10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 27, 2001

Commission File Number 1-7707

MEDTRONIC, INC.
(Exact name of registrant as specified in its charter)

Minnesota
(State of incorporation) 41-0793183
(I.R.S. Employer
Identification No.)

710 Medtronic Parkway
Minneapolis, Minnesota 55432
(Address of principal executive offices)

Telephone number: (763) 514-4000

    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 /x/  No / /

    Shares of common stock, $.10 par value, outstanding on August 24, 2001: 1,210,184,784

PART I—FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

MEDTRONIC, INC.

STATEMENT OF CONSOLIDATED EARNINGS

(Unaudited)

			Three months ended
			July 27, 2001			July 28, 2000
			(in millions, except per share data)
Net sales			$	1,455.7		$	1,310.4
Costs and expenses:
	Cost of products sold			378.1			316.6
	Research and development expense			151.0			138.7
	Selling, general, and administrative expense			444.8			400.7
	Non-recurring charges			62.1			16.9
	Other (income)/expense, net			0.7			26.1
	Interest (income)/ expense, net			(21.3	)		(11.3	)
		Total costs and expenses		1,015.4			887.7
Earnings before income taxes				440.3			422.7
Provision for income taxes				138.8			138.6
Net earnings			$	301.5		$	284.1
Earnings per share:
	Basic		$	0.25		$	0.24
	Diluted		$	0.25		$	0.23
Weighted average shares outstanding:
	Basic			1,209.9			1,198.9
	Diluted			1,223.3			1,228.8

See accompanying notes to condensed consolidated financial statements.

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MEDTRONIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			July 27, 2001			April 27, 2001
			(in millions of dollars, except per share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	1,170.2		$	1,030.3
	Short-term investments			188.4			201.4
	Accounts receivable, less allowance for doubtful accounts of $36.7 and $34.9			1,246.4			1,226.1
	Inventories			717.6			729.5
	Deferred tax assets, net			281.2			281.5
	Prepaid expenses and other current assets			309.1			288.0
		Total current assets		3,912.9			3,756.8
Property, Plant, and Equipment				2,116.8			2,057.3
Accumulated depreciation				(916.6	)		(880.8	)
		Net Property, Plant, and Equipment		1,200.2			1,176.5
Goodwill, net				995.9			995.9
Patents and Other Intangible Assets, net				238.3			239.4
Long-term investments				763.2			683.2
Other assets				163.2			187.1
		Total assets	$	7,273.7		$	7,038.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term borrowings		$	127.9		$	145.4
	Accounts payable			200.6			205.9
	Accrued compensation			255.3			248.2
	Accrued income taxes			226.6			204.1
	Other accrued expenses			509.5			555.7
		Total current liabilities		1,319.9			1,359.3
Long-term debt				13.9			13.3
Deferred tax liabilities, net				4.2			—
Long-term accrued compensation				94.9			88.3
Other long-term liabilities				68.3			68.5
		Total liabilities		1,501.2			1,529.4
Shareholders' equity:
	Common stock—par value $0.10			121.0			121.0
	Retained earnings			5,812.6			5,576.3
	Accumulated other non-owner changes in equity			(145.7	)		(168.8	)
				5,787.9			5,528.5
	Receivable from Employee Stock Ownership Plan			(15.4	)		(19.0	)
		Total shareholders' equity		5,772.5			5,509.5
		Total liabilities and shareholders' equity	$	7,273.7		$	7,038.9

See accompanying notes to condensed consolidated financial statements.

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MEDTRONIC, INC.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)

				Three months ended
				July 27, 2001			July 28, 2000
				(in millions)
OPERATING ACTIVITIES:
	Net earnings			$	301.5		$	284.1
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization			65.7			72.6
		Non-recurring charges			61.5			16.9
		Deferred income taxes			18.1			0.1
		Change in operating assets and liabilities:
			Accounts receivable		(31.1	)		59.5
			Inventories		7.6			(39.0	)
			Accounts payable and accrued liabilities		(71.6	)		26.7
			Changes in other operating assets and liabilities		25.3			78.5
			Net cash provided by operating activities		377.0			499.4
INVESTING ACTIVITIES:
	Additions to property, plant, and equipment				(84.1	)		(65.5	)
	Purchases of marketable securities				(225.0	)		(197.0	)
	Sales and maturities of marketable securities				181.0			37.0
	Other investing activities, net				(32.2	)		(39.0	)
			Net cash used in investing activities		(160.3	)		(264.5	)
FINANCING ACTIVITIES:
	Decrease in short-term borrowings, net				(16.3	)		(58.2	)
	Increase in long-term debt, net				0.7			0.9
	Dividends to shareholders				(69.6	)		(59.9	)
	Issuance of common stock				4.4			2.8
	Repayment of loan from ESOP				3.6			0.5
			Net cash used in financing activities		(77.2	)		(113.9	)
Effect of exchange rate changes on cash and cash equivalents					0.4			(0.6	)
Net change in cash and cash equivalents					139.9			120.4
Cash and cash equivalents at beginning of period					1,030.3			467.8
Cash and cash equivalents at end of period				$	1,170.2		$	588.2

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, financial position, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, the consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's results for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended April 27, 2001.

    Certain reclassifications have been made to prior year amounts to conform to current year presentation.

Note 2—Other Non-Owner Changes in Equity

    In addition to net earnings, other non-owner changes in equity include, as applicable, unrealized gains and losses on available for sale securities, unrealized gains and losses on derivative instruments qualifying and designated as cash flow hedges, foreign currency translation adjustments and minimum pension liability. For the three-month periods ended July 27, 2001 and July 28, 2000 the Company's other non-owner changes in equity were $324.6 million and $297.8 million, respectively.

Note 3—Inventories

    Inventories consisted of the following (amounts are in millions):

	July 27, 2001		April 27, 2001
Finished goods	$	397.4	$	400.7
Work in process		120.4		131.5
Raw materials		199.8		197.3
Total	$	717.6	$	729.5

Note 4—Non-Recurring Items

    During the first quarter of fiscal year 2002, the Company recorded a pre-tax non-recurring charge totaling $62.1 million, of which $36.1 million relates to the restructuring initiatives announced in the fourth quarter of fiscal 2001. The remainder of the charge consists primarily of an additional $27.0 million related to an arbitration award received in July 2001, and a reduction in estimate of $1.0 million related to its fiscal 2000 Latin America restructuring initiative which was completed during the first quarter of fiscal 2002.

    During the fourth quarter of fiscal 2001, the Company recorded a pre-tax restructuring charge of $14.5 million. This charge, along with the $36.1 million recorded in the first quarter of fiscal 2002, is related to restructuring the sales organization of certain neurological product lines, reducing and consolidating certain manufacturing operations, and streamlining and reorganizing European sales

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organizations to further integrate prior acquisitions. Of the 650 employees identified for termination, 104 have been terminated as of July 27, 2001.

    In July 2001, an arbitration panel found that certain Medtronic rapid exchange perfusion delivery systems infringed a patent held by Boston Scientific Corporation, and awarded damages based on the sales of these systems. The Company recorded a non-recurring charge during the fourth quarter of fiscal 2001 for this award, related legal costs, impaired intangible assets and goodwill, and excess inventory. During the first quarter of fiscal 2002, the Company recorded an additional $27.0 million related to current quarter sales of certain products associated with this arbitration award.

    During the third quarter of fiscal year 2001 and in connection with the merger of PercuSurge, the Company recorded pre-tax transaction and integration related charges totaling $14.4 million. The employee terminations related to the PercuSurge integration efforts have been substantially completed as of July 27, 2001.

    Applications during the first quarter of fiscal year 2002 against remaining accruals were as follows (amounts are in millions):

	Balance at April 27, 2001		New Charges		Charges Utilized			Balance at July 27, 2001
Facility reductions	$	2.0	$	6.0	$	(0.2	)	$	7.8
Severance and related costs		9.6		17.1		(2.9	)		23.8
Contractual obligations		10.9		3.8		(1.9	)		12.8
Total restructuring-related accruals		22.5		26.9		(5.0	)		44.4
Asset write-downs		—		6.9		(6.9	)		—
Litigation		254.4		28.3		(67.3	)		215.4
Total	$	276.9	$	62.1	$	(79.2	)	$	259.8

    Reserve balances at July 27, 2001 include amounts necessary to complete the restructuring initiatives taken in the first quarter of fiscal 2002 and the fourth quarter of fiscal 2001, the arbitration award and legal expenses associated with the Boston Scientific litigation decision, the PercuSurge integration charge, as well as amounts necessary to conclude cases related to the Company's spinal system for pedicle fixation.

Note 5—Accounting for Derivatives and Hedging Activities

    On April 28, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133, as amended, requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to measure the instruments at fair value through income unless the derivative qualifies as a hedge. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other non-owner changes in equity until the hedged item is recognized in earnings. Upon adoption, the Company recorded a cumulative after-tax unrealized gain of $35.7 million ($54.9 million pre-tax) in accumulated other non-owner changes in equity.

    The Company uses derivative instruments, primarily forward exchange contracts, to manage its exposure related to foreign exchange rate changes. The Company enters into contracts with major financial institutions that change in value as foreign exchange rates change. These contracts are designated either as cash flow hedges, net investment hedges or as freestanding derivatives. Forward

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contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in foreign currency that will take place in the next twenty months. Net investment hedges are designed to hedge long-term investments in foreign operations. In addition, the Company uses forward exchange contracts to offset its exposure to the change in value of certain foreign currency intercompany assets and liabilities. These forward exchange contracts are not designated as hedges, and therefore, changes in the value of these freestanding derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities. It is the Company's policy to enter into foreign currency transactions only to the extent true exposures exist; the Company does not enter into foreign currency transactions for speculative purposes. Principal currencies hedged are the Yen and the Euro.

    All derivative instruments are recorded at fair value on the balance sheet. Changes in value of derivatives designated as cash flow hedges are recorded in accumulated other non-owner changes in equity until earnings are affected by the variability of the underlying cash flows. At that time, the applicable amount of gain or loss from the derivative instrument that is deferred in equity is reclassified to earnings and is included in Other Income/Expense. The effectiveness of net investment hedges is measured on a spot to spot basis. The effective portion of the change in the fair value of net investment hedges is recorded as foreign currency translation adjustments in accumulated non-owner changes in equity, while the ineffective portion resulting from the time value of the hedging instrument is recorded in earnings as Other Income/Expense. Net gains included in cumulative translation adjustment relating to net investment hedges totaled $1.6 million for the first quarter of fiscal 2002.

    At inception, all derivatives are expected to be highly effective, as the critical terms of these instruments are the same as those of the underlying risks being hedged. The Company evaluates hedge effectiveness at inception and on an ongoing basis. When a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings. No gains or losses relating to ineffectiveness of cash flow hedges were recognized in earnings during the first quarter of fiscal 2002.

    The following table summarizes activity in accumulated non-owner changes in equity related to all derivatives classified as cash flow hedges during the period from April 28, 2001 through July 27, 2001 (amounts are in millions and net of tax):

Beginning Balance, April 28, 2001:		$	—
	Cumulative effect of adoption of SFAS 133		(35.7	)
	Gains (losses)reclassified to earnings		9.7
	Change in fair value of hedges		(6.3	)
Accumulated derivative (gains)/losses,			(32.3	)
Ending Balance, July 27, 2001		$	(32.3	)

    All gains and losses reclassified to earnings during the first quarter of fiscal 2002 related to the transition adjustment. The Company expects that, of the balance in accumulated derivative gains/losses at July 27, 2001, approximately $29.6 million, net of tax will be reclassified to earnings over the next twelve months.

Note 6—Goodwill and Other Intangible Assets

    In July 2001, the FASB issued Statement No. 141 "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets," (collectively, "the Statements"). The Statements

7

eliminate the pooling-of-interests method of accounting for business combinations and the systematic amortization of goodwill. The Company adopted the Statements during the first quarter of fiscal 2002.

    Had the Statements been effective May 1, 2000, net income and earnings per share would have been reported as the following amounts (amounts are in millions except per share data):

	Three months ended July 28, 2000
Net earnings, as reported	$	284.1
Add back goodwill amortization		9.7
Adjusted net earnings	$	293.8
Basic earnings per share:
Net earnings, as reported	$	0.24
Goodwill amortization		0.01
Adjusted net earnings	$	0.25
Diluted earnings per share:
Net earnings, as reported	$	0.23
Goodwill amortization		0.01
Adjusted net earnings	$	0.24

    Balances of acquired intangible assets, excluding goodwill were as follows:

		July 27, 2001						April 27, 2001
		Acquired Patents			Other Intangibles			Acquired Patents			Other Intangibles
Amortized intangible assets:
	Original cost	$	223.5		$	151.8		$	212.9		$	168.0
	Accumulated amortization		(80.7	)		(56.3	)		(66.0	)		(75.5	)
	Carrying value	$	142.8		$	95.5		$	146.9		$	92.5

Note 7—Segment and Geographic Information

    The Company operates its business in four operating segments, which are aggregated into one reportable segment - the manufacture and sale of device-based medical therapies. Each of the Company's operating segments has similar economic characteristics, technology, manufacturing processes, customers, distribution and marketing strategies, regulatory environments, and shared infrastructures. Net sales by operating segment were as follows (amounts are in millions):

	Three months ended July 27, 2001		Three months ended July 28, 2000
Cardiac Rhythm Management	$	668.9	$	627.0
Neurological, Spinal and ENT		399.4		338.5
Vascular		264.4		225.6
Cardiac Surgery		123.0		119.3
	$	1,455.7	$	1,310.4

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Geographic information:

    Certain historical revenue amounts by geography have been reclassified to reflect revised allocations (amounts are in millions):

Three months ended July 27, 2001	United States		Europe		Asia Pacific		Other Foreign		Eliminations			Consolidated
Revenues from external customers	$	993.5	$	260.0	$	163.4	$	38.8	$	—		$	1,455.7
Intergeographic sales		202.4		54.3		0.2		2.8		(259.7	)		—
Total sales	$	1,195.9	$	314.3	$	163.6	$	41.6	$	(259.7	)	$	1,455.7
Long-lived assets	$	3,075.6	$	225.3	$	49.5	$	10.4	$	—		$	3,360.8

Three months ended July 28, 2000	United States		Europe		Asia Pacific		Other Foreign		Eliminations			Consolidated
Revenues from external customers	$	867.0	$	248.3	$	154.6	$	40.5	$	—		$	1,310.4
Intergeographic sales		190.4		60.4		0.8		4.1		(255.7	)		—
Total sales	$	1,057.4	$	308.7	$	155.4	$	44.6	$	(255.7	)	$	1,310.4
Long-lived assets	$	2,490.5	$	209.2	$	46.7	$	16.4	$	—		$	2,762.8

Note 8—Subsequent Events

    On August 28, 2001, the Company acquired the outstanding common stock of Minimed Inc. (MiniMed) for approximately $3.4 billion in cash. Minimed is the market leader in the design, development, manufacture and marketing of advanced medical systems for the treatment of diabetes. On the same date, the Company also acquired the outstanding common stock of Medical Research Group, Inc. (MRG) for approximately $400.0 million in cash. MRG designs and develops technologies related to implantable pumps and sensors used in the treatment of diabetes. The acquisitions were funded with a combination of $1.5 billion of existing cash balances and bridge financing provided under a senior unsecured short-term credit facility. The senior unsecured short-term credit facility provides for up to $3.0 billion of bridge financing at a variable interest rate of LIBOR plus twenty five basis points, or 3.83 percent as of August 28, 2001.

    On September 6, 2001, the Company announced that it had agreed to sell approximately $2.0 billion aggregate principal amount of 1.25% Contingent Convertible Debentures due 2021, which includes $262.5 million aggregate principal amount of Debentures pursuant to the exercise of the initial purchasers' option to purchase additional Debentures, in a private placement offering under Rule 144A. Under the proposed terms, each Debenture is expected to carry an interest rate of 1.25 percent per annum, payable semi-annually, and is expected to be convertible into approximately 16.1796 shares of the Company's common stock provided certain conditions have been met. The Company may be required to repurchase the securities at the option of the holders in September 2002, 2004, 2006, 2008, 2011, and 2016. If the repurchase option is exercised, the Company may elect to repurchase the securities for cash, the Company's common shares, or some combination thereof. The Company may elect to redeem the securities for cash at any time after September 2006. The Company will use the net proceeds from this offering, which is expected to close on September 11, 2001, to repay a substantial portion of the outstanding bridge financing obtained in connection with its acquisitions of MiniMed and MRG.

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

Results of Operations

Net Earnings

    Net earnings for the three months ended July 27, 2001 were $301.5 million, or $0.25 per diluted share, compared to net earnings of $284.1 million, or $0.23 per diluted share for the quarter ended July 28, 2000, representing an increase of 6.1 percent and 8.7 percent, respectively, over the same period a year ago. During the quarter, the Company finalized its plans to further streamline its operations as announced in the fourth quarter of fiscal 2001. This resulted in a pre-tax charge of $36.1 million in the first quarter of fiscal 2002. Also during the quarter, the Company recorded a pre-tax non-recurring charge of $27.0 million related to current quarter sales of certain products associated with an arbitration award received in July 2001. Without these non-recurring items, net earnings and diluted earnings per share for the quarter would have been $342.0 million and $0.28, respectively, an increase of 15.7 percent and 16.7 percent, respectively, over pre-charge net earnings and diluted earnings per share for the same period a year ago. In the year-ago quarter, the Company recorded a $16.9 million pre-tax charge related to a litigation judgment.

Sales

    Sales for the three-month period ended July 27, 2001 increased 11.1 percent, compared to the same period of fiscal year 2001. Sales growth compared to the same period a year ago was negatively impacted by $33.7 million of unfavorable foreign exchange rate fluctuations. Excluding the effects of foreign currency fluctuations, sales for the quarter increased 13.9 percent over the same period a year ago. All revenue growth rates that follow are reported on a constant-currency basis.

    Net sales of cardiac rhythm management products, which consist primarily of pacemakers, implantable and external defibrillators, leads and ablation products increased 9.6 percent during the three-month period ended July 27, 2001, compared to the same period a year ago. Worldwide bradycardia pacing revenues grew approximately 7 percent in the quarter. The growth was driven by strong performance from both the Medtronic Kappa and Sigma families as well as the Vitatron Collection and Clarity families. Sales of implantable defibrillators grew 12 percent during the quarter. Revenue growth was attributable to the worldwide acceptance of the GEM® III VR/DR and the GEM®III AT and continued growth in the under-penetrated tachyarrhythmia market. External defibrillator sales increased more than 20 percent over the same period a year ago. In the heart failure market, the following milestones were achieved during the first quarter: the Medtronic InSync® III device was market released in Europe; the Medtronic InSync® device received a unanimous recommendation for approval from the FDA Circulatory Devices Panel; and the enrollment in the SCD/HFT trial, which evaluates the use of defibrillator backup in heart failure patients, was completed. Subsequent to quarter-end, the Company received FDA approval of the InSync® device, the first major therapeutic breakthrough for heart failure since the development of specialized heart failure drugs.

    Net sales of neurological, spinal and ear, nose and throat (ENT) products, consisting primarily of implantable neurostimulation devices, implantable drug administration systems, spinal products, neurosurgery products, functional diagnostics and surgical products used by ENT physicians, increased 20.1 percent for the three-month period ended July 27, 2001, compared to the same period a year ago. Sales of spinal surgery products, led by rapid growth in the interbody products that benefited from an entire quarter of sales of the LT-Cage^TM, grew approximately 25 percent compared to the same period a year ago. The Company is anticipating an FDA advisory panel review of its InFuse^TM Bone Graft bone morphogenetic protein (BMP) sometime during the next two quarters. Core neurological product sales (consisting of neurostimulation, drug administration systems, functional diagnostics and functional

10

stimulation), increased more than 15 percent from the same period a year ago. This growth is the result of strong sales in three product lines: drug infusion systems for intrathecal baclofen therapy in the treatment of movement disorders; Activa® Tremor Control Therapy commercially available outside the U.S. for the treatment of essential tremor and the tremor associated with Parkinson's disease, and Interstim® Therapy for Urinary Control for the treatment of bladder control problems. The Company is awaiting FDA approval of its Activa® Parkinson's Control deep brain stimulation therapy.

    Net sales of vascular product lines, consisting of stents, balloons and guiding catheters, and peripheral vascular products, increased 20.9 percent for the three-month period ended July 27, 2001, compared to the same period a year ago. The growth was driven by coronary vascular revenues that rose approximately 14 percent during the quarter, led by the S7® coronary stent which was available for sale in the U.S. market for the full quarter plus the continued success of the S670® coronary stent. During the quarter, coronary vascular sales also benefited from the U.S. market launch of the R2^TM and D2^TM balloon catheters. In addition, during the quarter the Company received FDA approval for the PercuSurge GuardWire^TM Plus Temporary Occlusion and Aspiration System and began a limited release of this product. The Company also announced the initiation of an exclusive worldwide agreement with AVI BioPharma to license a family of antisense compounds currently under evaluation, including Resten-NG^TM, for use on medical devices, including stents. Revenues from the Company's AAA product lines more than doubled when compared to the prior year, driven by full availability of all sizes of the AneuRx^TM Stent Graft System.

    Net sales of cardiac surgery product lines, consisting of heart valves, perfusion systems, minimally invasive cardiac surgery products and surgical accessories, increased 6.0 percent for the three-month period ended July 27, 2001, compared to the same period a year ago. Heart valve revenues grew approximately 18 percent, highlighted by approximately 38 percent growth in tissue valve sales in the United States. Cardiac Surgery Technology products for beating heart surgery, including the Starfish^TM Heart Positioner that was market released in June in the U.S., continued to be well received in the market place and grew by more than 50 percent when compared to the same period a year ago.

Cost of Products Sold

    Cost of products sold as a percentage of sales was 26.0 percent for the three-month period ended July 27, 2001, compared to 24.2 percent for the same period a year ago. The increase in cost of products sold as a percent of revenue is the result of the unfavorable impact of foreign exchange rates compared to the prior year, and an increase in obsolescence expense resulting from several recent product introductions.

Research and Development Expense

    The Company remains committed to its objective of investing significantly in research and development (R&D) to develop technological enhancements and new indications for existing products, to develop less invasive and new technologies that address unmet patient needs and to help reduce patient care costs and length of hospital stay. R&D expense as a percentage of sales for the first quarter of fiscal year 2002 was 10.4 percent, consistent with the 10.6 percent of sales for the same period a year ago.

Selling, General and Administrative Expense (SG&A)

    SG&A expense for the three-month period ended July 27, 2001 was 30.6 percent of sales; this was the same percentage for the same period a year ago. The Company continues to be committed to controlling cost and implementing cost control measures.

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Non-Recurring Charges

    The Company recorded a total pre-tax, non-recurring charge of $62.1 million in the three-month period ended July 27, 2001. During the quarter, the Company finalized its plans to further streamline its operations as announced in the fourth quarter of fiscal 2001. This resulted in a pre-tax charge of $36.1 million in the first quarter of fiscal 2002. The pre-tax charge recorded in the fourth quarter of fiscal 2001 associated with these restructuring initiatives was $14.5 million. The total pre-tax charge related to these initiatives is $50.6 million, which is within the range of $47.0 to $52.0 million estimated in the prior quarter. The Company also recorded a pre-tax non-recurring charge of $27.0 million related to current quarter sales of certain products associated with an arbitration award received in July 2001. The Company previously recorded a charge for this arbitration award, the related legal costs, impaired intangible assets and goodwill, and excess inventory in the fourth quarter of fiscal 2001. In addition, during the quarter the Company reversed $1.0 million of reserves related to its fiscal 2000 Latin America restructuring initiatives no longer considered necessary, as these restructuring initiatives have been completed.

    During the first quarter of fiscal 2001, the Company recorded a $16.9 million pre-tax charge related to a litigation judgment. The judgment is protected by a confidentiality agreement, is non-recurring, non-product related and pertains to business matters that occurred in 1997 and 1998.

Other Income/Expense

    Other income/expense includes goodwill and intellectual property amortization, royalty income and expense, minority investment gains and losses and foreign currency gains and losses. Other expense, net was $0.7 million for the three-month period ended July 27, 2001, and $26.1 million for the same period a year ago. In July 2001, the FASB issued Statement No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets," (collectively, "the Statements"). The Company adopted the Statements during the first quarter of fiscal 2002. The decrease in other expense, net relates primarily to the discontinuance of goodwill amortization resulting from the adoption of the Statements and increased gains on foreign currency hedging transactions compared to the same period a year ago, partially offset by an increase in royalty expense related to an arbitration award received in July 2001.

Interest Income/Expense

    Net interest income during the first quarter of fiscal year 2002 was $21.3 million, compared to $11.3 million, for the same period a year ago. The increase in net interest income is the result of higher cash balances attributable to larger cash inflows from operations; however, this was partially offset by lower interest rates.

Income Taxes

    The Company's effective income tax rate for the first quarter of the current fiscal year was 31.5 percent, or 31.9 percent before non-recurring charges. The estimated effective income tax rate for fiscal year 2002 is 32.0 percent. The effective income tax rate for fiscal 2001 was 32.5 percent. The Company continues to review alternative strategies to reduce its effective income tax rate.

Acquisitions

    On August 28, 2001, the Company completed the acquisitions of MiniMed Inc. (MiniMed) and Medical Research Group, Inc. (MRG) for consideration of approximately $3.4 billion and $400.0 million, respectively. MiniMed is the market leader in the design, development, manufacture, and marketing of advanced medical systems for the treatment of diabetes. MRG designs and develops technologies related to implantable pumps and sensors used in the treatment of diabetes. The

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acquisitions were funded with a combination of $1.5 billion of existing cash balances and bridge financing provided under an unsecured short-term credit facility. The senior unsecured short-term credit facility provides for up to $3.0 billion of bridge financing at a variable interest rate of LIBOR plus twenty five basis points, or 3.83 percent as of August 28, 2001.

Liquidity and Capital Resources

    Operating activities provided $377.0 million of cash and cash equivalents for the three-month period ended July 27, 2001 compared to $499.4 million for the same period a year ago. Significant uses of cash included investments in long-term marketable securities, purchases of property, plant and equipment, and payment of dividends to shareholders.

    Working capital was $2,593.0 million at July 27, 2001, an increase of $195.5 million over the $2,397.5 million at April 27, 2001. The current ratio was 3.0:1 at July 27, 2001 as compared to 2.8:1 at April 27, 2001.

    The Company's capital structure consists of equity and interest-bearing debt. Interest-bearing debt as a percent of total capital was 2.4 percent as of July 27, 2001, compared to 2.8 percent at April 27, 2001. The Company has existing lines of credit totaling $709.7 million with various banks, of which $567.9 million were unused at July 27, 2001.

    On September 6, 2001, the Company announced that it has agreed to sell approximately $2.0 billion aggregate principal amount of 1.25% Contingent Convertible Debentures due 2021, which includes $262.5 million aggregate principal amount of Debentures pursuant to the exercise of the initial purchasers' option to purchase additional Debentures, in a private placement offering under Rule 144A. Under the proposed terms, each Debenture is expected to carry an interest rate of 1.25 percent per annum, payable semi-annually, and is expected to be convertible into approximately 16.1796 shares of the Company's common stock provided certain conditions have been met. The Company may be required to repurchase the securities at the option of the holders in September 2002, 2004, 2006, 2008, 2011, and 2016. If the repurchase option is exercised, the Company may elect to repurchase the securities for cash, the Company's common shares, or some combination thereof. The Company may elect to redeem the securities for cash at any time after September 2006. The Company will use the net proceeds from this offering, which is expected to close on September 11, 2001, to repay a substantial portion of the outstanding bridge financing obtained in connection with its acquisitions of MiniMed and MRG.

Operations Outside of the United States

    Sales to customers located outside of the United States accounted for 31.8 percent of total sales for the first quarter of fiscal year 2002. Sales outside of the United States are accompanied by certain financial risks, such as collection of receivables, which typically have longer payment terms. Outstanding receivables for these sales totaled $539.6 million at July 27, 2001, or 42.1 percent of total outstanding receivables at July 27, 2001, compared to $527.6 million or 41.8 percent of total receivables outstanding at April 27, 2001.

Cautionary Factors That May Affect Future Results

    Certain statements contained in this document and other written and oral statements made from time to time by the Company do not relate strictly to historical or current facts. As such, they are considered "forward-looking statements" which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as "anticipate," "believe," "estimate," "expect," "intend," "may," "could," "possible," "plan," "project," "should," "will," "forecast" and similar words or expressions. The Company's forward-looking statements generally relate to its growth strategies, financial results, product development and regulatory approval programs, and

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sales efforts. One must carefully consider forward-looking statements and understand that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions, including, among others, those discussed in the section entitled "Government Regulation and Other Matters" and "Cautionary Factors That May Affect Future Results" in the Company's Annual Report and Form 10-K for the year ended April 27, 2001. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.

    The Company undertakes no obligation to update any forward-looking statement, but investors are advised to consult any further disclosures by the Company on this subject in its filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K (if any), in which the Company discusses in more detail various important factors that could cause actual results to differ from expected or historic results. The Company notes these factors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks, uncertainties or potentially inaccurate assumptions.

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PART II—OTHER INFORMATION

Item 3.  Legal Proceedings

    In October 1997, Cordis Corporation (Cordis), a subsidiary of Johnson & Johnson, filed suit in federal court in the District Court of Delaware against Arterial Vascular Engineering, Inc., which was acquired by the Company in January 1999 (AVE). The suit alleged that AVE's modular stents infringe certain patents now owned by Cordis. Boston Scientific Corporation is also a defendant in this suit. The complaint seeks injunctive relief and damages from all defendants. In November 2000, a Delaware jury rendered a verdict that the previously marketed MicroStent and GFX stents infringe valid claims of two patents. Thereafter the jury awarded damages to Cordis totaling approximately $270 million. In February 2001, the court heard evidence on the affirmative defense of inequitable conduct and will consider that evidence along with other post-trial motions. The jury verdict does not address products that are currently marketed by Medtronic AVE.

    In September 2000, Cordis filed an additional suit against AVE in the District Court of Delaware alleging that AVE's S670, S660 and S540 stents infringe the patents asserted in the above case.

    In December 1999, Advanced Cardiovascular Systems, Inc. (ACS), a subsidiary of Guidant Corporation, sued Medtronic and AVE in federal court in the Northern District Court of California alleging that the S670 rapid exchange perfusion stent delivery system infringes a patent held by ACS. The complaint seeks injunctive relief and monetary damages. ACS filed a demand for arbitration with the American Arbitration Association in Chicago simultaneously with the lawsuit. AVE has filed a counterclaim denying infringement based on its license to the patent for perfusion catheters as part of the assets acquired from C.R. Bard in 1998 and has asserted that the license agreement requires disputes to be resolved through arbitration. The parties have agreed to arbitrate all claims against AVE. Litigation against Medtronic has been stayed pending the arbitration decision. Arbitration hearings were held in February but the arbitrators were unable to reach a decision. AVE has filed a new demand for arbitration.

    In December 1997, ACS sued AVE in federal court in the Northern District of California alleging that AVE's modular stents infringe certain patents held by ACS and is seeking injunctive relief and monetary damages. AVE denied infringement and in February 1998, AVE sued ACS in federal court in the District Court of Delaware alleging infringement of certain of its stent patents, for which AVE is seeking injunctive relief and monetary damages. The cases have been consolidated in Delaware and an order has been entered staying the proceedings until September 2002.

    In June 2000, Medtronic filed suit in United States District Court in Minnesota against Guidant Corporation seeking a declaration that Medtronic's Jewel AF device does not infringe certain patents held by Guidant and/or that such patents were invalid. Thereafter, Guidant filed a counterclaim alleging that the Jewel AF and the Gem III AT infringe certain patents relating to atrial fibrillation. The case is in the early stages of discovery.

    In 1996, two former shareholders of Endovascular Support Systems, Inc. (ESS) filed a lawsuit in Dallas District Court for the State of Texas against AVE and several former officers, directors and shareholders of AVE. The lawsuit alleges that AVE's acquisition of ESS assets was based on fraud and breach of fiduciary duty and that plaintiffs were given insufficient value when they exchanged their stock in ESS for AVE stock in several transactions that occurred from 1993 to 1995. AVE has asserted counterclaims including breach of contract, breach of covenant of good faith and fair dealing, business disparagement and fraud, and has agreed to indemnify the individual defendants. The Court has ruled that the defendants owed a fiduciary duty to plaintiffs. The Company believes the defendants have meritorious defenses and counterclaims against the plaintiffs and will continue to defend the actions vigorously. A trial is scheduled to commence in October 2001.

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    In May 2001, as a result of the proposed merger with the Company, MiniMed Inc. (MiniMed) and its directors were named as defendants in a class action lawsuit filed in the Court of Chancery of the State of Delaware for New Castle County. The plaintiffs purport to represent a class of public stockholders of MiniMed whose stock was converted into the right to receive the $48 per share cash payment in connection with the merger. The complaint alleges that the $48 price is inadequate and that the directors did not undertake an appropriate process to obtain the best price reasonably available for the sale of MiniMed. As a result, the plaintiffs allege that the directors breached their fiduciary duties to MiniMed stockholders in approving the merger agreement. In addition, the plaintiffs allege that the merger was coupled with the sale of MRG in order to confer substantial special benefits upon Alfred E. Mann, the founder, former Executive Chairman and the largest stockholder of MiniMed, and his affiliates at the expense of a proper process to maximize value from the merger. The complaint seeks remedies including unspecified monetary damages, attorneys', accountants' and experts' fees. The complaint also requested injunctive relief, which was not granted, to prevent completion of the merger.

    In addition, MiniMed and its directors have been named in a class action lawsuit filed in June 2001 in the Superior Court of the State of California for the County of Los Angeles. The plaintiffs purport to represent a class of stockholders of MiniMed asserting a claim in connection with the alleged violation of the fiduciary duties owed by MiniMed and its directors to the MiniMed stockholders. Among other things, the complaint sought preliminary and permanent injunctive relief to prevent completion of the merger. In August 2001, the Court denied the plaintiffs' request for injunctive relief to prevent completion of the merger.

    The Company believes that it has meritorious defenses against the above claims and intends to vigorously contest them. While it is not possible to predict the outcome of these actions, the Company believes that costs associated with them will not have a material adverse impact on the Company's financial position or liquidity, but may be material to the consolidated results of operations of any one period.

    In March 2000, Boston Scientific Corporation (BSX) sued AVE in federal court in the Northern District of California alleging that the S670 rapid exchange perfusion stent delivery system infringes a patent held by Boston Scientific. As previously disclosed in the Company's Form 10-K filed July 26, 2001, arbitration hearings were held in April 2001 and, in July 2001, the arbitrators issued an award in favor of BSX, finding infringement, awarding approximately $169.0 million in damages plus legal fees and costs to BSX, and allowing for an injunction against future sales of certain rapid exchange perfusion delivery systems. A hearing is currently scheduled on September 14, 2001 in the federal court in the Northern District of California to obtain affirmation of the arbitration panel's decision, including the injunction.

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

    At the Company's 2001 Annual Meeting of Shareholders' held on August 30, 2001, the shareholders approved the following:

    (a) A proposal to elect four Class III Directors of the Company to serve for three-year terms ending in 2004, as follows:

Director	Votes For	Votes Withheld
William R. Brody	908,076,947	56,042,995
Paul W. Chellgren	908,083,676	56,036,266
Arthur D. Collins, Jr.	908,128,525	55,991,417
Antonio M. Gotto, Jr.	908,178,298	55,941,644

    There were no broker non-votes. In addition, the terms of the following directors continued after the meeting: Class I directors for a term ending in 2002—Glen D. Nelson, M.D., Denise M. O'Leary,

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Jean-Pierre Rosso and Jack W. Schuler and Class II directors for a term ending in 2003—Michael R. Bonsignore, William W. George, Bernadine P. Healy, M.D. and Gordon M. Sprenger.

    b)  A proposal to approve the appointment of PricewaterhouseCoopers LLP to serve as independent auditors of the Company for the fiscal year ending April 26, 2002. The proposal received 958,232,026 votes for, and 5,406,571 against ratification. There were 4,402,264 abstentions and no broker non-votes.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

3.1	Medtronic Restated Articles of Incorporation, as amended to date, incorporated by reference herein to Exhibit 3.1 of the Company's Quarterly Report of Form 10-Q for the quarter ended October 29, 1999, filed with the Commission on December 10, 1999.
3.2	Medtronic Bylaws, as amended to date.
4.1	Rights Agreement, dated as of October 26, 2000, between Medtronic and Wells Fargo Bank, Minnesota, N.A., including the form of Rights Certificate as Exhibit B thereto, incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form 8-A, filed with the Commission on November 3, 2000.
10.1	Credit Agreement dated as of August 27, 2001 among Medtronic, Inc., as Borrower, certain of its subsidiaries, as guarantors, the lenders party thereto, Bank of America, N.A. as Administrative Agent and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager.
99.1	Consent and Report of Independent Accountants.
99.2	Consent and Report of Independent Accountants.
99.3	Press Release dated September 5, 2001.
99.4	Press Release dated September 6, 2001.

(b)

Reports on Form 8-K

No report on Form 8-K was filed by the Company during the quarter ended July 27, 2001. Subsequent to the quarter ended July 27, 2001, the Company filed on September 5, 2001 a Report on Form 8-K reporting under (i) Item 2 its completion of the acquisitions of MiniMed Inc. (MiniMed) and Medical Research Group, Inc. (MRG) and (ii) Item 7 the financial results of MiniMed and MRG, certain year-end and quarter-end pro forma financial information of the Company, including the financial results of MiniMed and MRG.

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SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MEDTRONIC, INC. (REGISTRANT)
Date: September 10, 2001	/s/ ARTHUR D. COLLINS, JR. Arthur D. Collins, Jr. President and Chief Executive Officer
Date: September 10, 2001	/s/ ROBERT L. RYAN Robert L. Ryan Senior Vice President and Chief Financial Officer

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PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

MEDTRONIC, INC. STATEMENT OF CONSOLIDATED EARNINGS (Unaudited)
MEDTRONIC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
MEDTRONIC, INC. CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

PART II—OTHER INFORMATION

Item 3. Legal Proceedings
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

EX-3.2

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Exhibit 3.2

BYLAWS
OF
MEDTRONIC, INC.
(As Amended through April 25, 1991)

ARTICLE 1 - MEETINGS OF SHAREHOLDERS

1.1

Regular Meetings.  Regular meetings of the shareholders of the corporation shall be held each year on the date and at the time set by the Board of Directors or by the chief executive officer. At each regular meeting the shareholders shall elect the Board of Directors and shall transact such other business as shall come properly before the meeting, in accordance with applicable provisions of the Articles of Incorporation and these Bylaws.

1.2

Special Meetings.  A special meeting of the shareholders may be called for any purpose or purposes at any time by the chief executive officer; by the chief financial officer; by the Board of Directors or any two or more members thereof; or by one or more shareholders holding not less than ten percent of the voting power of all shares of the corporation entitled to vote (except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the Board of Directors for that purpose, must be called by twenty-five percent or more of the voting power of all shares of the corporation entitled to vote), who shall demand such special meeting by written notice given to the chief executive officer or the chief financial officer of the corporation specifying the purposes of such meeting.

1.3

Meetings Held Upon Shareholder Demand.  Within thirty days after receipt by the chief executive officer or the chief financial officer of a demand from any shareholder or shareholders entitled to call a meeting of the shareholders, it shall be the duty of the Board of Director to cause a special meeting of shareholders to be duly called and held on notice no later than ninety days after receipt of such demand. If the Board of Directors fails to cause such a meeting to be called and held as required by this Section, the shareholder or shareholders making the demand may call the meeting by giving notice as provided in Section 1.5 hereof at the expense of the corporation.

1.4

Place of Meetings.  Meetings of the shareholders shall be held at the principal executive office of the corporation or at such other place, within or without the State of Minnesota, as is designated by the Board of Directors or the chief executive officer, except that a meeting called by or at the demand of a shareholder shall be held in the county where the principal executive office of the corporation is located.

1.5

Notice of Meeting.  Except as otherwise specified in Section 1.6 or required by law, written notice of each meeting of shareholders, setting out the place, date and time of any regular or special meeting, shall be given not less than four days prior to the date of the meeting to each holder of shares entitled to vote. Notice of any special meeting shall state the purpose or purposes of the proposed meeting, and business transacted at all special meetings shall be confined to the purposes stated in the notice. A shareholder may waive notice of any meeting before, at or after the meeting, in writing, orally or by attendance. Attendance at a meeting by any shareholder is a waiver of notice of that meeting unless the shareholder objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened, or objects before a vote on an item of business because the item may not lawfully be considered at the meeting and does not participate in the consideration of the item at that meeting.

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1.6

Quorum and Adjourned Meeting.  The holders of a majority of the voting power of the shares entitled to vote at a meeting, represented either in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of shareholders. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though the withdrawal of a number of shareholders originally present leaves less than the proportion or number otherwise required for a quorum. In case a quorum is not present at any meeting, the meeting may be adjourned from time to time without notice other than announcement at the time of adjournment of the date, time and place at which the meeting will be reconvened. At any adjourned meeting in which a quorum is present, any business may be transacted which might have been transacted at the original meeting.

1.7

Voting.  At each meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person or by proxy duly appointed by an instrument in writing subscribed by such shareholder. Each shareholder shall have one vote for each share having voting power standing in such shareholder's name on the books of the corporation except as may be otherwise provided in the terms of the share. Upon the demand of any shareholder, the vote for directors or the vote upon any question before the meeting shall be by ballot. All elections shall be determined and all questions decided by a majority vote of the number of shares entitled to vote and represented at any meeting at which there is a quorum except in such cases as shall otherwise be required by statute, the Articles of Incorporation or these Bylaws.

1.8

Record Date.  The Board of Directors may fix a date, not exceeding sixty days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of and entitled to vote at such meeting. When a date is so fixed, only shareholders on that date are entitled to notice of and permitted to vote at that meeting of shareholders, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed.

ARTICLE 2 - DIRECTORS

2.1

Quorum and Voting.  A majority of the directors currently holding office shall constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn a meeting from time to time without further notice until a quorum is present. If a quorum is present when a duly called or held meeting is convened, the directors present may continue to transact business until adjournment, even though the withdrawal of a number of directors originally present leaves less than the proportion or number otherwise required for a quorum.

2.2

Place of Meetings.  Each meeting of the Board of Directors shall be held at the principal executive office of the corporation or at such other place as may be designated from time to time by a majority of the members of the Board, provided that if the Board shall not have designated the place of the meeting, the chief executive officer of the corporation (if then a director of the corporation) may designate a place other than the principal executive office of the corporation for any such meeting called by such chief executive officer in such officer's capacity as a director.

2.3

Regular Meetings.  Regular meetings of the Board of Directors for the election of officers and the transaction of any other business shall be held without notice at the place of and immediately after each regular meeting of the shareholders.

2.4

Special Meetings.  A special meeting of the Board of Directors may be called for any purpose or purposes at any time by any member of the Board by giving not less than twenty-four hours' notice to all directors of the date, time and place of the meeting, provided that when notice is mailed, at least four days' notice shall be given. The notice need not state the purpose of the

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meeting. If a meeting schedule is adopted by the Board, or if the day or date, time and place of a Board meeting have been announced at a previous Board meeting, no notice is required. Notice of an adjourned meeting need not be given other than by announcement at the meeting at which adjournment is taken.

2.5

Waiver of Notice.  A director may waive notice of a meeting of the Board. A waiver of notice by a director entitled to notice is effective whether given before, at or after the meeting, and whether given in writing, orally or by attendance. Attendance by a director at a meeting is a waiver of notice of that meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting.

2.6

Absent Directors.  A director may give advance written consent or opposition to a proposal to be acted on at a Board meeting. If the director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of or against the proposal and shall be entered in the minutes of the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected.

2.7

Electronic Communications.  (a) A conference among directors by any means of communication through which the directors may simultaneously hear each other during the conference constitutes a Board meeting, if the same notice is given of the conference as would be required for a meeting, and if the number of directors participating in the conference would be sufficient to constitute a quorum at a meeting. Participation in a meeting by that means constitutes presence in person at the meeting.

(b)  A director may participate in a Board meeting not described in paragraph (a) by any means of communication through which the director, other directors so participating, and all directors physically present at the meeting may simultaneously hear each other during the meeting. Participation in a meeting by that means constitutes presence in person at the meeting.

2.8

Action Without a Meeting.  An action required or permitted to be taken at a Board meeting may be taken without a meeting by written action signed by all of the directors. If the Articles of Incorporation so provide, any action, other than an action requiring shareholder approval, may be taken by written action signed by the number of directors that would be required to take the same action at a meeting of the Board at which all directors were present. The written action is effective when signed by the required number of directors, unless a different effective time is provided in the written action. When written action is permitted to be taken by less than all directors, all directors shall be notified immediately of its text and effective date.

2.9

Compensation.  Directors who are not salaried officers of the corporation shall receive such fixed sum and expenses per meeting attended or such fixed annual sum or both as shall be determined from time to time by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving this corporation in any other capacity and receiving proper compensation therefor.

2.10

Committees.  The Board of Directors may, by resolution approved by the affirmative vote of a majority of the Board, establish committees having the authority of the Board in the management of the business of the corporation only to the extent provided in the resolution. Each such committee shall consist of one or more natural persons (who, except as set forth below, need not be directors) appointed by affirmative vote of a majority of the directors present at a duly held Board meeting, and shall, except in the case of a committee of disinterested persons, be subject at all times to the direction and control of the Board. A majority of the

3

members of a committee shall constitute a quorum for the transaction of business. Such committees include but are not limited to the following:

(a)  Audit Committee.  The directors shall by resolution appoint members of the Board who are independent of management and who are free of any relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment, as an Audit Committee with such powers and duties as the Board may deem appropriate, subject to review by the Board of Directors.

(b)  Compensation Committee.  The directors shall by resolution appoint members of the Board who are independent of management and who are free of any relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment, as a Compensation Committee with such powers and duties as the Board may deem appropriate, subject to review by the Board of Directors.

(c)  Committee of Disinterested Persons.  The Board may by resolution establish a committee composed of two or more disinterested directors or other disinterested persons to determine whether it is in the best interests of the corporation to pursue a particular legal right or remedy of the corporation and whether to cause the dismissal or discontinuance of a particular proceeding that seeks to assert a right or remedy on behalf of the corporation. The committee, once established, is not subject to the direction or control of, or termination by, the Board. A vacancy on the committee may be filled by a majority vote of the remaining committee members. The good faith determinations of the committee are binding upon the corporation and its directors, officers and shareholders. The committee terminates when it issues a written report of its determinations to the Board.

ARTICLE 3 - OFFICERS

3.1

Number and Designation.  The corporation shall have one or more natural persons exercising the functions of the offices of chief executive officer and chief financial officer. The Board of Directors may elect or appoint such other officers or agents as it deems necessary for the operation and management of the corporation with such powers, rights, duties and responsibilities as may be determined by the Board, including, but not limited to, a Chairman of the Board, a President, one or more Executive Officers, a Secretary, a Treasurer and a Controller, each of whom shall have the powers, rights, duties and responsibilities set forth in these Bylaws unless otherwise determined by the Board. Any of the offices or functions of those offices may be held by the same person.

3.2

Election, Term of Office and Qualification.  At the first meeting of the Board following each election of directors, the Board shall elect officers who shall hold office until the next election of officers or until their successors are elected or appointed and qualify, provided, however, that any officer may be removed with or without cause by the affirmative vote of a majority of the Board of Directors present (without prejudice, however, to any contract rights of such officer).

3.3

Resignation.  Any officer may resign at any time by giving written notice to the corporation. The resignation is effective without acceptance when the notice is given to the corporation, unless a later effective date is specified in the notice.

3.4

Vacancies in Office.  A vacancy in any office of the corporation by reason of death, resignation, removal, disqualification or otherwise may, or in the case of a vacancy in the office of chief executive officer or chief financial officer, shall be filled for the unexpired term by the Board of Directors.

3.5

Chief Executive Officer.  Unless provided otherwise by a resolution adopted by the Board of Directors, the chief executive officer (a) shall have general active management of the business of

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the corporation; (b) shall, when present and in the absence of the Chairman of the Board, preside at all meetings of the shareholders and Board of Directors; (c) shall see that all orders and resolutions of the Board are carried into effect; (d) shall sign and deliver in the name of the corporation any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the Articles, these Bylaws or the Board to some other officer or agent of the corporation; (e) may appoint such divisional or staff officers, a secretary, a treasurer and a controller, each of whom shall have the powers, rights, duties and responsibilities delegated to him or her by the chief executive officer; (f) may maintain records of and certify proceedings of the Board and shareholders; and (g) shall perform such other duties as may from time to time be assigned by the Board.

3.6

Chief Financial Officer.  Unless provided otherwise by a resolution adopted by the Board of Directors, the chief financial officer (a) shall keep accurate financial records for the corporation; (b) shall deposit all monies, drafts and checks in the name of and to the credit of the corporation in such banks and depositories as the Board of Directors shall designate from time to time; (c) shall endorse for deposit all notes, checks and drafts received by the corporation as ordered by the Board, making proper vouchers therefor; (d) shall disburse corporate funds and issue checks and drafts in the name of the corporation, as ordered by the Board; (e) shall render to the chief executive officer and the Board of Directors, whenever requested, an account of all of such officer's transactions as chief financial officer and of the financial condition of the corporation; and (f) shall perform such other duties as may be prescribed by the Board of Directors or the chief executive officer from time to time.

3.7

(a) Chairman of the Board.  The Chairman of the Board shall preside at all meetings of the shareholders and directors and shall be an ex-officio member of all committees of the Board, except as otherwise prescribed by the Board of Directors. In the event of absence or disability of the President, the Chairman of the Board shall succeed to the powers and shall perform the duties of the President until such absence or disability has terminated or the Board of Directors has elected a new President or designated a Vice President or Vice Presidents to succeed to the powers and duties of the President. In general, the Chairman of the Board shall have the powers and duties usually vested in the office of Chairman of the Board, and shall have such other duties as may be prescribed by the Board of Directors.

(b)  Vice Chairman.  The Vice Chairman of the Board shall have such duties as may be prescribed by the Board of Directors.

3.8

President.  Unless otherwise determined by the Board, the President shall be the chief executive officer of the corporation. The President shall preside at all meetings of the shareholders and directors in the absence of the Chairman of the Board.

3.9

Executive Officers.  The executive officers may include Executive Vice Presidents, divisional Presidents, Vice Presidents and other officers who shall have such powers and shall perform such duties as may be specified in these Bylaws or prescribed by the Board of Directors. In the event of absence or disability of the President, the Board of Directors may designate a Vice President or Vice Presidents to succeed to the power and duties of the President.

3.10

Secretary.  The Secretary shall be secretary of and shall attend all meetings of the shareholders and Board of Directors. The Secretary shall give proper notice of meetings of shareholders and directors and shall keep minutes of such meetings and other actions of the Board. The Secretary shall certify proceedings of the Board of Directors and shareholders, shall have charge of the share registers and stock transfer records of the corporation and shall perform such other duties as may be prescribed by the Board of Directors or the chief executive officer from time to time.

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3.11

Treasurer.  The Treasurer shall perform such duties as may be prescribed by the Board of Directors or the chief executive officer from time to time.

3.12

Controller.  The Controller shall prepare financial reports, establish controls and perform such other duties as may be prescribed by the Board of Directors or the chief executive officer from time to time.

3.13

Delegation.  Unless prohibited by a resolution approved by the affirmative vote of a majority of the directors present, an officer elected or appointed by the Board may, without the approval of the Board, delegate some or all of the duties and powers of the office to other persons.

ARTICLE 4 - INDEMNIFICATION

4.1

Indemnification.  The corporation shall indemnify such persons, for such expenses and liabilities, in such manner, under such circumstances, and to such extent, as permitted by Minnesota Statutes, Section 302A.521, as now enacted or hereafter amended, or as required or permitted by other provisions of law.

4.2

Insurance.  The corporation may purchase and maintain insurance on behalf of any person in such person's official capacity against any liability asserted against and incurred by such person in or arising from that capacity, whether or not the corporation would otherwise be required to indemnify the person against the liability.

ARTICLE 5 - SHARES AND THEIR TRANSFERS

5.1

Certificate of Stock.  Every owner of stock of the corporation shall be entitled to a certificate, in such form as the Board of Directors may prescribe, certifying the number of shares of stock of the corporation owned by such shareholder. The certificates for such stock shall be numbered (separately for each class) in the order in which they are issued and shall, unless otherwise determined by the Board, be signed by the chief executive officer, the chief financial officer or any other officer of the corporation. A signature upon a certificate may be a facsimile. Certificates on which a facsimile signature of a former officer, transfer agent or registrar appears may be issued with the same effect as if such person had that capacity on the date of issue.

5.2

Stock Record.  As used in these Bylaws, the term "shareholder" shall mean the person in whose name outstanding shares of capital stock of the corporation are currently registered on the stock record books of the corporation. The corporation shall keep, at its principal executive office or at another place or places within the United States determined by the Board, a share register not more than one year old containing the names and addresses of the shareholders and the number and classes of shares held by each shareholder. The corporation shall also keep at its principal executive office or at another place or places within the United States determined by the Board, a record of the dates on which certificates representing shares were issued. Every certificate surrendered to the corporation for exchange or transfer shall be canceled and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled (except as provided for in Section 5.4 of this Article 5).

5.3

Transfer of Shares.  Transfer of shares on the books of the corporation may be authorized only by the shareholder named in the certificate (or his legal representative or duly authorized attorney-in-fact) and upon surrender for cancellation of the certificate or certificates for such shares. The shareholder in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation, provided that when any transfer of shares shall be made as collateral security and not absolutely, such fact, if known to the corporation or to the transfer agent, shall be so expressed in the entry of transfer, and provided further, that the Board of Directors may establish a procedure whereby a

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shareholder may certify that all or a portion of the shares registered in the name of the shareholder are held for the account of one or more beneficial owners.

5.4

Lost Certificate.  Any shareholder claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact in such form as the Board of Directors may require, and shall, if the directors so require, give the corporation a bond of sufficient indemnity in form and with one or more sureties satisfactory to the Board in order to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been destroyed or lost.

5.5

Record Date.  The Board of Directors may fix a date, not exceeding sixty days preceding the date fixed for the payment of any dividend or other distribution, as a record date for the determination of the shareholders entitled to receive payment of such dividend or other distribution, and in such case only shareholders of record on the date so fixed shall be entitled to receive payments of such dividend or other distribution, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed.

ARTICLE 6 - GENERAL PROVISIONS

6.1

Distributions, Acquisitions of Shares.  The Board of Directors may authorize distributions upon the shares of the corporation or acquisitions by the corporation of such shares to the extent permitted by law.

6.2

Fiscal Year.  The fiscal year of the corporation shall be established by the Board of Directors.

6.3

No Corporate Seal.  There shall be no corporate seal.

6.4

Voting Securities Held by the Corporation.  Unless otherwise ordered by the Board of Directors, the chief executive officer shall have full power and authority on behalf of the corporation (i) to attend and to vote at any meeting of security holders of other companies in which the corporation may hold securities; (ii) to execute any proxy for such meeting on behalf of the corporation; and (iii) to execute a written action in lieu of a meeting of such other company on behalf of this corporation. At such meeting, by such proxy or by such writing in lieu of meeting, the chief executive officer shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons.

6.5

Amendments.  The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the corporation, subject to the power of the shareholders to change or repeal the same, provided, however, that the Board shall not adopt, amend or repeal any Bylaw fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board, or fixing the number of directors or their classifications, qualifications or terms of office, but may adopt or amend a Bylaw that increases the number of directors.

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Exhibit 3.2

BYLAWS OF MEDTRONIC, INC. (As Amended through April 25, 1991)

EX-10.1

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Exhibit 10.1
[EXECUTION COPY]

$3,000,000,000 CREDIT AGREEMENT

dated as of

August 27, 2001

among

MEDTRONIC, INC.,

as Borrower,

CERTAIN OF ITS SUBSIDIARIES,

as Guarantors,

THE LENDERS PARTY HERETO,

BANK OF AMERICA, N.A.

as Administrative Agent

and

BANC OF AMERICA SECURITIES LLC,

as Sole Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

ARTICLE I  Definitions			1
	Section 1.01	Defined Terms	1
	Section 1.02	Classification of Loans and Borrowings	11
	Section 1.03	Terms Generally	11
	Section 1.04	Accounting Terms; GAAP	12
ARTICLE II  The Credits			12
	Section 2.01	Commitments	12
	Section 2.02	Loans and Borrowings	12
	Section 2.03	Requests for Borrowings	13
	Section 2.04	Funding of Borrowings	13
	Section 2.05	Interest Elections	14
	Section 2.06	Termination and Reduction of Commitments	15
	Section 2.07	Repayment of Loans; Evidence of Debt	15
	Section 2.08	Prepayment of Loans	16
	Section 2.09	Fees	17
	Section 2.10	Interest	17
	Section 2.11	Alternate Rate of Interest	18
	Section 2.12	Increased Costs	18
	Section 2.13	Break Funding Payments	19
	Section 2.14	Taxes	20
	Section 2.15	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	21
	Section 2.16	Mitigation Obligations; Replacement of Lenders	22
ARTICLE III  Representations and Warranties			23
	Section 3.01	Organization; Powers	23
	Section 3.02	Authorization; Enforceability	23
	Section 3.03	Governmental Approvals; No Conflicts	23
	Section 3.04	Financial Condition; No Material Adverse Change	23
	Section 3.05	Properties	23
	Section 3.06	Litigation and Environmental Matters	24
	Section 3.07	Compliance with Laws and Agreements	24
	Section 3.08	Investment and Holding Company Status	24
	Section 3.09	Taxes	24
	Section 3.10	ERISA	24
	Section 3.11	Disclosure	25
	Section 3.12	Federal Regulations	25
	Section 3.13	Purpose of Loans	25
	Section 3.14	Subsidiaries and Significant Subsidiaries	25
ARTICLE IV  Conditions			25
	Section 4.01	Closing Conditions	25
	Section 4.03	Each Credit Event	26

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ARTICLE V  Affirmative Covenants			27
	Section 5.01	Financial Statements and Other Information	27
	Section 5.02	Notices of Material Events	28
	Section 5.03	Existence; Conduct of Business	28
	Section 5.04	Payment of Obligations	28
	Section 5.05	Maintenance of Properties; Insurance	28
	Section 5.06	Books and Records; Inspection Rights	29
	Section 5.07	Compliance with Laws	29
	Section 5.08	Use of Proceeds	29
	Section 5.09	Maintenance of Accreditation, Etc.	29
	Section 5.10	Additional Subsidiary Guarantors	29
ARTICLE VI  Negative Covenants			29
	Section 6.01	Consolidated Tangible Net Worth	29
	Section 6.02	Indebtedness	29
	Section 6.03	Liens	30
	Section 6.04	Fundamental Changes	30
	Section 6.05	Transactions with Affiliates	31
	Section 6.06	Restrictive Agreements	31
	Section 6.07	Business Activity	31
	Section 6.08	Restricted Payments	31
ARTICLE VII  Events of Default			32
ARTICLE VIII  The Administrative Agent			33
ARTICLE IX  Miscellaneous			35
	Section 9.01	Notices	35
	Section 9.02	Waivers; Amendments	35
	Section 9.03	Expenses; Indemnity; Damage Waiver	36
	Section 9.04	Successors and Assigns	37
	Section 9.05	Survival	39
	Section 9.06	Counterparts; Integration; Effectiveness	40
	Section 9.07	Severability	40
	Section 9.08	Right of Setoff	40
	Section 9.09	Governing Law; Jurisdiction; Consent to Service of Process	40
	Section 9.10	Waiver of Jury Trial	41
	Section 9.11	Headings	41
	Section 9.12	Confidentiality	41

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ARTICLE X  GUARANTY			42
	Section 10.1	The Guaranty	42
	Section 10.2	Bankruptcy	42
	Section 10.3	Nature of Liability	42
	Section 10.4	Independent Obligation	43
	Section 10.5	Authorization	43
	Section 10.6	Reliance	43
	Section 10.7	Waiver	43
	Section 10.8	Limitation on Enforcement	44
	Section 10.9	Confirmation of Payment	44
SCHEDULES:
Schedule 2.01—Commitments
Schedule 3.06—Disclosed Matters
Schedule 3.14—Subsidiaries and Significant Subsidiaries
Schedule 6.02—Existing Indebtedness
Schedule 6.03—Existing Liens
EXHIBITS:
Exhibit A—Form of Assignment and Acceptance
Exhibit B—Form of Joinder Agreement

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CREDIT AGREEMENT

    CREDIT AGREEMENT dated as of August 27, 2001 among Medtronic, Inc., a Minnesota corporation (the "Borrower"), the Subsidiaries of the Borrower listed on the signature pages hereto (individually a "Guarantor", collectively the "Guarantors"), the Lenders party hereto, and Bank of America, N.A., as Administrative Agent.

W I T N E S S E T H:

WHEREAS, the Borrower and the Guarantors have requested that the Lenders provide a $3,000,000,000 credit facility for the purposes hereinafter set forth; and

WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth;

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Definitions

    Section 1.01  Defined Terms.

    As used in this Credit Agreement, the following terms have the meanings specified below:

    "ABR",  when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

    "Acquisition",  shall mean collectively the acquisitions contemplated by the Acquisition Agreement.

    "Acquisition Agreement"  shall mean collectively the Amended and Restated Agreement and Plan of Merger dated as of July 27, 2001 among the Borrower, the Merger Sub named therein, and Medical Research, Inc. and the Amended and Restated Merger Agreement and Plan of Merger dated as of June 19, 2001 among the Borrower, the Merger Sub named therein and MiniMed Inc., as the same may be amended, supplemented or otherwise modified in accordance with the terms hereof and thereof.

    "Acquisition Documents"  shall mean the Acquisition Agreement and all other instruments, documents and agreements executed and delivered in connection with the consummation of the Acquisition (excluding this Credit Agreement and the other Credit Documents), including, without limitation, any stockholders, registration or other agreements related thereto, as the same may be amended, supplemented or otherwise modified in accordance with the terms hereof and thereof.

    "Administrative Agent"  means Bank of America, in its capacity as administrative agent for the Lenders hereunder, and its successors in such capacity.

    "Administrative Questionnaire"  means an Administrative Questionnaire in a form supplied by the Administrative Agent.

    "Affiliate"  means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

    "Alternate Base Rate"  means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the

Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

    "Applicable Percentage"  means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments

    "Applicable Rate"  means, for purposes of calculating the applicable interest rate for any day with respect to the facility fees payable hereunder, the applicable rate per annum set forth below (in basis points) under the caption "Facility Fee Rate" based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt.

Category	S&P /Moody's Rating	Facility Fee Rate
I	Greater than or equal to AA-/Aa3	4.0
II	Greater than or equal to A+/A1 but less than AA-/Aa3	5.0
III	Greater than or equal to A/A2 but less than A+/A1	7.0
IV	Greater than or equal to A-/A3 but less than A/A2	8.0
V	Less than A-/A3	10.0

    For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category V; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless one of the two ratings is two or more Categories lower than the other, in which case the Applicable Rate shall be determined by reference to the Category next above that of the lower of the two ratings; and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation.

    "Approved Fund"  means with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

    "Assignment and Acceptance"  means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

    "Availability Period"  means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

    "Bank of America"  means Bank of America, N.A.

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    "Board"  means the Board of Governors of the Federal Reserve System of the United States of America.

    "Borrower"  means Medtronic, Inc., a Minnesota corporation.

    "Borrowing"  means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

    "Borrowing Request"  means a request by the Borrower for a Borrowing in accordance with Section 2.03.

    "Business Day"  means any day that is not a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

    "Capital Lease Obligations"  of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

    "Capital Stock"  means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

    "Cash Equivalents"  shall mean (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition ("Government Obligations"), (b) U.S. dollar denominated (or foreign currency fully hedged) time deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 or (z) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 364 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or commercial paper or any variable rate notes issued by, or guaranteed by any domestic corporation rated A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements with a bank or trust company (including a Lender) or a recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America, (e) obligations of any state of the United States or any political subdivision thereof for the payment of the principal and redemption price of and interest on which there shall have been irrevocably deposited Government Obligations maturing as to principal and interest at times and in amounts sufficient to provide such payment and (f) auction preferred stock rated in the highest short-term credit rating category by S&P or Moody's.

3

    "Change in Control"  means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group.

    "Change in Law"  means (a) the adoption of any law, rule or regulation after the date of this Credit Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Credit Agreement or (c) compliance by any Lender (or, for purposes of Section 2.12(b), by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Credit Agreement.

    "Closing Date"  means the date hereof.

    "Code"  means the Internal Revenue Code of 1986, as amended from time to time.

    "Commitment"  means with respect to each Lender, the commitment of such Lender to make Loans hereunder, as such commitment may be reduced from time to time pursuant to Section 2.06. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable.

    "Consolidated Assets"  means the consolidated assets of the Borrower and its Subsidiaries, determined in accordance with GAAP.

    "Consolidated Net Income"  means, for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or requirement of law applicable to such Subsidiary.

    "Consolidated Net Tangible Assets"  means the Consolidated Assets less: (i) all current liabilities and minority interests and (ii) goodwill and other intangibles (other than patents, trademarks, licenses, copyrights and other intellectual property and prepaid assets).

    "Consolidated Tangible Net Worth"  means at any date, Consolidated Net Tangible Assets minus Consolidated Total Liabilities, determined in accordance with GAAP.

    "Consolidated Total Liabilities"  means at any date, with respect to the Borrower and its Subsidiaries on a consolidated basis, total liabilities, determined in accordance with GAAP.

    "Control"  means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

4

    "Credit Documents"  means a collective reference to this Credit Agreement, the Notes, if any, each Joinder Agreement and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto (in each case as the same may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time), and "Credit Document" means any one of them.

    "Debt Issuance"  means the issuance of any Indebtedness for borrowed money by the Borrower or any of its Subsidiaries.

    "Default"  means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

    "Disclosed Matters"  means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06.

    "dollars" or "$"  refers to lawful money of the United States of America.

    "Effective Date"  shall mean the date upon which the conditions in Section 4.2 shall have been satisfied and the initial Loans shall have been made by the Lenders.

    "Environmental Laws"  means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material.

    "Environmental Liability"  means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

    "Equity Issuance"  means any issuance by the Borrower or any of its Subsidiaries to any Person of (a) shares of its Capital Stock other than (i) any shares of its Capital Stock pursuant to the exercise of options or warrants, (ii) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity and (iii) in the case of Subsidiaries, any shares of its Capital Stock issued to the Borrower or any of its Subsidiaries or (b) any options or warrants relating to its Capital Stock. The term "Equity Issuance" shall not include (i) any Debt Issuance or (ii) the issuance of Capital Stock of the Borrower to its officers, directors or employees.

    "ERISA"  means the Employee Retirement Income Security Act of 1974, as amended from time to time.

    "ERISA Affiliate"  means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

    "ERISA Event"  means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an

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application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

    "Eurodollar",  when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the LIBO Rate.

    "Event of Default"  has the meaning assigned to such term in Article VII.

    "Excluded Taxes"  means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Lender is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.16(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Credit Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.14(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.14(a).

    "Federal Funds Effective Rate"  means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

    "Financial Officer"  means the chief financial officer, principal accounting officer, senior vice president of finance, treasurer or controller of the Borrower or any officer having substantially the same position for the Borrower.

    "Foreign Lender"  means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

    "GAAP"  means generally accepted accounting principles in the United States of America.

    "Governmental Authority"  means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority,

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instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

    "Guarantee"  of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

    "Guarantor"  means each of the Persons identified as a "Guarantor" on the signature pages hereto and each Person which may hereafter execute a Joinder Agreement pursuant to Section 5.10, together with their successors and permitted assigns, and "Guarantor" means any one of them.

    "Guaranty"  shall mean the guaranty of the Guarantors set forth in Article X.

    "Hazardous Materials"  means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

    "Hedging Agreement"  means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

    "Indebtedness"  of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to similar cash advances (but excluding any premiums, fees and deposits received in the ordinary course of business), (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable or other like obligations incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the

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foregoing, Indebtedness shall exclude Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary.

    "Indemnified Taxes"  means Taxes other than Excluded Taxes.

    "Index Debt"  means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.

    "Interest Election Request"  means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05.

    "Interest Payment Date"  means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period.

    "Interest Period"  means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.

    "Lenders"  means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance.

    "LIBO Rate"  means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of Telerate (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

    "Lien"  means, with respect to any asset (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

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    "Loans"  means the loans made by the Lenders to the Borrower pursuant to this Credit Agreement.

    "Material Adverse Effect"  means a material adverse effect on (a) the business, property, operations or financial condition of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Credit Agreement or (c) the legal rights of or benefits available to the Lenders under this Credit Agreement.

    "Material Indebtedness"  means Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

    "Maturity Date"  means February 27, 2002.

    "Moody's"  means Moody's Investors Service, Inc.

    "Multiemployer Plan"  means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

    "Net Cash Proceeds"  means the aggregate proceeds paid in cash or Cash Equivalents received by the Borrower or any of its Subsidiaries in respect of any Equity Issuance or Debt Issuance, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and (b) taxes paid or payable as a result thereof; it being understood that "Net Cash Proceeds" shall include, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by the Borrower or any Subsidiary of the Borrower in any Equity Issuance or Debt Issuance.

    "Other Taxes"  means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Credit Agreement.

    "PBGC"  means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

    "Permitted Encumbrances"  means:

    (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04;

    (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04;

    (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations;

    (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

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    (e) Liens arising out of judgments or awards so long as an appeal or proceeding for review is being prosecuted in good faith and for the payment of which adequate reserves, bonds or other security reasonably acceptable to the Administrative Agent have been provided or are fully covered by insurance; and

    (f)  easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;

provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness.

    "Person"  means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

    "Plan"  means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

    "Prime Rate"  means the rate of interest per annum publicly announced from time to time by Bank of America as its prime rate in effect at its principal office in Charlotte, North Carolina; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

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

    "Register"  has the meaning set forth in Section 9.04(c).

    "Related Parties"  means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.

    "Required Lenders"  means, at any time, Lenders having Loans and unused Commitments representing more than 50% of the sum of the total Loans and unused Commitments at such time.

    "Restricted Payment"  means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding, and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding.

    "SEC"  means the United States Securities and Exchange Commission.

    "S&P"  means Standard & Poor's Ratings Services.

    "Significant Subsidiary"  means, at any particular time, any Subsidiary of the Borrower (or such Subsidiary and its Subsidiaries taken together) that would be a "significant subsidiary" of the Borrower within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

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    "Statutory Reserve Rate"  means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent or any Lender is subject for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

    "subsidiary"  means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

    "Subsidiary"  means any subsidiary of the Borrower.

    "Taxes"  means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

    "Transactions"  means the execution, delivery and performance by the Borrower of this Credit Agreement, the borrowing of Loans and the use of the proceeds thereof.

    "Type",  when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the LIBO Rate or the Alternate Base Rate.

    "Used Commitment"  means on any day the aggregate outstanding principal amount of Loans.

    "Withdrawal Liability"  means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

    Section 1.02  Classification of Loans and Borrowings.

    For purposes of this Credit Agreement, Loans may be classified and referred to by Type (e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing").

    Section 1.03  Terms Generally.

    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to

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such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Credit Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Credit Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

    Section 1.04  Accounting Terms; GAAP.

    Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

The Credits

    Section 2.01  Commitments.

    Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (a) the aggregate principal amount of such Lender's Loans exceeding such Lender's Commitment or (b) the aggregate principal amount of Loans exceeding the total Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.

    Section 2.02  Loans and Borrowings.

    (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required.

    (b) Subject to Section 2.11, (i) each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Credit Agreement.

    (c) At the commencement of each Interest Period for any Eurodollar Borrowing or ABR Borrowing, such Borrowing shall be in a minimum aggregate amount of $5,000,000 and integral multiples of $500,000 in excess thereof; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments. Borrowings of more

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than one Type may be outstanding at the same time; provided that there shall not at any time be more than an aggregate total of ten Eurodollar Borrowings outstanding.

    (d) Notwithstanding any other provision of this Credit Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

    Section 2.03  Requests for Borrowings.

    To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon (Charlotte, North Carolina time), two Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon (Charlotte, North Carolina time), on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

     (i) the aggregate amount of the requested Borrowing;

    (ii) the date of such Borrowing, which shall be a Business Day;

    (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

    (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and

    (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04.

    If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.

    Section 2.04  Funding of Borrowings.

    (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m. (Charlotte, North Carolina time), to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in Charlotte, North Carolina and designated by the Borrower in the applicable Borrowing Request.

    (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding

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amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing.

    Section 2.05  Interest Elections.

    (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefore, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

    (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.

    (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

    (i)  the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

    (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

    (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

    (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period."

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration.

    (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.

    (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Eurodollar Borrowing with an Interest Period of one month's duration.

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Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

    Section 2.06  Termination and Reduction of Commitments.

    (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

    (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments in whole or in part; provided that (i) each reduction of the Commitments shall be in an aggregate amount not less than $50,000,000 and integral multiples of $10,000,000 in excess thereof and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.08, the aggregate principal amount of outstanding Loans would exceed the total Commitments.

    (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

    Section 2.07  Repayment of Loans; Evidence of Debt.

    (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan and all interest, fees and other amounts payable hereunder on the Maturity Date.

    (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

    (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof.

    (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Credit Agreement.

    (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its

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registered assigns) and in a form approved by the Administrative Agent and the Borrower. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

    Section 2.08  Prepayment of Loans.

    (a)  Voluntary Prepayments.  (i) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty, subject to Section 2.13 and subject to prior notice in accordance with paragraph (a)(ii) of this Section. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (A) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m. (Charlotte, North Carolina time), two Business Days before the date of prepayment, or (B) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m. (Charlotte, North Carolina time), one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.06, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10.

    (b)  Mandatory Prepayments.

    (i)  Commitment.  If at any time, the aggregate outstanding amount of the Loans shall exceed the aggregate Commitment, the Borrower immediately shall prepay the Loans, in an amount sufficient to eliminate such excess.

    (ii)  Debt Issuances.  Immediately upon receipt by the Borrower or any of its Subsidiaries of proceeds from any Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Debt Issuance (such prepayment to be applied as set forth in clause (iv) below).

    (iii)  Equity Issuances.  Immediately upon receipt by the Borrower or any of its Subsidiaries of proceeds from any Equity Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Equity Issuance (such prepayment to be applied as set forth in clause (iv) below).

    (iv)  Application of Mandatory Prepayments.  All amounts required to be paid pursuant to this Section 2.08(b) shall be applied as follows: (A) with respect to all amounts prepaid pursuant to Section 2.08(b)(i), to the Loans (with no corresponding reduction in the Commitment) and (B) with respect to all amounts prepaid pursuant to Section 2.08(b)(ii) or (iii) to the Loans (with a corresponding reduction in the Commitment in an amount equal to all amounts applied to the Loans pursuant to this clause (B)). Within the parameters of the applications set forth above, prepayments shall be applied first to ABR Loans and then to Eurodollar Loans in direct order of Interest Period maturities. Each prepayment of a Borrowing pursuant to this Section 2.08(b) shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10.

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    Section 2.09  Fees.

    (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee, which shall accrue at the Applicable Rate on the daily amount of the Commitment of such Lender (whether used or unused) during the period from and including the Closing Date to but excluding the date on which such Commitment terminates; provided that, if such Lender continues to have any outstanding Loans after its Commitment terminates, then such facility fee shall continue to accrue on the daily aggregate principal amount of such Lender's outstanding Loans from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any outstanding Loans. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

    (b) In the event that on December 31, 2001, Bank of America holds 100% of the Commitments hereunder, the Borrower shall pay to Bank of America, for its own account, a utilization fee calculated at the rate equal to 5 basis points on the Used Commitment as of such date, payable on the next Business Day.

    (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

    (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

    Section 2.10  Interest.

    (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate.

    (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the LIBO Rate for the Interest Period in effect for such Borrowing plus .25%.

    (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due (following the expiration of any grace period specified in Article VII), whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided above.

    (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefore, accrued interest on such Loan shall be payable on the effective date of such conversion and (iv) all accrued interest shall be payable upon termination of the Commitments.

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    (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

    (f)  If any Lender shall be required under the regulations of the Board to maintain reserves with respect to liabilities or assets consisting of, or including, Eurocurrency Liabilities (as defined in Regulation D of the Board), the Borrower shall pay to the Administrative Agent for the account of such Lender, additional interest on the unpaid principal amount of each Eurodollar Loan made to the Borrower by such Lender, from the date of such Loan until such Loan is paid in full, at an interest rate per annum equal at all times during the Interest Period for such Eurodollar Loan to the remainder obtained by subtracting (i) the LIBO Rate for such Interest Period from (ii) the rate obtained by multiplying LIBO Rate as referred to in clause (i) above by the Statutory Reserve Rate applicable to such Lender for such Interest Period. Such additional interest shall be determined by such Lender and notified to the Borrower (with a copy to the Administrative Agent) not later than five Business Days before the next Interest Payment Date for such Eurodollar Loan, and such additional interest so notified to the Borrower by any Lender shall be payable to the Administrative Agent for the account of such Lender on each Interest Payment Date for such Eurodollar Loan.

    Section 2.11  Alternate Rate of Interest.

If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

    (a) the Administrative Agent reasonably determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or

    (b) the Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not, in their reasonable judgment, adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.

    Section 2.12  Increased Costs.

    (a) If any Change in Law shall:

    (i)  impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (other than any reserves included in the Statutory Reserve Rate); or

    (ii) impose on any Lender or the London interbank market any other condition affecting this Credit Agreement or Eurodollar Loans made by such Lender;

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and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

    (b) If any Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Credit Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.

    (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and the method of calculating such amounts, in reasonable detail, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

    (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefore; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof.

    Section 2.13  Break Funding Payments.

    In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.08(a) if such notice is revoked in accordance herewith two Business Days or less before the specified effective date), (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.16, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense (but not loss of profit) attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount reasonably determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate

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of such Lender) for dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

    Section 2.14  Taxes.

    (a) Any and all payments by or an account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

    (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

    (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefore, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

    (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

    (e) Each Foreign Lender, on or prior to the date of its execution and delivery of this Credit Agreement or on the date of the Assignment and Acceptance pursuant to which it becomes a Lender, as applicable, shall provide the Borrower with any form or certificate that is required by any taxing authority (including, if applicable, two original Internal Revenue Service Forms W-9, W-8BEN or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service), certifying that such Lender is exempt from or entitled to a reduced rate of withholding taxes on payments pursuant to this Credit Agreement. Thereafter, each such Lender shall provide additional forms or certificates (i) to the extent a form or certificate previously provided has been inaccurate, invalid or otherwise ceases to be effective or (ii) as requested in writing by the Borrower. If any Foreign Lender fails to comply with the provisions of this Section, the Borrower, may, as required by law, deduct and withhold federal income tax payments from payments to such Lender under this Credit Agreement.

    (f)  Any Lender claiming any additional amounts payable pursuant to this Section 2.14 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to select or change the jurisdiction of its applicable lending office if the making of such a selection or change would avoid the need for, or reduce the amount of, any such additional amounts that may

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thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise economically disadvantageous to such Lender.

    (g) If any Lender or the Administrative Agent, as the case may be, obtains a refund or any Tax for which payment has been made pursuant to this Section 2.14, which refund in the good faith judgment of such Lender or the Administrative Agent, as the case may be, (and without any obligation to disclose its tax records) is allocable to such payment made under this Section 2.14, the amount of such refund (together with any interest received thereon and reduced by reasonable costs incurred in obtaining such refund) promptly shall be paid to the Borrower to the extent payment has been made in full by the Borrower pursuant to this Section 2.14.]

    Section 2.15  Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

    (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees under Section 2.12, 2.13 or 2.14, or otherwise) prior to 12:00 noon(Charlotte, North Carolina time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 100 North Tryon, Charlotte, North Carolina except that payments pursuant to Sections 2.12, 2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

    (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

    (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Credit Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of

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set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

    (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate.

    (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.15(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.

    Section 2.16  Mitigation Obligations; Replacement of Lenders.

    (a) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

    (b) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Credit Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

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ARTICLE III

Representations and Warranties

    The Borrower represents and warrants to the Lenders that:

    Section 3.01  Organization; Powers.

    Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

    Section 3.02  Authorization; Enforceability.

    The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, shareholder action. This Credit Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

    Section 3.03  Governmental Approvals; No Conflicts.

    The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.

    Section 3.04  Financial Condition; No Material Adverse Change.

    (a) The Borrower has heretofore furnished to the Lenders (i) its consolidated balance sheet and statements of operations, shareholders' equity and cash flows as of and for the fiscal year ended April 27, 2001, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) its consolidated balance sheet and statements of operations and cash flows as of and for the fiscal quarter ended June 30, 2001, signed by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

    (b) Since April 27, 2001, there has been no material adverse change in the business, assets, operations, or financial condition of the Borrower and its Subsidiaries, taken as a whole, other than as disclosed in the Borrower's quarterly report on Form 10-Q for its fiscal quarter ending on June 30, 2001 as filed with the SEC prior to the date hereof.

    Section 3.05  Properties.

    (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do

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not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

    (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

    Section 3.06  Litigation and Environmental Matters.

    (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Credit Agreement or the Transactions.

    (b) Except for the Disclosed Matters or except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

    (c) Since the date of this Credit Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or could reasonably be expected to result in a Material Adverse Effect.

    Section 3.07  Compliance with Laws and Agreements.

    Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

    Section 3.08  Investment and Holding Company Status.

    Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

    Section 3.09  Taxes.

    Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed (taking into account any extensions granted by the applicable taxing authority) and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

    Section 3.10  ERISA.

    No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be

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expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value of the assets of all such underfunded Plans.

    Section 3.11  Disclosure.

    The Borrower has disclosed (which disclosure includes all filings by the Borrower pursuant to the Securities Exchange Act of 1934) to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished in writing by or on behalf of the Borrower to the Administrative Agent or any Lender for use specifically in connection with the negotiation of this Credit Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

    Section 3.12  Federal Regulations.

    No part of the proceeds of any Loans will be used in any transaction or for any purpose which violates the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System, as now and from time to time hereafter in effect. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of Form FR U-1 referred to in said Regulation U.

    Section 3.13  Purpose of Loans.

    The proceeds of the Loans shall be used to finance (i) the Acquisition pursuant to the Acquisition Documents and (ii) any lawful general corporate purpose and working capital.

    Section 3.14  Subsidiaries and Significant Subsidiaries.

    Set forth on Schedule 3.14 is a complete and accurate list of all Subsidiaries and all Significant Subsidiaries as of the Closing Date.

ARTICLE IV

Conditions

    Section 4.01  Closing Conditions.

    This Credit Agreement shall become effective on the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

    (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Credit Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Credit Agreement) that such party has signed a counterpart of this Credit Agreement.

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    (b) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower and each of the Guarantors, the authorization of the Transactions and any other legal matters relating to the Borrower, the Guarantors, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

    The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding.

    Section 4.02  Conditions to Initial Loan.

    The obligation of each Lender to make the initial Loan are subject to satisfaction of each of the following conditions (in addition to satisfaction of each of the conditions set forth in Section 4.01 as of the Closing Date):

    (a) The Administrative Agent shall have received a favorable written opinion or opinions (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of special counsel for the Borrower and the Guarantors and covering such other matters relating to the Borrower, the Guarantors, this Credit Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion.

    (b) The Acquisition Documents shall have been, or shall be simultaneously with the incurrence of the Loans, completed to the satisfaction of the Administrative Agent and the Acquisition and related transactions shall have been consummated substantially in accordance with the terms of the Acquisition Documents. The Acquisition Documents shall not have been altered, amended or otherwise modified or supplemented or any material condition thereof waived without the prior written consent of the Administrative Agent. The Administrative Agent shall have received a copy, certified by an officer of the Borrower as true and complete, of each Acquisition Document as originally executed and delivered, together with all exhibits and schedules thereto.

    (c) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.03.

    (d) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, and, to the extent invoiced, the reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

    Section 4.03  Each Credit Event.

    The obligation of each Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions (in additional to satisfaction of each of the conditions set forth in Section 4.01 as of the Closing Date and satisfaction of each of the conditions set forth in Section 4.02 as of the Effective Date):

    (a) The representations and warranties of the Borrower set forth in this Credit Agreement shall be true and correct on and as of the date of such Borrowing.

    (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing.

    Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

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ARTICLE V

Affirmative Covenants

    Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that:

    Section 5.01  Financial Statements and Other Information.

    The Borrower will furnish to the Administrative Agent (with copies for each Lender):

    (a) within 55 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (including the fiscal quarter ending on September 30, 2001), its consolidated balance sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (the Lenders agree that the Borrower's obligations under this paragraph (b) will be satisfied in respect of any fiscal quarter by delivering to the Administrative Agent, with copies for each Lender, within 55 days after the end of such fiscal quarter of its quarterly report for such fiscal quarter on Form 10-Q as filed with the SEC);

    (b) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.01 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

    (c) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

    (d) promptly after the same become publicly available or upon transmission or receipt thereof, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be, provided that, with respect to materials filed with any national securities exchange, only material filings shall be required to be delivered pursuant to this clause (e); and

    (e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Credit Agreement, as the Administrative Agent or any Lender (acting through the Administrative Agent) may reasonably request.

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    Section 5.02  Notices of Material Events.

    The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of, but in any event not later than five Business Days after, the following:

    (a) the occurrence of any Default;

    (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

    (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $25,000,000;

    (d) the non-compliance or potential non-compliance with any contractual obligation or requirement of law that is not currently being contested in good faith by appropriate proceedings if all such non-compliance in the aggregate could reasonably be expected to have a Material Adverse Effect;

    (e) the revocation of any license, permit, authorization, certificate, qualification or accreditation of the Borrower or any Subsidiary by any Governmental Authority if all such revocations in the aggregate could reasonably be expected to have a Material Adverse Effect; and

    (f)  any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

    Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

    Section 5.03  Existence; Conduct of Business.

    The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation, dissolution or stock or asset sale permitted under Section 6.04.

    Section 5.04  Payment of Obligations.

    The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

    Section 5.05  Maintenance of Properties; Insurance.

    The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations or maintain a system or systems of self-insurance or assumption of risk which accords with the practices of similar businesses.

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    Section 5.06  Books and Records; Inspection Rights.

    The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.

    Section 5.07  Compliance with Laws.

    The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

    Section 5.08  Use of Proceeds.

    The proceeds of the Loans will be used for the purposes described in Section 3.13. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X.

    Section 5.09  Maintenance of Accreditation, Etc.

    The Borrower will preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, all licenses, permits, authorizations, certifications and qualifications (including, without limitation, those qualifications with respect to solvency and capitalization) required, except where the failure to do so would not result in a Material Adverse Effect.

    Section 5.10  Additional Subsidiary Guarantors.

    The Borrower will cause each of its Significant Subsidiaries, whether newly formed, after acquired or otherwise existing, to promptly become a Guarantor hereunder by way of execution of a Joinder Agreement in the form of Exhibit B.

ARTICLE VI

Negative Covenants

    Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that:

    Section 6.01  Consolidated Tangible Net Worth.

    The Consolidated Tangible Net Worth shall at all times be greater than or equal to $730,900,000, increased by the sum of, on a cumulative basis as of the end of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending September 30, 2001, (i) an amount equal to 50% of Consolidated Net Income (to the extent positive) for the fiscal quarter then ended plus (ii) an amount equal to 100% of the Net Cash Proceeds from any Equity Issuance occurring after the Effective Date.

    Section 6.02  Indebtedness.

    The Borrower will not, and will not permit any Subsidiary to, create, incur, create, assume or permit to exist any other Indebtedness or liability on account of borrowed money, represented by any

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notes, bonds, debentures or similar obligations, or on account of the deferred purchase price of any property, or any other deposits, advance or progress payments under contracts, except:

    (a) Indebtedness arising or existing under this Credit Agreement and the other Credit Documents;

    (b) Indebtedness existing on the date hereof and set forth in Schedule 6.02 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof;

    (c) Indebtedness of the Borrower and its Subsidiaries incurred after the Closing Date consisting of Capital Lease Obligations or Indebtedness incurred to provide all or a portion of the purchase price or cost of construction of an asset provided that (i) such Indebtedness when incurred shall not exceed the purchase price or cost of construction of such asset and (ii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing;

    (d) Indebtedness of any Subsidiary to the Borrower or any other Subsidiary;

    (e) Indebtedness secured by Liens to the extent permitted under Section 6.03(d);

    (f)  other unsecured Indebtedness of the Borrower and its Subsidiaries; provided that such Indebtedness is not senior in right of payment to the payment of the Indebtedness arising or existing under this Credit Agreement and the other Credit Documents.

    Section 6.03  Liens.

    The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

    (a) Permitted Encumbrances;

    (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.03; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

    (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; or

    (d) Liens not otherwise permitted under this Section securing obligations in an aggregate amount not exceeding at any time 10% of Consolidated Net Tangible Assets as at the end of the immediately preceding fiscal quarter of the Borrower.

    Section 6.04  Fundamental Changes.

    The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its

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assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Person, including any Affiliate, may merge with any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary, (iv) any Subsidiary may liquidate or dissolve or the Borrower or any Subsidiary may sell, transfer, lease or otherwise dispose of the assets or stock of any Subsidiary if, in each case, the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders, (v) the Borrower and its Subsidiaries may sell immaterial businesses, including Subsidiaries, in the ordinary course of business and (vi) any Subsidiary formed for the purpose of acquiring a minority interest in * Corporation may merge into * Corporation.

    Section 6.05  Transactions with Affiliates.

    The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliates, (c) contributions to the Medtronic Foundation in amounts consistent with past practices or (d) as otherwise permitted by this Credit Agreement.

    Section 6.06  Restrictive Agreements.

    The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Subsidiary to grant a lien on its properties or assets whether now owned or hereafter acquired or pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law, rule, regulation or regulatory administrative agreement or determination or by this Credit Agreement, and (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder.

    Section 6.07  Business Activity.

    The Borrower will not, nor will it permit any Significant Subsidiary to, alter the character of its business in any material respect from that conducted as of the Closing Date.

    Section 6.08  Restricted Payments.

    The Borrower will not, nor will it permit any Subsidiary to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make dividends payable solely in the same class of capital stock of such Person, (b) to make dividends or other distributions payable to the Borrower (directly or indirectly through Subsidiaries) and ratably to minority shareholders and (c) other distributions in respect of the capital stock of such Person or the redemption, retirement, purchase or other acquisition of the capital stock of such Person (or any warrant, option or other rights with respect to any shares of capital stock (now or hereafter outstanding) of such Person) if no Default has occurred and is continuing or would result from such action.

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ARTICLE VII

Events of Default

    If any of the following events ("Events of Default") shall occur:

    (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise (or any Guarantor shall fail to pay on the Guaranty in respect of any of the foregoing or in respect of any other Guaranty Obligations thereunder);

    (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Credit Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days;

    (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Credit Agreement or any amendment or modification hereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Credit Agreement or any amendment or modification hereof, shall prove to have been incorrect in any material respect when made or deemed made;

    (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article VI;

    (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Credit Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower;

    (f)  the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

    (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with the giving of notice if required) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

    (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

    (i)  the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any

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Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

    (j)  the Borrower or any Significant Subsidiary shall become unable, admit in writing or fail generally to pay its debts as they become due;

    (k) one or more judgments or decrees shall be rendered against the Borrower, any Significant Subsidiary or any combination thereof and the same shall not have been paid, vacated, discharged, stayed or bonded pending appeal within 45 days from the entry thereof that involves in the aggregate a liability (not paid or fully covered by insurance) of $25,000,000 or more;

    (l)  an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

    (m) a Change in Control of the Borrower shall occur; or

    (n) the Guaranty or any provision thereof shall cease to be in full force and effect (other than in accordance with its terms) or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm any Guarantor's obligations under the Guaranty;

then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately (and the Commitments shall terminate), without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII

The Administrative Agent

    Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

    The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

    The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be

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subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Credit Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Credit Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

    The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

    The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

    The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article and Section 9.03 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative

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Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

    Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Credit Agreement, any related agreement or any document furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

    Section 9.01  Notices.

    Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

    (a) if to the Borrower, to it at Medtronic, Inc., 710 Medtronic Parkway N.E., Minneapolis, MN 55432-5604, Attention: Treasury Department, Mail Stop LC480 (Telecopy No. (763) 505-2700), with a copy to the attention of General Counsel, Mail Stop LC400 (Telecopy No. (763) 572-5459);

    (b) if to the Administrative Agent, to Bank of America, N.A., Independence Center, 15^th Floor, NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency Services—Neil Hendrix, Telephone: 704-386-4220, Telecopy: 704-409-0017; and

    (c) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Credit Agreement shall be deemed to have been given on the date of receipt.

    Section 9.02  Waivers; Amendments.

    (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Credit Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

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    (b) Neither this Credit Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly affected thereby, (iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender or release all or substantially all of the Guarantors from their obligations under this Credit Agreement; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent.

    Section 9.03  Expenses; Indemnity; Damage Waiver.

    (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Credit Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Credit Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof.

    (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Credit Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the actual or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee.

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    (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.

    (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Credit Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof.

    (e) All amounts due under this Section shall be payable promptly after written demand therefor.

    Section 9.04  Successors and Assigns.

    (a) The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement.

    (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund with respect thereto, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender, an Approved Fund with respect thereto or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000, except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment, unless each of the Borrower and the Administrative Agent otherwise consent and, after giving effect to such assignment, the assigning Lender and its Affiliates and the Approved Funds with respect to such Lender shall have a Commitment of at least $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consents, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Credit Agreement, (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in

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each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.14 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that does not comply with this paragraph shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

    (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in Charlotte, North Carolina a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary.

    (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Credit Agreement unless it has been recorded in the Register as provided in this paragraph.

    (e) Any Lender may, without the consent of the Borrower, the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section.

    (f)  A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified

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of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender.

    (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

    (h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to Section 2.01, provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any payment under this Credit Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 9.04 or in Section 9.12, any SPC may (i) with notice to, but without the prior written consent of, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC.

    Section 9.05  Survival.

    All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Credit Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Credit Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Credit Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12, 2.14 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Credit Agreement or any provision hereof.

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    Section 9.06  Counterparts; Integration; Effectiveness.

    This Credit Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Credit Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Credit Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Credit Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Credit Agreement.

    Section 9.07  Severability.

    Any provision of this Credit Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

    Section 9.08  Right of Setoff.

    If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, 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 such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Credit Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Credit Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

    Section 9.09  Governing Law; Jurisdiction; Consent to Service of Process.

    (a) This Credit Agreement shall be construed in accordance with and governed by the law of the State of New York.

    (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Credit Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Credit Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Credit Agreement against the Borrower or its properties in the courts of any jurisdiction.

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    (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Credit Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

    (d) Each party to this Credit Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Credit Agreement will affect the right of any party to this Credit Agreement to serve process in any other manner permitted by law.

    Section 9.10  WAIVER OF JURY TRIAL.

    EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

    Section 9.11  Headings.

    Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Credit Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Credit Agreement.

    Section 9.12  Confidentiality.

    Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' and its Approved Funds' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent, and only to the extent, required by applicable laws or regulations or by any subpoena or similar legal process, provided that the Person required to disclose such information shall take reasonable efforts (at Borrower's expense) to ensure that any Information so disclosed shall be afforded confidential treatment, (d) to any other party to this Credit Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Credit Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Credit Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower who is not, to the knowledge of the Administrative Agent or such Lender, under an obligation of confidentiality to Borrower with respect to such Information. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in

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the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

ARTICLE X

GUARANTY

    Section 10.1  The Guaranty.

    In order to induce the Lenders to enter into this Credit Agreement and the other Credit Documents and to extend credit hereunder and in recognition of the direct benefits to be received by the Guarantors from the Borrowings hereunder, each of the Guarantors hereby agrees with the Administrative Agent and the Lenders as follows: the Guarantor hereby unconditionally and irrevocably jointly and severally guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all obligations of the Borrower to the Administrative Agent and the Lenders. If any or all of the obligations of the Borrower to the Administrative Agent and the Lenders becomes due and payable hereunder, each Guarantor unconditionally promises to pay such indebtedness to the Administrative Agent and the Lenders, on order, or demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Lenders in collecting any of the obligations.

    Notwithstanding any provision to the contrary contained herein, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each such Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state).

    Section 10.2  Bankruptcy.

    Additionally, each of the Guarantors unconditionally and irrevocably guarantees jointly and severally the payment of any and all indebtedness of the Borrower to the Lenders whether or not due or payable by the Borrower upon the occurrence of any of the Event of Default specified in Article VII, subsection (i), and unconditionally promises to pay such obligations to the Administrative Agent for the account of the Lenders, or order, on demand, in lawful money of the United States. Each of the Guarantors further agrees that to the extent that the Borrower or a Guarantor shall make a payment or a transfer of an interest in any property to the Administrative Agent or any Lender, which payment or transfer or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise is avoided, and/or required to be repaid to the Borrower or a Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such avoidance or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made.

    Section 10.3  Nature of Liability.

    The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower whether executed by any such Guarantor, any other guarantor or by any other party, and no Guarantor's liability hereunder shall be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the

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Borrower, or (e) any payment made to the Administrative Agent or the Lenders on the indebtedness which the Administrative Agent or such Lenders repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each of the Guarantors waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding.

    Section 10.4  Independent Obligation.

    The obligations of each Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other Guarantor or the Borrower is joined in any such action or actions.

    Section 10.5  Authorization.

    Each of the Guarantors authorizes the Administrative Agent and each Lender without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof in accordance with this Credit Agreement, including any increase or decrease of the rate of interest thereon, (b) take and hold security from any guarantor or any other party for the payment of this Guaranty or the indebtedness and exchange, enforce waive and release any such security, (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their discretion may determine and (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors.

    Section 10.6  Reliance.

    It is not necessary for the Administrative Agent or the Lenders to inquire into the capacity or powers of the Borrower or the officers, directors, members, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

    Section 10.7  Waiver.

    (a) Each of the Guarantors waives any right (except as shall be required by applicable statute and cannot be waived) to require the Administrative Agent or any Lender to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party, or (iii) pursue any other remedy in the Administrative Agent's or any Lender's power whatsoever. Each of the Guarantors waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party other than payment in full of the indebtedness, including without limitation any defense based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the indebtedness. The Administrative Agent or any of the Lenders may, at their election, foreclose on any security held by the Administrative Agent or a Lender by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any Lender may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the indebtedness has been paid. Each of the Guarantors waives any defense arising out of any such election by the Administrative Agent and each of the Lenders, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantors against the Borrower or any other party or any security.

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    (b) Each of the Guarantors waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notice of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the indebtedness and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any Lender shall have any duty to advise such Guarantor of information known to it regarding such circumstances or risks.

    (c) Each of the Guarantors hereby agrees it will not exercise any rights of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders against the Borrower or any other guarantor of the indebtedness of the Borrower owing to the Lenders (collectively, the "Other Parties") and all contractual, statutory or common law rights of reimbursement, contribution or indemnity from any Other Party which it may at any time otherwise have as a result of this Guaranty until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. Each of the Guarantors hereby further agrees not to exercise any right to enforce any other remedy which the Administrative Agent and the Lenders now have or may hereafter have against any Other Party, any endorser or any other guarantor of all or any part of the indebtedness of the Borrower and any benefit of, and any right to participate in, any security or collateral given to or for the benefit of the Lenders to secure payment of the indebtedness of the Borrower until such time as the Loans hereunder shall have been paid and the Commitments have been terminated.

    Section 10.8  Limitation on Enforcement.

    The Lenders agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Lenders and that no Lender shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Lenders under the terms of this Credit Agreement. The Lenders further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder or other equityholder of the Guarantors.

    Section 10.9  Confirmation of Payment.

    The Administrative Agent and the Lenders will, upon request after payment of the indebtedness and obligations which are the subject of this Guaranty and termination of the Commitments relating thereto, confirm to the Borrower, the Guarantors or any other Person that such indebtedness and obligations have been paid and the Commitments relating thereto terminated, subject to the provisions of Section 10.2.

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    IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed by their respective authorized officers as of the day and year first above written

BORROWER:	MEDTRONIC, INC, a Minnesota corporation
	By:
	Name:
	Title:
GUARANTORS:	MEDTRONIC ASSET MANAGEMENT, INC., a Minnesota corporation
	By:
	Name:
	Title:
	MEDTRONIC AVE, INC., a Delaware corporation
	By:
	Name:
	Title:
	MEDTRONIC INTERNATIONAL TECHNOLOGY, INC., a Minnesota corporation
	By:
	Name:
	Title:
	MEDTRONIC SOFAMOR DANEK, INC., an Indiana corporation
	By:
	Name:
	Title:

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MEDTRONIC USA, INC., a Minnesota corporation
By:
Name:
Title:
BANK OF AMERICA, N.A., individually   and as Administrative Agent
By:
	Name:
	Title:

46

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Exhibit 10.1 [EXECUTION COPY]

TABLE OF CONTENTS
CREDIT AGREEMENT
W I T N E S S E T H
ARTICLE I Definitions
ARTICLE II The Credits
ARTICLE III Representations and Warranties
ARTICLE IV Conditions
ARTICLE V Affirmative Covenants
ARTICLE VI Negative Covenants
ARTICLE VII Events of Default
ARTICLE VIII The Administrative Agent
ARTICLE IX Miscellaneous
ARTICLE X GUARANTY

EX-99.1

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Exhibit 99.1

INDEPENDENT AUDITORS' CONSENT

    We consent to the incorporation by reference in Registration Statements No. 2-65156, 2-65157, 2-68408, 33-168, 33-24212, 33-36552, 33-37529, 33-44230, 33-55329, 33-63805, 33-64585, 333-04099, 333-07385, 333-44766, 333-52840, 333-65227, 333-66978, 333-68594, 333-71259, 333-71355, 333-74229, 333-75819, and 333-90381 of Medtronic Inc. on Form S-8 of our report dated June 4, 2001, on the financial statements of Medical Research Group, Inc. for the years ended December 31, 2000 and 1999.

Los Angeles, California
September 5, 2001

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Exhibit 99.1

EX-99.2

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Exhibit 99.2

INDEPENDENT AUDITORS' CONSENT

    We consent to the incorporation by reference in Registration Statements No. 2-65156, 2-65157, 2-68408, 33-168, 33-24212, 33-36552, 33-37529, 33-44230, 33-55329, 33-63805, 33-64585, 333-04099, 333-07385, 333-44766, 333-52840, 333-65227, 333-66978, 333-68594, 333-71259, 333-71355, 333-74229, 333-75819, and 333-90381 of Medtronic Inc. on Form S-8 of our report dated February 7, 2001, appearing in the Annual Report on Form 10-K of MiniMed Inc. for the year ended December 29, 2000.

Los Angeles, California
September 5, 2001

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Exhibit 99.2

EX-99.3

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Exhibit 99.3

Contact:

Rachael Scherer

Investor Relations

763/505-2694

Chris Campbell-Loth

Public Relations

763/505-2633

F O R  I M M E D I A T E  R E L E A S E

MEDTRONIC TO ISSUE CONTINGENT CONVERTIBLE DEBENTURES

    MINNEAPOLIS, MN, September 5, 2001 — Medtronic, Inc. (NYSE: MDT), announced today its intent to issue and sell $1.5 billion aggregate principal amount of its Contingent Convertible Debentures due 2021 in a private placement under Rule 144A.

    The Debentures will be convertible into the Company's common stock.

    The net proceeds from the issuance will be used to repay amounts outstanding under the Company's existing short-term credit facility, which it entered into in order to complete its acquisitions of MiniMed, Inc. and Medical Research Group, Inc.

    The notes will not be registered under the Securities Act of 1933 as amended and may not be offered or sold in the United States unless they are registered or unless such sale is exempt from registration requirements of the Securities Act.

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Exhibit 99.3

EX-99.4

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Exhibit 99.4

Contact:	Rachael Scherer
	Investor Relations
	763-505-2694
	Jessica Stoltenberg
	Public Relations
	763-505-3333

Medtronic Announces Sale of 1.25 percent Contingent Convertible Debentures Due 2021

MINNEAPOLIS, Sept. 6, 2001 — Medtronic, Inc. (NYSE: MDT) announced today that it has agreed to sell 1.25 percent Contingent Convertible Debentures due 2021 in a private offering resulting in gross proceeds of approximately $1.75 billion. The initial purchasers are Bank of America Securities LLC, Goldman, Sachs & Co., and Morgan Stanley & Co. Incorporated. The Company has also granted the initial purchasers an option to purchase up to another $262.5 million aggregate principal amount of debentures. The Company will use the net proceeds of the offering to repay a substantial portion of amounts outstanding under its short-term credit facility, which was entered into in order to complete the acquisitions of MiniMed, Inc. and Medical Research Group, Inc. The debentures will be convertible into shares of the Company's common stock at a conversion price of $61.81 during any fiscal quarter in which the price of the common stock exceeds 110 percent of the conversion price over a specified period, subject to adjustment, or in certain other circumstances. At the initial conversion price, each $1,000 principal amount of debentures will be convertible into 16.1796 shares of the Company's common stock. The initial conversion price represents a 37.5 percent premium over the last reported sale price of the common stock on September 5, 2001, which was $44.95 per share.

    The debentures will be redeemable at the Company's option beginning on Sept. 15, 2006, and the holders may require the Company to repurchase the debentures on Sept. 15, 2002, 2004, 2006, 2008, 2011 or 2016, and in certain other circumstances.

    The debentures will bear interest at a rate of 1.25 percent per annum, and will pay additional contingent interest in specified circumstances.

    The offering is being made only to qualified institutional buyers, as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").

    The securities to be offered have not been registered under the Securities Act, or any state securities laws and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, registration requirements of the Securities Act and applicable securities laws.

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Exhibit 99.4