any of its Property (including, without limitation, any shares of capital stock of a Subsidiary owned by Borrower or another Subsidiary) or (B) issue, sell or otherwise dispose of any shares of capital stock of any Subsidiary, except for (1) sales of inventory in the ordinary course of business (which does not include a transfer of Inventory in partial or total satisfaction of any Debt), (2) sales of margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System for fair market value in cash (3) sales of fixed assets in an amount not to exceed $2,500,000 in proceeds in the aggregate in any fiscal year, and (4) sales of fixed assets which are obsolete, worn-out or otherwise not used or useable in the ordinary course of its business so long as the net proceeds thereof are used solely to purchase replacement fixed assets or assets of comparable quality or to pay or prepay, Debt secured by any Permitted Lien encumbering the assets being sold or the Borrower’s Obligations.

(d)Sale and Leaseback Transactions.  Borrower will not, and it will not cause or permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby Borrower or such Subsidiary shall in one or more related transactions sell, transfer or otherwise dispose of any Property owned by Borrower or such Subsidiary to any Person and then rent or lease, as lessee, such Property or any part thereof for a period or periods which in the aggregate would exceed twelve (12) months from the date of commencement of the lease term without the written consent of Required Lenders unless any Debt arising therefrom is permitted by Section 5.02(a) and the proceeds therefrom do not exceed $5,000,000 in the aggregate.

(e)Sale or Discount of Accounts.  Borrower will not, and it will not cause or permit any Subsidiary to, sell or discount (other than prompt payment discounts granted in the ordinary course of business) any of its accounts  or other receivables or chattel paper.

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(f)Transactions with Affiliates.  Except for the transactions and arrangements described on Schedule 5.02(f) attached hereto as in effect on the date of this Agreement, Borrower will not, and it will not cause or permit any Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of Property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of business and pursuant to the reasonable requirements of Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arm’s-length transaction with a Person not an Affiliate.

(g)Changes in Nature of Business.  Borrower will not, and it will not cause or permit any Subsidiary to, engage in any business if, as a result, the general nature of the business which would then be engaged in by Borrower and its Subsidiaries, considered as a whole, would be substantially changed from the general nature of the business engaged in by Borrower and its Subsidiaries, considered as a whole, as of the date of this Agreement.

(h)Fiscal Year.  Borrower will not, and it will not cause or permit any Subsidiary to, change its fiscal year.

(i)Distributions.  Except for a Permitted Distribution, Borrower will not, and it will not cause or permit any Subsidiary to, declare or incur any liability to make any Distribution in respect of the capital stock or other equity interest of Borrower or the capital stock or other equity interest of such Subsidiary, as the case may be.

(j)Pension Plans.  Borrower will not, and it will not cause or permit any Subsidiary to, (a) permit any condition to exist in connection with any Pension Plan which might constitute grounds for the PBGC to institute proceedings to have such Pension Plan terminated or a trustee appointed to administer such Pension Plan or (b) engage in, or permit to exist or occur, any other condition, event or transaction with respect to any Pension Plan which could result in the incurrence by Borrower, any Subsidiary or any ERISA Affiliate of any material liability, fine or penalty.

(k)Restricted Investments.  Except for Intangible Capital Expenditures permitted by Section 5.02(o), Borrower will not, and it will not cause or permit any Subsidiaries to, directly or indirectly, make any Restricted Investments.

(l)Acquisitions.  Borrower will not, and it will not cause or permit any Subsidiary to, consummate any Acquisitions other than the Permitted Acquisitions.

(m)Subsidiaries.  Except with respect to the anticipated Subsidiaries described by the Borrower on Schedule 5.02(m), Borrower or any Subsidiary will not, and it will not cause or permit any Subsidiary to, create, form or acquire any Subsidiaries without the prior written consent of the Required Lenders unless Borrower or any Subsidiary which creates, forms or acquires any Subsidiary on or after the date of this Agreement, Borrower or such Subsidiary, as the case may be, shall, contemporaneously with the creation, formation or acquisition of such Subsidiary, (i) grant the Agent for the ratable benefit of the Lenders a first priority perfected security interest in and lien on all of the issued and outstanding shares of capital stock of such Domestic Subsidiary, and (B) up to sixty-five percent (65%) of the issued and outstanding shares of capital stock (or other ownership interests) of such Foreign Subsidiary, and (ii) cause such Subsidiary to (A) guaranty the payment and performance of all of the Borrower’s Obligations pursuant to a Subsidiary Guaranty and (B) secure said Subsidiary Guaranty with a first priority perfected security interest in and lien on all of the accounts, inventory, documents, instruments, chattel paper, general intangibles, goods, machinery, equipment, investment property, other tangible and intangible personal property, real property and books and records of such Subsidiary and the proceeds thereof, all pursuant to a joinder to the Security Agreement and other documentation (including, without limitation, an amendment to this Agreement if requested by the Agent or any Lender) in form and substance reasonably satisfactory to the Required Lenders.  Notwithstanding the foregoing, in the case of a Foreign Subsidiary, or a Domestic

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Subsidiary owned by a Foreign Subsidiary, no such Subsidiary shall be required to give, execute and deliver a Subsidiary Guaranty if the delivery of such Subsidiary Guaranty would either (i) cause the undistributed earnings of any such Foreign Subsidiary, or Domestic Subsidiary owed by a Foreign Subsidiary, to be treated as a deemed dividend to the Borrower for federal income tax purposes or (ii) be limited on account of legal or financial limitations imposed by the jurisdiction of organization of such Subsidiary (or the parent of such Subsidiary) or other relevant jurisdictions having authority over such Subsidiary.

(n)Limitations on Restrictive Agreements.  Borrower will not, and it will not cause or permit any Subsidiary to, enter into, or permit to exist, any agreement with any Person which prohibits or limits the ability of Borrower or such Subsidiary, as the case may be, to (a) make loans or advances to Borrower and/or any Subsidiary, (b) transfer any of its properties or assets to Borrower and/or any Subsidiary or (c) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; provided that the foregoing shall not apply to restrictions in effect on the date of this Agreement contained in agreements governing Debt outstanding on the date of this Agreement and listed on Schedule 5.02(n) attached hereto and, if such Debt is renewed, extended or refinanced, restrictions in the agreements governing the renewed, extended or refinanced Debt (and successive renewals, extensions and refinancings thereof) if such restrictions are no more restrictive in any material respect than those contained in the agreements governing the Debt being renewed, extended or refinanced.

(o)Capital Expenditures.  Borrower will not, and it will not cause or permit any Subsidiary to, make any Capital Expenditure or Intangible Capital Expenditures if the sum of (i) the aggregate amount of all Capital Expenditures and Intangible Capital Expenditures as the case may be (including the expenditure in question) made by Borrower and its Subsidiaries during a fiscal year exceeds $10,000,000.

5.03Use of Proceeds.  Borrower covenants and agrees that (a) the proceeds of the Loans will be used solely to (i) refinance existing Debt of Borrower and its Subsidiaries, (ii) for Permitted Acquisitions, and (iii) for the working capital and general corporate purposes of Borrower; (b) no part of the proceeds of any Loan will be used in violation of any applicable law, rule or regulation and (c) no part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately (i) to purchase or carry margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock, or to refund or repay indebtedness originally incurred for such purpose or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of any of the Regulations of The Board of Governors of the Federal Reserve System, including, without limitation, Regulations U, T or X thereof, as amended.

Section 6.                      EVENTS OF DEFAULT.

If any of the following (each of the following herein sometimes called an “Event of Default”) shall occur and be continuing:

a)Borrower shall fail to pay within five (5) Domestic Business Days after the respective due date any of the Borrower’s Obligations constituting principal as and when the same shall become due and payable, whether by reason of demand, maturity, acceleration or otherwise;

b)Borrower shall fail to pay within five (5) Domestic Business Days after the respective due date any of the Borrower’s Obligations constituting interest, fees or other amounts (other than principal);

c)Any representation or warranty of Borrower and/or any other Obligor made in this Agreement, in any other Transaction Document to which Borrower and/or any other Obligor is a party or in any certificate, agreement, instrument or written statement furnished or made or delivered pursuant hereto or thereto or in connection herewith or therewith, shall prove to have been untrue or incorrect in any material respect when made or effected;

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d)Borrower shall fail to perform or observe any term, covenant or provision contained in Section 2.01, Section 2.04(f), Section 5.01(a), Section 5.01(c), Section 5.01(f), Section 5.01(k), Section 5.01(1), Section 5.01(o), Section 5.01(p), Section 5.01(q), Section 5.02 or Section 5.03;

e)Borrower shall fail to perform or observe any other term, covenant or provision contained in this Agreement (other than those specified in Sections 6.01 through 6.04 above) and any such failure shall remain unremedied for thirty (30) days after the earlier of (i) written notice of default is given to Borrower by the Agent or any Lender or (ii) Borrower or a Responsible Officer obtaining actual knowledge of such default;

f)This Agreement or any of the other Transaction Documents shall at any time for any reason (other than the termination of this Agreement or such other Transaction Documents, as the case may be, in accordance with its terms) cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, or if the validity or enforceability thereof shall be contested or denied by Borrower or any other Obligor, or if the transactions completed hereunder or thereunder shall be contested by Borrower or any other Obligor or if Borrower or any other Obligor shall deny that it has any further liability or obligation hereunder or thereunder;

g)Borrower, any other Obligor or any Subsidiary shall (a) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency, receivership, liquidation or similar law, (b) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition, (c) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official of itself or of a substantial part of its Property, (d) file an answer admitting the material allegations of a petition filed against itself in any such proceeding, (e) make a general assignment for the benefit of creditors, (f) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (g) take any corporate or other action for the purpose of effecting any of the foregoing;

h)An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (a) relief in respect of Borrower, any other Obligor or any Subsidiary, or of a substantial part of the Property of Borrower, any other Obligor or any Subsidiary, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency, receivership, liquidation or similar law, (b) the appointment of a receiver, trustee, custodian, sequestrator or similar official of Borrower, any other Obligor or any Subsidiary or of a substantial part of the Property of Borrower, any other Obligor or any Subsidiary or (c) the winding-up or liquidation of Borrower, any other Obligor or any Subsidiary; and such proceeding or petition shall continue undismissed for sixty (60) consecutive days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for ninety (90) days;

i)Any of the Letter of Credit Applications shall at any time for any reason (other than the termination of such Letter of Credit Application in accordance with its terms) cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, or if the validity or enforceability of any of the Letter of Credit Applications shall be contested or denied by Borrower, or if Borrower shall deny that it has any further liability or obligation under any of the Letter of Credit Applications or if Borrower shall fail to comply with or observe any of the terms, provisions or conditions contained in any of the Letter of Credit Applications;

j)Any event of default (if separately defined therein) shall occur under or within the meaning of the Security Agreement;

k)Any event of default (if separately defined therein) shall occur under or within the meaning of any of the Stock Pledge Agreements;

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l)The Patent and Trademark Security Agreement or the Copyright Security Agreement shall at any time for any reason (other than the termination of the Patent and Trademark Security Agreement or the Copyright Security Agreement in accordance with its terms) cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction;

m)Any of the Guaranties or Subsidiary Guaranties shall at any time for any reason cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, or if the validity or enforceability thereof shall be contested by or denied by the Guarantor executing any such Guaranty or Subsidiary Guaranty, or if any such Guarantor or Subsidiary shall deny that it has any further liability or obligation thereunder;

n)If the shares of capital stock or other equity interests of Borrower then pledged to the Agent pursuant to the Stock Pledge Agreements shall at any time for any reason constitute less than One Hundred Percent (100%) of the then issued and outstanding shares of each class of capital stock or each class of other type of equity interest held in Borrower;

o)Borrower, any other Obligor or any Subsidiary shall be declared by any Lender to be in default on, or pursuant to the terms of, (a) any other present or future obligation to such Lender, including, without limitation, any other loan, line of credit, revolving credit, guaranty or letter of credit reimbursement obligation or (b) any other present or future agreement purporting to convey to such Lender a Lien upon any Property of Borrower, such other Obligor or such Subsidiary, as the case may be and in the case of a transaction under either (a) or (b) the outstanding amount under such transaction exceeds $1,000,000;

p)The occurrence of any default or event of default under or within the meaning of any agreement, document or instrument evidencing, securing, guaranteeing the payment of or otherwise relating to any Debt of Borrower, any other Obligor or any Subsidiary (other than the Borrower’s Obligations) having an aggregate outstanding principal balance in excess of $500,000 which is not cured or waived in writing within any applicable cure or grace period;

q)The occurrence of any default or event of default under or within the meaning of any agreement providing Borrower with any interest rate swap, interest rate cap, interest rate collar or other interest rate hedge;

r)Borrower, any other Obligor or any Subsidiary, collectively, shall have one or more final judgments in an aggregate amount exceeding $1,000,000 entered against them by a court or courts having jurisdiction in the premises which judgment(s) shall not have been appealed in good faith (and execution of such judgment(s) stayed during such appeal) or otherwise satisfied by Borrower, such other Obligor or such Subsidiary, as the case may be, within the time period permitted by applicable law for the filing of an appeal of such judgment;

s)The occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower, any ERISA Affiliate or any Subsidiary; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a “complete withdrawal” or a “partial withdrawal” as defined in Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary from any Multi-Employer Plan; or the incurrence of any material increase in the contingent liability of Borrower or any Subsidiary with respect to any “employee welfare benefit plan” as defined in Section 3(1) of ERISA which covers retired employees and their beneficiaries; or

t)The institution by Borrower, any ERISA Affiliate or any Subsidiary of steps to terminate any Pension Plan if, in order to effectuate such termination, Borrower, such ERISA Affiliate or such Subsidiary, as the case may be, would be required to make a contribution to such Pension Plan, or would incur a liability or obligation to such Pension Plan, in excess of $500,000; or the institution by the PBGC of steps to terminate any Pension Plan.

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THEN, and in each such event (other than an event described in Sections 6.07 or 6.08), the Agent may, and if requested in writing by the Required Lenders the Agent shall, declare that the obligations of the Lenders to make Loans under this Agreement and the obligation of U.S. Bank to issue Letters of Credit under this Agreement have terminated, whereupon such obligations of the Lenders and U.S. Bank shall be immediately and forthwith terminated, and the Agent may further, and if requested in writing by the Required Lenders the Agent shall further, declare the entire outstanding principal balance of and all accrued and unpaid interest on the Notes and all of the other Borrower’s Obligations to be forthwith due and payable, whereupon all of the unpaid principal balance of and all accrued and unpaid interest on the Notes and all of such other Borrower’s Obligations shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, and the Agent, the Lenders and U.S. Bank may exercise any and all other rights and remedies which they may have under any of the other Transaction Documents or under applicable law; provided, however, that upon the occurrence of any event described in Sections 6.07 or 6.08, the obligation of the Lenders to make Loans under this Agreement and the obligation of U.S. Bank to issue Letters of Credit under this Agreement shall automatically terminate and the entire outstanding principal balance of and all accrued and unpaid interest on the Notes and all of the other Borrower’s Obligations shall automatically become immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, and the Agent, the Lenders and U.S. Bank may exercise any and all other rights and remedies which they may have under any of the other Transaction Documents or under applicable law.  If any Event of Default under this Agreement has occurred and is continuing, in addition to all of the other rights and remedies of the Agent, the Lenders and U.S. Bank under this Agreement and the other Transaction Documents and at law or in equity, the Agent and the Required Lenders shall have the right, in their sole and absolute discretion, to reduce the amount of the Revolving Credit Commitments of the Lenders and/or the Swing Line Commitment of U.S. Bank.

Section 7.                      AGENT.

7.01Appointment.  U.S. Bank National Association is hereby appointed by the Lenders as Agent under this Agreement, the Notes and the other Transaction Documents.  The Agent agrees to act as such upon the express conditions contained in this Agreement.

7.02Powers.  The Agent shall have and may exercise such powers hereunder as are specifically delegated to the Agent by the terms of this Agreement and the other Transaction Documents, together with such powers as are reasonably incidental thereto.  The Agent shall have no implied duties to the Lenders, nor any obligation to the Lenders to take any action under this Agreement or any of the other Transaction Documents, except any action specifically provided by this Agreement or any of the other Transaction Documents to be taken by the Agent.  Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default or Event of Default, except as expressly provided in Section 6 or in Section 7.06.

7.03General Immunity.  Neither the Agent nor any of its directors, officers, employees, agents or advisors shall be liable to any of the Lenders for any action taken or not taken by it in connection with this Agreement or any of the other Transaction Documents (a) with the consent or at the request of the Required Lenders or (b) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, nonappealable order.

7.04No Responsibility for Loans, Recitals, etc.  Neither the Agent nor any of its directors, officers, employees, agents or advisors shall (a) be responsible for or have any duty to ascertain, inquire into or verify any recitals, reports, statements, representations or warranties contained in this Agreement or any of the other Transaction Documents or furnished pursuant hereto or thereto, (b) be responsible for any Loans or Letters of Credit hereunder, (c) be bound to ascertain or inquire as to the performance or observance of any of the terms of this Agreement or any of the other Transaction Documents, (d) be responsible for the satisfaction of any condition specified in Section 3, except receipt of items

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required to be delivered to the Agent, (e) be responsible for the validity, effectiveness, genuineness or enforceability of this Agreement or any of the other Transaction Documents or (f) be responsible for the creation, attachment, perfection or priority of any security interests or liens purported to be granted to the Agent or any of the Lenders pursuant to this Agreement or any of the other Transaction Documents.

7.05Right to Indemnity.  Notwithstanding any other provision contained in this Agreement to the contrary, to the extent Borrower fails to reimburse the Agent pursuant to Section 8.03, Section 8.04 or Section 8.05, or if any Default or Event of Default shall occur under this Agreement, the Lenders shall ratably in accordance with their respective Pro Rata Shares of the aggregate principal amount of outstanding Loans (other than the Swing Line Loans) indemnify the Agent and hold it harmless from and against any and all liabilities, losses (except losses occasioned solely by failure of Borrower to make any payments or to perform any obligations required by this Agreement (excepting those described in Sections 8.03, 8.04 and 8.05), the Notes, the Letter of Credit Applications or any of the other Transaction Documents), costs and/or expenses, including, without limitation, any liabilities, losses, costs and/or expenses arising from the failure of any Lender to perform its obligations hereunder or in respect of this Agreement, and also including, without limitation, Attorneys’ Fees and expenses, which the Agent may incur, directly or indirectly, in connection with this Agreement, the Notes, the Letter of Credit Applications or any of the other Transaction Documents, or any action or transaction related hereto or thereto; provided only that the Agent shall not be entitled to such indemnification for any losses, liabilities, costs and/or expenses directly and solely resulting from its own gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, nonappealable order.  This indemnity shall be a continuing indemnity, contemplates all liabilities, losses, costs and expenses related to the execution, delivery and performance of this Agreement, the Notes, the Letter of Credit Applications and the other Transaction Documents, and shall survive the satisfaction and payment of the Borrower’s Obligations and the termination of this Agreement.

7.06Action Upon Instructions of Required Lenders.  The Agent agrees, upon the written request of the Required Lenders, to take any action of the type specified in this Agreement or any of the other Transaction Documents as being within the Agent’s rights, duties, powers or discretion.  Notwithstanding the foregoing, the Agent shall be fully justified in failing or refusing to take any action hereunder, unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liabilities, losses, costs and expenses (including, without limitation, attorneys’ fees and expenses) which may be incurred by it by reason of taking or continuing to take any such action, other than any liability which may arise out of Agent’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final, nonappealable order.  The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders and on all holders of the Notes.  In the absence of a request by the Required Lenders, the Agent shall have authority, in its good faith discretion, to take or not to take any action, unless this Agreement or any of the other Transaction Documents specifically requires the consent of the Required Lenders or of all of the Lenders.

7.07Employment of Agents and Counsel.  The Agent may execute any of its duties as Agent hereunder by or through employees, agents and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it in good faith and with reasonable care.  The Agent shall be entitled to advice and opinion of legal counsel concerning all matters pertaining to the duties of the agency hereby created.

7.08Reliance on Documents; Counsel.  The Agent shall be entitled to rely upon any note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of legal counsel selected by the Agent.

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7.09May Treat Payee as Owner.  The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent.  Any request, authority or consent of any person, firm or corporation who at the time of making such request or giving such authority or consent is the holder of any such Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note issued in exchange therefor.

7.10Agent’s Reimbursement.  Each Lender agrees to reimburse the Agent pro rata in accordance with its Pro Rata Share of the aggregate principal amount of outstanding Loans (other than the Swing Line Loans) for (a) any reasonable out-of-pocket costs and expenses not reimbursed by Borrower for which the Agent is entitled to reimbursement by the Borrower under this Agreement or any of the other Transaction Documents and (b) for any other reasonable out-of-pocket costs and expenses incurred by the Agent on behalf of the Lenders in connection with the preparation, execution, delivery, amendment, modification, extension, renewal and/or enforcement of this Agreement and/or any of the other Transaction Documents.

7.11Rights as a Lender.  With respect to its Revolving Credit Commitment, the Loans made by it and the Notes issued to it, the Agent shall have the same rights and powers hereunder as any Lender and may exercise the same as though it were not the Agent, and the terms “Lender” and “Lenders” shall, unless the context otherwise indicates, include the Agent in its individual capacity.  The Agent may accept deposits from, lend money to, issue letters of credit for the account of and generally engage in any kind of banking or trust business with the Borrower and its Subsidiaries and Affiliates as if it were not the Agent.

7.12Independent Credit Decision.  Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Section 4.04 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Transaction Documents.  Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Transaction Documents.

7.13Resignation of Agent.  Subject to the appointment of a successor Agent, the Agent may resign as Agent for the Lenders under this Agreement and the other Transaction Documents at any time by forty-five (45) days’ notice in writing to the Lenders and Borrower.  Such resignation shall take effect upon appointment of such successor Agent.  Subject to the consent of Borrower (which consent shall not be unreasonably withheld or delayed), the Required Lenders shall have the right to appoint a successor Agent who shall be entitled to all of the rights of, and vested with the same powers as, the original Agent under this Agreement and the other Transaction Documents.  In the event a successor Agent shall not have been appointed within the forty-five (45) day period following the giving of notice by the Agent, subject to the consent of Borrower (which consent shall not be unreasonably withheld or delayed), the Agent may appoint its own successor.  Resignation by the Agent shall not affect or impair the rights of the Agent under Sections 7.05 and 7.10 hereof with respect to all matters preceding such resignation.  Any successor Agent must be a national banking association or a bank chartered in any State of the United States having a combined capital and surplus of at least $2,000,000,000.

7.14Delivery of Documents.  The Agent agrees to promptly provide each Lender with copies of (a) this Agreement and the other Transaction Documents (including any amendments thereto), (b) any default notices sent by the Agent to Borrower or any other Obligor with respect to this Agreement or any of the other Transaction Documents, (c) any waivers or consents signed by the Agent or otherwise sent by the Agent to Borrower or any other Obligor with respect to this Agreement or any of the other Transaction Documents, (d) any notices of default sent by Borrower, any other Obligor or any Lender to the Agent with respect to this Agreement or any of the other Transaction Documents, (e)

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any requests for any amendments, waivers or consents sent to the Agent by Borrower or any other Obligor with respect to this Agreement or any of the other Transaction Documents, and (f) the tax ID number and organization documents related to any new subsidiary or borrower.  The Agent agrees to provide each Lender, within seven (7) Domestic Business Days after written request by such Lender and at such Lender’s expense, a copy of such other information, reports, certificates and/or other materials prepared by Borrower or otherwise required by the Transaction Documents and which are in the possession of the Agent which are reasonably requested by such Lender in writing.

7.15Duration of Agency.  The agency established by Section 7.01 hereof shall continue, and Sections 7.01 through and including this Section 7.15 shall remain in full force and effect, until all of the Borrower’s Obligations shall have been paid in full and the Lenders’ commitments to make Loans and/or extend credit to or for the benefit of the Borrower shall have terminated or expired.

Section 8.                      GENERAL.

8.01No Waiver.  No failure or delay by the Agent or any Lender in exercising any right, remedy, power or privilege under this Agreement or under any other Transaction Document 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, remedy, power or privilege.  The remedies provided herein and in the other Transaction Documents are cumulative and not exclusive of any remedies provided by law.  Nothing contained in this Agreement shall in any way affect the right of the Agent or any Lender to exercise any statutory or common law right of banker’s lien or setoff.

8.02Right of Setoff.  Upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, without notice to Borrower (any such notice being expressly waived by Borrower) and to the fullest extent permitted by law, to setoff and apply any and all deposits at any time held by such Lender and any and all other indebtedness at any time owing by such Lender to or for the credit or account of Borrower against any and all of the Borrower’s Obligations irrespective of whether or not such Lender shall have made any demand under this Agreement or under any of the other Transaction Documents and although such obligations may be contingent or unmatured.  Each Lender agrees to promptly notify Borrower, as applicable, after any such setoff and application made by such Lender, provided, however, that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of the Lenders under this Section 8.02 are in addition to the security interest in deposit accounts granted to Agent and in addition to any other rights and remedies (including, without limitation, other rights of setoff) which the Lenders may have.  Nothing contained in this Agreement or any other Transaction Document shall impair the right of any Lender to exercise any right of setoff it may have against Borrower and to apply the amount subject to such exercise to the payment of indebtedness of Borrower unrelated to this Agreement or the other Transaction Documents.

8.03Cost and Expenses.  Borrower agrees, whether or not any Loan is made under this Agreement or any Letter of Credit is issued under this Agreement, to pay the Agent and each Lender upon demand for (a) all reasonable out-of-pocket costs and expenses and all Attorneys’ Fees incurred by the Agent in connection with the preparation, documentation, negotiation, execution and/or administration of this Agreement and/or any of the other Transaction Documents, (b) all recording, filing and search fees and expenses incurred by the Agent or any Lender in connection with this Agreement and the other Transaction Documents, (c) all reasonable out-of-pocket costs and expenses and all Attorneys’ Fees incurred by the Agent or any of the Lenders in connection with the (i) the preparation, documentation, negotiation and execution of any amendment, modification, extension or renewal of this Agreement and/or any of the other Transaction Documents that has been requested by Borrower, (ii) the preparation of any waiver or consent under this Agreement or under any of the other Transaction Documents or (iii) any Default or Event of Default or alleged Default or Event of Default under this Agreement, (d) if an Event of Default occurs, all out-of-pocket costs and expenses and all Attorneys’ Fees incurred by the Agent or any Lender in connection with such Event of Default and collection and other

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enforcement proceedings resulting therefrom and (e) all other Attorneys’ Fees incurred by the Agent or any Lender relating to or arising out of or in connection with this Agreement or any of the other Transaction Documents.  Borrower further agrees to pay or reimburse the Agent and each Lender upon demand for any documentary other similar taxes which may be payable with respect to the execution, delivery, recording and/or filing of this Agreement and/or any of the other Transaction Documents.  All of the obligations of Borrower under this Section 8.03 shall survive the satisfaction and payment of the Borrower’s Obligations and the termination of this Agreement.

8.04Environmental Indemnity.  Borrower hereby agrees to defend and indemnify the Agent and each Lender and hold the Agent and each Lender harmless from and against any and all losses, liabilities, damages, injuries, claims, costs and expenses of any and every kind whatsoever (including, without limitation, court costs and reasonable Attorneys’ Fees and expenses) which at any time or from time to time may be paid, incurred or suffered by, or asserted against, the Agent or any Lender for, with respect to or as a direct or indirect result of the violation by Borrower or any Subsidiary of any Environmental Laws; or with respect to, or as a direct or indirect result of the presence on or under, or the Release from, properties owned, leased or operated by Borrower and/or any Subsidiary in the conduct of their respective businesses into or upon any land, the atmosphere or any watercourse, body of water or wetland, of any Hazardous Substances or any other hazardous or toxic waste, substance or constituent or other substance (including, without limitation, any losses, liabilities, damages, injuries, claims, costs or expenses asserted or arising under the Environmental Laws), other than for such liabilities due to the gross negligence or willful misconduct of the Agent or any Lender seeking such indemnification hereunder as determined by a court of competent jurisdiction in a final, nonappealable order; and the provisions of and undertakings and indemnification set out in this Section 8.04 shall survive the satisfaction and payment of the Borrower’s Obligations and the termination of this Agreement.

8.05General Indemnity.  In addition to the payment of expenses pursuant to Section 8.03, whether or not the transactions contemplated hereby shall be consummated, Borrower hereby agrees to defend, indemnify, pay and hold the Agent and each Lender and any holder(s) of the Notes, and the officers, directors, employees, agents and affiliates of the Agent and each Lender and such holder(s) (collectively, the “Indemnitees”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, disbursements, costs and expenses of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitees shall be designated a party thereto), that may be imposed on, incurred by or asserted against the Indemnitees, in any manner relating to or arising out of this Agreement, any of the other Transaction Documents, any other agreement, document or instrument executed and delivered by Borrower or any other Obligor in connection herewith or therewith or any commitment letter delivered by the Agent or any Lender to Borrower, the agreement of the Lenders to make the Loans under this Agreement, the agreement of U.S. Bank to issue Letters of Credit under this Agreement or the use or intended use of the proceeds of any Loan or Letter of Credit under this Agreement (collectively, the “indemnified liabilities”); provided that (a) Borrower shall have no obligation to an Indemnitee hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a court of competent jurisdiction in a final, nonappealable order and (b) Borrower shall have no obligation to indemnify the Agent or any Lender with respect to disputes between the Agent and any one or more of the Lenders or with respect to disputes among one or more of the Lenders or of any Lender in connection with a Lender Default by such Lender.  To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them.  The provisions of the undertakings and indemnification set out in this Section 8.05 shall survive satisfaction and payment of the Borrower’s Obligations and the termination of this Agreement.

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8.06Authority to Act.  The Agent and each Lender shall be entitled to act on any notices and instructions (telephonic or written) believed by the Agent or such Lender in good faith to have been sent or delivered by an Authorized Person, regardless of whether such notice or instruction was in fact delivered by an Authorized Person, and Borrower hereby agrees that each Authorized Person is authorized to act on its behalf with respect to the transactions contemplated by this Agreement and to defend and indemnify the Agent and each Lender and hold the Agent and each Lender harmless from and against any and all losses and expenses, if any, ensuing from any such action.

8.07Notices.  Any notice, request, demand, consent, confirmation or other communication under this Agreement shall be in writing and delivered in person or sent by facsimile, recognized overnight courier or registered or certified mail, return receipt requested and postage prepaid, to: (a) any applicable party (other than the Borrower) at its address or facsimile number set forth on the signature pages hereof, or at such other address or telecopy number as any party hereto may designate as its address or facsimile number for communications hereunder by notice so given, or (b) if to Borrower, to Schiff Nutrition Group, Inc., 2002 South 5070 West, Salt Lake City, Utah 84104, Facsimile No. 801-886-2297, Attention: Joseph Baty, or at such other address or facsimile number as any party hereto may designate as its address or facsimile number for communications hereunder by notice so given.  Such notices shall be deemed effective on the day on which delivered or sent if delivered in person or sent by facsimile (with answerback confirmation received), on the first (1st) Domestic Business Day after the day on which sent, if sent by recognized overnight courier or on the third (3rd) Domestic Business Day after the day on which mailed, if sent by registered or certified mail.

8.08Consent to Jurisdiction; Waiver of Jury Trial.  BORROWER IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY UTAH STATE COURT SITTING IN SALT LAKE COUNTY, UTAH AND/OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE DISTRICT OF UTAH, AS THE AGENT MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.  BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS.  BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY REGISTERED MAIL SENT TO ITS ADDRESS DETERMINED PURSUANT TO SECTION 8.07.  BORROWER, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND THE AGENT OR ANY LENDER ARE PARTIES RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS.

8.09Governing Law.  This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Utah (without reference to conflict of law principles).

8.10Amendments and Waivers.  Any provision of this Agreement, the Notes or any of the other Transaction Documents to which Borrower is a party may be amended or waived if, but only if, such amendment or waiver is in writing and is (a) signed by Borrower and the Required Lenders, (b) signed by the Agent if the rights or duties of the Agent in its capacity as Agent are affected thereby, (c) signed by the applicable Lender if such Lender’s Revolving Credit Commitment is being increased, and (d) signed by U.S. Bank in the event of an  increase the Swing Line Commitment of U.S. Bank.

8.11References; Headings for Convenience.  Unless otherwise specified herein, all references herein to Section numbers refer to Section numbers of this Agreement, all references herein to Exhibits A, B, C, D, E, F, G, H, I, J and K refer to annexed Exhibits A, B, C, D, E, F, G, H, I, J, and K which are hereby incorporated herein by reference and all

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references herein to Schedules 1.01(a) and (b), 2.04, 4.05, 4.08, 4.10, 4.12, 4.16, 4.17, 4.18, 4.20, 4.22, 5.01(l), 5.01(q), 5.02(f), 5.02(k), 5.02(m) and 5.02(n) refer to annexed Schedules 1.01(a) and (b), 2.04, 4.05, 4.08, 4.10, 4.12, 4.16, 4.17, 4.18, 4.20, 4.22, 5.01(q), 5.02(f), 5.02(m) and 5.02(n) which are hereby incorporated herein by reference.  The Section headings are furnished for the convenience of the parties and are not to be considered in the construction or interpretation of this Agreement.

8.12Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Notwithstanding the foregoing, Borrower may not assign or otherwise transfer any of their rights or delegate any of their obligations or duties under this Agreement without the prior written consent of the Agent and each Lender.

(b)Any Lender may at any time grant to one or more Lenders or other financial institutions (each a “Participant”) participating interests in its Revolving Credit Commitment or any or all of its Revolving Credit Loans.  In the event of any such grant by a Lender of a participating interest to a Participant, whether or not upon notice to Borrower and the Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that the applicable Lender will not agree to any amendment, modification or waiver of this Agreement described in clauses (a), (b), (c), or (d) of Section 8.10 without the consent of the Participant.  Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Sections 2.17, 2.18, 2.19, 2.20, 2.21, 2.22, 2.23 and 2.24 of this Agreement with respect to its participating interest, but Borrower’s liability in respect thereof shall not be greater than its liability thereunder to the Lender granting the original participation.

(c)Any Lender may at any time assign to one or more Lenders or other Eligible Institutions (each an “Assignee”) all, or a proportionate part of all, of its rights and obligations under this Agreement its Notes and the other Transaction Documents in a minimum amount of at least $5,000,000, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit K attached hereto executed by such Assignee and such transferor Lender, with (and subject to) the subscribed consent of Borrower and the Agent, which, in each case, shall not be unreasonably withheld or delayed; provided, however, that (i) if any Assignee is an affiliate of such transferor Lender or, immediately prior to such assignment, a Lender, no consent shall be required and (ii) if any Event of Default under this Agreement has occurred and is continuing no consent of Borrower to such assignment shall be required.  Upon execution and delivery of such instrument and payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Revolving Credit Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required.  Upon the consummation of any assignment pursuant to this subsection (c), the transferor Lender, the Agent and Borrower shall make appropriate arrangements so that, if required, new Note(s) are issued to the Assignor and/or the Assignee, as applicable.  In connection with any such assignment, the transferor Lender shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,500.

(d)Any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to secure its obligations to a Federal Reserve Bank.  No such assignment shall release the transferor Lender from any of its obligations hereunder.

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(e)To the extent that an assignment of all or any portion of a Lender’s Revolving Credit Commitment and related outstanding Borrower’s Obligations pursuant to this Section 8.12 would, at the time of such assignment, result in increased costs under Sections 2.17, 2.18, 2.19, 2.20 and 2.22 from those being charged by the respective transferor Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment).  The transferor Lender, the Assignee and Borrower agree to execute such documents (including, without limitation, amendments to this Agreement and the other Transaction Documents) as shall be necessary to effect the foregoing.

(f)Notwithstanding any other provisions of this Section 8.12, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the “Blue Sky” law of any state.

(g)Each Lender initially party to this Agreement hereby represents, and each Person that became a Lender pursuant to an assignment permitted by this Section 8.12 will, upon its becoming party to this Agreement, represent that (i) it is an Eligible Institution which makes loans in the ordinary course of its business, and that (ii) it will make or acquire Loans for its own account in the ordinary course of such business, provided that subject to the preceding clauses (i) and (ii), the disposition of any promissory notes or other evidences or interests in indebtedness held by such Lender shall at all times be within its exclusive control.

(h)Except to the extent of any assignment pursuant to subsection (c) above, no Lender shall be relieved of any of its obligations under the Transaction Documents as a result of any assignment of or granting of participations in, all or any part of its rights and obligations under the Transaction Documents.

8.13Defaulting Lender.

(a)In addition to the rights and remedies that may be available under this Agreement or applicable law, if at any time a Lender is a Defaulting Lender such Defaulting Lender’s right to collect Unused Commitment Fees and Letter of Credit Fees or to participate in the administration of the Loans, this Agreement and the other Transaction Documents, including without limitation, any right to vote in respect of, to consent to or to direct any action or inaction of the Agent or to be taken into account in the calculation of the Required Lenders, shall be suspended while such Lender remains a Defaulting Lender; provided, however, that the Revolving Credit Commitment of such Lender may not be increased and the period of such Revolving Credit Commitment may not be extended without such Lender’s consent. If a Lender is a Defaulting Lender because it has failed to make timely payment to the Agent of any amount required to be paid to the Agent hereunder, in addition to other rights and remedies which the Agent or the Borrower may have, the Agent shall be entitled (i) to collect interest from such Defaulting Lender on such delinquent payment for the period from the date on which the payment was due until the date on which the payment is made at the Fed Funds Rate, (ii) to withhold or setoff and to apply in satisfaction of the defaulted payment and any related interest, any amounts otherwise payable to such Defaulting Lender under this Agreement or any other Transaction Document until such defaulted payment and related interest has been paid in full and such default no longer exists and (iii) to bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. Any amounts received by the Agent in respect of a Defaulting Lender’s Loans shall not be paid to such Defaulting Lender and shall be held uninvested by the Agent and either applied against the purchase price of such Loans under the following subsection (b) or paid to such Defaulting Lender upon the default of such Defaulting Lender being cured.

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(b)Any Lender that is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire all of a Defaulting Lender’s Revolving Credit Commitment.  If more than one Lender exercises such right, each such Lender shall have the right to acquire such proportion of such Defaulting Lender’s Revolving Credit Commitment on a pro rata basis. Upon any such purchase, the Defaulting Lender’s interest in its Loans and its rights hereunder (but not its liability in respect thereof or under the Transaction Documents or this Agreement to the extent the same relate to the period prior to the effective date of the purchase) shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest to the purchaser thereof subject to and in accordance with the requirements set forth in Section 8.12, including the execution of an Assignment and Assumption Agreement. The purchase price for the Revolving Credit Commitment of a Defaulting Lender shall be equal to the amount of the principal balance of the Loans outstanding and owed by the Borrower to the Defaulting Lender. The purchaser shall pay to the Defaulting Lender in immediately available funds on the date of such purchase the principal of and accrued and unpaid interest and fees on the Loans made by such Defaulting Lender hereunder (it being understood that such accrued and unpaid interest and fees may be paid pro rata to the purchasing Lender and the Defaulting Lender by the Agent at a subsequent date upon receipt of payment of such amounts from the Borrower). Prior to payment of such purchase price to a Defaulting Lender, the Agent shall apply against such purchase price any amounts retained by the Agent pursuant to the last sentence of the preceding subsection (a). The Defaulting Lender shall be entitled to receive amounts owed to it by the Borrower under the Transaction Documents which accrued prior to the date of the default by the Defaulting Lender, to the extent the same are received by the Agent from or on behalf of the Borrower. There shall be no recourse against any Lender or the Agent for the payment of such sums except to the extent of the receipt of payments from any other party or in respect of the Loans.

(c)If any Lender is a Defaulting Lender, then the Agent may, by notice to such Defaulting Lender, require such Defaulting Lender to (a) deliver to the Agent, for the account of the other Lenders, cash collateral in an amount equal to such Defaulting Lender’s Pro Rata Share (prior to any reduction of the amounts of such Lender’s Revolving Credit Commitment as provided in Section 8.13(d) below) of the undrawn principal amount of all Letters of Credit issued by the Agent for the account of the Borrower (the “Reserve Amount”), or (b) make other arrangements reasonably satisfactory to the Agent to assure that such Defaulting Lender will reimburse the Agent for its Pro Rata Share of the amount of any undrawn Letter of Credit.  If any Defaulting Lender fails to provide cash collateral or make other arrangements as required by the first sentence of this Section 8.13(c), then the Agent may in its discretion retain as cash collateral all amounts otherwise payable to such Defaulting Lender under this Agreement until the Agent has retained an amount equal to the Reserve Amount.  If at any time such Defaulting Lender becomes obligated to make a Revolving Credit Loan to reimburse the Agent for a drawing on a Letter of Credit, shall be applied (to the extent required) by the Agent to make such Revolving Loan.  Upon the expiration, termination or reduction in amount of any applicable Letter of Credit (or upon termination of such Defaulting Lender’s Revolving Credit Commitment), the Agent shall release to such Defaulting Lender (or such other Person as may be entitled thereto) any cash collateral held by the Agent in excess of the Reserve Amount.  If any Defaulting Lender fails to provide cash collateral or make other arrangements as required by this Section 8.13(c), then the Borrower shall promptly (and in any event within three Business Days of a demand from the Agent), deliver to the Agent, for the account of the Agent, cash collateral in the Reserve Amount (pursuant to documentation reasonably satisfactory to the Agent).

(d)At any time a Lender becomes a Defaulting Lender, then, at the Agent’s option in its sole discretion, such Defaulting Lender’s Revolving Credit Commitment shall be reduced to the amount of such Defaulting Lender’s outstanding Revolving Credit Loans, plus the amount of cash collateral held by the Agent for the account ofsuch Defaulting Lender pursuant to Section 8.13(c) in respect of all outstanding Letters of Credit.  In addition, if any Lender is a Defaulting Lender at the time any payment is to be made by the

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Lenders to the Agent pursuant to Section 2.07, no Lender that is not a Defaulting Lender shall be obligated to make a payment to the Agent that would cause the aggregate principal amount of such Lender’s Revolving Credit Loans plus such Lender’s Pro Rata Share (without giving effect to any Revolving Credit Commitment reduction pursuant to the foregoing provisions) of the aggregate maximum amount available to be drawn under outstanding Letters of Credit to exceed such Lender’s Revolving Credit Commitment  (or, if all the Revolving Credit Commitments have terminated, such Lender’s Revolving Credit Commitment at the time of such termination, adjusted for any assignments by or to such Lender).

8.14NO ORAL AGREEMENTS:  ENTIRE AGREEMENT. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT.  TO PROTECT BORROWER, THE AGENT AND THE LENDERS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER, THE AGENT AND THE LENDERS COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER, THE AGENT AND THE LENDERS, EXCEPT AS BORROWER, THE AGENT AND THE LENDERS MAY LATER AGREE IN WRITING TO MODIFY THEM.  This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings (oral or written) relating to the subject matter hereof.

8.15Severability.  In the event any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

8.16Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.17Resurrection of the Borrower’s Obligations.  To the extent that the Agent or any Lender receives any payment on account of any of the Borrower’s Obligations, and any such payment(s) or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, subordinated and/or required to be repaid to a trustee, receiver or any other Person under any bankruptcy code, state or federal law, common law or equitable cause, then, to the extent of such payment(s) received, the Borrower’s Obligations or part thereof intended to be satisfied and any and all Liens upon or pertaining to any Property of Borrower and/or any other Obligor and theretofore created and/or existing in favor of the Agent or any of the Lenders as security for the payment of Borrower’s Obligations shall be revived and continue in full force and effect, as if such payment(s) had not been received by the Agent or such Lender, as the case may be, and applied on account of Borrower’s Obligations.

8.18Subsidiary Reference.  Any reference in this Agreement to a Subsidiary of Borrower, and any financial definition, ratio, restriction or other provision of this Agreement which is stated to be applicable to Borrower and its Subsidiaries or which is to be determined on a “consolidated” or “consolidating” basis, shall apply only to the extent Borrower has any Subsidiaries and, where applicable, to the extent any such Subsidiaries are required to be consolidated with Borrower for financial reporting purposes in accordance with GAAP.

8.19Independence of Covenants.  All of the covenants contained in this Agreement and the other Transaction Documents shall be given independent effect so that if a particular action, event or condition is prohibited by any one of such covenants, the fact that it would be permitted by an exception to, or otherwise be in compliance within the provisions of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken, such event occurs or such condition exists.

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8.20Confidentiality.  Each Lender agrees to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, any nonpublic information supplied to such Lender by Borrower or any Guarantor pursuant to this Agreement or any other Transaction Document which is identified by Borrower of any Guarantor as being confidential at the time the same is delivered to such Lender; provided, however, that nothing contained in this Section 8.19 shall prohibit or limit the disclosure by such Lender of any such information (a) to the extent required by any statute, rule, regulation, subpoena or judicial process, (b) to any governmental or regulatory agency having jurisdiction over such Lender, (c) to any professional advisors, including counsel and accountants, for such Lender, (d) to any Lender examiners or auditors, (e) in connection with any litigation to which such Lender is a party, (f) in connection with the enforcement of such Lender’s rights and remedies under this Agreement, any of the Notes or any of the other Transaction Documents or (g) to any assignee or participant (or prospective assignee or participant); and provided further, that in no event shall any Lender be obligated or required to return any materials furnished to such Lender by Borrower or any Guarantor under this Agreement or any other Transaction Document.  Notwithstanding the foregoing, no Lender shall have any liability to Borrower, any Guarantor or any shareholder, partner, joint venturer, director, officer, employee or agent of Borrower or of any Guarantor by reason of, or in any way claimed to be related to, any disclosure by such Lender of any information with respect to Borrower or any Guarantor except as the same results from the gross negligence or willful misconduct of such Lender as determined by a court of competent jurisdiction in a final, nonappealable order.  Agent or any Lender required to disclose any nonpublic information pursuant to a subpoena or other judicial process will use reasonable efforts to give Borrower notice of such a request for disclosure, provided that neither Agent nor any Lender shall incur any liability whatsoever to Borrower or any Guarantor for any failure or delay in giving any such notice.  For purposes of this Section, the term “nonpublic information” shall mean all financial statements, certificates, reports, agreements and information (including all analyses, compilations and studies prepared by any Lender based on any of the foregoing) that are received from Borrower, a Guarantor or any Affiliate and related to the Borrower, a Guarantor, or any Affiliate, other than any of the foregoing that were available to any Lender on a nonconfidential basis prior to its disclosure thereto by Borrower, a Guarantor or any Affiliate.  The provisions of this Section 8.19 shall remain operative and in full force and effect regardless of the expiration and term of this Agreement.

8.21Effect of Breach of Representation or Warranty.  The Agent and each Lender hereby agree that the inaccuracy of a representation or warranty made by Borrower in this Agreement and/or in any other Transaction Document will not be deemed or treated as fraudulent or give rise to a claim based on fraudulent misrepresentation unless Borrower or an officer of Borrower had actual knowledge that such representation or warranty was inaccurate at the time made or effected under this Agreement and/or the applicable Transaction Document.  Borrower hereby acknowledges and agrees that it will constitute an Event of Default under Section 6.03 of this Agreement if any representation or warranty made by Borrower in this Agreement and/or in any other Transaction Document shall prove to have been untrue or incorrect in any material respect when made or effected regardless of whether any officer of Borrower had actual knowledge that such representation or warranty was inaccurate at the time made or effected under this Agreement and/or the applicable Transaction Document.

8.22USA PATRIOT ACT NOTIFICATION.  The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. When Borrower opens an account, if the Borrower is an individual a Lender will ask for the Borrower’s name, taxpayer identification number, residential address, date of birth, and other information that will allow such Lender to identify the Borrower, and if the Borrower

is not an individual a Lender will ask for the Borrower’s name, taxpayer identification number, business address, and other information that will allow such Lender to identify the Borrower. A Lender may also ask, if the Borrower is an individual to see the Borrower’s driver’s license or other identifying documents, and if Borrower is not an individual to see the Borrower’s legal organizational documents or other identifying documents.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURES ON FOLLOWING PAGES]

 

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IN WITNESS WHEREOF, Borrower, the Agent and the Lenders have executed this Loan Agreement this 18th day of August, 2009.

BORROWER:

SCHIFF NUTRITION GROUP, INC.,

a Utah corporation

By:	/s/ Joseph W. Baty
Name:	Joseph W. Baty
Its:	Executive Vice President and Chief Financial Officer

[Borrower Signature Page]

ADMINISTRATIVE AGENT AND LENDER:

U.S. BANK NATIONAL ASSOCIATION

By:	/s/ Adam M. Hill
Name:	Adam M. Hill
Title:	Relationship Manager

Address:

170 South Main Street, 6th Floor

Salt Lake City, UT 84101

Attention:  Adam Hill

Facsimile No.:  801-534-6008

[Administrative Agent and Lender Signature Page]

LENDER:

BANK OF THE WEST

By:	/s/ Gary Fowler
Name:	Gary Fowler
Title:	SVP, Regional Manager

Address:

633 17th St., 20th Floor

Denver, CO  80202

Attention:  Gary Fowler

Facsimile No.:  402-918-7253

[Lender Signature Page]

LENDER:

KEYBANK NATIONAL ASSOCIATION

By:	/s/ John P. Williamson
Name:	John P. Williamson
Title:	Vice President

Address:

36 South State Street, Suite 2510

Salt Lake City, UT  84111

Attention:  John P. Williamson

   Facsimile No.:  801-297-5710

[Lender Signature Page]

LENDER:

JPMORGAN CHASE BANK, N.A.

By:	/s/ Robert W. Carpenter
Name:	Robert W. Carpenter
Title:	Vice President

Address:

201 S. Main Street, Suite 300

Salt Lake City, UT  84111-2870

   Attention:  Robert W. Carpenter

   Facsimile No.:  801-715-7401

[Lender Signature Page]

EXHIBIT A

[Reserved]

  1

EXHIBIT B-1

REVOLVING CREDIT NOTE

$______________ Salt Lake City, Utah

    August 18, 2009

FOR VALUE RECEIVED, on the Revolving Maturity Date, the undersigned, SCHIFF NUTRITION GROUP, INC., a Utah corporation (“Borrower”), hereby promises to pay to the order of __________________________________, as Lender (“Lender”) under the terms of the Loan Agreement (as hereinafter defined), the principal sum of _________________ and No/Dollars ($_______________), or such lesser sum as may then constitute the aggregate unpaid principal amount of all Revolving Credit Loans made by Lender to Borrower pursuant to the Loan Agreement.  Subject to Section 2.01 of the Agreement, the aggregate principal amount of Revolving Credit Loans which Lender shall be committed to have outstanding under this Note at any one time shall not exceed the Lender’s Revolving Credit Commitment, which amount may be borrowed, paid, reborrowed and repaid, in whole or in part, subject to the other terms, conditions and restrictions of this Note and of the Loan Agreement.  Borrower further promises to pay to the order of Lender interest on the aggregate unpaid principal amount of such Revolving Credit Loans on the dates and at the rate or rates provided for in the Loan Agreement.  All such payments of principal and interest shall be made in lawful currency of the United States in immediately available funds at the office of U.S. Bank National Association, as the Agent for Lender, located at 170 South Main, 6th Floor, Salt Lake City, Utah 84101, or such other place as the Agent may from time to time designate in writing.

Lender shall record in its books and records the date, amount, type and maturity of each  Revolving Credit Loan made by Lender to Borrower and the date and amount of each payment of principal and/or interest made by Borrower with respect thereto; provided, however, that the obligation of Borrower to repay each Revolving Credit Loan made to Borrower under this Note shall be absolute and unconditional, notwithstanding any failure of any Lender to make any such recordation or any mistake by any Lender in connection with any such recordation. The books and records of Lender showing the account between Lender and Borrower shall be conclusive evidence of the items set forth therein in the absence of demonstrable error.

This Note is one of the Revolving Credit Notes referred to in Section 2.08(a) of the Loan Agreement dated as of August 18, 2009, by and among Borrower, Lender, the other Lenders from time to time party thereto and U.S. Bank National Association, as a Lender and as Agent for the Lenders, as the same may from time to time be amended, modified, extended, renewed or restated (the “Loan Agreement”; all capitalized terms used and not otherwise defined in this Note shall have the respective meanings ascribed to them in the Loan Agreement).  The Loan Agreement, among other things, contains provisions for acceleration of the maturity of this Note upon the occurrence of certain stated events and also for prepayments on account of principal of this Note and interest on this Note prior to the maturity of this Note upon the terms and conditions specified therein.

This Note is secured by, among other things, the Security Agreement, the Copyright Security Agreement, the Patent and Trademark Security Agreement, and the Trust Deeds, to which Security Agreement, Copyright Security Agreement, Patent and Trademark Security Agreement, and Trust Deeds reference is hereby made for a description of the security and a statement of the terms and conditions upon which this Note is secured.

This Note is supported by the Guaranties and the Subsidiary Guaranties.

1

Upon the occurrence of any Event of Default under the Loan Agreement, Lender’s obligation to make additional Revolving Credit Loans under this Note may be terminated in the manner and with the effect as provided in the Loan Agreement and the entire outstanding principal balance of this Note and all accrued and unpaid interest thereon may be declared to be immediately due and payable in the manner and with the effect as provided in the Loan Agreement.

In the event that any payment due under this Note shall not be paid when due, whether by reason of maturity, acceleration or otherwise, and this Note is placed in the hands of an attorney or attorneys for collection or for foreclosure of the Security Agreement, the Copyright Security Agreement, the Patent and Trademark Security Agreement, the Stock Pledge Agreements, any of the Trust Deeds, any of the Guarantor Security Agreements and/or any of the Guaranties or the Subsidiary Guaranties, or if this Note is placed in the hands of an attorney or attorneys for representation of Lender in connection with bankruptcy or insolvency proceedings relating hereto, Borrower hereby promises to pay to the order of Lender, in addition to all other amounts otherwise due on or under this Note, the costs and expenses of such collection, foreclosure and representation, including, without limitation, Attorneys’ Fees and expenses (whether or not litigation shall be commenced in aid thereof).  Borrower hereby waives presentment for payment, demand, protest, notice of protest and notice of dishonor.

This Note shall be governed by and construed in accordance with the substantive laws of the State of Utah (without reference to conflict of law principles).

[Remainder of page intentionally left blank – Signature Page to follow]

2

Signature Page to Revolving Credit Note

BORROWER:

SCHIFF NUTRITION GROUP, INC.,

a Utah corporation

By:

Name:

Its:

3

EXHIBIT C

SWING LINE NOTE

$5,000,000.00Salt Lake City, Utah

August 18, 2009

FOR VALUE RECEIVED, on the Revolving Maturity Date, the undersigned, SCHIFF NUTRITION GROUP, INC., a Utah corporation (“Borrower”), hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, as Lender (“Lender”), the principal sum of Five Million and No/Dollars ($5,000,000.00), or such lesser sum as may then constitute the aggregate unpaid principal amount of all Swing Line Loans made by Lender to Borrower pursuant to the Loan Agreement (as hereinafter defined).  The aggregate principal amount of the Swing Line Loans which Lender shall be committed to have outstanding under this Note at any one time shall not exceed Five Million Dollars ($5,000,000.00), which amount may be borrowed, paid, reborrowed and repaid, in whole or in part, subject to the terms, conditions and restrictions of this Note and of the Loan Agreement.  Borrower further promises to pay to the order of Lender interest on the aggregate unpaid principal amount of such Swing Line Loans on the dates and at the rate or rates provided for in the Loan Agreement.  All such payments of principal and interest shall be made in lawful currency of the United States in immediately available funds at the office of U.S. Bank National Association located at 170 South Main, 6th Floor, Salt Lake City, Utah 84101, or such other place as Lender may from time to time designate in writing.

Lender shall record in its books and records the date, amount, type and maturity of each Swing Line Loan made by Lender to Borrower and the date and amount of each payment of principal and/or interest made by Borrower with respect thereto; provided, however, that the obligation of Borrower to repay each Swing Line Loan made to Borrower under this Note shall be absolute and unconditional, notwithstanding any failure of Lender to make any such recordation or any mistake by Lender in connection with any such recordation.  The books and records of Lender showing the account between  Lender and Borrower shall be conclusive evidence of the items set forth therein in the absence of demonstrable error.

This Note is the Swing Line Note referred to in the Loan Agreement dated the date hereof by and among Borrower, the Lenders from time to time party thereto and U.S. Bank National Association, as a Lender and as Agent for the Lenders, as the same may from time to time be amended, modified, extended, renewed or restated (the “Loan Agreement”; all capitalized terms used and not otherwise defined in this Note shall have the respective meanings ascribed to them in the Loan Agreement).  The Loan Agreement, among other things, contains provisions for acceleration of the maturity of this Note upon the occurrence of certain stated events and also for prepayments on account of principal of this Note and interest on this Note prior to the maturity of this Note upon the terms and conditions specified therein.

This Note is secured by, among other things, the Security Agreement, the Copyright Security Agreement, the Patent and Trademark Security Agreement, and the Trust Deeds, to which Security Agreement, Copyright Security Agreement, Patent and Trademark Security Agreement, and Trust Deeds reference is hereby made for a description of the security and a statement of the terms and conditions upon which this Note is secured.

This Note is guarantied by the Guaranties and the Subsidiary Guaranties.

Upon the occurrence of any Event of Default under the Loan Agreement, Lender’s obligation to make additional Swing Line Loans under this Note may be terminated in the manner and with the effect as provided in the Loan Agreement and the entire outstanding principal balance of this Note and all accrued and unpaid interest thereon may be declared to be immediately due and payable in the manner and with the effect as provided in the Loan Agreement.

1

In the event that any payment due under this Note shall not be paid when due, whether by reason of maturity, acceleration or otherwise, and this Note is placed in the hands of an attorney or attorneys for collection or for foreclosure of the Security Agreement, the Copyright Security Agreement, the Patent and Trademark Security Agreement, any of the Stock Pledge Agreements, any of the Trust Deeds, any of the Guarantor Security Agreements and/or any of the Guaranties, the Subsidiary Guaranties, or if this Note is placed in the hands of an attorney or attorneys for representation of Lender in connection with bankruptcy or insolvency proceedings relating hereto, Borrower hereby jointly and severally promises to pay to the order of Lender, in addition to all other amounts otherwise due on or under this Note, the costs and expenses of such collection, foreclosure and representation, including, without limitation, Attorneys’ Fees and expenses (whether or not litigation shall be commenced in aid thereof).  Borrower hereby waives presentment for payment, demand, protest, notice of protest and notice of dishonor.

This Note shall be governed by and construed in accordance with the substantive laws of the State of Utah (without reference to conflict of law principles).

[Remainder of page intentionally left blank – Signature Page to follow]

2

Signature page to Swing Line Note

BORROWER:

SCHIFF NUTRITION GROUP, INC.,

a Utah corporation

By:

Name:

Its:

3

EXHIBIT F

FORM OF CONTINUING REIMBURSEMENT AGREEMENT FOR

STANDBY LETTERS OF CREDIT

CONTINUING REIMBURSEMENT AGREEMENT FOR

LETTERS OF CREDIT

Including U.S. Bank Global Trade WorksSM

This Continuing Reimbursement Agreement for Letters of Credit is made effective this day of , by and between U.S. BANK NATIONAL ASSOCIATION (“Bank”) and                 (“Applicant”).

In consideration of the issuance by Bank or an affiliate of Bank (each such affiliated issuer, an “Other Issuer”) of one or more Credits, Applicant agrees that the following terms shall apply to each Application and each Credit issued by Bank or any Other Issuer (either or both referred to herein as “Bank”).

1.      The Credit.

a)From time to time, Applicant may request Bank to issue or to request one of its subsidiaries or affiliates to issue one or more letters of credit (each, a “Credit”) substantially in accordance with the terms of any application (each, an “Application”) submitted to Bank by Applicant.  All Credits will be deemed irrevocable unless otherwise stated in an Application.  Bank may either issue the Credit or request one of its affiliates to issue the Credit.  Bank may sell, assign or participate all or any part of its rights and obligations under this Agreement, the Application and the Credit.  Without limiting the foregoing, any Other Issuer may sell a participation in all or any part of its rights and obligations under this Agreement and the Credit to Bank.

b)Bank hereby is authorized to set forth in the Credit the terms appearing in the Application, with such modifications as Bank in its discretion may determine are appropriate or necessary and are not materially different from such terms.

c)All communications relating to the Credit will be sent at Applicant’s risk.  Bank shall have no responsibility for any inaccuracy of translation, or any error or delay in transmission or delivery by mail, telecommunication or any other method outside of Bank’s reasonable control, including all communications made through a correspondent.

d)Neither Bank nor its correspondents shall be in any way responsible for the performance of any beneficiary’s obligations to Applicant or for the form, sufficiency, accuracy, genuineness, authority of person signing, falsification or legal effect, of any documents required by the Credit if such documents appear in order on their face.  Whether the documents conform to the terms of the Credit and whether any demand is timely and in proper form shall be independently determined by Bank in its sole discretion, which determination shall be final and binding on Applicant.

e)Subject to Section 8(b), Bank may in its discretion honor Applicant’s request to increase the amount of the Credit, extend the time for making and honoring of demands under the Credit and otherwise modify the terms and conditions governing the Credit.  In the event of any extension of the maturity or time for negotiation or presentation of the drafts or documents or any other modification of the terms or provisions of, or increase in the amount of, the Credit at the request or with the consent of Applicant, this Agreement shall be binding upon Applicant with regard to (i) the Credit as so increased or otherwise modified, (ii) drafts, documents and property covered thereby, (iii) any action taken by Bank or Bank’s correspondents in accordance with such extension, increase or other modification; and (iv) any draft paid by Bank or any of Bank’s correspondents which is dated on or before the expiration of any time limit expressed in the Credit, regardless of when drawn or presented for payment and when or whether negotiated, provided the required documents are presented prior to the expiration of the Credit.

f)Applicant shall promptly review all information, documents and instruments delivered to Applicant from time to time by Bank, including any Credits upon issuance and any amendments and all related presentations and negotiations, and shall notify Bank within five banking days after receipt if Applicant claims that Bank has failed to comply with Applicant’s instructions or Bank’s obligations with respect to the Credit, has wrongfully honored or dishonored any presentation under the Credit or claims any other irregularity.  If Applicant does not so notify Bank within such time period, Applicant shall be conclusively deemed to have waived and shall be precluded from asserting such claim(s).

2.      Internet-Based Letter of Credit Services (“Internet Services”).

a)If requested by Applicant and agreed to by Bank, Bank will grant Applicant access to Bank’s letter of credit-related Internet Services.  U.S. Bank Global Trade Works is an example of one such Internet Service.  Bank’s Internet Services may be used by Applicant for the processing and issuance of Credits in accordance with the terms of this Agreement.  Bank shall post Rules of Use of the Internet Services within each such Service.  Applicant’s initial use of an Internet Service shall constitute Applicant’s acceptance of the Rules of Use.

b)Applicant agrees to use the Internet Services in accordance with the security procedures established by Bank.  Due to emerging technologies and ensuing changes in security practices, Bank reserves the right to supplement or change its security procedures from time to time upon reasonable notice to Applicant.  Applicant shall designate one or more Security Administrators.  The Security Administrator is responsible for setting up Applicant’s Internet Services and for establishing internal security procedures related to such services, including without limitation, accepting software for delivery, assigning users, establishing authority levels, distributing passwords and other security devices and procedures related to the Internet Services.  Designation of any Security Administrator may be amended or revoked upon written notice to Bank.  Bank shall have a reasonable time to act on such notice.

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c)Applicant is responsible for maintaining the security and confidentiality of all IDs, passwords and other security devices issued to or by Applicant (collectively, “Applicant’s Internal Security Devices”).  Applicant shall not permit unauthorized individuals to use Applicant’s Internal Security Devices to access the Internet Services.  Applicant is responsible for the actions of any individuals using Applicant’s Internal Security Devices to access to the Internet Services and Applicant shall be bound by any transmission to Bank that is accepted in accordance with the established security procedures.  Applicant shall promptly notify Bank if Applicant has actual knowledge that its Internal Security Devices have been compromised.  Applicant agrees to defend and indemnify Bank against any claims, losses, damages, costs, expenses, fines and other liabilities arising out of Applicant’s failure to maintain the security and confidentiality of Applicant’s Internal Security Devices or arising out of the unlawful use of any Internet Services by Applicant or any person who obtains access to the Internet Services using Applicant’s Internal Security Devices.

3.      Reimbursement Obligations.  Applicant promises to pay Bank on demand at the address specified in the Application for Credit in the following amounts:

a)The amount of each draft or other request for payment (hereinafter called a “draft”) drawn under the Credit (whether drawn before, on or, if in accordance with the law applicable to the Credit, after the expiration date stated in the Credit).  For amounts payable in United States currency, Applicant agrees to reimburse Bank in United States currency.  For amounts payable in other currencies, Applicant agrees to reimburse Bank an equivalent amount in United States currency at Bank’s then current selling rate for such foreign currencies or Applicant will reimburse Bank by sending the foreign currency amount due Bank by wire transfer to the account and location designated by Bank, or at Bank’s opinion, in any other currency, place, form and manner acceptable to Bank.  Upon request, Applicant will pay Bank in advance, in United States currency, all sums necessary for Bank to pay all such drafts upon presentation whether payable in United States currency or otherwise.  If the draft is a time draft, Applicant shall make payment without demand sufficiently in advance of its maturity to enable Bank to arrange for funds to reach the place of payment when due.

b)All commissions, at the rate fixed by Bank, shall be payable from time to time at such intervals as Bank may require and shall be nonrefundable, whether or not the Credit is drawn upon, reduced in time or amount or otherwise modified.  Applicant also agrees to pay all of Bank’s other standard fees and charges related to Credits.

c)All taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature whatsoever paid or incurred by Bank in connection with this Agreement, the Credit or related transactions, and any liability with respect thereto (including but not limited to interest, penalties and expenses).

d)Interest on all amounts due under this Agreement from the applicable due date until paid will be variable at the per annum rate fixed from time to time by Bank.  Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed.  Interest accrued hereunder shall be due and payable on the first day of each calendar month.

e)Without limiting Applicant’s obligations to any Other Issuer, but without duplication, Applicant promises to pay Bank on demand, at the Bank International Banking Office designated by Bank, an amount equal to all amounts which Bank pays or becomes obligated to pay to any Other Issuer with respect to the Credit, whether as a participant in the Credit or otherwise.

f)Notwithstanding any other provision of this Agreement, Applicant’s obligation to make any payment hereunder to any Other Issuer shall, to the extent of such payment, be satisfied by payment to Bank as set forth in this Agreement.

g)Applicant hereby authorizes Bank to automatically deduct from any of its accounts with Bank, all amounts which become due to Bank under this Agreement.  Applicant will pay all fees on the account which result from the automatic deductions, including any overdraft/NSF charges.  If for any reason Bank does not charge the account for any amount due, or if an automatic deduction is reversed, the amount due is still owing to Bank as set forth herein.

4.      Security and Insurance.

a)As security for payment of any and all of Applicant’s obligations to Bank and any other Issuer under this Agreement, any Credit or any other indebtedness of Applicant to Bank and any Other Issuer, Applicant hereby grants Bank a continuous and continuing interest in (i) all property of Applicant or in which Applicant has an interest (including, but not limited to, all bank accounts Applicant maintains with Bank and all proceeds thereof) and which is now or hereafter for any reason in the possession or control of, or in transit to, Bank, Bank’s affiliates or the agent or bailee thereof, and (ii) any and all bills of lading, other documents of title, policies, certificates of insurance, chattel paper, and general intangibles accompanying or relative to a Credit or any drafts drawn thereunder, and any and all inventory, goods and other property shipped under, in connection with or relative to a Credit or any drafts drawn thereunder.  In addition to all other rights which Bank may have, Applicant hereby authorizes Bank to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the credit or the account of Applicant against any and all of the obligations of Applicant now or hereafter existing under this Agreement, irrespective of whether Bank shall have made any demand under this Agreement and although such deposits, indebtedness or obligations may be unmatured or contingent.

b)If at any time Bank requires collateral (or additional collateral), Applicant will, on demand, assign and deliver to Bank as security for any and all obligations of Applicant now or hereafter existing under this Agreement collateral of a type and value satisfactory to Bank or make such cash payment as Bank may require and execute and deliver to Bank such security agreements, pledge agreements, or other documents requested by Bank covering such collateral.

c) At Bank’s request, Applicant will execute any financing statements and other documents or instruments as Bank may require to perfect the security interests granted or contemplated hereunder and will pay the cost of any filings in connection therewith.

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d)For commercial credits, Applicant shall keep any property described in the Credit adequately covered by insurance satisfactory to Bank, issued  by companies satisfactory to Bank, and at Bank’s request will furnish certificates or evidence thereof and will assign insurance policies or certificates to Bank and make losses, adjustments or proceeds payable to Bank.  If any such policies procured by Applicant fails to provide for payment of the loss thereunder, Applicant hereby makes the loss payable to Bank under such policy and assigns to Bank all proceeds of such policy and agrees to accept proceeds of all insurance as Bank’s agent and to hold same in trust for Bank, and forthwith to deliver the same to Bank, with Applicant’s endorsement where necessary, and Bank or any of Bank’s officers are hereby irrevocably empowered, with power of substitution, to endorse any check in the name of Applicant received in payment of any loss or adjustment.

e)Bank shall not be liable for any failure to collect or demand payment of, or to protest or give any notice of non-payment of, any collateral or any part thereof or for any delay in so doing, nor shall Bank be under any obligation to take any action whatsoever with respect to the collateral or any part thereof.  Bank shall use reasonable care in the custody and preservation of the collateral in Bank’s possession but need not take any steps to preserve rights against prior parties or to keep the collateral identifiable.  Bank shall have no obligation to comply with any recording, re-recording, filing, re-filing or other legal requirement necessary to establish or maintain the validity, priority or enforceability of, or Bank’s right in and to, the collateral, or any part thereof.  Bank may exercise any right of Applicant with respect to any collateral.  Bank may endorse Applicant’s name on any and all notes, checks, drafts, bills of exchange, money orders or commercial paper included in the collateral or representing the proceeds thereof.

5.      Default and Remedies.

a)Time is of the essence in this Agreement.  The occurrence of any of the following shall be an Event of Default hereunder:

(i)Default in payment or performance of any of Applicant’s obligations hereunder or under any promissory note or other agreement between Bank and Applicant;

(ii)Default under any security documents securing Applicant’s obligations hereunder, whether executed by Applicant or any other person;

(iii)Levy or proceeding against any property of Applicant or any guarantor of Applicant’s obligations hereunder (“Guarantor”);

(iv)Death, dissolution, termination of existence, insolvency or business failure of, appointment of a receiver for any part of the property of, assignment for the benefit of creditors by, commencement of any proceeding under any bankruptcy or insolvency laws by or against, or entry of judgment against, Applicant or any Guarantor;

(v)Any warranty, representation or statement made or furnished to Bank by Applicant or any Guarantor proves to have been false in any material respect when made or furnished;

(vi)Any event which gives the holder of any debt obligation of Applicant or any Guarantor the right to accelerate its maturity, whether or not such right is exercised;

(vii)Any guaranty of Applicant’s obligations hereunder ceases to be, or is asserted by any person not to be, in full force and effect; or

(viii)Any material adverse change in the financial condition or management of Applicant or any Guarantor, or if Bank for any reason in good faith, deems itself insecure.

b)Upon the occurrence of any Event of Default and at any time thereafter, Bank at its option and in addition to all other rights of Bank under this Agreement, any related agreement and applicable law, may (i) without notice or demand declare the amount for which the Credit was issued and any other amounts owing hereunder immediately due and payable; and (ii) exercise any and all rights and remedies of a secured party under the Uniform Commercial Code and other applicable law.

6.      Certain Warranties.

a)Applicant warrants that the execution, delivery and performance of this Agreement are within its authority and are not in contravention of law, of any terms of any agreement, instrument, order or judgment to which Applicant Is a party or by which it or its property may be bound or of any provision of its charter document or bylaws, and that it has obtained all necessary approvals and consents therefor.

b)Applicant represents and warrants that any Credit, and transactions related thereto, shall be in compliance with any federal, state, local and foreign laws, regulations, treaties or customs applicable to Bank or Customer, including without limitation the regulations promulgated by Office of Foreign Assets Control (OFAC), and any other foreign or domestic legal restriction on doing business with certain individuals or countries.

c)Applicant will procure promptly all necessary licenses for the export, import, shipping or warehousing of, or payment for property covered by the Credit and will comply with all foreign and U.S. laws, rules and regulations (including exchange control regulations) now or hereafter applicable to the transaction related to the Credit or applicable to the execution, delivery and performance by Applicant of this Agreement.

7.      Changes to Laws and Regulations.  If any adoption of or change in law or regulation, or in the interpretation or administration thereof by any official authority shall impose on Bank any tax, charge, fee, deduction or withholding of any kind whatsoever, or shall impose or modify any reserve requirements, standards regarding capital adequacy or any other conditions affecting this Agreement or the Credit, and the result of any of the foregoing shall be to increase the cost to Bank of issuing and maintaining the Credit, reduce the amount of any sum receivable by Bank hereunder or reduce the rate of return on Bank’s capital, then Applicant shall pay to Bank upon demand such additional amount or amounts as Bank may specify to be necessary to compensate Bank for such additional costs incurred or reduction suffered.

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8.      General Terms and Conditions.

a)Each Applicant shall be subject to all terms and conditions of this Agreement.  In addition, this Agreement shall apply to each Credit issued or confirmed by Bank at the request of Applicant, including, without limitation, all Credits (if any) previously opened and outstanding on the date hereof.

b)Notwithstanding any other term hereof, Applicant understands and agrees that the Credit can be revoked or amended only with the consent of the beneficiary of the Credit, Bank or Other Issuer of the Credit and any confirming bank.

c)If Applicant requests Bank to issue a Credit for the account of a third party, whether affiliated with Applicant or otherwise (the “Account Party”), the Account Party shall have no rights against Bank.  Bank may deal with Applicant as if Applicant were the named Account Party.

d)Applicant shall give Bank prior written notice of any change of name, address or place of business.  Any notice of any nature by Applicant to Bank must be given at Bank’s office to which the application was submitted.

e)The singular includes the plural.  If Applicant consists of more than one person, the obligations of Applicant hereunder are joint and several and are binding upon any marital community of which any Applicant is a member.  This Agreement shall be binding on Applicant, its successors and assigns, and shall inure to the benefit of Bank or Bank’s successors, transferees and assigns.  Notwithstanding the foregoing, Applicant may not assign its rights under this agreement without Bank’s prior written consent.

f)Notwithstanding the title appearing on any Credit instrument, the rights and obligations of Bank and Applicant with respect to the Credit shall be as set forth herein.

g)The Application and/or the Credit will set forth which rules or customs apply to the corresponding Credit.  Such rules and customs may include, but are not limited to, the International Standby Practices, as published by the International Chamber of Commerce (“ISP”) or the Uniform Customs and Practice for Documentary Credits, as published by the International Chamber of Commerce (“UCP”).  In any event, the rules or practices set forth in the Credit are incorporated herein and shall govern the Credit.  This Agreement and the Credit shall be governed by the internal laws of the State in which the credit was issued and the United States of America (the “Governing Laws”), except to the extent such laws are inconsistent with the rules adopted in the Application as set forth above.

h)When possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

i)Applicant hereby indemnifies and agrees to defend and hold harmless Bank, its officers, directors, agents, successors and assigns, from and against any and all liabilities, claims, demands, losses and expenses (including without limitation legal costs and attorney fees incurred in any appellate proceeding, proceeding under the bankruptcy code or receivership and post-judgment attorney fees incurred in enforcing any judgment), arising from or in connection with this Agreement, the Credit or any related transaction, except to the extent such claims arise from Bank’s gross negligence or willful misconduct.

j)Any action, inaction or omission, taken or suffered by Bank or by any of Bank’s correspondents under or in connection with the Credit or any relative drafts, documents or property, if in good faith and in conformity with foreign or United States laws, regulations or customs applicable thereto, shall be binding upon Applicant and shall not place Bank or any of Bank’s correspondents under any resulting liability to Applicant.  Without limiting the generality of the foregoing, Bank and Bank’s correspondents may act in reliance upon any oral, telephonic, telegraphic, electronic or written request or notice believed in good faith to have been authorized by Applicant, whether or not in fact given or signed by an authorized person.

k)Bank’s waiver of any right on any occasion or occasions shall not be construed as a bar or waiver of any other right or of such right on any other occasion.  Applicant hereby waives and agrees not to assert any defense under any applicable statute of limitations, to the fullest extent permitted by law.

l)Without notice to any Applicant and without affecting Bank’s rights or Applicant’s obligations, Bank may deal in any manner with any person who at any time is liable for, or provides any collateral for, any obligations of Applicant to Bank.  Without limiting the foregoing, Bank may impair, release (with or without substitution of new collateral) and fail to perfect a security interest in, any collateral provided by any person; and sue, fail to sue, agree not to sue, release, and settle or compromise with, any person.

m)Except as otherwise provided herein or in any Credit, all notices and other communications required or permitted to be given to any party hereto shall be in writing or an electronic medium that is retrievable in a perceivable form and shall be deemed given when delivered by hand, electronically, by overnight courier, or when deposited in the United States mail, postage prepaid, addressed as set forth in the Application.

n)Whether or not litigation or arbitration is commenced, Applicant promises to pay all attorney fees and other costs and expenses incurred by Bank in collecting overdue amounts or construing or enforcing any provision of this Agreement or the Credit, including but not limited to reasonable attorney fees at trial, in any arbitration, appellate proceeding, proceeding under the bankruptcy code or receivership and post-judgment attorney fees incurred in enforcing any judgment.

o)If the Credit is issued pursuant to a loan agreement or other separate agreement, the terms of such other agreement shall control in the event of a conflict between the terms of this Agreement and such other agreement.

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p)This Agreement is a continuing agreement and shall remain in effect until terminated, amended or replaced.  This Agreement may be terminated by Applicant or Bank by giving notice of termination to the other and may be amended or replaced by a written agreement signed by Applicant and accepted by Bank; provided, however, that no such termination, amendment or replacement shall alter or affect the undertaking of Applicant or Bank with respect to any Credit issued, or commitment to issue, prior to such termination, amendment or replacement.

q)This Agreement, as supplemented by the laws, rules and customs incorporated herein by subpart (g) to this part, and as supplemented by the terms of the Application, if any, constitutes the entire understanding between Bank and Applicant with respect to the matters treated herein and specifically supersedes any prior or contemporaneous oral agreements.

r)Nothing in this Agreement shall be construed as imposing any obligation on Bank to issue any Credit.  Each Credit shall be issued by Bank in its sole discretion and at its sole option.

s)Bank is authorized, but not obligated, to record electronically or otherwise any telephone and other oral communications between Bank and Applicant.

t)All terms and conditions on the attached Schedule 1, and any replacement Schedule 1 are hereby incorporated herein.  Applicant may change the provisions of Schedule 1 by executing and delivering a new Schedule 1 to Bank.

u)In the event Applicant submits an Application or other instruction by facsimile transmission (each, a “Faxed Document”), Applicant agrees: (i) each Faxed Document shall be deemed to be an original document and shall be effective for all purposes as if it were an original; (ii) Applicant shall retain the original of any Faxed Document and shall deliver it to Bank upon request; (iii) if Applicant sends Bank a manually signed confirmation of a Faxed Document, Bank shall have no duty to compare it to the previously received Faxed Document nor shall it have any liability or duty to act should the contents of the written confirmation differ therefrom.  Any manually signed confirmation of a Faxed Document must be conspicuously marked “Previously transmitted by facsimile.”  Bank will not be liable for issuance of duplicate letters of a credit or amendments thereto that result from Bank’s receipt of confirmations not so marked; (iv) Bank cannot effectively determine whether a particular facsimile request is valid.  Therefore Applicant shall have sole responsibility for the security of using facsimile transmissions and for any authorized or unauthorized Faxed Document received by Bank, purportedly on behalf of Applicant.

9.      IMPORTANT NOTICE.  ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING PREPAYMENT OF A DEBT INCLUDING VERBAL PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.

Applicant acknowledges receipt of a completed copy of this Agreement.

IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the day and year first above written.

APPLICANT:   

By:

Name:

Title:

      BANK:

U.S. BANK NATIONAL ASSOCIATION

By:

Name:

Title:

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AUTHORIZATION

CONTINUING REIMBURSEMENT AGREEMENT FOR

LETTERS OF CREDIT

The provisions of this Schedule 1 are hereby incorporated into and made a part of the Continuing Reimbursement Agreement for Letters of Credit (“Agreement”) executed by and between U.S. BANK NATIONAL ASSOCIATION, (“Bank”) and __________ (“Applicant”), dated __________.  Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Agreement.

1.In addition to those authorized through U.S. Bank Global Trade Works or other electronic letter of credit application system offered by Bank, if applicable, any one of the persons whose name, title and signature appears below is authorized to give instructions to Bank and to execute and/or transmit Applications, requests for amendments, requests for extensions and other communications of any nature regarding any Credit issued by Bank for Applicant.

NAME TITLE SIGNATURE

2.In addition to those authorized through U.S. Bank Global Trade Works or other electronic letter of credit application system offered by Bank, if applicable, the following persons are entitled to waive discrepancies contained in documents presented under a Credit.  (Applicant understands that upon any such waiver, Applicant is obligated to reimburse Bank to the same extent as if the documents fully complied with the terms of the Credit.):

NAME TITLE TELEPHONE NUMBER

3.Bank is instructed to automatically deduct from Account No. _____ all amounts which become due under the Agreement.  Should there be insufficient funds in this account to reimburse Bank, Bank is authorized to deduct any remaining amounts due from any of Applicant’s accounts with Bank.

4.This Schedule 1 shall be effective upon receipt by Bank.  Bank may rely on this Schedule 1 until it has been revoked in writing by Applicant and Bank has a reasonable opportunity to act on any such revocation.

APPLICANT:

By:

Name:

Title:

Date:

BANK:

U.S. BANK NATIONAL ASSOCIATION

By:

Name:

Title:

Date:

EXHIBIT G

APPLICATION FOR STANDBY LETTER OF CREDIT

  Standby Letters of Credit, PD-WA-T9IN 1420 Fifth Avenue, 9th Floor Seattle, WA  98101 (206) 344-2398 / 587-7049 FAX (206) 344 - 5365 Bank Use Only   LC No. _____________   Date Rec'd __________

The undersigned ("Applicant", whether one or more) hereby requests you to establish an irrevocable Letter of Credit (hereinafter referred to as the "Credit") as set forth below in such language as you may deem appropriate, with such variations from such terms as you may in your discretion determine necessary and are not materially inconsistent with this Application, and forward the same by: SWIFT/Telex;  Courier; through your correspondent or directly to beneficiary.

 rFax copy to:                                                                                                            Attention:

In Favor of (Beneficiary)	For Account of (Applicant)
Advising Bank	Amount $________________________________ Partial Drawings Allowed ____       Not Allowed ___ Expiration Date _________________________
r PLEASE ISSUE THE CREDIT IN THE FORM OF THE ATTACHED DOCUMENT LABELED "EXHIBIT A" AND SIGNED BY APPLICANT.
Document(s), if any, required to accompany drawing(s) Additional Conditions: Banking Charges for account of the Applicant___  Beneficiary___

In consideration of your issuance of the Credit, the undersigned Applicant(s), jointly and/or severally agree(s) to the terms and conditions set forth above and in the most recent Continuing Reimbursement Agreement for Standby Letters of Credit executed by Applicant.

Account Number	Telephone Number		Applicant Name
Street Address		CITY		State	ZIP
Authorized Signature				Title

re is verified and authority to sign in confirmed. The extension of credit is approved in accordance with the Bank's current requirements.

Correspondent Bank			Address
Authorized Signature			Telephone Number
Account Officer Name (Please Print)		Officer Telephone No.			Account Officer Signature
Obligor Number	Cost Center	Mail Code		Telephone Number	Fee Rate Manual __­­­__        Other_______

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EXHIBIT H

[Reserved]

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EXHIBIT I

LETTER OF CREDIT REQUEST

[Date]

U.S. Bank National Association

170 South Main, 6th Floor

Salt Lake City, Utah 84101

Attention:              

Ladies and Gentlemen:

Reference is hereby made to that certain Loan Agreement dated as of August 18, 2009, by and among Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), the Lenders from time to time party thereto, and U.S. Bank National Association, a national banking association, as Lender and as Agent for the Lenders, as the same may from time to time be amended, modified, extended, renewed or restated (the “Loan Agreement”).  All capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Loan Agreement.

Pursuant to Section 2.04 of the Loan Agreement, the undersigned hereby requests that you issue an irrevocable standby letter of credit in the original face amount of $_______________________ for the account of the undersigned and for the benefit of ________________________ upon the terms and conditions set forth in the attached Application and Agreement for Irrevocable Standby Letter of Credit.

The undersigned hereby represents and warrants to you that all of the representations and warranties of Borrower and/or any other Obligor contained in the Loan Agreement and/or in any of the other Transaction Documents are true and correct in all material respects on and as of the date hereof as if made on and as of the date hereof and no Default or Event of Default has occurred and is continuing and that no such Default or Event of Default will result from the issuance of the Letter of Credit requested hereby.

Very truly yours,

SCHIFF NUTRITION GROUP, INC.

By:                    

Title:                       

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EXHIBIT J

[Date]

U.S. Bank National Association, as Agent

170 South Main, 6 Floor

Salt Lake City, Utah 84101

Attention:       

Ladies and Gentlemen:

Reference is hereby made to that certain Loan Agreement dated as of August 18, 2009, by and among Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), the Lenders from time to time party thereto, and U.S. Bank National Association, a national banking association, as Lender and as Agent for the Lenders, as the same may from time to time be amended, modified, extended, renewed or restated (the “Loan Agreement”).  All capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Loan Agreement.

Borrower hereby certifies to the Agent and the Lenders that as of the date hereof:

(a)           except as set forth below, all of the representations and warranties of Borrower and/or any other Obligor contained in the Loan Agreement and/or in any of the other Transaction Documents are true and correct in all material respects on and as of the date of this Certificate as if made on and as of the date of this Certificate:

Exceptions:            

(b)           except as set forth below, no Default or Event of Default under or within the meaning of the Loan Agreement has occurred and is continuing:

Exceptions:            

(c)           the financial statements of Borrower, Parent and the Subsidiaries delivered to you with this letter are true, correct and complete in all material respects and have been prepared in accordance with GAAP (subject, in the case of any interim financial statements, to normal year-end adjustments and absence of footnote disclosures); and

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(d)           Schedule 1 to this letter is a determination of Borrower’s compliance with the financial covenants set forth in Section 5.01(o) of the Loan Agreement as of ________________ ________, in each case calculated in accordance with the Loan Agreement.

Very truly yours,

SCHIFF NUTRITION GROUP, INC.

By: 

Title:   

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SCHEDULE 1

Financial Covenant Information

Section 5.01(o)

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EXHIBIT K

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made and entered into as of, 20, by and among [ASSIGNOR] (the “Assignor”) and [ASSIGNEE] (the “Assignee”).

WITNESSETH:

WHEREAS, this Agreement relates to the Loan Agreement (the “Loan Agreement”) dated as of August 18, 2009, by and among Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), the Assignor and the other Lenders party to the Loan Agreement, and U.S. Bank National Association as administrative agent for the Lenders (in such capacity, the “Agent”); and

WHEREAS, as provided under the Loan Agreement, the Assignor has (a) a Revolving Credit Commitment to make Revolving Credit Loans to Borrower in an aggregate principal amount at any one time outstanding not to exceed ____________________________________ Dollars ($______________) and (b) a ____________ Percent (____%) participation interest in each of the Letter(s) of Credit together with all unreimbursed drawings with respect thereto; and

WHEREAS, as of the date hereof, (a) the aggregate outstanding principal amount of all Revolving Credit Loans made by the Assignor to Borrower is $_________, and (b) the aggregate undrawn face amount of all of the outstanding Letters of Credit plus all unreimbursed drawings with respect thereto is $________________; and

WHEREAS, the Assignor proposes to sell and assign to the Assignee a __________________ Percent (_________%) (the “Assigned Percentage”) (a) interest in all of the rights and obligations of the Assignor under the Loan Agreement in respect of its Revolving Credit Commitment and its Revolving Credit Loans, and (b) a _____________ Percent (_______%) participation interest in the Assignor’s Pro Rata Share of the aggregate undrawn face amount of all of the outstanding Letters of Credit plus all unreimbursed drawings with respect thereto, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

SECTION 1.  Definitions.  All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement.

SECTION 2.  Assignment.  The Assignor hereby assigns and sells to the Assignee (a) all of the rights of the Assignor under the Loan Agreement in respect of its Revolving Credit Commitment and its Revolving Credit Loans, and (b) a _____________ Percent (_______%) participation interest in all of the rights of the Assignor under the Loan Agreement in respect of its Pro Rata Share of the aggregate undrawn face amount of all of the outstanding Letters of Credit plus all unreimbursed drawings with respect thereto, to the extent of the Assigned Percentage, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Loan Agreement in respect of its Revolving Credit Commitment, its Revolving Credit Loans and its Pro Rata Share of the aggregate undrawn face amount of all of the outstanding Letters of Credit plus all unreimbursed drawings with respect thereto, in each case to the extent of the Assigned Percentage, including the purchase from the Assignor of the corresponding portion of the

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principal amount of the Revolving Credit Loans made by the Assignor outstanding at the date hereof.  Upon (a) the execution and delivery hereof by the Assignor and the Assignee, (b) the acknowledgment hereof by the Borrower (to the extent required under the Loan Agreement) and the Agent and (c) the payment of the amounts specified in Section 3 required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Lender under the Loan Agreement with a Revolving Credit Commitment in an amount equal to $ and a Pro Rata Share of %, (ii) the Revolving Credit Commitment of the Assignor shall, as of the date hereof, be reduced to $ and the Pro Rata Share of the Assignor shall, as of the date hereof, be reduced to % and (iii) the Assignor shall be released from its obligations under the Loan Agreement to the extent such obligations have been assumed by the Assignee.  The assignment provided for herein shall be without recourse to the Assignor.

SECTION 3.  Payments.  As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.  It is understood that commitment and/or facility fees accrued to but excluding the date hereof with respect to the Assigned Percentage are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee.  Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Loan Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party’s interest therein and shall promptly pay the same to such other party.

SECTION 4.  Administrative Fee.  In connection with the assignment provided for herein, the Assignee shall pay to the Agent an administrative fee for processing such assignment in the amount of $3,500, or such other amount as may be set forth in Section in 8.12(c) of the Loan Agreement as amended from time to time.

SECTION 5.  Increased Costs.  To the extent that the assignment provided for herein results in increased costs under Section 2.17, 2.18, 2.19, 2.20 or 2.22 of the Loan Agreement from those being charged by the Assignor prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of this assignment), and the Assignor and the Assignee agree to execute such documents as shall be necessary to effect the foregoing.

SECTION 6.  Representations of Assignee.  The Assignee represents that (i) it is an Eligible Institution which makes loans in the ordinary course of its business, and (ii) it will make or acquire Loans for its own account in the ordinary course of such business, provided that subject to the preceding clauses (i) and (ii), the disposition of any promissory notes or other evidences or interests in indebtedness held by the Assignee shall at all times be within its exclusive control.

SECTION 7.  Notice Address.  For purposes of Section 8.07 of the Loan Agreement, the Assignee’s address and facsimile number for notice purposes is as follows:

_______________________________________

_______________________________________

Attention:                       

Facsimile No.:                                         

SECTION 8.  Consent of the Borrower and the Agent.  This Agreement is conditioned upon the consent of the Borrower and the Agent pursuant to Section 8.12(c) of the Loan Agreement.  The acknowledgement of this Agreement by the Borrower and the Agent is evidence of this consent.  Pursuant to Section 8.12(c) of the Loan Agreement, the Borrower hereby agrees to execute and deliver new Revolving Credit Notes payable to the order of the Assignor and the Assignee to evidence the assignment and assumption provided for herein.

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SECTION 9.  Nonreliance on Assignor.  The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower or any other Obligor, or the validity and enforceability of the obligations of the Borrower or any other Obligor in respect of the Loan Agreement, any Note or any other Transaction Document.  The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower and each other Obligor.

SECTION 10.  Governing Law.  This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Utah (without reference to conflict of law principles).

SECTION 11.  Counterparts.  This Agreement may be signed in any number of counterparts (including facsimile counterparts), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Signature Page(s) to Follow]

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IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Assumption Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Name:

Title:

[ASSIGNEE]

By:

Name:

Title:

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Assignment and Assumption Agreement Acknowledged and Consented to by the Borrower:

SCHIFF NUTRITION GROUP, INC.,

a Utah corporation

By:

Name:

Its:

5

Assignment and Assumption Agreement Acknowledged and Consented to by the Agent:

U.S. BANK NATIONAL ASSOCIATION,

as Agent

By:

Name:

Title:

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EX-10.28

Exhibit 10.28

SECURITY AGREEMENT

Dated as of August 18, 2009

among

SCHIFF NUTRITION GROUP, INC.,

as a Grantor

and

SCHIFF NUTRITION INTERNATIONAL, INC.,

as a Grantor

and

WNG HOLDINGS (INTERNATIONAL) LTD.,

as a Grantor

and

COPPAL RESEARCH, INC.,

as a Grantor

and

U.S. BANK NATIONAL ASSOCIATION,

as Agent

		TABLE OF CONTENTS	Page
ARTICLE I		DEFINED TERMS	1
	Section 1.1	Definitions	1
	Section 1.2	Certain Other Terms	3
ARTICLE II		GRANT OF SECURITY INTEREST	4
	Section 2.1	Collateral	4
	Section 2.2	Grant of Security Interest in Collateral	4
ARTICLE III		REPRESENTATIONS AND WARRANTIES	4
	Section 3.1	Title; No Other Liens	4
	Section 3.2	Perfection and Priority	5
	Section 3.3	Jurisdiction of Organization; Chief Executive Office	5
	Section 3.4	Locations of Inventory, Equipment and Books and Records	5
	Section 3.5	Pledged Collateral	5
	Section 3.6	Instruments and Tangible Chattel Paper Formerly Accounts	6
	Section 3.7	Intellectual Property	6
	Section 3.8	Commercial Tort Claims	6
	Section 3.9	Enforcement	6
ARTICLE IV		COVENANTS	7
	Section 4.1	Maintenance of Perfected Security Interest; Further Documentation and Consents	7
	Section 4.2	Changes in Locations, Name, Organizational Documents, Etc	7
	Section 4.3	Pledged Collateral	8
	Section 4.4	Delivery of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit   Rights and Electronic Chattel Paper	8
	Section 4.5	Intellectual Property	9
	Section 4.6	Notices	10
	Section 4.7	Notice of Commercial Tort Claims	10
ARTICLE V		REMEDIAL PROVISIONS	10
	Section 5.1	Remedies	10
	Section 5.2	Accounts and Payments in Respect of General Intangibles	13
	Section 5.3	Pledged Collateral	13
	Section 5.4	Proceeds to be Turned over to Secured Party	14
	Section 5.5	Registration Rights	14
	Section 5.6	Deficiency	15
ARTICLE VI		THE SECURED PARTY	15
	Section 6.1	Secured Party’s Appointment as Attorney-in-Fact	15
	Section 6.2	Authorization to File Financing Statements	17
	Section 6.3	[Reserved]	17
	Section 6.4	Duty; Obligations and Liabilities	17
ARTICLE VII		MISCELLANEOUS	17
	Section 7.1	Reinstatement	17
	Section 7.2	Release of Collateral	18
	Section 7.3	Independent Obligations	18
	Section 7.4	No Waiver by Course of Conduct	18
	Section 7.5	Amendments in Writing	18
	Section 7.6	Additional Pledged Collateral	18
	Section 7.7	Notices	19
	Section 7.8	Successors and Assigns	19
	Section 7.9	Counterparts	19
	Section 7.10	Severability	19
	Section 7.11	Governing Law	19
	Section 7.12	WAIVER OF JURY TRIAL	19

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ANNEXES AND SCHEDULES

Annex 1	Form of Pledge Amendment
Annex 2	Form of Joinder Agreement
Annex 3	Form of Intellectual Property Security Agreement
Schedule 1	Commercial Tort Claims
Schedule 2	Filings
Schedule 3	Jurisdiction of Organization; Chief Executive Office
Schedule 4	Location of Inventory and Equipment
Schedule 5	Pledged Collateral
Schedule 6	Intellectual Property

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SECURITY AGREEMENT, dated as of August 18, 2009, by Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), Schiff Nutrition International, Inc., a Delaware corporation (“Parent”), WNG Holdings (International) Ltd., a Nevada corporation (“WNG”), Coppal Research, Inc., a Utah corporation (“Coppal”) (Borrower, Parent, WNG, and Coppal shall be referred to each as a “Grantor” and collectively as the “Grantors”), in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors and assigns, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to below).

W I T N E S S E T H:

WHEREAS, pursuant to the Loan Agreement dated as of the date hereof (as the same may be amended, restated, modified or otherwise supplemented from time to time, the “Loan Agreement”) among Borrower, Agent, and the Lenders from time to time party thereto, the Lenders, subject to the terms and conditions contained therein, have agreed to make available to Borrower credit in the aggregate principal amount of the respective Revolving Credit Commitments;

WHEREAS, as a condition precedent under the terms of the Loan Agreement, each Grantor has agreed to grant a lien and security interest in all of its assets to secure the Secured Obligations (as defined herein);

WHEREAS, each Grantor will derive substantial direct and indirect benefits of reasonably equivalent value from the transactions evidenced by the Transaction Documents; and

NOW, THEREFORE, in consideration of the premises and to induce the Agent and the Lenders to enter into the transactions evidenced by the Transaction Documents, each Grantor hereby agrees with the Agent as follows:

ARTICLE I

DEFINED TERMS

Section 1.1      Definitions.  (a)  Capitalized terms used herein without definition shall have the meanings given in the Loan Agreement.

(b)The following terms have the meanings given to them in the UCC and terms used herein without definition that are defined in the UCC have the meanings given to them in the UCC (such meanings to be equally applicable to both the singular and plural forms of the terms defined): “account”, “account debtor”, “certificated security”, “chattel paper”, “commercial tort claim”, “commodity contract”, “deposit account”, “documents”, “electronic chattel paper”, “equipment”, “fixture”, “general intangible”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit right”, “proceeds”, “record”, “securities account”, “security”, “supporting obligation” and “tangible chattel paper”.

(c)The following terms shall have the following meanings:

“Agreement” shall mean this Security Agreement, as amended, restated, modified or otherwise supplemented from time to time.

“Applicable IP Office” shall mean the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency within or outside the United States.

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“Collateral” has the meaning specified in Section 2.1.

“Contractual Obligations” shall mean, with respect to any Person, any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“Control Agreement” shall mean with respect to any deposit account, any securities account, any commodity account, securities entitlement or commodity contract, an agreement, in form and substance satisfactory to the Agent, among the Agent, the financial institution or Person at which such account is maintained or with which such entitlement or contract is carried, and the respective Grantor.

“Equity Interests” shall mean, with respect to any Person, any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, units, participations or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other equity security.

“Excluded Property” shall mean the outstanding Equity Interests of (1) the Excluded Subsidiaries and (2) a Foreign Subsidiary in excess of sixty-five percent (65%) of the voting Equity Securities (within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under the IRC) of such Foreign Subsidiary.

“Governmental Authority” shall mean the government of any nation, state, city, locality or other political subdivision of any thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Intellectual Property” shall mean all rights, title and interest in or related to intellectual property and all IP Ancillary Rights related thereto, including all copyrights, patents, trademarks, Internet domain names, trade secrets, and intellectual property licenses.

“IP Ancillary Rights”  shall mean with respect to any other Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for the past, present or future infringement, misappropriation, dilution, violation or other impairment thereof.

“IRC” shall mean the Internal Revenue Code of 1986, as amended from time to time (or any successor statute thereto), and the regulations promulgated and rulings issued thereunder.

“Material Intellectual Property” shall mean Intellectual Property that is owned by or licensed to a Grantor and material to the conduct of any Grantor’s business.

“Pledged Certificated Stock” shall mean all certificated securities and any other Equity Interests of any Person evidenced by a certificate, instrument or other similar document (as defined in the UCC), in each case owned by any Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including all Equity Interests listed on Schedule 5.  Pledged Certificated Stock excludes any Excluded Property.

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“Pledged Collateral” shall mean, collectively, the Pledged Stock and the Pledged Debt Instruments.

“Pledged Debt Instruments” shall mean all right, title and interest of any Grantor in instruments evidencing any indebtedness owed to such Grantor or other obligations owed to such Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including all indebtedness described on Schedule 5, issued by the obligors named therein.

“Pledged Investment Property” shall mean any investment property of any Grantor, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, other than any Pledged Stock or Pledged Debt Instruments.  Pledged Investment Property excludes any Excluded Property.

“Pledged Stock” shall mean all Pledged Certificated Stock and all Pledged Uncertificated Stock.

“Pledged Uncertificated Stock” shall mean any Equity Interests of any Person that is not Pledged Certificated Stock, including all right, title and interest of any Grantor as a limited or general partner in any partnership not constituting Pledged Certificated Stock or as a member of any limited liability company, all right, title and interest of any Grantor in, to and under any Organizational Document of any partnership or limited liability company to which it is a party, and any distribution of property made on, in respect of or in exchange for the foregoing from time to time, including in each case those interests set forth on Schedule 5, to the extent such interests are not certificated.  Pledged Certificated Stock excludes any Excluded Property.

“Requirements of Law” shall mean, as to any Person, the organizational and governing documents of such Person and any law, treaty, rule, regulation, right, qualification or determination of a court or other Governmental Authority, in each case applicable or binding on such Person or its property.

“Secured Obligations” shall mean all Borrower’s Obligations including without limitation all obligations of Grantors under this Agreement.

“Software” shall mean (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data, whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.

“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of Utah; provided, however, that, in the event that, by reason of mandatory provisions of any applicable Requirement of Law, any of the attachment, perfection or priority of the Agent’s security interest in any Collateral is governed by the Uniform Commercial Code of a jurisdiction other than the State of Utah, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of the definitions related to or otherwise used in such provisions.  Section references in this Agreement to the UCC shall be deemed to be to the equivalent section in the UCC in the applicable State.

“Vehicles” shall mean all vehicles covered by a certificate of title law of any state.

Section 1.2      Certain Other Terms.  (a)  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The terms “herein”, “hereof” and similar terms refer to this Agreement as a whole and not to any particular Article, Section or clause in this Agreement.  References herein to an Annex, Schedule, Article, Section or clause refer to the appropriate Annex or Schedule to, or Article, Section or clause in this Agreement.  Where the context requires, provisions relating to any Collateral when used in relation to a Grantor shall refer to such Grantor’s Collateral or any relevant part thereof.

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ARTICLE II

GRANT OF SECURITY INTEREST

Section 2.1      Collateral.  For the purposes of this Agreement, all of the following property now owned or at any time hereafter acquired by a Grantor or in which a Grantor now has or at any time in the future may acquire any right, title or interests is collectively referred to as the “Collateral”:

(a)all accounts, chattel paper, deposit accounts, documents, equipment, general intangibles (including the Intellectual Property), goods, instruments, inventory, investment property (including the Pledged Stock and the Pledged Investment Property), letter-of-credit rights and any supporting obligations related thereto;

(b)the commercial tort claims described on Schedule 1 and on any supplement thereto received by the Agent pursuant to Section 3.8;

(c)all books and records pertaining to any of the property described in this Section 2.1;

(d)all property of such Grantor held by the Agent, including all property of every description, in the custody of or in transit to the Agent for any purpose, including safekeeping, collection or pledge, for the account of such Grantor or as to which such Grantor may have any right or power, including but not limited to deposit accounts and cash;

(e)all other goods (including but not limited to fixtures) and all other personal property of such Grantor, whether tangible or intangible and wherever located; and

(f)to the extent not otherwise included, all proceeds and products of the foregoing;

provided, however, that “Collateral” shall not include any Excluded Property.

Section 2.2      Grant of Security Interest in Collateral.  Each Grantor, as collateral security for the prompt and complete payment and performance of the Secured Obligations, hereby mortgages, pledges and hypothecates to the Agent, and grants to the Agent a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral of such Grantor.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce the Agent and the Lenders to enter into the Loan Agreement, each Grantor hereby represents and warrants each of the following to the Agent:

Section 3.1      Title; No Other Liens.  Except for the Lien granted to the Agent pursuant to this Agreement, the Liens granted by the Transaction Documents, and other Permitted Liens, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others.  Such Grantor (a) is the record and beneficial owner of the Collateral pledged by it hereunder constituting instruments or certificates and (b) has rights in or the power to transfer each other item of Collateral in which a Lien is granted by it hereunder, free and clear of any other Lien other than Permitted Liens.

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Section 3.2      Perfection and Priority.  The security interest granted pursuant to this Agreement constitutes a valid and continuing security interest in favor of the Agent in all Collateral, with perfection thereof to include without limitation the following:  (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on Schedule 2, (ii) with respect to any deposit account, the execution of a Control Agreement other than deposit accounts for which the Agent is the depository bank and has automatic control, (iii) in the case of all copyrights, trademarks and patents, all appropriate filings having been made with the Applicable IP Office, (iv) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a Contractual Obligation granting control to the Agent over such letter-of-credit rights, (v) in the case of electronic chattel paper, the completion of all steps necessary to grant control to the Agent over such electronic chattel paper, (vi) in the case of Vehicles, the actions required under Section 4.1(e), and (vii) in the case of Pledged Collateral or Pledged Investment Property issued by a Foreign Subsidiary, such filings and actions as may be required under the laws of the jurisdiction under which such Foreign Subsidiary was formed.  In the case of all Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property, delivery shall be made to the Agent of such Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property consisting of instruments and certificates, in each case properly endorsed for transfer to the Agent or in blank.  In the case of all Pledged Investment Property not in certificated form, Control Agreements shall be executed with respect to such investment property.  In the case of all other instruments and tangible chattel paper that are not Pledged Certificated Stock, Pledged Debt Instruments or Pledged Investment Property, the delivery shall be made the Agent of such instruments and tangible chattel paper.  Such security interest shall be prior to all other Liens on the Collateral except for any Permitted Liens having priority over the Agent’s Lien by operation of law or unless otherwise granted or permitted by any Transaction Document.

Section 3.3      Jurisdiction of Organization; Chief Executive Office.  Such Grantor’s jurisdiction of organization, legal name and organizational identification number, if any, and the location of such Grantor’s chief executive office or sole place of business, in each case as of the date hereof, is specified on Schedule 3 and such Schedule 3 also lists all jurisdictions of incorporation, legal names and locations of such Grantor’s chief executive office or sole place of business for the five years preceding the date hereof.

Section 3.4      Locations of Inventory, Equipment and Books and Records.  On the date hereof, such Grantor’s inventory and equipment (other than inventory or equipment in transit) and books and records concerning the Collateral are kept at the locations listed on Schedule 4 and such Schedule 4 also lists the locations of such inventory, equipment and books and records for the five years preceding the date hereof.

Section 3.5      Pledged Collateral.  (a)  The Pledged Stock pledged by such Grantor hereunder (i) is listed on Schedule 5 and constitutes that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on Schedule 5, (ii) has been duly authorized, validly issued and is fully paid and nonassessable (other than Pledged Stock in limited liability companies and partnerships).  The pledge by such Grantor of the Pledged Stock hereunder constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms.

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(b)As of the Closing Date, all Pledged Collateral (other than Pledged Uncertificated Stock) and all Pledged Investment Property consisting of instruments and certificates has been delivered to the Agent in accordance with Section 4.3(a).

Section 3.6      Instruments and Tangible Chattel Paper Formerly Accounts.  As of the date hereof, no amount payable to such Grantor under or in connection with any account is evidenced by any instrument or tangible chattel paper that has not been delivered to the Agent, properly endorsed for transfer, to the extent delivery is required by Section 4.4(a).

Section 3.7      Intellectual Property.  (a)  Schedule 6 sets forth a true and complete list of the following Intellectual Property such Grantor owns, licenses or otherwise has the right to use:  (i) Intellectual Property that is registered or subject to applications for registration, (ii) Internet domain names and (iii) other Material Intellectual Property and material Software, separately identifying that owned and licensed to such Grantor and including for each of the foregoing items (1) the owner, (2) the title, (3) the jurisdiction in which such item has been registered or otherwise arises or in which an application for registration has been filed, (4) as applicable, the registration or application number and registration or application date and (5) any intellectual property licenses or other rights (including franchises) granted by the Grantor with respect thereto.

(b)On the Closing Date, all Material Intellectual Property owned by such Grantor is valid, in full force and effect, subsisting, unexpired and enforceable, and no Material Intellectual Property has been abandoned.  On the Closing Date, no breach or default of any Material Intellectual Property license shall be caused by any of the following, and none of the following shall limit or impair the ownership, use, validity or enforceability of, or any rights of such Grantor in, any Material Intellectual Property: (i) the consummation of the transactions contemplated by any Transaction Document or (ii) to such Grantor’s knowledge, any holding, decision, judgment or order rendered by any Governmental Authority.  There are no pending (or, to the knowledge of such Grantor, threatened) actions, investigations, suits, proceedings, audits, claims, demands, orders or disputes challenging the ownership, use, validity, enforceability of, or such Grantor’s rights in, any Material Intellectual Property of such Grantor.  To such Grantor’s knowledge, no Person has been or is infringing, misappropriating, diluting, violating or otherwise impairing any Intellectual Property of such Grantor.  Such Grantor, and to such Grantor’s knowledge each other party thereto, is not in material breach or default of any Material Intellectual Property license.

Section 3.8      Commercial Tort Claims.  The only commercial tort claims of any Grantor existing on the date hereof (regardless of whether the amount, defendant or other material facts can be determined and regardless of whether such commercial tort claim has been asserted, threatened or has otherwise been made known to the obligee thereof or whether litigation has been commenced for such claims) are those listed on Schedule 1, which sets forth such information separately for each Grantor.

Section 3.9      Enforcement.  No permit, notice to or filing with any Governmental Authority or any other Person or any consent from any Person is required for the exercise by the Agent of its rights (including voting rights) provided for in this Agreement or the enforcement of remedies in respect of the Collateral pursuant to this Agreement, including the transfer of any Collateral, except as may be required in connection with the disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities generally or any approvals that may be required to be obtained from any bailees or landlords to collect the Collateral.

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ARTICLE IV

COVENANTS

Each Grantor agrees with the Agent to the following, as long as any Secured Obligations remain outstanding:

Section 4.1      Maintenance of Perfected Security Interest; Further Documentation and Consents.  (a)  Such Grantor shall (i) not use or permit any Collateral to be used unlawfully or in violation of any provision of any Transaction Document, any Requirement of Law or any policy of insurance covering the Collateral and (ii) not enter into any Contractual Obligation or undertaking restricting the right or ability of such Grantor or the Agent to sell any Collateral if such restriction would have a Material Adverse Effect.

(b)Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having the priority described in Section 3.2 and shall defend such security interest and such priority against the claims and demands of all Persons not constituting Permitted Liens.

(c)Such Grantor shall furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other documents in connection with the Collateral as the Agent may reasonably request, all in reasonable detail and in form and substance satisfactory to the Agent.

(d)At any time and from time to time, upon the written request of the Agent, such Grantor shall, for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, (i) promptly and duly execute and deliver, and have recorded, such further documents, including an authorization to file any financing statement or amendment under the UCC (or other filings under similar Requirements of Law) in effect in any jurisdiction with respect to the security interest created hereby and (ii) take such further action as the Agent may reasonably request, including (A) during the continuance of an Event of Default using its best efforts to secure all approvals necessary or appropriate for the assignment to or for the Agent to enforce the security interests granted hereunder and (B) executing and delivering any Control Agreements with respect to deposit accounts and securities accounts.

(e)If requested by the Agent, the Grantor shall arrange for the Agent’s security interest to be noted on the certificate of title of each Vehicle and shall file any other necessary documentation in each jurisdiction that the Agent shall deem advisable to perfect its security interests in any Vehicle.

Section 4.2      Changes in Locations, Name, Organizational Documents, Etc.  Except upon thirty (30) days’ prior written notice to the Agent and delivery to the Agent of (a) all documents reasonably requested by the Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 4 showing any additional locations at which inventory or equipment shall be kept, such Grantor shall not do any of the following:

(i)permit any inventory or equipment to be kept at a location other than those listed on Schedule 4, except for inventory or equipment in transit;

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(ii)change its jurisdiction of organization or its location, in each case from that referred to in Section 3.3; or

(iii)change its legal name or organizational identification number, if any, or corporation, limited liability company, partnership or other form of legal entity.

Section 4.3      Pledged Collateral.  (a)  Delivery of Pledged Collateral.  Such Grantor shall (i) deliver to the Agent, in suitable form for transfer and in form and substance satisfactory to the Agent, (i) all Pledged Certificated Stock, (ii) all Pledged Debt Instruments and (iii) all certificates and instruments evidencing Pledged Investment Property.

(b)Event of Default.  During the continuance of an Event of Default, the Agent shall have the right, at any time in its discretion and without notice to the Grantor, to (i) transfer to or to register in its name or in the name of its nominees any Pledged Collateral or any Pledged Investment Property and (ii) exchange any certificate or instrument representing or evidencing any Pledged Collateral or any Pledged Investment Property for certificates or instruments of smaller or larger denominations.

(c)Cash Distributions with respect to Pledged Collateral.  Except as provided in Article V, such Grantor shall be entitled to receive all cash or other distributions paid in respect of the Pledged Collateral or Pledged Investment Property.

(d)Voting Rights.  Except as provided in Article V, such Grantor shall be entitled to exercise all voting, consent and corporate, partnership, limited liability company and similar rights with respect to the Pledged Collateral and the Pledged Investment Property; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by such Grantor that would impair the Collateral or be inconsistent with or result in any violation of any provision of any Transaction Document.

(e)Organizational Documents.  No Grantor shall amend any of its organizational documents, or participate in any amendment to the organizational documents of any issuer of Pledged Stock, that in any way adversely affects the perfection of the Agent’s Lien in the Pledged Stock including, without limitation, any amendment electing to treat any membership interest of any issuer of Pledged Stock as a security under Section 8-103 of the UCC, or any election to turn any previously uncertificated membership interest of any issuer of Pledged Stock into a certificated membership interest.

Section 4.4      Delivery of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper.  (a)  If any amount in excess of $100,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced by an instrument or tangible chattel paper other than such instrument delivered in accordance with Section 4.3(a) and in the possession of the Agent, such Grantor shall mark all such instruments and tangible chattel paper with the following legend:  “This writing and the obligations evidenced or secured hereby are subject to the security interest of U.S. Bank National Association as Agent” and, at the request of the Agent, shall immediately deliver such instrument or tangible chattel paper to the Agent, duly indorsed in a manner satisfactory to the Agent.

(b)Such Grantor shall not grant “control” (within the meaning of such term under Section 9-106 of the UCC) over any deposit account or investment property to any Person other than the Agent.

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(c)If such Grantor is or becomes the beneficiary of a letter of credit that is (i) not a supporting obligation of any Collateral and (ii) has a face amount in excess of $100,000, such Grantor shall promptly (and in any event within two (2) Domestic Business Days) after becoming a beneficiary, notify the Agent thereof and as soon as practicable thereafter enter into a Contractual Obligation with the Agent, the issuer of such letter of credit or any nominated person with respect to the letter-of-credit rights under such letter of credit.  Such Contractual Obligation shall assign the proceeds of such letter of credit to the Agent and such assignment shall be sufficient to grant control for the purposes of Section 9-107 of the UCC (or any similar section under any equivalent UCC).  The provisions of the Contractual Obligation shall be in form and substance reasonably satisfactory to the Agent.

(d)If any amount in excess of $100,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced by electronic chattel paper, such Grantor shall take all steps necessary to grant the Agent control of all such electronic chattel paper for the purposes of Section 9-105 of the UCC.

Section 4.5      Intellectual Property.  (a)  Within sixty (60) days after any change to Schedule 6 for such Grantor, such Grantor shall provide the Agent notification thereof and the short-form intellectual property agreements and assignments as described in this Section 4.5 and other documents that the Agent reasonably requests with respect thereto.

(b)Such Grantor shall (and shall require all its licensees to) (i) (A) continue to use each trademark included in the Material Intellectual Property in order to maintain such trademark in full force and effect with respect to each class of goods for which such trademark is currently used, free from any claim of abandonment for non-use, (B) maintain at least the same standards of quality of products and services offered under such trademark as are currently maintained, (C) use such trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (D) not adopt or use any other trademark that is confusingly similar or a colorable imitation of such trademark unless the Agent shall obtain a perfected security interest in such other trademark pursuant to this Agreement and (ii) not do any act or omit to do any act whereby (A) such trademark (or any goodwill associated therewith) may become destroyed, invalidated, impaired or harmed in any way, (B) any patent included in the Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, (C) any portion of the copyright included in the Material Intellectual Property may become invalidated, otherwise impaired or fall into the public domain or (D) any trade secret that is Material Intellectual Property may become publicly available or otherwise unprotectable.

(c)Such Grantor shall notify the Agent immediately if it knows, or has reason to know, that any application or registration relating to any Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, or of any adverse determination or development regarding the validity or enforceability or such Grantor’s ownership of, interest in, right to use, register, own or maintain any Material Intellectual Property (including the institution of, or any such determination or development in, any proceeding relating to the foregoing in any Applicable IP Office).  Such Grantor shall take all actions that are necessary or reasonably requested by the Agent to maintain and pursue each application (and to obtain the relevant registration or recordation) and to maintain each registration and recordation included in the Material Intellectual Property.

(d)Such Grantor shall not knowingly do any act or omit to do any act to infringe, misappropriate, dilute, violate or otherwise impair in any material respect the Intellectual Property of any other Person.  In the event that any Material Intellectual Property of such Grantor is or has been infringed, misappropriated, violated, diluted or otherwise impaired by a third party, such Grantor shall take such action as it reasonably deems appropriate under the circumstances in response thereto, including promptly bringing suit and recovering all damages therefor.

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(e)Such Grantor shall execute and deliver to the Agent in form and substance reasonably acceptable to the Agent and suitable for (i) filing in the Applicable IP Office the short-form intellectual property security agreements in the form attached hereto as Annex 3 for all copyrights, trademarks and patents of such Grantor and (ii) upon the request of the Agent, recording with the appropriate Internet domain name registrar, a duly executed form of assignment for all Internet domain names of such Grantor (together with appropriate supporting documentation as may be requested by the Agent).

Section 4.6      Notices.  Such Grantor shall promptly notify the Agent in writing of its acquisition of any interest hereafter in property that is of a type where a security interest or lien must be or may be registered, recorded or filed under, or notice thereof given under, any federal statute or regulation.

Section 4.7      Notice of Commercial Tort Claims.  Such Grantor agrees that, if it shall acquire any interest in any commercial tort claim (whether from another Person or because such commercial tort claim shall have come into existence), (i) such Grantor shall, promptly (but in no event more than two (2) Domestic Business Days) upon such acquisition, deliver to the Agent, in each case in form and substance satisfactory to the Agent, a notice of the existence and nature of such commercial tort claim and a supplement to Schedule 1 containing a specific description of such commercial tort claim, (ii) Section 2.2 shall apply to such commercial tort claim and (iii) such Grantor shall execute and deliver to the Agent, in each case in form and substance satisfactory to the Agent, any document, and take all other action, deemed by the Agent to be reasonably necessary or appropriate for the Agent to obtain a perfected security interest having at least the priority set forth in Section 3.2 in all such commercial tort claims.  Any supplement to Schedule 1 delivered pursuant to this Section 4.7 shall, after the receipt thereof by the Agent, become part of Schedule 1 for all purposes hereunder other than in respect of representations and warranties made prior to the date of such receipt.

ARTICLE V

REMEDIAL PROVISIONS

Section 5.1      Remedies.  (a)  UCC Remedies.  During the continuance of an Event of Default, the Agent may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to any Secured Obligations, all rights and remedies of a secured party under the UCC or any other applicable law.

(b)Disposition of Collateral.  Without limiting the generality of the foregoing, the Agent  may, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived to the extent permitted by law), during the continuance of any Event of Default (personally or through its agents or attorneys), (i) enter upon the premises where any Collateral is located, without any obligation to pay rent, through self-help, without judicial process, without first obtaining a final judgment or giving any Grantor or any other Person notice or opportunity for a hearing on the Agent’s claim or action, (ii) collect, receive, appropriate and realize upon any Collateral and (iii) sell, grant option or options to purchase and deliver any Collateral (enter into Contractual Obligations to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Agent shall have the right, upon any such public sale or sales and, to the extent permitted by the UCC and other applicable Requirements of Law, upon any such private sale, to purchase the whole or any part of the Collateral through a credit bid.

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(c)Management of the Collateral.  Each Grantor further agrees, that, during the continuance of any Event of Default, (i) at the Agent’s request, it shall assemble the Collateral and make it available to the Agent at places that the Agent shall reasonably select, whether at such Grantor’s premises or elsewhere, (ii) without limiting the foregoing, the Agent also has the right to require that each Grantor store and keep any Collateral pending further action by the Agent and, while any such Collateral is so stored or kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain such Collateral in good condition, (iii) until the Agent is able to sell any Collateral, the Agent shall have the right to hold or use such Collateral to the extent that it deems appropriate for the purpose of preserving the Collateral or its value or for any other purpose deemed appropriate by the Agent and (iv) the Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and to enforce any of the Agent’s remedies, with respect to such appointment without prior notice or hearing as to such appointment.  The Agent shall not have any obligation to any Grantor to maintain or preserve the rights of any Grantor as against third parties with respect to any Collateral while such Collateral is in the possession of the Agent.

(d)Application of Proceeds.  The Agent shall apply the cash proceeds of any action taken by it pursuant to this Section 5.1, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any Collateral or in any way relating to the Collateral or the rights of the Agent hereunder, including Attorneys’ Fees and disbursements, to the payment in whole or in part of the Secured Obligations, and only after such application and after the payment by the Agent of any other amount required by any Requirement of Law, the Agent shall deliver the surplus, if any, to the Grantors.

(e)Direct Obligation.  Neither the Agent shall be required to make any demand upon, or pursue or exhaust any right or remedy against, any Grantor or any other Person with respect to the payment of the Secured Obligations or to pursue or exhaust any right or remedy with respect to any Collateral therefor or any direct or indirect guaranty thereof.  All of the rights and remedies of the Agent under any Transaction Document shall be cumulative, may be exercised individually or concurrently and not exclusive of any other rights or remedies provided by any Requirement of Law.  To the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Agent, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses it may have as a surety, now or hereafter existing, arising out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other disposition of any Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.

(f)Commercially Reasonable.  To the extent that applicable Requirements of Law impose duties on the Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is not commercially unreasonable for the Agent to do any of the following:

(i)fail to incur significant costs, expenses or other liabilities reasonably deemed as such by the Agent to prepare any Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition;

(ii)fail to obtain permits or other consents for access to any Collateral to sell or for the collection or sale of any Collateral, or, if not required by other Requirements of Law, fail to obtain permits or other consents for the collection or disposition of any Collateral;

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(iii)fail to exercise remedies against account debtors or other Persons obligated on any Collateral or to remove Liens on any Collateral or to remove any adverse claims against any Collateral;

(iv)advertise dispositions of any Collateral through publications or media of general circulation, whether or not such Collateral is of a specialized nature or to contact other Persons, whether or not in the same business as any Grantor, for expressions of interest in acquiring any such Collateral;

(v)exercise collection remedies against account debtors and other Persons obligated on any Collateral, directly or through the use of collection agencies or other collection specialists, hire one or more professional auctioneers to assist in the disposition of any Collateral, whether or not such Collateral is of a specialized nature or, to the extent deemed appropriate by the Agent, obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any Collateral, or utilize internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets to dispose of any Collateral;

(vi)dispose of assets in wholesale rather than retail markets;

(vii)disclaim disposition warranties, such as title, possession or quiet enjoyment; or

(viii)purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of any Collateral or to provide to the Agent a guaranteed return from the collection or disposition of any Collateral.

Each Grantor acknowledges that the purpose of this Section 5.1 is to provide a non-exhaustive list of actions or omissions that are commercially reasonable when exercising remedies against any Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 5.1.  Without limitation upon the foregoing, nothing contained in this Section 5.1 shall be construed to grant any rights to any Grantor or to impose any duties on the Agent that would not have been granted or imposed by this Agreement or by applicable Requirements of Law in the absence of this Section 5.1.

(g)Intellectual Property Licenses.  For the purpose of enabling the Agent to exercise rights and remedies under this Section 5.1 (including in order to take possession of, collect, receive, assemble, process, appropriate, remove, realize upon, sell or grant options to purchase any Collateral) at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Agent, (i) an irrevocable, nonexclusive, worldwide license (exercisable without payment of royalty or other compensation to such Grantor), including in such license the right to sublicense, use and practice any Intellectual Property now owned or hereafter acquired by such Grantor and access to all media in which any of the licensed items may be recorded or stored and to all Software and programs used for the compilation or printout thereof and (ii) an irrevocable license (without payment of rent or other compensation to such Grantor) to use, operate and occupy all real property owned, operated, leased, subleased or otherwise occupied by such Grantor.

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Section 5.2      Accounts and Payments in Respect of General Intangibles.  (a)   If required by the Agent at any time during the continuance of an Event of Default, any payment of accounts or payment in respect of general intangibles, when collected by any Grantor, shall be promptly (and, in any event, within two (2) Domestic Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Agent, in an account controlled by the Agent, subject to withdrawal by the Agent as provided in Section 5.4.  Until so turned over, such payment shall be held by such Grantor in trust for the Agent, segregated from other funds of such Grantor.  Each such deposit of proceeds of accounts and payments in respect of general intangibles shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

(b)At any time during the continuance of an Event of Default:

(i)each Grantor shall, upon the Agent’s request, deliver to the Agent all original and other documents evidencing, and relating to, the Contractual Obligations and transactions that gave rise to any account or any payment in respect of general intangibles, including all original orders, invoices and shipping receipts and notify account debtors that the accounts or general intangibles have been collaterally assigned to the Agent and that payments in respect thereof shall be made directly to the Agent;

(ii)the Agent may, without notice, at any time during the continuance of an Event of Default, limit or terminate the authority of a Grantor to collect its accounts or amounts due under general intangibles or any thereof and, in its own name or in the name of others, communicate with account debtors to verify with them to the Agent’s satisfaction the existence, amount and terms of any account or amounts due under any general intangible.  In addition, the Agent may at any time enforce such Grantor’s rights against such account debtors and obligors of general intangibles; and

(iii)each Grantor shall take all actions, deliver all documents and provide all information necessary or reasonably requested by the Agent to ensure any Internet domain name is registered.

(c)Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each account and each payment in respect of general intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto.  Neither the Agent shall have any obligation or liability under any agreement giving rise to an account or a payment in respect of a general intangible by reason of or arising out of any Transaction Document or the receipt by the Agent of any payment relating thereto, nor shall the Agent be obligated in any manner to perform any obligation of any Grantor under or pursuant to any agreement giving rise to an account or a payment in respect of a general intangible, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

Section 5.3      Pledged Collateral.  (a)  Voting Rights.  During the continuance of an Event of Default, upon notice by the Agent to the relevant Grantor or Grantors, the Agent or its nominee may exercise (i) any voting, consent, corporate and other right pertaining to the Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (ii) any right of conversion, exchange and subscription and any other right, privilege or option pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any Pledged Collateral upon the merger, amalgamation,

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consolidation, reorganization, recapitalization or other fundamental change in the corporate or equivalent structure of any issuer of Pledged Stock, the right to deposit and deliver any Pledged Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Agent may determine), all without liability except to account for property actually received by it; provided, however, that neither the Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(b)Proxies.  In order to permit the Agent to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Agent all such proxies, dividend payment orders and other instruments as the Agent may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, such Grantor hereby grants to the Agent an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other Person (including the issuer of such Pledged Collateral or any officer or agent thereof) during the continuance of an Event of Default and which proxy shall only terminate upon the payment in full of the Secured Obligations.

(c)Authorization of Issuers.  Each Grantor hereby expressly irrevocably authorizes and instructs, without any further instructions from such Grantor, each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with any instruction received by it from the Agent in writing that states that an Event of Default is continuing and is otherwise in accordance with the terms of this Agreement and each Grantor agrees that such issuer shall be fully protected from liabilities to such Grantor in so complying and (ii) unless otherwise expressly permitted hereby, pay any dividend or make any other payment with respect to the Pledged Collateral directly to the Agent.

Section 5.4      Proceeds to be Turned over to the Agent.  All proceeds of any Collateral received by any Grantor hereunder in cash shall be held by such Grantor in trust for the Agent, segregated from other funds of such Grantor, and shall, following the occurrence and during the continuance of an Event of Default, promptly upon receipt by any Grantor, be turned over to the Agent in the exact form received (with any necessary endorsement).  All proceeds being so received by the Agent shall be applied to the Secured Obligations.

Section 5.5      Registration Rights.  (a)  If, in the opinion of the Agent, it is necessary or advisable to sell any portion of the Pledged Collateral by registering such Pledged Collateral under the provisions of the Securities Act, each relevant Grantor shall, if such issuer is a Grantor or a Subsidiary of a Grantor, cause the issuer thereof to do or cause to be done all acts, or if such issuer is not a Grantor or a Subsidiary of a Grantor, use commercially reasonable efforts to cause the issuer thereof to do or cause to be done all acts, in each case, as may be, in the opinion of the Agent, necessary or advisable to register such Pledged Collateral or that portion thereof to be sold under the provisions of the Securities Act, all as directed by the Agent in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto and in compliance with the securities or “Blue Sky” laws of any jurisdiction that the Agent shall designate.

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(b)Each Grantor recognizes that the Agent may be unable to effect a public sale of any Pledged Collateral by reason of certain prohibitions contained in the Securities Act and applicable state or foreign securities laws or otherwise or may determine that a public sale is impracticable, not desirable or not commercially reasonable and, accordingly, may resort to one or more private sales thereof to a restricted group of purchasers that shall be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner.  The Agent shall be under no obligation to delay a sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register such securities for public sale under the Securities Act or under applicable state securities laws even if such issuer would agree to do so.

(c)Each Grantor agrees to use its commercially reasonable efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of any portion of the Pledged Collateral pursuant to this Section 5.5 valid and binding and in compliance with all applicable Requirements of Law.  Each Grantor further agrees that a breach of any covenant contained in this Section 5.5 will cause irreparable injury to the Agent, that the Agent  have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 5.5 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defense against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Transaction Documents.

Section 5.6      Deficiency.  Grantors, in their capacity as Obligors, shall remain jointly and severally liable for any deficiency if the proceeds of any sale or other disposition of any Collateral are insufficient to pay the Secured Obligations.

ARTICLE VI

THE SECURED PARTY

Section 6.1      The Agent’s Appointment as Attorney-in-Fact.  (a)  Each Grantor hereby irrevocably constitutes and appoints the Agent and its agents, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, but subject to the limitations set forth in this Section 6.1, to take any appropriate action and to execute any document or instrument that may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Agent and its agents the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any of the following when an Event of Default shall be continuing:

(i)in the name of such Grantor, in its own name or otherwise, take possession of and indorse and collect any check, draft, note, acceptance or other instrument for the payment of moneys due under any account or general intangible or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Agent for the purpose of collecting any such moneys due under any account or general intangible or with respect to any other Collateral whenever payable;

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(ii)in the case of any Intellectual Property owned by or licensed to the Grantors, execute, deliver and have recorded any document that the Agent may request to evidence, effect, publicize or record the Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;

(iii)pay or discharge taxes and Liens levied or placed on or threatened against any Collateral, effect any repair or pay any insurance called for by the terms of the Loan Agreement (including all or any part of the premiums therefor and the costs thereof);

(iv)execute, in connection with any sale provided for in Section 5.1 or Section 5.5, any document to effect or otherwise necessary or appropriate in relation to evidence the sale of any Collateral; or

(v)(A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to the Agent or as the Agent shall direct, (B) ask or demand for, and collect and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) sign and indorse any invoice, freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice and other document in connection with any Collateral, (D) commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (E) defend any actions, suits, proceedings, audits, claims, demands, orders or disputes brought against such Grantor with respect to any Collateral, (F) settle, compromise or adjust any such actions, suits, proceedings, audits, claims, demands, orders or disputes and, in connection therewith, give such discharges or releases as the Agent may deem appropriate, (G) assign any Intellectual Property owned by the Grantors or any Intellectual Property licenses of the Grantors throughout the world on such terms and conditions and in such manner as the Agent shall in its sole discretion determine, including the execution and filing of any document necessary to effectuate or record such assignment and (H) generally sell, grant a Lien on, make any Contractual Obligation with respect to and otherwise deal with, any Collateral as fully and completely as though the Agent were the absolute owner thereof for all purposes and do, at the Agent’s option, at any time or from time to time, all acts and things that the Agent deems necessary to protect, preserve or realize upon any Collateral and the Agent’s security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

(b)If any Grantor fails to perform or comply with any Contractual Obligation contained herein, the Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such Contractual Obligation.

(c)The expenses of the Agent incurred in connection with actions undertaken as provided in this Section 6.1, together with interest thereon at a rate set forth in the Loan Agreement, from the date of payment by the Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Agent on demand.

(d)Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Section 6.1.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

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Section 6.2      Authorization to File Financing Statements.  Each Grantor authorizes the Agent and its agents, at any time and from time to time, to file or record financing statements, amendments thereto, and other filing or recording documents or instruments with respect to any Collateral in such form and in such offices as the Agent reasonably determines appropriate to perfect the security interests of the Agent under this Agreement, and such financing statements and amendments may described the Collateral covered thereby as “all assets of the debtor”.  Such Grantor also hereby ratifies its authorization for the Agent to have filed any initial financing statement or amendment thereto under the UCC (or other similar laws) in effect in any jurisdiction if filed prior to the date hereof.

Section 6.3      [Reserved]

Section 6.4      Duty; Secured Obligations and Liabilities.  (a)  Duty of the Agent.  The Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as the Agent deals with similar property for its own account.  The powers conferred on the Agent hereunder are solely to protect the Agent’s interest in the Collateral and shall not impose any duty upon the Agent to exercise any such powers.  The Agent shall be accountable only for amounts that it receives as a result of the exercise of such powers, and shall not be responsible to any Grantor for any act or failure to act hereunder, except for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.  In addition, the Agent shall not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehousemen, carrier, forwarding agency, consignee or other bailee if such Person has been selected by the Agent in good faith.

(b)Secured Obligations and Liabilities with respect to Collateral.  The Agent shall not be liable for failure to demand, collect or realize upon any Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to any Collateral.  The powers conferred on the Agent hereunder shall not impose any duty upon the Agent to exercise any such powers.  The Agent shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their respective officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.

ARTICLE VII

MISCELLANEOUS

Section 7.1      Reinstatement.  Each Grantor agrees that, if any payment made by the Grantors or other Person and applied to the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of any Collateral are required to be returned by the Agent to such party, its estate, trustee, receiver or any other party, including any Grantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if

17

such payment had never been made.  If, prior to any of the foregoing, any Lien or other Collateral securing such Grantor’s liability hereunder shall have been released or terminated by virtue of the foregoing, such Lien or other Collateral shall be reinstated in full force and effect and such prior release, termination, cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of any such Grantor in respect of any Lien or other Collateral securing such obligation or the amount of such payment.

Section 7.2      Release of Collateral.  Upon payment and termination of all Secured Obligations, the Collateral shall be released from the Lien created hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors.  Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Agent and agrees that it will not do so without the prior written consent of the Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.  At the request of any Grantor following any such termination, the Agent shall deliver to such Grantor any Collateral of such Grantor held by the Agent hereunder and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

Section 7.3      Independent Obligations.  The obligations of each Grantor hereunder are independent, joint and several.  If any Secured Obligation is not paid when due, or upon any Event of Default, the Agent may, at its sole election, proceed directly and at once, without notice, against any Grantor and any Collateral to collect and recover the full amount of the Secured Obligations, without first proceeding against any other Grantor, or any other Collateral and without first joining any other Grantor in any proceeding.

Section 7.4      No Waiver by Course of Conduct.  Neither the Agent shall by any act (except by a written instrument pursuant to Section 7.5), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in exercising, on the part of the Agent, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Agent would otherwise have on any future occasion.

Section 7.5      Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in writing signed by all parties; provided, however, that annexes to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released).

Section 7.6      Additional Pledged Collateral.  To the extent any Pledged Collateral has not been delivered as of the Closing Date, such Grantor shall deliver a pledge amendment duly executed by the Grantor in substantially the form of Annex 1 (each, a “Pledge Amendment”).  Such Grantor authorizes the Agent to attach each Pledge Amendment to this Agreement.

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Section 7.7      Notices.  All notices, requests and demands to or upon the Agent or any Grantor hereunder shall be effected in the manner provided for in the Loan Agreement.

Section 7.8      Successors and Assigns.  This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Agent and their successors and assigns.

Section 7.9      Counterparts.  This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.  Delivery of an executed signature page of this Agreement by facsimile transmission or by electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.

Section 7.10    Severability.  Any provision of this Agreement being held illegal, invalid or unenforceable in any jurisdiction shall not affect any part of such provision not held illegal, invalid or unenforceable, any other provision of this Agreement or any part of such provision in any other jurisdiction.

Section 7.11    Governing Law.  This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Utah.

Section 7.12    WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO, OR DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN OR RELATED THERETO (WHETHER FOUNDED IN CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO OTHER PARTY AND NO RELATED PERSON OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.12.

[Signature Page Follows]

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IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written.

SCHIFF NUTRITION GROUP, INC.,

as a Grantor

By:	/s/ Joseph W. Baty
	Name: Joseph W. Baty
	Title:  Executive Vice President and Chief Financial Officer

SCHIFF NUTRITION INTERNATIONAL, INC.,

as a Grantor

By:	/s/ Joseph W. Baty
	Name: Joseph W. Baty
	Title:  Executive Vice President and Chief Financial Officer

WNG HOLDINGS (INTERNATIONAL) LTD.,

as a Grantor

By:	/s/ Joseph W. Baty
	Name: Joseph W. Baty
	Title:  Executive Vice President and Treasurer

COPPAL RESEARCH, INC.,

as a Grantor

By:	/s/ Joseph W. Baty
	Name: Joseph W. Baty
	Title:  Executive Vice President and Treasurer

ACCEPTED AND AGREED

as of the date first above written:

U.S. BANK NATIONAL ASSOCIATION,

as the Agent

By:	/s/ Adam M. Hill
	Name: Adam M. Hill
	Title: Relationship Manager

20

ANNEX 1

TO

SECURITY AGREEMENT

FORM OF PLEDGE AMENDMENT

This Pledge Amendment, dated as of __________, 20__, is delivered pursuant to Section 7.6 of the Security Agreement, dated as of August 18, 2009, by _______________ (“__________”), the undersigned Grantor and the other Affiliates of ___________ from time to time party thereto as Grantors in favor of U.S. Bank National Association, as the Agent (as amended, restated, modified or otherwise supplemented from time to time, the “Security Agreement”). Capitalized terms used herein without definition are used as defined in the Security Agreement.

The undersigned hereby agrees that this Pledge Amendment may be attached to the Security Agreement and that the Pledged Collateral listed on Exhibit-A to this Pledge Amendment shall be and become part of the Collateral referred to in the Security Agreement and shall secure all Secured Obligations.

The undersigned hereby represents and warrants that each of the representations and warranties contained in Sections 3.1 and 3.5 of the Security Agreement is true and correct and as of the date hereof as if made on and as of such date (except for such representations and warranties that expressly relate to a prior date, in which case such representations and warranties shall have been true and accurate on and as of such earlier date).

[GRANTOR]

By:	/s/
	Name:
	Title:

ACKNOWLEDGED AND AGREED

as of the date first above written:

U.S. BANK NATIONAL ASSOCIATION,

as the Agent

By:	/s/
	Name:
	Title:

Annex 1 – Page 1

Exhibit-A to

Pledge Amendment

PLEDGED STOCK
ISSUER	CLASS	CERTIFICATE NO(S).	PAR VALUE	NUMBER OF SHARES, UNITS OR INTERESTS
1.
2.
3.
4.

PLEDGED DEBT INSTRUMENTS
ISSUER	DESCRIPTION OF DEBT	CERTIFICATE NO(S).	FINAL MATURITY	PRINCIPAL AMOUNT
1.
2.
3.
4.

Annex 1 – Page 2

ANNEX 2

TO

SECURITY AGREEMENT

FORM OF JOINDER AGREEMENT

This JOINDER AGREEMENT, dated as of __________ __, 20__, is delivered pursuant to Section 7.6 of the Security Agreement, dated as of August 18, 2009 by Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), Schiff Nutrition International, Inc., a Delaware corporation (“Parent”), WNG Holdings (International) Ltd., a Nevada corporation (“WNG”), Coppal Research, Inc., a Utah corporation (“Coppal”) (Borrower, Parent, WNG, and Coppal shall be referred to each as a “Grantor” and collectively as the “Grantors”), in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors and assigns, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to therein) (as amended, restated, modified or otherwise supplemented from time to time, the “Security Agreement”).  Capitalized terms used herein without definition are used as defined in the Security Agreement.

By executing and delivering this Joinder Agreement, the undersigned, as provided in Section 5.02(m) of the Loan Agreement, hereby becomes a party to the Security Agreement as a Grantor thereunder with the same force and effect as if originally named as a Grantor therein and, without limiting the generality of the foregoing, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the undersigned, hereby mortgages, pledges and hypothecates to the Agent for the benefit of the Purchasers, and grants to the Agent for the benefit of the Purchasers a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral of the undersigned and expressly assumes all obligations and liabilities of a Grantor thereunder.  The undersigned hereby agrees to be bound as a Grantor for the purposes of the Security Agreement.

The information set forth in Exhibit-A is hereby added to the information set forth in Schedules 1 through 6 to the Security Agreement.  By acknowledging and agreeing to this Joinder Agreement, the undersigned hereby agree that this Joinder Agreement may be attached to the Security Agreement and that the Pledged Collateral listed on Exhibit -A to this Joinder Agreement shall be and become part of the Collateral referred to in the Security Agreement and shall secure all Secured Obligations of the undersigned.

The undersigned hereby represents and warrants that each of the representations and warranties contained in Article III of the Security Agreement applicable to it is true and correct on and as the date hereof as if made on and as of such date (except for such representations and warranties that expressly relate to a prior date, in which case such representations and warranties shall have been true and accurate on and as of such earlier date).

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed and delivered as of the date first above written.

[ADDITIONAL GRANTOR]

By:	/s/
	Name:
	Title:

Annex 2 – Page 1

ACKNOWLEDGED AND AGREED

as of the date first above written:

U.S. BANK NATIONAL ASSOCIATION,

as Administrative Agent

By:	/s/
	Name:
	Title:

Annex 2 – Page 2

Exhibit-A to

Joinder Agreement

Schedule 1                      Commercial Tort Claim

Schedule 2                      Filings

Schedule 3                      Jurisdiction of Organization;

 Chief Executive Office

Schedule 4                      Location of Inventory and Equipment

Schedule 5                      Pledged Collateral

Schedule 6                      Intellectual Property

Annex 2 – Page 3

ANNEX 3

TO

SECURITY AGREEMENT

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of _________ __, 20__, is made by each of the entities listed on the signature pages hereof (each a “Grantor” and, collectively, the “Grantors”), in favor of in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors and assigns, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to below).

W I T N E S S E T H:

WHEREAS, pursuant to the Loan Agreement dated as of the date hereof (as the same may be amended, restated, modified or otherwise supplemented from time to time, the “Loan Agreement”) among Borrower, Agent, and the Lenders from time to time party thereto, the Lenders, subject to the terms and conditions contained therein, has agreed to make available to Borrower a loan in the aggregate principal amount of the Revolving Credit Commitments;

WHEREAS, all of the Grantors are party to the Security Agreement, dated as of August 18, 2009 in favor of the Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”), pursuant to which the Grantors are required to execute and deliver this [Copyright] [Patent] [Trademark] Security Agreement;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereby agrees with the Agent as follows:

Section 1.      Defined Terms. Capitalized terms used herein without definition are used as defined in the Loan Agreement or the Security Agreement.

Section 2.      Grant of Security Interest in [Copyright] [Trademark] [Patent] Collateral.  Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges and hypothecates to the Agent for the benefit of the Purchasers, and grants to the Agent a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor (the “[Copyright] [Patent] [Trademark] Collateral”):

(a)[all of its Copyrights, including, without limitation, those referred to on Schedule 1 hereto;

(b)all renewals, reversions and extensions of the foregoing; and

(c)all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

or

Annex 3 – Page 1

(a)[all of its Patents, including, without limitation, those referred to on Schedule 1 hereto;

(b)all reissues, reexaminations, continuations, continuations-in-part, divisionals, renewals and extensions of the foregoing; and

(c)all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

or

(a)[all of its Trademarks, including, without limitation, those referred to on Schedule 1 hereto;

(b)all renewals and extensions of the foregoing;

(c)all goodwill of the business connected with the use of, and symbolized by, each such Trademark; and

(d)all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

Section 3.      Security Agreement.  The security interest granted pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted in conjunction with the security interest granted to the Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and agrees that the rights and remedies of the Agent with respect to the security interest in the [Copyright] [Patent] [Trademark] Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

Section 4.      Grantor Remains Liable.  Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with such Grantor’s [Copyright] [Patents] [Trademarks] and Intellectual Property licenses subject to a security interest hereunder.

Section 5.      Counterparts.  This [Copyright] [Patent] [Trademark] Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

Section 6.      Governing Law.  This [Copyright] [Patent] [Trademark] Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Utah.

[Signature Page Follows]

Annex 3 – Page 2

IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent] [Trademark] Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

Very truly yours,

[GRANTOR], as a Grantor

 

By:	/s/
	Name:
	Title:

ACCEPTED AND AGREED

as of the date first above written:

U.S. BANK NATIONAL ASSOCIATION,

as the Agent

 

By:	/s/
	Name:
	Title:

Annex 3 – Page 3

SCHEDULE 1

TO

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT

[Copyright] [Patent] [Trademark] Registrations

A.   REGISTERED [COPYRIGHT] [PATENTS] [TRADEMARKS]

[Include Registration Number and Date]

B.   [COPYRIGHT] [PATENT] [TRADEMARK] APPLICATIONS

[Include Application Number and Date]

Schedule 1 – Page 1

EX-10.29

Exhibit 10.29

CONTINUING AND UNCONDITIONAL GUARANTY

This Continuing and Unconditional Guaranty (“Guaranty”) is made as of August 18, 2009, by Schiff Nutrition International, Inc., a Delaware corporation (“Guarantor”), in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to below) and in favor of each of the Lenders.

1.Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), has entered into a Loan Agreement (the “Loan Agreement”) dated August 18, 2009 with the Agent and the “Lenders” from time to time party thereto, pursuant to which the Lenders, subject to the terms and conditions contained therein, are to make available to Borrower credit in the aggregate principal amount of the Revolving Credit Commitments.

2.Capitalized terms in this Guaranty not otherwise defined shall have the meanings given in the Loan Agreement.

3.For good and valuable consideration, Guarantor hereby, jointly and severally, absolutely and unconditionally, guarantees and promises to pay to the Agent and to the Lenders or to their respective order, on demand, any and all of the Borrower’s Obligations.  If Borrower does not pay any amount or perform Borrower’s Obligations in strict accordance with the Transaction Documents, Guarantor shall immediately pay all amounts due thereunder (including, without limitation, all principal, interest, indemnifications, reimbursements, and fees) and otherwise to proceed to complete the same and satisfy all of Borrower’s Obligations under the Transaction Documents.

4.The obligations of Guarantor under this Guaranty are joint and several and independent of the obligations of Borrower and any other Obligor, and a separate action or actions may be brought and prosecuted by the Agent or the Lenders against Guarantor whether action is brought against Borrower or any other Obligor or whether Borrower or any other Obligor be joined in any such action or actions.  Guarantor’s liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Transaction Documents against Borrower or any other Obligor.

5.It is agreed and understood by Guarantor that the Revolving Credit Commitments and the credit to be extended under the Loan Documents were agreed to and extended by the Lenders to Borrower or for Borrower’s account with direct reliance by the Lenders upon this Guaranty and the obligations of Guarantor under this Guaranty in favor of the Agent and the Lenders.  Guarantor acknowledges that the extension of credit by the Lenders to Borrower and the execution of this Guaranty has or will result in a receipt by Guarantor of significant and reasonably equivalent value.

6.The obligations of Guarantor under this Guaranty shall not be reduced, limited or discharged until payment and performance in full of all of the Borrower’s Obligations.  Any payment by Guarantor to the Agent or the Lenders shall not reduce Guarantor’s obligations under this Guaranty.  The obligations of Guarantor under this Guaranty shall be in addition to any other obligations that Guarantor may have to the Agent or to any of the Lenders under any other credit agreement, including guaranties, whether such guaranties are for the indebtedness of Borrower or any other person.

7.This Guaranty is a guaranty of payment and not of collection.  Guarantor agrees that upon the occurrence of an Event of Default with respect to Borrower’s Obligations, Agent and Lenders may, at its option, proceed directly and at once against Guarantor to collect and recover the full amount of the liability hereunder or any portion of such liability.  

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No delay or omission by the Agent or the Lenders in exercising any right shall operate as a waiver of such right or any other right.  Guarantor agrees to assume the complete responsibility for being and keeping informed of the financial condition of Borrower and all other Obligors and all other circumstances bearing upon the risk of nonpayment of the Borrower’s Obligations, and the Agent and the Lenders shall have no duty to advise Guarantor of information known regarding the Borrower’s Obligations or Borrower’s or any other Obligor’s financial condition or any other matter.

8.Guarantor authorizes the Agent and the Lenders, without notice to or any consent by Guarantor, and without affecting Guarantor’s liability under this Guaranty, from time to time in whole or in part to: (a) alter, compromise, renew, extend, waive, accelerate or otherwise change the time for payment of, or otherwise change the terms of, one or more of the Transaction Documents and the Borrower’s Obligations, or any part thereof, or any condition precedent to an advance under the Loan Agreement, including without limitation an increase in the principal amount of the Borrower’s Obligations or a change or an increase in the rate or rates of interest on the Borrower’s Obligations; (b) take and hold Collateral for the payment of the Borrower’s Obligations, this Guaranty, or the obligations of any other Obligor and exchange, surrender, compromise, release, enforce, waive, fail to perfect, or deal with such Collateral in any manner the Agent and the Lenders deem necessary, whether the Collateral was provided by Borrower, Guarantor or any other Obligor; (c) apply the proceeds of such Collateral (if the Agent and the Lenders choose to pursue remedies with respect to such Collateral) and direct the order or manner of sale as the Agent and the Lenders in their discretion may determine; (d) release or substitute any one or more of the Obligors, including Borrower; and (e) determine how, when and what application of payments shall be made on Borrower’s Obligations.

9.Guarantor represents and warrants to the Agent and the Lenders that (a) no representations or agreements of any kind have been made to Guarantor by the Agent or any of the Lenders that would limit, affect, or qualify the terms of this Guaranty; (b) this Guaranty is executed at Borrower’s request as part of Borrower’s application for credit from the Lenders; and (c) the Agent and the Lenders have made no representation to Guarantor as to the credit-worthiness or financial condition of Borrower.

10.Guarantor acknowledges that it has had the opportunity to read the Loan Agreement and the other Transaction Documents executed in connection with this Guaranty, and, to the extent that the Loan Agreement or the other Transaction Documents contemplate performance by Guarantor or the adherence by Guarantor to certain covenants or the provision to the Agent and the Lenders of certain financial information regarding Guarantor, Guarantor hereby agrees to comply with all such provisions.

11.Guarantor waives any right to require the Agent or the Lenders to (a) proceed against Borrower or any other Obligor; (b) proceed against or exhaust any Collateral; or (c) pursue any other remedy in the Agent’s or the Lenders’ power.  The Agent and the Lenders may, at its or their election, exercise or decline or fail to exercise any right or remedy it may have against Borrower, any Obligor, or any Collateral, including without limitation the right to foreclose upon any such Collateral by judicial or nonjudicial measures, without affecting or impairing in any way the liability of Guarantor hereunder.  Guarantor waives any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower under the Borrower’s Obligations.  To the extent permitted by law, Guarantor’s liability shall not be limited or affected by any setoff, defense or counterclaim that Borrower may have against the Agent or the Lenders.  Guarantor waives any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower, any other Obligor, or any Collateral.  Until all Borrower’s Obligations have been paid in full, Guarantor shall have no right of subrogation or reimbursement, contribution or other rights against Borrower, any other Obligor, or any Collateral.  Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness constituting Borrower’s Obligations.  Guarantor expressly waives any right to exercise or assert any suretyship defense that may be available to Guarantor under applicable law.

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12.In addition to all rights of setoff against the deposit accounts of Guarantor held by the Agent and each of the Lenders, and in addition to all other Collateral granted by Guarantor, Guarantor hereby grants to the Agent and the Lenders a security interest in all deposit accounts (as defined in Chapter 9a of the Utah Uniform Commercial Code) that Guarantor now or hereafter has with the Agent or any of the Lenders.  Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor.  No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lenders, or by any neglect to exercise such right of setoff or to enforce such security interest, or by any delay in so doing, and every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lenders.

13.Any indebtedness of Borrower now or hereafter held by Guarantor is hereby subordinated to the Borrower’s Obligations; and such indebtedness of Borrower to Guarantor shall be collected, enforced and received by Guarantor as trustee for Bank and be paid over to Bank on account of the indebtedness of Borrower to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

14.If any of the payments of money or transfers of property made to the Agent or the Lenders by Borrower, Guarantor, or any other Obligor, in payment of Borrower’s Obligations should for any reason be declared to be fraudulent, preferential or voidable within the meaning of any state or federal law relating to fraudulent conveyances or preferential transfers, or otherwise become voidable or recoverable under the Bankruptcy Code or any other federal or state law, in whole or in part, for any reason (hereinafter collectively called “Voidable Transfers”) and the Agent or any of the Lenders is required to repay or restore any such Voidable Transfers, or any portion thereof, then, as to any such Voidable Transfer or the amount repaid or restored (including all costs, expenses and attorneys’ fees of the Agent and the Lenders related thereto), the liability of Guarantor and all security interests and liens in Collateral granted by Grantor shall automatically be revived, reinstated and restored as though such Voidable Transfer had never been made.  This provision is precautionary, and nothing herein is an admission by any party that any such Voidable Transfer has occurred and all parties believe that no such Voidable Transfer exists.

15.The Agent and the Lenders may assume that all directors, officers, and agents purporting to act on behalf of Borrower in negotiating and executing the Transaction Documents and in taking measures thereunder to incur the Borrower’s Obligations have all corporate authority to do so.

16.Guarantor represents and warrants to the Agent and the Lenders that (a) Guarantor has taken all necessary and appropriate action to authorize the execution, delivery and performance of this Guaranty, (b) execution, delivery and performance of this Guaranty do not conflict with or result in a breach of or constitute a default under Guarantor’s articles of incorporation or bylaws or other organizational documents or agreements to which it is party or by which it is bound, and (c) this Guaranty constitutes a valid and binding obligation, enforceable against Guarantor in accordance with its terms.

17.Guarantor covenants and agrees that Guarantor shall do all of the following: (a) maintain its corporate existence, remain in good standing in its jurisdiction of organization, (b) continue to qualify in each jurisdiction in which the failure to so qualify could have a material adverse effect on the financial condition, operations or business of Guarantor, (c) maintain in force all licenses, approvals and agreements, the loss of which could have a material adverse effect on its financial condition, operations or business, and (d) comply with all statutes, laws, ordinances, directives, orders, and government rules and regulations to which it is subject if non-compliance with such laws could adversely affect the financial condition, operations or business of Guarantor.

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18.Guarantor jointly and severally agrees to pay all Attorneys’ Fees and other expenses incurred by the Agent and the Lenders in the enforcement of their respective rights hereunder, including without limitation such expenses incurred before legal action, during the pendency of any such legal action, during the enforcement and protection of the Agent’s and the Lenders’ rights and claims in any bankruptcy or insolvency proceedings, and continuing to all such expenses in connection with any appeal to higher courts arising out of any such proceedings.

19.Guarantor agrees and acknowledges that this Guaranty shall be binding upon the successors and assigns of Guarantor.  At any time and from time to time such Guarantor shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect or to affirm the purposes of this Guaranty.

20.Guarantor hereby agrees and submits to the exclusive jurisdiction of the state and Federal courts located in Salt Lake County, State of Utah, in any action by the Agent or the Lenders to enforce, or in any other action or suit relating to, this Guaranty.  Guarantor waives any objection which it may now or hereafter have to such venue for any suit, action or proceeding arising out of or relating to the enforcement of this Guaranty, including any assertion that any such designated courts is an inconvenient forum.

21.GUARANTOR HEREBY UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY PRESENT OR FUTURE CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARNTY OR ANY TRANSACTION DOCUMENT OR RELATED TO THE DEALINGS OF THE PARTIES THERETO.  ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT WITHOUT A JURY.  GUARANTOR REPRESENTS THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

22.This Guaranty is assignable by the Agent and the Lenders in connection with any assignment of Borrower’s Obligations as contemplated by the Loan Agreement, and when so assigned, Guarantor shall be bound pursuant to this Guaranty to such assignees.

23.No obligation of Guarantor under this Guaranty shall be deemed to have been waived by any act or conduct on the part of the Agent or any of the Lenders, or by any delay in exercising the right to collect such obligations, and every right, power and remedy of the Agent and the Lenders shall continue in full force and effect until any such right, power or remedy is specifically waived or released by a written document executed by the Agent and the Lenders.

24.This Guaranty is intended to be an integrated agreement with respect to the subject matter set forth herein and represents the final expression of the parties with respect thereto and supersedes all prior agreements among the parties with respect to the matters set forth herein.  This Guaranty may not be modified except by written document executed by the Agent and the Lenders.  The provisions of this Guaranty are severable, and in the event that any provision shall be held to be invalid or enforceable, the remaining provisions shall continue to be enforceable.

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[GUARANTOR’S SIGNATURE ON NEXT PAGE]

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Dated as of August 18, 2009.

SCHIFF NUTRITION INTERNATIONAL, INC., a

Delaware corporation

By:	/s/ Joseph W. Baty
Name:	Joseph W. Baty
Its:	Executive Vice President and   Chief Financial Officer

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EX-10.30

Exhibit 10.30

CONTINUING AND UNCONDITIONAL GUARANTY

This Continuing and Unconditional Guaranty (“Guaranty”) is made as of August 18, 2009, by WNG Holdings (International) Ltd. a Nevada corporation (“Guarantor”), in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to below) and in favor of each of the Lenders.

1.Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), has entered into a Loan Agreement (the “Loan Agreement”) dated August 18, 2009 with the Agent and the “Lenders” from time to time party thereto, pursuant to which the Lenders, subject to the terms and conditions contained therein, are to make available to Borrower credit in the aggregate principal amount of the Revolving Credit Commitments.

2.Capitalized terms in this Guaranty not otherwise defined shall have the meanings given in the Loan Agreement.

3.For good and valuable consideration, Guarantor hereby, jointly and severally, absolutely and unconditionally, guarantees and promises to pay to the Agent and to the Lenders or to their respective order, on demand, any and all of the Borrower’s Obligations.  If Borrower does not pay any amount or perform Borrower’s Obligations in strict accordance with the Transaction Documents, Guarantor shall immediately pay all amounts due thereunder (including, without limitation, all principal, interest, indemnifications, reimbursements, and fees) and otherwise to proceed to complete the same and satisfy all of Borrower’s Obligations under the Transaction Documents.

4.The obligations of Guarantor under this Guaranty are joint and several and independent of the obligations of Borrower and any other Obligor, and a separate action or actions may be brought and prosecuted by the Agent or the Lenders against Guarantor whether action is brought against Borrower or any other Obligor or whether Borrower or any other Obligor be joined in any such action or actions.  Guarantor’s liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Transaction Documents against Borrower or any other Obligor.

5.It is agreed and understood by Guarantor that the Revolving Credit Commitments and the credit to be extended under the Loan Documents were agreed to and extended by the Lenders to Borrower or for Borrower’s account with direct reliance by the Lenders upon this Guaranty and the obligations of Guarantor under this Guaranty in favor of the Agent and the Lenders.  Guarantor acknowledges that the extension of credit by the Lenders to Borrower and the execution of this Guaranty has or will result in a receipt by Guarantor of significant and reasonably equivalent value.

6.The obligations of Guarantor under this Guaranty shall not be reduced, limited or discharged until payment and performance in full of all of the Borrower’s Obligations.  Any payment by Guarantor to the Agent or the Lenders shall not reduce Guarantor’s obligations under this Guaranty.  The obligations of Guarantor under this Guaranty shall be in addition to any other obligations that Guarantor may have to the Agent or to any of the Lenders under any other credit agreement, including guaranties, whether such guaranties are for the indebtedness of Borrower or any other person.

7.This Guaranty is a guaranty of payment and not of collection.  Guarantor agrees that upon the occurrence of an Event of Default with respect to Borrower’s Obligations, Agent and Lenders may, at its option, proceed directly and at once against Guarantor to collect and recover the full amount of the liability hereunder or any portion of such liability.  No delay or omission by the Agent or the Lenders in exercising any right shall operate as a waiver of such right or any other right.  Guarantor agrees to assume the complete responsibility for being and keeping informed of the financial condition of Borrower and all other Obligors and all other circumstances bearing upon the risk of nonpayment of the Borrower’s Obligations, and the Agent and the Lenders shall have no duty to advise Guarantor of information known regarding the Borrower’s Obligations or Borrower’s or any other Obligor’s financial condition or any other matter.

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8.Guarantor authorizes the Agent and the Lenders, without notice to or any consent by Guarantor, and without affecting Guarantor’s liability under this Guaranty, from time to time in whole or in part to: (a) alter, compromise, renew, extend, waive, accelerate or otherwise change the time for payment of, or otherwise change the terms of, one or more of the Transaction Documents and the Borrower’s Obligations, or any part thereof, or any condition precedent to an advance under the Loan Agreement, including without limitation an increase in the principal amount of the Borrower’s Obligations or a change or an increase in the rate or rates of interest on the Borrower’s Obligations; (b) take and hold Collateral for the payment of the Borrower’s Obligations, this Guaranty, or the obligations of any other Obligor and exchange, surrender, compromise, release, enforce, waive, fail to perfect, or deal with such Collateral in any manner the Agent and the Lenders deem necessary, whether the Collateral was provided by Borrower, Guarantor or any other Obligor; (c) apply the proceeds of such Collateral (if the Agent and the Lenders choose to pursue remedies with respect to such Collateral) and direct the order or manner of sale as the Agent and the Lenders in their discretion may determine; (d) release or substitute any one or more of the Obligors, including Borrower; and (e) determine how, when and what application of payments shall be made on Borrower’s Obligations.

9.Guarantor represents and warrants to the Agent and the Lenders that (a) no representations or agreements of any kind have been made to Guarantor by the Agent or any of the Lenders that would limit, affect, or qualify the terms of this Guaranty; (b) this Guaranty is executed at Borrower’s request as part of Borrower’s application for credit from the Lenders; and (c) the Agent and the Lenders have made no representation to Guarantor as to the credit-worthiness or financial condition of Borrower.

10.Guarantor acknowledges that it has had the opportunity to read the Loan Agreement and the other Transaction Documents executed in connection with this Guaranty, and, to the extent that the Loan Agreement or the other Transaction Documents contemplate performance by Guarantor or the adherence by Guarantor to certain covenants or the provision to the Agent and the Lenders of certain financial information regarding Guarantor, Guarantor hereby agrees to comply with all such provisions.

11.Guarantor waives any right to require the Agent or the Lenders to (a) proceed against Borrower or any other Obligor; (b) proceed against or exhaust any Collateral; or (c) pursue any other remedy in the Agent’s or the Lenders’ power.  The Agent and the Lenders may, at its or their election, exercise or decline or fail to exercise any right or remedy it may have against Borrower, any Obligor, or any Collateral, including without limitation the right to foreclose upon any such Collateral by judicial or nonjudicial measures, without affecting or impairing in any way the liability of Guarantor hereunder.  Guarantor waives any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower under the Borrower’s Obligations.  To the extent permitted by law, Guarantor’s liability shall not be limited or affected by any setoff, defense or counterclaim that Borrower may have against the Agent or the Lenders.  Guarantor waives any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower, any other Obligor, or any Collateral.  Until all Borrower’s Obligations have been paid in full, Guarantor shall have no right of subrogation or reimbursement, contribution or other rights against Borrower, any other Obligor, or any Collateral.  Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness constituting Borrower’s Obligations.  Guarantor expressly waives any right to exercise or assert any suretyship defense that may be available to Guarantor under applicable law.

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12.In addition to all rights of setoff against the deposit accounts of Guarantor held by the Agent and each of the Lenders, and in addition to all other Collateral granted by Guarantor, Guarantor hereby grants to the Agent and the Lenders a security interest in all deposit accounts (as defined in Chapter 9a of the Utah Uniform Commercial Code) that Guarantor now or hereafter has with the Agent or any of the Lenders.  Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor.  No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lenders, or by any neglect to exercise such right of setoff or to enforce such security interest, or by any delay in so doing, and every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lenders.

13.Any indebtedness of Borrower now or hereafter held by Guarantor is hereby subordinated to the Borrower’s Obligations; and such indebtedness of Borrower to Guarantor shall be collected, enforced and received by Guarantor as trustee for Bank and be paid over to Bank on account of the indebtedness of Borrower to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

14.If any of the payments of money or transfers of property made to the Agent or the Lenders by Borrower, Guarantor, or any other Obligor, in payment of Borrower’s Obligations should for any reason be declared to be fraudulent, preferential or voidable within the meaning of any state or federal law relating to fraudulent conveyances or preferential transfers, or otherwise become voidable or recoverable under the Bankruptcy Code or any other federal or state law, in whole or in part, for any reason (hereinafter collectively called “Voidable Transfers”) and the Agent or any of the Lenders is required to repay or restore any such Voidable Transfers, or any portion thereof, then, as to any such Voidable Transfer or the amount repaid or restored (including all costs, expenses and attorneys’ fees of the Agent and the Lenders related thereto), the liability of Guarantor and all security interests and liens in Collateral granted by Grantor shall automatically be revived, reinstated and restored as though such Voidable Transfer had never been made.  This provision is precautionary, and nothing herein is an admission by any party that any such Voidable Transfer has occurred and all parties believe that no such Voidable Transfer exists.

15.The Agent and the Lenders may assume that all directors, officers, and agents purporting to act on behalf of Borrower in negotiating and executing the Transaction Documents and in taking measures thereunder to incur the Borrower’s Obligations have all corporate authority to do so.

16.Guarantor represents and warrants to the Agent and the Lenders that (a) Guarantor has taken all necessary and appropriate action to authorize the execution, delivery and performance of this Guaranty, (b) execution, delivery and performance of this Guaranty do not conflict with or result in a breach of or constitute a default under Guarantor’s articles of incorporation or bylaws or other organizational documents or agreements to which it is party or by which it is bound, and (c) this Guaranty constitutes a valid and binding obligation, enforceable against Guarantor in accordance with its terms.

17.Guarantor covenants and agrees that Guarantor shall do all of the following: (a) maintain its corporate existence, remain in good standing in its jurisdiction of organization, (b) continue to qualify in each jurisdiction in which the failure to so qualify could have a material adverse effect on the financial condition, operations or business of Guarantor, (c) maintain in force all licenses, approvals and agreements, the loss of which could have a material adverse effect on its financial condition, operations or business, and (d) comply with all statutes, laws, ordinances, directives, orders, and government rules and regulations to which it is subject if non-compliance with such laws could adversely affect the financial condition, operations or business of Guarantor.

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18.Guarantor jointly and severally agrees to pay all Attorneys’ Fees and other expenses incurred by the Agent and the Lenders in the enforcement of their respective rights hereunder, including without limitation such expenses incurred before legal action, during the pendency of any such legal action, during the enforcement and protection of the Agent’s and the Lenders’ rights and claims in any bankruptcy or insolvency proceedings, and continuing to all such expenses in connection with any appeal to higher courts arising out of any such proceedings.

19.Guarantor agrees and acknowledges that this Guaranty shall be binding upon the successors and assigns of Guarantor.  At any time and from time to time such Guarantor shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect or to affirm the purposes of this Guaranty.

20.Guarantor hereby agrees and submits to the exclusive jurisdiction of the state and Federal courts located in Salt Lake County, State of Utah, in any action by the Agent or the Lenders to enforce, or in any other action or suit relating to, this Guaranty.  Guarantor waives any objection which it may now or hereafter have to such venue for any suit, action or proceeding arising out of or relating to the enforcement of this Guaranty, including any assertion that any such designated courts is an inconvenient forum.

21.GUARANTOR HEREBY UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY PRESENT OR FUTURE CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARNTY OR ANY TRANSACTION DOCUMENT OR RELATED TO THE DEALINGS OF THE PARTIES THERETO.  ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT WITHOUT A JURY.  GUARANTOR REPRESENTS THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

22.This Guaranty is assignable by the Agent and the Lenders in connection with any assignment of Borrower’s Obligations as contemplated by the Loan Agreement, and when so assigned, Guarantor shall be bound pursuant to this Guaranty to such assignees.

23.No obligation of Guarantor under this Guaranty shall be deemed to have been waived by any act or conduct on the part of the Agent or any of the Lenders, or by any delay in exercising the right to collect such obligations, and every right, power and remedy of the Agent and the Lenders shall continue in full force and effect until any such right, power or remedy is specifically waived or released by a written document executed by the Agent and the Lenders.

24.This Guaranty is intended to be an integrated agreement with respect to the subject matter set forth herein and represents the final expression of the parties with respect thereto and supersedes all prior agreements among the parties with respect to the matters set forth herein.  This Guaranty may not be modified except by written document executed by the Agent and the Lenders.  The provisions of this Guaranty are severable, and in the event that any provision shall be held to be invalid or enforceable, the remaining provisions shall continue to be enforceable.

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[GUARANTOR’S SIGNATURE ON NEXT PAGE]

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Dated as of August 18, 2009.

WNG HOLDINGS (INTERNATIONAL) LTD., a

Nevada corporation

By:	/s/ Joseph W. Baty
Name:	Joseph W. Baty
Its:	Chief Financial Officer and Treasurer

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EX-10.31

Exhibit 10.31

CONTINUING AND UNCONDITIONAL GUARANTY

This Continuing and Unconditional Guaranty (“Guaranty”) is made as of August 18, 2009, by Coppal Research, Inc. a Utah corporation (“Guarantor”), in favor of U.S. Bank National Association, as administrative agent (in such capacity, together with its successors, the “Agent”) for the Lenders (as defined in the Loan Agreement referred to below) and in favor of each of the Lenders.

1.Schiff Nutrition Group, Inc., a Utah corporation (“Borrower”), has entered into a Loan Agreement (the “Loan Agreement”) dated August 18, 2009 with the Agent and the “Lenders” from time to time party thereto, pursuant to which the Lenders, subject to the terms and conditions contained therein, are to make available to Borrower credit in the aggregate principal amount of the Revolving Credit Commitments.

2.Capitalized terms in this Guaranty not otherwise defined shall have the meanings given in the Loan Agreement.

3.For good and valuable consideration, Guarantor hereby, jointly and severally, absolutely and unconditionally, guarantees and promises to pay to the Agent and to the Lenders or to their respective order, on demand, any and all of the Borrower’s Obligations.  If Borrower does not pay any amount or perform Borrower’s Obligations in strict accordance with the Transaction Documents, Guarantor shall immediately pay all amounts due thereunder (including, without limitation, all principal, interest, indemnifications, reimbursements, and fees) and otherwise to proceed to complete the same and satisfy all of Borrower’s Obligations under the Transaction Documents.

4.The obligations of Guarantor under this Guaranty are joint and several and independent of the obligations of Borrower and any other Obligor, and a separate action or actions may be brought and prosecuted by the Agent or the Lenders against Guarantor whether action is brought against Borrower or any other Obligor or whether Borrower or any other Obligor be joined in any such action or actions.  Guarantor’s liability under this Guaranty is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Transaction Documents against Borrower or any other Obligor.

5.It is agreed and understood by Guarantor that the Revolving Credit Commitments and the credit to be extended under the Loan Documents were agreed to and extended by the Lenders to Borrower or for Borrower’s account with direct reliance by the Lenders upon this Guaranty and the obligations of Guarantor under this Guaranty in favor of the Agent and the Lenders.  Guarantor acknowledges that the extension of credit by the Lenders to Borrower and the execution of this Guaranty has or will result in a receipt by Guarantor of significant and reasonably equivalent value.

6.The obligations of Guarantor under this Guaranty shall not be reduced, limited or discharged until payment and performance in full of all of the Borrower’s Obligations.  Any payment by Guarantor to the Agent or the Lenders shall not reduce Guarantor’s obligations under this Guaranty.  The obligations of Guarantor under this Guaranty shall be in addition to any other obligations that Guarantor may have to the Agent or to any of the Lenders under any other credit agreement, including guaranties, whether such guaranties are for the indebtedness of Borrower or any other person.

7.This Guaranty is a guaranty of payment and not of collection.  Guarantor agrees that upon the occurrence of an Event of Default with respect to Borrower’s Obligations, Agent and Lenders may, at its option, proceed directly and at once against Guarantor to collect and recover the full amount of the liability hereunder or any portion of such liability.  No delay or omission by the Agent or the Lenders in exercising any right shall operate as a waiver of such right or any other right.  Guarantor agrees to assume the complete responsibility for being and keeping informed of the financial condition of Borrower and all other Obligors and all other circumstances bearing upon the risk of nonpayment of the Borrower’s Obligations, and the Agent and the Lenders shall have no duty to advise Guarantor of information known regarding the Borrower’s Obligations or Borrower’s or any other Obligor’s financial condition or any other matter.

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8.Guarantor authorizes the Agent and the Lenders, without notice to or any consent by Guarantor, and without affecting Guarantor’s liability under this Guaranty, from time to time in whole or in part to: (a) alter, compromise, renew, extend, waive, accelerate or otherwise change the time for payment of, or otherwise change the terms of, one or more of the Transaction Documents and the Borrower’s Obligations, or any part thereof, or any condition precedent to an advance under the Loan Agreement, including without limitation an increase in the principal amount of the Borrower’s Obligations or a change or an increase in the rate or rates of interest on the Borrower’s Obligations; (b) take and hold Collateral for the payment of the Borrower’s Obligations, this Guaranty, or the obligations of any other Obligor and exchange, surrender, compromise, release, enforce, waive, fail to perfect, or deal with such Collateral in any manner the Agent and the Lenders deem necessary, whether the Collateral was provided by Borrower, Guarantor or any other Obligor; (c) apply the proceeds of such Collateral (if the Agent and the Lenders choose to pursue remedies with respect to such Collateral) and direct the order or manner of sale as the Agent and the Lenders in their discretion may determine; (d) release or substitute any one or more of the Obligors, including Borrower; and (e) determine how, when and what application of payments shall be made on Borrower’s Obligations.

9.Guarantor represents and warrants to the Agent and the Lenders that (a) no representations or agreements of any kind have been made to Guarantor by the Agent or any of the Lenders that would limit, affect, or qualify the terms of this Guaranty; (b) this Guaranty is executed at Borrower’s request as part of Borrower’s application for credit from the Lenders; and (c) the Agent and the Lenders have made no representation to Guarantor as to the credit-worthiness or financial condition of Borrower.

10.Guarantor acknowledges that it has had the opportunity to read the Loan Agreement and the other Transaction Documents executed in connection with this Guaranty, and, to the extent that the Loan Agreement or the other Transaction Documents contemplate performance by Guarantor or the adherence by Guarantor to certain covenants or the provision to the Agent and the Lenders of certain financial information regarding Guarantor, Guarantor hereby agrees to comply with all such provisions.

11.Guarantor waives any right to require the Agent or the Lenders to (a) proceed against Borrower or any other Obligor; (b) proceed against or exhaust any Collateral; or (c) pursue any other remedy in the Agent’s or the Lenders’ power.  The Agent and the Lenders may, at its or their election, exercise or decline or fail to exercise any right or remedy it may have against Borrower, any Obligor, or any Collateral, including without limitation the right to foreclose upon any such Collateral by judicial or nonjudicial measures, without affecting or impairing in any way the liability of Guarantor hereunder.  Guarantor waives any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation from any cause whatsoever of the liability of Borrower under the Borrower’s Obligations.  To the extent permitted by law, Guarantor’s liability shall not be limited or affected by any setoff, defense or counterclaim that Borrower may have against the Agent or the Lenders.  Guarantor waives any defense arising out of the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower, any other Obligor, or any Collateral.  Until all Borrower’s Obligations have been paid in full, Guarantor shall have no right of subrogation or reimbursement, contribution or other rights against Borrower, any other Obligor, or any Collateral.  Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness constituting Borrower’s Obligations.  Guarantor expressly waives any right to exercise or assert any suretyship defense that may be available to Guarantor under applicable law.

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12.In addition to all rights of setoff against the deposit accounts of Guarantor held by the Agent and each of the Lenders, and in addition to all other Collateral granted by Guarantor, Guarantor hereby grants to the Agent and the Lenders a security interest in all deposit accounts (as defined in Chapter 9a of the Utah Uniform Commercial Code) that Guarantor now or hereafter has with the Agent or any of the Lenders.  Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor.  No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lenders, or by any neglect to exercise such right of setoff or to enforce such security interest, or by any delay in so doing, and every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lenders.

13.Any indebtedness of Borrower now or hereafter held by Guarantor is hereby subordinated to the Borrower’s Obligations; and such indebtedness of Borrower to Guarantor shall be collected, enforced and received by Guarantor as trustee for Bank and be paid over to Bank on account of the indebtedness of Borrower to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

14.If any of the payments of money or transfers of property made to the Agent or the Lenders by Borrower, Guarantor, or any other Obligor, in payment of Borrower’s Obligations should for any reason be declared to be fraudulent, preferential or voidable within the meaning of any state or federal law relating to fraudulent conveyances or preferential transfers, or otherwise become voidable or recoverable under the Bankruptcy Code or any other federal or state law, in whole or in part, for any reason (hereinafter collectively called “Voidable Transfers”) and the Agent or any of the Lenders is required to repay or restore any such Voidable Transfers, or any portion thereof, then, as to any such Voidable Transfer or the amount repaid or restored (including all costs, expenses and attorneys’ fees of the Agent and the Lenders related thereto), the liability of Guarantor and all security interests and liens in Collateral granted by Grantor shall automatically be revived, reinstated and restored as though such Voidable Transfer had never been made.  This provision is precautionary, and nothing herein is an admission by any party that any such Voidable Transfer has occurred and all parties believe that no such Voidable Transfer exists.

15.The Agent and the Lenders may assume that all directors, officers, and agents purporting to act on behalf of Borrower in negotiating and executing the Transaction Documents and in taking measures thereunder to incur the Borrower’s Obligations have all corporate authority to do so.

16.Guarantor represents and warrants to the Agent and the Lenders that (a) Guarantor has taken all necessary and appropriate action to authorize the execution, delivery and performance of this Guaranty, (b) execution, delivery and performance of this Guaranty do not conflict with or result in a breach of or constitute a default under Guarantor’s articles of incorporation or bylaws or other organizational documents or agreements to which it is party or by which it is bound, and (c) this Guaranty constitutes a valid and binding obligation, enforceable against Guarantor in accordance with its terms.

17.Guarantor covenants and agrees that Guarantor shall do all of the following: (a) maintain its corporate existence, remain in good standing in its jurisdiction of organization, (b) continue to qualify in each jurisdiction in which the failure to so qualify could have a material adverse effect on the financial condition, operations or business of Guarantor, (c) maintain in force all licenses, approvals and agreements, the loss of which could have a material adverse effect on its financial condition, operations or business, and (d) comply with all statutes, laws, ordinances, directives, orders, and government rules and regulations to which it is subject if non-compliance with such laws could adversely affect the financial condition, operations or business of Guarantor.

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18.Guarantor jointly and severally agrees to pay all Attorneys’ Fees and other expenses incurred by the Agent and the Lenders in the enforcement of their respective rights hereunder, including without limitation such expenses incurred before legal action, during the pendency of any such legal action, during the enforcement and protection of the Agent’s and the Lenders’ rights and claims in any bankruptcy or insolvency proceedings, and continuing to all such expenses in connection with any appeal to higher courts arising out of any such proceedings.

19.Guarantor agrees and acknowledges that this Guaranty shall be binding upon the successors and assigns of Guarantor.  At any time and from time to time such Guarantor shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect or to affirm the purposes of this Guaranty.

20.Guarantor hereby agrees and submits to the exclusive jurisdiction of the state and Federal courts located in Salt Lake County, State of Utah, in any action by the Agent or the Lenders to enforce, or in any other action or suit relating to, this Guaranty.  Guarantor waives any objection which it may now or hereafter have to such venue for any suit, action or proceeding arising out of or relating to the enforcement of this Guaranty, including any assertion that any such designated courts is an inconvenient forum.

21.GUARANTOR HEREBY UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY PRESENT OR FUTURE CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARNTY OR ANY TRANSACTION DOCUMENT OR RELATED TO THE DEALINGS OF THE PARTIES THERETO.  ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT WITHOUT A JURY.  GUARANTOR REPRESENTS THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

22.This Guaranty is assignable by the Agent and the Lenders in connection with any assignment of Borrower’s Obligations as contemplated by the Loan Agreement, and when so assigned, Guarantor shall be bound pursuant to this Guaranty to such assignees.

23.No obligation of Guarantor under this Guaranty shall be deemed to have been waived by any act or conduct on the part of the Agent or any of the Lenders, or by any delay in exercising the right to collect such obligations, and every right, power and remedy of the Agent and the Lenders shall continue in full force and effect until any such right, power or remedy is specifically waived or released by a written document executed by the Agent and the Lenders.

24.This Guaranty is intended to be an integrated agreement with respect to the subject matter set forth herein and represents the final expression of the parties with respect thereto and supersedes all prior agreements among the parties with respect to the matters set forth herein.  This Guaranty may not be modified except by written document executed by the Agent and the Lenders.  The provisions of this Guaranty are severable, and in the event that any provision shall be held to be invalid or enforceable, the remaining provisions shall continue to be enforceable.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[GUARANTOR’S SIGNATURE ON NEXT PAGE]

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Dated as of August 18, 2009.

COPPAL RESEARCH, INC., a

Utah corporation

By:	/s/ Joseph W. Baty
Name:	Joseph W. Baty
Its:	Executive Vice President   and Chief Financial Officer

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EX-21.1

Exhibit 21.1

SUBSIDIARIES OF SCHIFF NUTRITION INTERNATIONAL, INC.

Entity Name	Incorporation	Shareholder/Parent Corp.	Ownership Percentage
Schiff Nutrition International, Inc.	Delaware
Schiff Nutrition Group, Inc.	Utah	Schiff Nutrition International, Inc.	100%
WNG Holdings (International) LTD, Inc.	Nevada	Schiff Nutrition Group, Inc.	100%
Coppal Research, Inc.	Utah	WNG Holdings (International) LTD, Inc.	100%
Weider Nutrition (WNI) Limited	UK	WNG Holdings (International) LTD, Inc.	100%
Weider Nutrition BV	Netherlands	WNG Holdings (International) LTD, Inc.	100%
Weider Nutrition Italia SrL	Italy	Weider Nutrition (WNI) Limited	100%
Weider Nutrition GmbH	Germany	Weider Nutrition BV	100%

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No.’s 333-87944, 333-27973, and 333-128959 on Forms S-8 of our report dated August 18, 2009, relating to the consolidated financial statements of Schiff Nutrition International, Inc., appearing in this Annual Report on Form 10-K of Schiff Nutrition International, Inc. for the year ended May 31, 2009.

Our audits of the consolidated financial statements referred to in our aforementioned report also included the consolidated financial statement schedule of Schiff Nutrition International, Inc., listed in Item 15.  This financial statement schedule is the responsibility of Schiff Nutrition International, Inc’s management.  Our responsibility is to express an opinion based on our audits.  In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

DELOITTE & TOUCHE LLP

Salt Lake City, Utah

August 18, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce J. Wood, President and Chief Executive Officer, certify that:

1.      I have reviewed this Annual Report on Form 10-K of Schiff Nutrition International, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)             Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)             Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)             Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 18, 2009	/s/  Bruce J. Wood
	Bruce J. Wood President and Chief Executive Officer (Principle Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph W. Baty, Executive Vice President and Chief Financial Officer, certify that:

1.      I have reviewed this Annual Report on Form 10-K of Schiff Nutrition International, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)             Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)             Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)             Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 18, 2009	/s/  Joseph W. Baty
	Joseph W. Baty Executive Vice President and Chief Financial Officer (Principle Financial Officer)

EX-32.1

Exhibit 32.1

The following certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and pursuant to SEC Release No. 33-8238 are being “furnished” to the SEC rather than “filed” either as part of the Report or as a separate disclosure statement, and are not to be incorporated by reference into the Report or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Schiff Nutrition International, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)             the accompanying Annual Report on Form 10-K of the Company for the annual period ended May 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(ii)             the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 18, 2009	/s/  Bruce J. Wood
	Bruce J. Wood President and Chief Executive Officer

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Schiff Nutrition International, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)             the accompanying Annual Report on Form 10-K of the Company for the annual period ended May 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(ii)             the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 18, 2009	/s/  Joseph W. Baty
	Joseph W. Baty Executive Vice President and Chief Financial Officer