**Exhibit 10.1**

 

** **

** **

CREDIT AGREEMENT

among

PHYSICIANS FORMULA, INC., a New York corporation

THE LENDERS PARTIES HERETO

and

UNION BANK OF CALIFORNIA,N.A.

as Administrative Agent

Dated as of November 14, 2006

 

 

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TABLE OF CONTENTS
|            | ** ** | ** **                                                           | ** ** | **Page** |
|------------|------------|----------------------------------------------------------------------|------------|----------|
|       |       |                                                                 |       |     |
| SECTION 1. |       | DEFINITIONS                                                          |       | 1        |
| 1.1        |       | Defined Terms                                                        |       | 1        |
| 1.2        |       | Other Definitional Provisions                                        |       | 19       |
|       |       |                                                                 |       |     |
| SECTION 2. |       | AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT;  COMMITMENT AMOUNTS |       | 20       |
| 2.1        |       | Revolving Loans and Letters of Credit; Revolving  Loan Commitments   |       | 20       |
| 2.2        |       | Term Loans; Term Loan Commitments                                    |       | 23       |
| 2.3        |       | Issuance of Letters of Credit                                        |       | 24       |
| 2.4        |       | Optional Prepayments; Optional Commitment Reductions                 |       | 27       |
| 2.5        |       | Mandatory Prepayments                                                |       | 27       |
| 2.6        |       | Conversion and Continuation Options                                  |       | 28       |
| 2.7        |       | Minimum Amounts of Tranches; Minimum Borrowings                      |       | 29       |
| 2.8        |       | Interest Rates and Payment Dates                                     |       | 29       |
| 2.9        |       | Computation of Interest and Fees                                     |       | 29       |
| 2.10       |       | Inability to Determine Interest Rate                                 |       | 30       |
| 2.11       |       | Pro Rata Treatment and Payments                                      |       | 30       |
| 2.12       |       | Illegality                                                           |       | 30       |
| 2.13       |       | Increased Costs                                                      |       | 31       |
| 2.14       |       | Taxes                                                                |       | 32       |
| 2.15       |       | Indemnity                                                            |       | 33       |
| 2.16       |       | Mitigation of Costs                                                  |       | 33       |
| 2.17       |       | Unused Commitment Fees                                               |       | 33       |
|       |       |                                                                 |       |     |
| SECTION 3. |       | REPRESENTATIONS AND WARRANTIES                                       |       | 33       |
| 3.1        |       | Financial Condition                                                  |       | 33       |
| 3.2        |       | Corporate Existence; Compliance with Law                             |       | 34       |
| 3.3        |       | Corporate Power; Authorization; Consents;  Enforceable Obligations   |       | 34       |
| 3.4        |       | No Legal Bar                                                         |       | 34       |
| 3.5        |       | No Material Litigation                                               |       | 35       |
| 3.6        |       | Ownership of Property; Liens; Condition of  Properties               |       | 35       |
| 3.7        |       | Environmental Matters                                                |       | 35       |
| 3.8        |       | Intellectual Property                                                |       | 37       |
| 3.9        |       | Taxes                                                                |       | 37       |
| 3.10       |       | Federal Regulations                                                  |       | 38       |
| 3.11       |       | ERISA Compliance                                                     |       | 38       |
| 3.12       |       | Investment Company Act                                               |       | 38       |
| 3.13       |       | Subsidiaries; Etc.                                                   |       | 39       |
| 3.14       |       | Purpose of Loans and Letters of Credit                               |       | 39       |
| 3.15       |       | Accuracy and Completeness of Information                             |       | 39       |

 

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| 3.16       |   | Real Property Assets                                                     |   | 39     |
|------------|--------|--------------------------------------------------------------------------|--------|--------|
| 3.17       |   | Permits, Etc.                                                            |   | 39     |
| 3.18       |   | Nature of Business                                                       |   | 40     |
| 3.19       |   | Capital Structure and Equity Ownership                                   |   | 40     |
| 3.20       |   | Insolvency                                                               |   | 40     |
| 3.21       |   | Labor Matters                                                            |   | 40     |
| 3.22       |   | Condemnation                                                             |   | 40     |
| 3.23       |   | Absence of Financing Statements                                          |   | 40     |
| 3.24       |   | Perfection of Security Interest                                          |   | 40     |
|       |   |                                                                     |   |   |
| SECTION 4. |   | CONDITIONS PRECEDENT                                                     |   | 41     |
| 4.1        |   | Conditions to Closing Date                                               |   | 41     |
| 4.2        |   | Conditions to Each Loan or Letter of Credit                              |   | 43     |
|       |   |                                                                     |   |   |
| SECTION 5. |   | AFFIRMATIVE COVENANTS                                                    |   | 44     |
| 5.1        |   | Financial Statements                                                     |   | 44     |
| 5.2        |   | Certificates; Other Information                                          |   | 44     |
| 5.3        |   | Payment of Obligations                                                   |   | 46     |
| 5.4        |   | Conduct of Business and Maintenance of Existence                         |   | 46     |
| 5.5        |   | Maintenance of Property; Insurance                                       |   | 46     |
| 5.6        |   | Inspection of Property; Books and Records;  Discussions                  |   | 47     |
| 5.7        |   | Use of Proceeds                                                          |   | 47     |
| 5.8        |   | Hedging Obligations                                                      |   | 47     |
| 5.9        |   | Acquisition of Real Property                                             |   | 48     |
| 5.10       |   | Lease and License Compliance                                             |   | 48     |
| 5.11       |   | Environmental and Safety Requirements                                    |   | 48     |
| 5.12       |   | Employee Matters                                                         |   | 49     |
| 5.13       |   | Covenants Regarding Additional Subsidiaries                              |   | 49     |
| 5.14       |   | Covenant Regarding Insurance Endorsements                                |   | 50     |
|       |   |                                                                     |   |   |
| SECTION 6. |   | NEGATIVE COVENANTS                                                       |   | 50     |
| 6.1        |   | Financial Condition Covenants                                            |   | 50     |
| 6.2        |   | Limitation on Indebtedness                                               |   | 51     |
| 6.3        |   | Limitation on Liens                                                      |   | 52     |
| 6.4        |   | Limitation on Fundamental Changes                                        |   | 53     |
| 6.5        |   | Limitation on Sale of Assets                                             |   | 53     |
| 6.6        |   | Limitation on Restricted Payments                                        |   | 53     |
| 6.7        |   | Limitation on Acquisitions, Investments, Loans and  Advances             |   | 54     |
| 6.8        |   | Transactions with Affiliates                                             |   | 55     |
| 6.9        |   | Fiscal Year                                                              |   | 55     |
| 6.10       |   | Prohibitions on Certain Agreements, Modifications to  Certain Agreements |   | 55     |
| 6.11       |   | Sale-Leaseback Transactions                                              |   | 55     |
| 6.12       |   | Unfunded Liabilities                                                     |   | 55     |
| 6.13       |   | Line of Business                                                         |   | 55     |
|       |   |                                                                     |   |   |
| SECTION 7. |   | EVENTS OF DEFAULT                                                        |   | 55     |

 

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| SECTION 8. |   | THE AGENT                                                  |   | 59     |
|------------|--------|------------------------------------------------------------|--------|--------|
| 8.1        |   | Appointment                                                |   | 59     |
| 8.2        |   | Delegation of Duties                                       |   | 59     |
| 8.3        |   | Exculpatory Provisions                                     |   | 59     |
| 8.4        |   | Reliance by Agent                                          |   | 60     |
| 8.5        |   | Notice of Default                                          |   | 60     |
| 8.6        |   | Non-Reliance on Agent and Other Lenders                    |   | 60     |
| 8.7        |   | Indemnification                                            |   | 61     |
| 8.8        |   | Agent in Its Individual Capacity                           |   | 61     |
| 8.9        |   | Successor Agent                                            |   | 62     |
|       |   |                                                       |   |   |
| SECTION 9. |   | MISCELLANEOUS                                              |   | 62     |
| 9.1        |   | Amendments and Waivers                                     |   | 62     |
| 9.2        |   | Notices                                                    |   | 63     |
| 9.3        |   | No Waiver; Cumulative Remedies                             |   | 63     |
| 9.4        |   | Survival of Representations and Warranties                 |   | 63     |
| 9.5        |   | Payment of Expenses and Taxes                              |   | 63     |
| 9.6        |   | Successors and Assigns; Participation; Purchasing  Lenders |   | 64     |
| 9.7        |   | Adjustments; Set-Off                                       |   | 68     |
| 9.8        |   | Counterparts                                               |   | 68     |
| 9.9        |   | Severability                                               |   | 68     |
| 9.10       |   | Integration                                                |   | 68     |
| 9.11       |   | GOVERNING LAW                                              |   | 69     |
| 9.12       |   | Judicial Reference; Consent to Jurisdiction                |   | 69     |
| 9.13       |   | Acknowledgements                                           |   | 70     |
| 9.14       |   | Headings                                                   |   | 70     |
| 9.15       |   | Confidentiality                                            |   | 70     |
| 9.16       |   | Patriot Act                                                |   | 70     |
|       |   |                                                       |   |   |
|       |   |                                                       |   |   |
| Exhibits   |   |                                                       |   |   |
|       |   |                                                       |   |   |
| A-1        |   | Form of Revolving Note                                     |   |   |
| A-2        |   | Form of Term Note                                          |   |   |
| B          |   | Form of No Default/Representation Certificate              |   |   |
| C          |   | Form of Continuation Notice                                |   |   |
| D          |   | Form of Borrowing Notice                                   |   |   |
| E          |   | Form of Assignment and Acceptance                          |   |   |
| F          |   | Form of Covenant Compliance Certificate                    |   |   |
| G-1        |   | Form of Letter of Credit Request (Standby)                 |   |   |
| G-2        |   | Form of Letter of Credit Request (Commercial)              |   |   |
| H          |   | Form of Landlord Consent                                   |   |   |
|       |   |                                                       |   |   |
| Schedules  |   |                                                       |   |   |
|       |   |                                                       |   |   |
| 3.2        |   | Qualification Jurisdictions                                |   |   |

 

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| 3.5  |   | Litigation                             |   |   |
|------|--------|----------------------------------------|--------|--------|
| 3.6  |   | Legal and Operating Names              |   |   |
| 3.7  |   | Environmental Matters                  |   |   |
| 3.8  |   | Intellectual Property Matters          |   |   |
| 3.13 |   | Subsidiaries                           |   |   |
| 3.16 |   | Real Property                          |   |   |
| 3.19 |   | Capital Structure and Equity Ownership |   |   |
| 6.7  |   | Certain Advance of Officers            |   |   |
| 6.8  |   | Affiliate Transactions                 |   |   |

 

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of November 14, 2006,among PHYSICIANS FORMULA, INC., a New York corporation (the “Borrower”),the several banks and other lenders from time to time parties to this Agreement(the “Lenders”) and UNION BANK OF CALIFORNIA, N.A. (“UBOC”), asadministrative agent for the Lenders (in such capacity, the “Agent”).

RECITALS

The Borrower has requested that the Lenders extendto it revolving and term loan facilities for its use in refinancing certaindebt, the payment of fees and expenses relating thereto, for working capitaland general corporate purposes and the payment of fees and expenses related tothe initial public offering of Holdings and for other uses as set forththerein.  The Lenders have agreedto such request, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises andthe mutual covenants herein contained, the parties hereto hereby agree asfollows:

# SECTION 1.           DEFINITIONS

## 1.1           DefinedTerms

As used in this Agreement, the following terms shallhave the following meanings:

“Accountants”: Deloitte & Touche LLP, or such other firm of independent certifiedpublic accountants of recognized national standing as shall be selected by theBorrower and reasonably satisfactory to the Agent.

“Acquired Person”:  as defined in the definition of “PermittedAcquisition” contained in this Section 1.1.

“Acquisition”: any transaction, or any series of related transactions, consummatedafter the Closing Date, by which the Borrower and/or any of its Subsidiariesdirectly or indirectly (a) acquires any ongoing business or all orsubstantially all of the assets of any firm, partnership, joint venture,limited liability company, corporation or division thereof, whether throughpurchase of assets, merger or otherwise, (b) acquires in one transactionor as the most recent transaction in a series of transactions control ofsecurities of a Person engaged in an ongoing business representing more than50% of the ordinary voting power for the election of directors or othergoverning position if the business affairs of such Person are managed by aboard of directors or other governing body or (c) acquires control of morethan 50% of the ownership interest in any partnership, joint venture, limitedliability company, business trust or other Person that is not managed by aboard of directors or other governing body.

“Acquisition Agreement”:  that certain Stock Purchase Agreement datedas of November 3, 2003 among PFI Acquisition Corp., Pierre FabreDermo-Cosmetique S.A., a French société 

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anonyme, Pierre Fabre, Inc., a New York corporation,the Pledgor and Pierre Fabre, S.A., a French société anonyme, as amended,modified, supplemented or restated from time to time.

“Adjusted EBITDA”:  for the Borrower and its Subsidiaries on aconsolidated basis, for the fiscal quarter most recently ended and theimmediately preceding three fiscal quarters, EBITDA plus, only to the extentreflected in the determination of Net Income for that period and withoutduplication, (i) Transaction Costs, (ii) one-time costs in connection with theinitial public offering of equity interests in the Pledgor relating tocompliance with (x) Sarbanes-Oxley Act of 2002 (as amended from time to time)and the rules and regulations promulgated thereunder and (y) securities lawsand regulations; provided that the aggregate amount of such costs under thisclause (ii) shall not exceed $450,000 during the fiscal year ending December31, 2006 and $325,000 during the fiscal year ending December 31, 2007, (iii)special one-time bonus in an amount equal to $270,000 paid to certain membersof management during the fiscal year ending December 31, 2006 and (iv) one-timenon-cash compensation charges in an amount equal to $9,308,000 associated withthe vesting of performance based options during the fiscal year ending December31, 2006.

“Affiliate”: as to any Person, (a) any other Person (other than a Subsidiary)which, directly or indirectly, is in control of, is controlled by, or is undercommon control with, such Person or (b) any Person who is a director,officer, shareholder, member or partner (i) of such Person, (ii) ofany Subsidiary of such Person or (iii) of any Person described in thepreceding clause (a).  For purposesof this definition, “control” of a Person means the power, directly orindirectly, either to (i) vote securities having 10% or more of theordinary voting power for the election of directors of such Person or(ii) direct or cause the direction of the management and policies of suchPerson whether by contract or otherwise.

“Agent”: as defined in the preamble hereto.

“Aggregate Revolving Loan Commitment”: the sumof the Revolving Loan Commitments set forth on the signature pages hereof.

“Aggregate Term Loan Commitment”:  the sum of the Term Loan Commitments setforth on the signature pages hereof.

“Aggregate Total Commitment”:  the sum of the Aggregate Revolving LoanCommitment and the Aggregate Term Loan Commitment.

“Aggregate Total Commitment Percentage”: withrespect to each Lender, the percentage equivalent of the ratio which suchLender’s Commitments (or, if any such Commitment has terminated, itsoutstanding Term Loans or Revolving Loans, participations in Letters of Creditand unreimbursed drawings thereunder, as applicable) bears to the AggregateTotal Commitment (or, with respect to any terminated Commitment, theoutstanding Term Loans or Revolving Loans, participations in Letters of Creditand unreimbursed drawings thereunder, as applicable, under such Commitment).

“Agreement”: this Credit Agreement, as amended, waived, supplemented or otherwisemodified from time to time.

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“Applicable Lending Office”:  for any Lender, its offices for LIBOR Loansand Base Rate Loans and for participations in Letters of Credit specified onthe signature pages hereof or in the Assignment and Acceptance pursuant towhich it became a party hereto, as the case may be, any of which offices may,upon 20 days’ prior written notice to the Agent and the Borrower, be changed bysuch Lender.

“Asset Disposition”:  the sale, sale and leaseback, transfer,conveyance, exchange, long-term lease accorded sales treatment under GAAP orsimilar disposition (including by means of a merger, consolidation,amalgamation, joint venture or other substantive combination) of any of theProperties, business or assets (other than Cash Equivalents but, including theassignment of any lease, license or permit relating to the Properties) of theBorrower or any of its Subsidiaries to any Person or Persons other than to theBorrower or any of its Subsidiaries; provided that Asset Dispositionsshall not include (i) the sale of Inventory in the ordinary course ofbusiness and otherwise,provided that such sale is not in connection with a winding up or liquidationof the Borrower or any Subsidiary and (ii) the sale of obsolete,surplus, uneconomical, or worn-out assets in an aggregate amount not exceeding$500,000 in any fiscal year of the Borrower.

“Assignment and Acceptance”:  an Assignment and Acceptance in the form ofExhibit E to this Agreement.

“Available Revolving Loan Commitment”: withrespect to each Revolving Loan Lender on the date of determination thereof, theamount by which (a) the Revolving Loan Commitment of such Lender on suchdate exceeds (b) the principal sum of such Lender’s (i) RevolvingLoans outstanding, (ii) Revolving Loan Commitment Percentage of theaggregate Letter of Credit Amount of all Letters of Credit outstanding and(iii) Revolving Loan Commitment Percentage of the aggregate amount of unreimburseddrawings under all Letters of Credit on such date.

“Base Rate”: for any day, a rate per annum (rounded upwards, if necessary, to thenext 1/16 of 1%) equal to the greater of (a) the Reference Rate in effecton such day and (b) the Federal Funds Effective Rate in effect on such dayplus 1/2 of 1%.  “Reference Rate”shall mean the rate of interest per annum publicly announced from time to timeby UBOC as its “reference rate” in effect at its office in Los Angeles,California.  Such rate is a rate set byUBOC based upon various factors including UBOC’s costs and desired return,general economic conditions and other factors, and is used as a reference pointfor pricing some loans, which may be priced at, above, or below such announcedrate.  “Federal Funds Effective Rate”shall mean, for any day, the weighted average of the rates on overnight federalfunds transactions with members of the Federal Reserve System arranged byfederal funds brokers, as published on the next succeeding Business Day by the FederalReserve Bank of New York, or, if such rate is not so published for any daywhich is a Business Day, the average of the quotations for the day of suchtransactions received by the Agent from three federal funds brokers ofrecognized standing selected by it.  If,for any reason, the Agent shall have determined (which determination shall beconclusive absent manifest error) that it is unable to ascertain the FederalFunds Effective Rate for any reason, including the inability or failure of theAgent to obtain sufficient quotations in accordance with the terms hereof, theBase Rate shall be determined without regard to clause (b) of thefirst sentence of this definition until the circumstances giving rise to suchinability no longer exist.  Any change inthe Base Rate due to a change in the Reference Rate or 

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the Federal Funds Effective Rate shall be effective onthe effective date of such change in the Reference Rate or the Federal FundsEffective Rate, respectively.

“Base Rate Loans”: Loans the rate of interestapplicable to which is based upon the Base Rate.

“Borrower”: as defined in the Recitals to this Agreement.

“Borrowing Notice”:  a notice from the Borrower to the Agentrequesting a borrowing of Loans, substantially in the form of Exhibit Dhereto.

“Business Day”: a day other than a Saturday, Sunday or other day on which commercialbanks in the State of California are authorized or required by law to close andwhich, in the case of a LIBOR Loan, is a Eurodollar Business Day.

“Capital Expenditures”:  for any period, collectively, for any Person,the aggregate of all expenditures which are made during such period (whetherpaid in cash or accrued as liabilities) by such Person for property, plant orequipment and which would be reflected as additions to property, plant orequipment on a balance sheet of such Person prepared in accordance with GAAP,including all Capitalized Lease Obligations.

“Capitalized Lease Obligations”:  obligations for the payment of rent for anyreal or personal property under leases or agreements to lease that, inaccordance with GAAP, have been or should be capitalized on the books of thelessee and, for purposes hereof, the amount of any such obligation shall be thecapitalized amount thereof determined in accordance with GAAP.

“Capital Stock”:  any and all shares, interests, participationor other equivalents (however designated) of capital stock of a corporation,any and all equivalent ownership interests in a Person (other than acorporation), any and all warrants, options or rights to purchase or any othersecurities convertible into any of the foregoing.

“Cash Collateral Deposit”:  cash deposits made by the Borrower to theAgent, to be held by the Agent as Collateral pursuant to the SecurityAgreement, for the reimbursement of drawings under Letters of Credit.

“Cash Equivalents”: investments having amaturity of not greater than 12 months from the date of acquisition thereof in(a) obligations issued or unconditionally guaranteed by the United States ofAmerica or any agency thereof, (b) certificates of deposit of any commercialbank organized under the laws of the United States of America or any statethereof and having combined capital and surplus of at least $250,000,000, (c)commercial paper with a rating of at least Prime-1 by Moody’s InvestorsService, Inc. or A-1 by Standard & Poor’s Ratings Group (a division of TheMcGraw Hill Companies, Inc.), (d) a readily redeemable “money market mutualfund” sponsored by a bank described in clause (b) hereof, or a broker or dealerregistered under the Securities Exchange Act of 1934, as amended, and having onthe date of the investment capital of at least $50,000,000, which fundmaintains an investment policy limiting its investments primarily toinstruments of the types described in clauses (a) through (c) hereof and givenon the date of such investment a credit rating of at least AA by Moody’sInvestors Service, 

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Inc. or AA by Standard & Poor’s Ratings Group(a division of The McGraw-Hill Companies, Inc.) or (e) other investments agreedto from time to time between the Borrower and the Agent.

“Closing Date”: the date on which the conditions set forth in Sections 4.1 and 4.2 aresatisfied and the initial Loans are made.

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

“Collateral”: all of the property (tangible or intangible) purported to be subject tothe lien or security interest purported to be created by any mortgage, deed oftrust, security agreement, pledge agreement, assignment or other security documentheretofore or hereafter executed by the Borrower as security for all or part ofthe Obligations.

“Collateral Documents”:  the Security Agreement, each ControlAgreement requested by the Agent pursuant to the Security Agreement, each UCC-1Financing Statement filed pursuant thereto and any other document or agreementencumbering the Collateral or evidencing or perfecting a security interesttherein for the benefit of the Agent or any Lender executed by the Borrower, asthe same may be amended or modified from time to time in accordance with theterms hereof.

“Commitment”: a Revolving Loan Commitment or a Term Loan Commitment, as applicable.

“Commitment Percentage”:  a Revolving Loan Commitment Percentage or aTerm Loan Commitment Percentage, as applicable.

“Commonly Controlled Entity”:  as to any Person, an entity, whether or notincorporated, which is under common control with such Person within the meaningof Section 4001 of ERISA or is part of a group which includes such Personand which is treated as a single employer under Section 414 of the Code.

“Continuation Notice”:  a request for continuation or conversion of aLoan as set forth in Section 2.6, substantially in the form of Exhibit C.

“Contractual Obligation”:  as to any Person, any provision of anysecurity issued by such Person or of any agreement, instrument or otherundertaking to which such Person is a party or by which it or any of itsproperty is bound.

“Control Agreement”:  a control agreement, restricted accountagreement or similar agreement or document, in each case in form and substancesatisfactory to the Agent and entered into for the purpose of perfecting asecurity interest in one or more deposit accounts or securities accounts of theBorrower or its Subsidiaries.

“Covenant Compliance Certificate”:  a certificate of the Chief Financial Officerof the Borrower (or, at any time during which the Borrower shall not have aChief Financial Officer, the President) substantially in the form ofExhibit F hereto.

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“Default”: any of the events specified in Section 7, whether or not anyrequirement for the giving of notice, the lapse of time, or both, or any othercondition, has been satisfied.

“Dollars” and “$”:  dollars in lawful currency of the UnitedStates.

“Domestic Subsidiary”:  each Subsidiary organized under the laws ofthe United States or any state thereof.

“EBITDA”:  for the Borrower and its Subsidiarieson a consolidated basis, with respect to any period, the sum of (a) Net Income for that period, plus (b) any non-recurringloss reflected in such Net Income, minus (c) any non-recurring gain (excludingany gain received from the sale of Inventory in the ordinarycourse of business andotherwise, provided that such sale is not in connection with a winding up orliquidation of the Borrower or any Subsidiary) reflected in such Net Income, plus (d) Interest Expense of the Borrowerand its Subsidiaries for that period, plus (e) the aggregate amount offederal and state taxes on or measured by income for that period, the aggregateamount of property taxes for that period and the aggregate amount of salestaxes for that period (whether or notpayable during that period), plus (f) depreciation and amortization expense ofBorrower and its Subsidiaries for that period, plus (g) all other non-cashcharges of Borrower and its Subsidiaries for that period, plus (h) all othernon-recurring expenses of Borrower and its Subsidiaries for that periodacceptable to the Agent, in each case as determined in accordance with GAAP,consistently applied and, in the case of items (d), (e), (f), (g) and (h), onlyto the extent reflected in the determination of Net Income for that period.

“Environmental and Safety Requirements”: allfederal, state, local and foreign statutes, regulations, ordinances and otherprovisions having the force or effect of law, all judicial and administrativeorders and determinations, all contractual obligations and all common law, ineach case concerning public health and safety, worker health and safety,exposure to hazardous substances or materials, pollution or protection of theenvironment, including all those relating to the presence, use, production,generation, handling, transport, treatment, storage, disposal, distribution,labeling, testing, processing, discharge, release, threatened release, controlor cleanup of, or exposure to, any hazardous or otherwise regulated materials,substances or wastes, chemical substances or mixtures, pesticides, pollutants,contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinatedbiphenyls, noise, radiation or radon, each as amended and as now or hereafterin effect.

“Equityholder Agreements”  each shareholder agreement, member agreement,partner agreement, voting agreement, buy-sell agreement, option, warrant, put,call, right of first refusal, and any other agreement or instrument withconversion rights into equity of the Borrower or any Subsidiary either(a) between the Borrower or any Subsidiary and any holder or prospectiveholder of any equity interest of the Borrower or any Subsidiary (includinginterests convertible into such equity) or (b) otherwise between any twoor more such holders of equity interests.

“Equity Offering”:  the sale or issuance (or reissuance) by theBorrower, the Pledgor or any Subsidiary of any equity interests or beneficialinterests (common stock, preferred stock, partnership interests, memberinterests or otherwise) or any options, warrants, convertible securities orother rights to purchase such equity interests or beneficial interests, otherthan a sale or issuance by (i) any Subsidiary to the Borrower or (ii) anySubsidiary to another Subsidiary.

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“ERISA”: the Employee Retirement Income Security Act of 1974, as amended fromtime to time.

“ERISA Affiliate”:  as to any Person, each trade or businessincluding such Person, whether or not incorporated, which together with suchPerson would be treated as a single employer under Section 4001(a)(14) ofERISA.

“Eurodollar Business Day”:  any day on which banks are open for dealingsin Dollar deposits in the London interbank market.

“Event of Default”:  any of the events specified inSection 7, provided that any requirement for the giving of notice,the lapse of time, or both, or any other condition, has been satisfied.

“Excluded Taxes”:  all taxes imposed on or by reference to thenet income of the Agent, or any Lender or its Applicable Lending Office by anyGovernmental Authority and all franchise taxes, taxes on doing business ortaxes measured by capital or net worth imposed on the Agent or on any Lender orits Applicable Lending Office by any Governmental Authority.

“Existing Credit Agreement”:  that certain Credit Agreement dated as ofDecember 16, 2005 among the Borrower, the Lenders referred to therein, andUBOC, as agent for such Lenders.

“Fee Letter”: that certain letter regarding fees executed between the Borrower and theAgent as of the Closing Date, as such letter may be amended or modified fromtime to time.

“Financial Statements”:  as defined in Section 3.1 hereof.

“Fixed Charge Coverage Ratio”:  for the Borrower and its Subsidiaries on aconsolidated basis, the ratio of Free Cash Flow to Fixed Charges for suchperiod.

“Fixed Charges”:  for the Borrower and its Subsidiaries on aconsolidated basis, for the fiscal quarter most recently ended and theimmediately preceding three fiscal quarters, without duplication, the sum of (a) Interest Expense (other than (i)Transaction Costs, (ii) amendment fees and expenses paid in connection with anyfuture amendment of this Agreement and (iii) unamortized loan fees and legalfees in the amount of approximately $1,100,000 paid on or about December 16,2005 in connection with the Existing Credit Agreement, in each case to theextent constituting Interest Expense) of the Borrower and its Subsidiariesactually paid or payable, without duplication, in cash for such period plus (b)the aggregate amount of scheduled principal payments actually made on TotalFunded Debt; provided, however, with respect to (x) the quarterending March 31, 2007, Fixed Charges shall be calculated by multiplying theamount of Fixed Charges for the quarter ending March 31, 2007 by four, (y) thequarter ending June 30, 2007, Fixed Charges shall be calculated by multiplyingthe aggregate amount of Fixed Charges for the quarters ending March 31, 2007and June 30, 2007 by two and (z) the quarter ending September 30, 2007, FixedCharges shall be calculated by multiplying the aggregate amount of FixedCharges for the quarters ending March 31, 2007, June 30, 2007 and September 30,2007 by 4/3.

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“Foreign Subsidiary:  any Subsidiary other than a DomesticSubsidiary.

“Free Cash Flow”:  with respect to any fiscal period, withoutduplication, the sum of (a) Adjusted EBITDA for such fiscal period, minus(b) the aggregate amount of cash income taxes actually paid by theBorrower and the Subsidiaries during such fiscal period.

“GAAP”: generally accepted accounting principles in the United States in effectfrom time to time.  If, at any time, GAAPchanges in a manner which will materially affect the calculations determiningcompliance by the Borrower with any of its covenants in Section 6.1, suchcovenants shall continue to be calculated in accordance with GAAP in effectprior to such changes in GAAP.

“Governmental Authority”:  any nation or government, any federal, stateor other political subdivision thereof and any federal, state or local entityexercising executive, legislative, judicial, regulatory or administrativefunctions of or pertaining to government.

“Guarantee Obligation”:  as to any Person (the “guaranteeing person”),any obligation of (a) the guaranteeing person or (b) another Person(including, without limitation, any bank under any letter of credit) whichPerson the guaranteeing person has agreed to reimburse or indemnify for undertakingsuch obligation in either case guaranteeing or in effect guaranteeing anyIndebtedness, leases, dividends or other obligations (the “primaryobligations”) of any other third Person (the “primary obligor”) inany manner, whether directly or indirectly, including, without limitation, anyobligation of the guaranteeing person, whether or not contingent, (i) topurchase any such primary obligation or any property constituting direct orindirect security therefor, (ii) to advance or supply funds for the purchaseor payment of any such primary obligation or to maintain working capital orequity capital of the primary obligor or otherwise to maintain the net worth orsolvency of the primary obligor, (iii) to purchase property, securities orservices primarily for the purpose of assuring the owner of any such primaryobligation of the ability of the primary obligor to make payment of suchprimary obligation or (iv) otherwise to assure or hold harmless the ownerof any such primary obligation against loss in respect thereof; provided,however, that the term Guarantee Obligation shall not includeendorsements of instruments for deposit or collection in the ordinary course ofbusiness.  The amount of any GuaranteeObligation of any guaranteeing person shall be deemed to be the lesser of(a) an amount equal to the stated or determinable amount of the primaryobligation in respect of which such Guarantee Obligation is made and(b) the maximum amount for which such guaranteeing person may be liablepursuant to the terms of the instrument embodying such Guarantee Obligation,unless such primary obligation and the maximum amount for which suchguaranteeing person may be liable are not stated or determinable, in which casethe amount of such Guarantee Obligation shall be such guaranteeing person’smaximum reasonably anticipated liability in respect thereof as determined bythe Borrower in good faith.

“Guarantees”: the Pledgor Guarantee and the Subsidiary Guarantee.

“Guarantor Collateral”:  all of the property (tangible or intangible)purported to be subject to the lien or security interest purported to becreated by any mortgage, deed of trust, security agreement, pledge agreement,assignment or other security document heretofore or hereafter executed by anyGuarantor as security for all or part of any Guarantee.

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“Guarantor Collateral Documents”:  the Guarantor Security Agreement, the PledgeAgreement, each Control Agreement requested by the Agent pursuant to theGuarantor Security Agreement, each UCC-1 Financing Statement filed pursuant toany of the foregoing and any other document or agreement encumbering theGuarantor Collateral or evidencing or perfecting a security interest thereinfor the benefit of the Lenders executed by a Guarantor, as the same may beamended, modified or supplemented from time to time in accordance with theterms hereof.

“Guarantor Security Agreement”:  that certain Guarantor Security Agreementdated as of the Closing Date, in form and substance acceptable to the Agent,made by Physician’s Formula Cosmetics, Inc. and the other grantors from time totime becoming party thereto in accordance with the terms thereof, in favor ofthe Agent, for the benefit of the Lenders, as the same may be amended, modifiedor supplemented in accordance with the terms hereof.

“Guarantors”:  the Pledgor and each Domestic Subsidiary.

“Hazardous Substance Activity” means anyactual, proposed or threatened Release, storage, use, generation, processing,production, manufacture, treatment, abatement, removal, repair, cleanup ordetoxification, disposition, recycling, disposal, handling or transportation ofany Hazardous Substance from, under, into or on property.

“Hazardous Substances” means any substance,material product, by-product, waste, emission, residual or odor that is describedas a toxic or hazardous substance, waste, material, pollutant, contaminant,infectious waste, designated waste or words of similar meaning or effect, inany of the Environmental and Safety Requirements, or any other words which areintended to define, list or classify substances by reason of deleteriousproperties such as ignitability, corrosivity, reactivity, carcinogenicity,toxicity, or reproductive toxicity and includes, without limitation, asbestos,asbestos-containing materials, lead-based paint, petroleum (including crude oilor any fraction thereof, natural gas, natural gas liquids, liquefied naturalgas, or synthetic gas usable for fuel, or any mixture thereof), petroleumproducts, waste oil, polychlorinated biphenyls, urea formaldehyde, radon gas,radioactive matter, medical waste and chemicals which may cause cancer orreproductive toxicity.

“Hedging Agreements”:  as defined in the definition of “HedgingObligations” in this Section 1.1.

“Hedging Obligations”:  of any Person, any and all obligations ofsuch Person, whether absolute or contingent and howsoever and whensoevercreated, arising, evidenced or acquired (including all renewals, extensions andmodifications thereof and substitutions therefor), under (i) any and allagreements, devices or arrangements designed to protect at least one of theparties thereto from the fluctuations of interest rates, commodity prices,exchange rates or forward rates applicable to such party’s assets, liabilitiesor exchange transactions, including dollar-denominated or cross-currencyinterest rate exchange agreements, forward currency exchange agreements,interest rate cap or collar protection agreements, forward rate currency orinterest rate options, puts and warrants or any similar derivative transactions(“Hedging Agreements”), and (ii) any and all cancellations, buy-backs,reversals, terminations or assignments of any of the foregoing.

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“Incremental EBITDA”:  for any fiscal period and with respect to anyAcquired Person which is the subject of a Permitted Acquisition, that portionof EBITDA for such fiscal period that the Borrower projects will be generatedas a result of the consummation of such Permitted Acquisition, in each case inaccordance with Regulation S-X or as otherwise approved by the Agent and theMajority Lenders.

“Indebtedness”: as to any Person, (i) all indebtedness of such Person for borrowedmoney or for the deferred purchase price of property or services (excluding alltrade payables not overdue for more than 90 days), (ii) all obligations ofsuch Person evidenced by notes, bonds, debentures or other similar instruments,(iii) all indebtedness created or arising under any conditional-sale orother title-retention agreement with respect to property acquired by suchPerson, (iv) all Capitalized Lease Obligations of such Person, (v) allHedging Obligations of such Person, (vi) all obligations, contingent orotherwise, of such Person under acceptance, letter of credit or similarfacilities, (vii)  all mandatory redemption, repurchase or dividendobligations of such Person with respect to Capital Stock, (viii) allliabilities in respect of unfunded vested benefits under plans covered byTitle IV of ERISA and (ix) all Guarantee Obligations of such Person inrespect of, and obligations (contingent or otherwise) to purchase or otherwiseacquire, or otherwise to secure a credit against loss in respect of,indebtedness or obligations of others of the kinds referred to in clause (i),(ii), (iii), (iv), (v), (vi), (vii) or (viii) above.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan isinsolvent within the meaning of Section 4245 of ERISA.

“Interest Expense”:  as of any date, with respect to any Person,for the fiscal quarter most recently ended and the immediately preceding threefiscal quarters, the sum of (a) allinterest, fees, charges and related expenses (in each case as such expenses arecalculated according to GAAP) paid or payable (without duplication) for suchfiscal period by that Person to a lender in connection with borrowed money(including any obligations for fees, charges and related expenses payable tothe issuer of any letter of credit) or the deferred purchase price of assetsthat are considered “interest expense” under GAAP plus (b) the portion of rentpaid or payable (without duplication) for such fiscal period by that Personunder Capitalized Lease Obligations that should be treated as interest inaccordance with Financial Accounting Standards Board Statement No. 13.

“Interest Payment Date”:  (a) as to any Base Rate Loan, the lastBusiness Day of each calendar month while any such Loan is outstanding, (b) asto any LIBOR Loan having an Interest Period of three months or less, the lastday of such Interest Period, (c) as to any LIBOR Loan having an InterestPeriod longer than three months, each day which is at the end of each threemonth-period within such Interest Period after the first day of such InterestPeriod and the last day of such Interest Period and (d) for each of (a),(b) and (c)  above, the day on which any such Loan becomes due and payablein full or is paid or prepaid in full.

“Interest Period”:  with respect to any LIBOR Loan:

### (a)           initially,the period commencing on the borrowing or conversion date, as the case may be,with respect to such LIBOR Loan and ending one, two, three or six monthsthereafter, or, if available from all of the Lenders and consented to by theAgent, nine or twelve months 

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### thereafter, as selected by the Borrower in its notice of borrowing orits Continuation Notice, as the case may be, given with respect thereto; and

### (b)           thereafter,each period commencing on the last day of the next preceding Interest Periodapplicable to such LIBOR Loan and ending one, two, three or six monthsthereafter, or, if  available from all ofthe Lenders and consented to by the Agent, nine or twelve months thereafter, asselected by the Borrower by irrevocable notice to the Agent not less than threeEurodollar Business Days prior to the last day of the then current InterestPeriod with respect thereto;

provided that, all of the foregoingprovisions relating to Interest Periods are subject to the following:

#### (i)            ifany Interest Period pertaining to a LIBOR Loan would otherwise end on a daythat is not a Business Day, such Interest Period shall be extended to the nextsucceeding Business Day unless the result of such extension would be to carrysuch Interest Period into another calendar month in which event such InterestPeriod shall end on the immediately preceding Business Day;

#### (ii)           anyInterest Period for any Loan that would otherwise extend beyond the date finalpayment is due on such Loan shall end on the date of such final payment; and

#### (iii)          anyInterest Period pertaining to a LIBOR Loan that begins on the last Business Dayof a calendar month (or on a day for which there is no numericallycorresponding day in the calendar month at the end of such Interest Period)shall end on the last Business Day of a calendar month.

“Inventory”: all “inventory,” as such term is defined in the UCC, now owned orhereafter acquired by any Person, wherever located, including all goods,merchandise and other personal property held for sale or lease by any suchPerson, or which is furnished by such Person under any contract of service oris held by such Person as raw materials, work or goods in process, materialsand supplies of every nature used or consumed or to be used or consumed by suchPerson in the ordinary course of its business, whether now owned or hereafteracquired by such Person.

“Investment Company Act”:  as defined in Section 3.12 hereof.

“Landlord Consent”:  each Waiver and Consent executed by thelandlord of the Borrower or any Subsidiary, substantially in the form ofExhibit H, as such agreements may be amended, restated, modified or supplementedfrom time to time in accordance with the terms hereof.

“Lenders”: as defined in the preamble hereto and Section 8.8 hereof.

“Letter of Credit”:  as defined in Section 2.1(a).

“Letter of Credit Amount”:  the stated maximum amount available to be drawnunder a particular Letter of Credit, as such amount may be reduced orreinstated from time to time in accordance with the terms of such Letter ofCredit.

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“Letter of Credit Request”:  a request by the Borrower for the issuance ofa Letter of Credit, on the Agent’s standard form of standby letter of creditapplication and agreement or commercial letter of credit application andagreement, as applicable, the current forms of which are attached hereto asExhibits G -1 and G-2, respectively, and containing terms and conditionssatisfactory to the Agent in its sole discretion.

“LIBOR”: with respect to each day during each Interest Period pertaining to aLIBOR Loan, the rate of interest determined by the Agent to be the rate perannum at which deposits in dollars would be offered to the Agent by leadingbanks in the London Interbank Market at or about 9:00 a.m., Los Angelestime, two Eurodollar Business Days prior to the beginning of such InterestPeriod, for delivery on the first day of such Interest Period for the number ofdays comprised therein and in an amount comparable to the amount of its LIBORLoan to be outstanding during such Interest Period.

“LIBOR Adjusted Rate”:  with respect to each day during each InterestPeriod pertaining to a LIBOR Loan, a rate per annum determined for such day inaccordance with the following formula (rounded upward to the nearest 1/100th of1%):
|        | LIBOR                             |   |
|--------|-----------------------------------|--------|
|   | 1.00 - LIBOR Reserve Requirements |   |

“LIBOR Loans”:  Loans the rate of interest applicable to whichis based upon LIBOR.

“LIBOR Reserve Requirements”:  for any day as applied to a LIBOR Loan, theaggregate (without duplication) of the maximum rates (expressed as a decimalfraction) of reserve requirements in effect on such day (including, withoutlimitation, basic, supplemental, marginal and emergency reserves under anyregulations of the Board of Governors of the Federal Reserve System or otherGovernmental Authority having jurisdiction with respect thereto) dealing withreserve requirements prescribed for eurocurrency funding (currently referred toas “Eurocurrency Liabilities” in Regulation D of such Board) maintained by amember bank of such Federal Reserve System.

“Lien”: any mortgage, pledge, charge, hypothecation, assignment, depositarrangement, encumbrance, lien (statutory or other), security interest or othersecurity agreement or preferential arrangement of any kind or nature whatsoever(including, without limitation, any conditional sale or other title retentionagreement, any Capitalized Lease Obligation having substantially the sameeconomic effect as any of the foregoing, and the filing of any financingstatement under the Uniform Commercial Code or comparable law of anyjurisdiction in respect of any of the foregoing).

“Liquidity Amount”: as of any date ofdetermination, an amount equal to the sum of Borrower’s cash on deposit withUBOC or subject to a control agreement in favor of the Agent, Borrower’s CashEquivalents and the aggregate Available Revolving Loan Commitment.

“Loan”: a Revolving Loan or a Term Loan, as applicable; and “Loans” meansthe aggregate of all Revolving Loans and all Term Loans, as applicable,outstanding at any given time.

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“Loan Documents”:  this Agreement, the Notes, the CollateralDocuments, the Guarantor Collateral Documents, the Guarantees, each LandlordConsent, any Hedging Agreements to which a Lender (or an Affiliate thereof) orthe Agent is party, the Fee Letter, any Letter of Credit Requests that areexecuted by the Borrower, and any other agreement executed by a Loan Party inconnection therewith or herewith including, but not limited to, UCC-1 FinancingStatements, as such agreements and documents may be amended, supplemented andotherwise modified from time to time in accordance with the terms hereof.

“Loan Parties”: without duplication, the Borrower, each Subsidiary and the Pledgor.

“Majority Lenders”:  subject to Section 2.1(e), Lenders havingCommitments equal to or more than 50.1% of the Aggregate Total Commitment, or,if any Commitment has terminated, with respect to such Commitment, Lenders withoutstanding Loans and/or participations in Letters of Credit (if applicable)under such Commitment having an unpaid principal balance equal to or more than50.1% of the sum of (i) the unpaid principal balance of all Loansoutstanding, (ii) the aggregate Letter of Credit Amount (if applicable)and (iii) the aggregate amount of unreimbursed drawings under all Letters ofCredit (if applicable), excluding from such calculation Lenders which havefailed or refused to fund a Loan when required to do so.

“Margin Stock”: as defined in Regulation U.

“Material Adverse Effect”:  a material adverse effect on (a) thebusiness, operations, property or condition (financial or otherwise) of theBorrower and its Subsidiaries, taken as a whole, (b) the ability of anyLoan Party to perform its respective obligations under the Loan Documents or(c) the validity or enforceability of the Loan Documents or the rights orremedies of the Agent or the Lenders hereunder or thereunder.

“Multiemployer Plan”:  a plan which is a multiemployer plan asdefined in Section 4001(a)(3) of ERISA.

“Net Income”: for the Borrower and its Subsidiaries on a consolidated basis, netincome as determined in accordance with GAAP.

“Net Proceeds”: with respect to any Asset Disposition, the net amount equal to theaggregate amount received in cash (including any cash received by way ofdeferred payment pursuant to a note receivable, other non-cash consideration orotherwise, but only as and when such cash is so received) in connection withsuch Asset Disposition minus the sum of (a) the reasonable fees,commissions and other out-of-pocket expenses incurred by the Borrower or any ofits Subsidiaries in connection with such Asset Disposition (other than amountspayable to Affiliates of the Person making such disposition),(b) Indebtedness, other than the Loans, required to be paid as a result ofsuch Asset Disposition, (c) federal, state and local taxes incurred inconnection with such Asset Disposition and (d) any reserves required by GAAP tobe established in connection with such Asset Disposition (provided that allamounts, if any, released to the Borrower shall at such time constitute NetProceeds subject to prepayment in accordance with Section 2.5(b)).

“Note”: a Revolving Note or a Term Note; and “Notes” means the aggregateof all Revolving Notes and all Term Notes.

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“Note Purchase Agreement”: that certain SeniorSubordinated Note Purchase Agreement dated as of December 16, 2005 among theBorrower, the Noteholders referred to therein and UnionBanCal Equities, Inc. in itscapacity as the Noteholder Representative.

“Obligations”: the unpaid principal of and interest on (including, without limitation,interest accruing after the maturity of the Loans and interest accruing on orafter the filing of any petition in bankruptcy, or the commencement of anyinsolvency, reorganization or like proceeding, relating to the Borrower,whether or not a claim for post-filing or post-petition interest is allowed insuch proceeding and whether or not at a default rate) the Notes, the obligationto reimburse drawings under Letters of Credit (including the contingentobligation to reimburse any drawings under outstanding Letters of Credit), andall other obligations and liabilities, including but not limited to any HedgingObligations or cash management services, of the Borrower and its Subsidiariesto the Agent and the Lenders or any of their Affiliates, whether direct orindirect, absolute or contingent, due or to become due, or now existing orhereafter incurred, which may arise under, out of, or in connection with, thisAgreement, the Notes, the Letters of Credit, any other Loan Document and anyother document made, delivered or given in connection herewith or therewith,whether on account of principal, interest, reimbursement obligations, fees,indemnities, costs, expenses (including, without limitation, all reasonablefees and disbursements of counsel, and the allocated reasonable cost ofinternal counsel, to the Agent or the Lenders that are required to be paid bythe Borrower and its Subsidiaries pursuant to the terms of this Agreement) orotherwise.

“Occupancy Agreements”:  as defined in Section 5.10.

“Organic Documents”:  with respect to any entity, in each case tothe extent applicable thereto, its certificate and articles of incorporation ororganization, its by-laws or operating agreement, its partnershipagreement, all other formation and/or governing documents, all EquityholderAgreements, and all other voting agreements and similar arrangements applicableto any of its authorized shares of capital stock, its partnership interests orits member interests.

“Participant”: as defined in Section 9.6(b) hereof.

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant toSubtitle A of Title IV of ERISA or any successor thereto.

“Permitted Acquisition”:  an Acquisition by the Borrower or anyDomestic Subsidiary of all or substantially all of the assets of, or all of theCapital Stock of, a Person, or a division of a Person (each, an “AcquiredPerson”), provided that (a) the Majority Lenders have consentedto such Acquisition or (b) each of the following conditions is satisfiedwith respect to such Acquisition:

#### (i)            if such Acquisition is of all of the Capital Stock of anAcquired Person, such Acquisition is not opposed by the board of directors ormanagement of the Acquired Person;

#### (ii)           suchAcquisition will not cause the Borrower to violate Section 6.13;

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#### (iii)          atthe time of such Acquisition, no Default shall have occurred and be continuingand no Default would occur as a result thereof on either an actual or pro formabasis immediately after giving effect to such Acquisition;

#### (iv)          Borrowershall have provided to the Agent, no later than 20 Business Days prior to the dateof consummation of the Acquisition, the following information and documentationpertaining to the Acquisition, in each case in form and substance satisfactoryto the Agent:  (A) calculationscertified by the Borrower’s Chief Financial Officer (or, at any time duringwhich the Borrower shall not have a Chief Financial Officer, the President)indicating pro forma compliance by the Borrower and its Subsidiaries with thecovenants contained in Section 6.1 subsequent to the Acquisition,(B) historical financial statements of the Acquired Person for the threefull fiscal years of the Acquired Person immediately preceding the date of theconsummation of the Permitted Acquisition, (C) consolidated projections ofthe Borrower and its Subsidiaries, by fiscal quarter, incorporating the resultsof operations of the Acquired Person, and which detail Incremental EBITDA foreach relevant fiscal period for the Acquired Person, (D) a certificate ofa Responsible Officer of the Borrower which sets forth the sources and uses offunds which will be required to consummate the Acquisition, (E) acertificate of a Responsible Officer of the Borrower (i) certifying thatthe Acquisition is a Permitted Acquisition, (ii) certifying that theBorrower and/or the applicable Subsidiaries have conducted customary Lien,litigation, environmental and, where applicable and available, title searcheswith respect to the Acquired Person and the material assets to be acquired inthe Acquisition in all relevant jurisdictions and with all relevantGovernmental Authorities, and attaching a summary of the results of suchsearches and (iii) reaffirming the representations and warrantiescontained in Article 3 of this Agreement as of the date of consummation of theAcquisition giving effect to such consummation, except for representations andwarranties which expressly speak as of a particular date or are no longer trueand correct as a result of a change which is permitted by this Agreement and(F) such other due diligence information and documentation as the Agentshall require;

#### (v)           theBorrower shall project that Incremental EBITDA for the first full fiscalquarter of the Borrower immediately succeeding such Acquisition shall begreater than $1 with respect to such Acquired Person; and

#### (vi)          thepurchase price for all Acquisitions consummated on or after the Closing Dateshall not exceed $25,000,000 (excluding any amounts financed with the proceedsof an equity issuance).

“Person”: any individual, firm, partnership, joint venture, corporation, limited liabilitycompany, association, business enterprise trust, unincorporated organization,government or department or agency thereof or other entity, whether acting inan individual, fiduciary or other capacity.

“Plan”: as to any Person, any plan (other than a Multiemployer Plan) subject toTitle IV of ERISA maintained for employees of such Person or any ERISAAffiliate of such Person (and any such plan no longer maintained by such Personor any of such Person’s ERISA Affiliates to which such Person or any of suchPerson’s ERISA Affiliates has made or was required to make any contributionswithin any of the five preceding years).

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“Pledge Agreement”:  the Pledge Agreement dated as of the ClosingDate made by the Pledgor in favor of the Agent, for the benefit of the Lenders,in form and substance satisfactory to the Agent, as it may be amended, modifiedor supplemented from time to time in accordance with the terms hereof.

“Pledgor”: Physicians Formula Holdings, Inc., a Delaware corporation formerly knownas PFI Holdings Corp.

“Pledgor Guarantee”:  the Pledgor Guarantee dated as of the ClosingDate made by the Pledgor in favor of the Agent, for the benefit of the Lenders,in form and substance satisfactory to the Agent, as it may be amended, modifiedor supplemented from time to time in accordance with the terms hereof.

“Properties”: the collective reference to the real and personal property owned,leased, used, occupied or operated, under license or permit, by the Borrower orany of its Subsidiaries.

“Purchasing Lenders”:  as defined in Section 9.6(c) hereof.

“Regulation D”: Regulation D of the Board of Governors of the Federal Reserve System, asthe same is from time to time in effect, and all official rulings andinterpretations thereunder or thereof and any successor regulation thereto.

“Regulation U”: Regulation U of the Board of Governors of the Federal Reserve System, asthe same is from time to time in effect, and all official rulings andinterpretations thereunder or thereof and any successor regulation thereto.

“Related Fund”: with respect to any Person, an Affiliate of such Person, or a fund oraccount managed by such Person or an Affiliate of such Person.

“Related Party Assignment”:  as defined in Section 9.6(c).

“Release” means any spilling, leaking, pumping,pouring, emitting, emptying, fugitive emission, discharging, injecting,escaping, leaching, dumping or disposing into the environment, includingcontinuing, active or passive migration, of Hazardous Substances into, onto orthrough soil, surface water or groundwater.

“Reorganization”:  with respect to any Multiemployer Plan, thecondition that such plan is in reorganization within the meaning of Section4241 of ERISA.

“Reportable Event”:  any of the events set forth inSection 4043(b) of ERISA, other than those events as to which the thirtyday notice period is waived under PBGC regulations.

“Requirement of Law”:  as to any Person, its Organic Documents, andany law, treaty, rule, order, judgment or regulation of an arbitrator or acourt or other Governmental Authority, in each case applicable to or bindingupon such Person or any of its property or to which such Person or any of itsproperty is subject.

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“Responsible Officer”:  the chief executive officer or the presidentof the applicable Loan Party, or, with respect to financial matters, the chieffinancial officer of the applicable Loan Party, as applicable (provided that,at any time during which the Borrower shall not have a Chief Financial Officer,the President may serve such function).

“Restricted Payments”:  as defined in Section 6.6.

“Revolving Loan”: as defined in Section 2.1(a).

“Revolving Loan Commitment”: the commitment ofa Lender listed on the signature pages hereof to make Revolving Loans andparticipate in Letters of Credit hereunder through its Applicable LendingOffice as set forth on the signature pages hereof, as the same may be adjustedpursuant to the provisions hereof.

“Revolving Loan Commitment Expiration Date”:  November 13, 2011, or such earlier date asthe Revolving Loan Commitments shall expire in accordance with the terms hereof(whether by acceleration or otherwise).

“Revolving Loan Commitment Percentage”: withrespect to each Revolving Loan Lender, the percentage equivalent of the ratiowhich such Lender’s Revolving Loan Commitment bears to the Aggregate RevolvingLoan Commitment (or if the Revolving Loan Commitment has terminated, thepercentage equivalent of the ratio which such Lender’s outstanding RevolvingLoans and participations in Letters of Credit bears to the (i) the unpaidprincipal balance of all Revolving Loans outstanding, (ii) the aggregateLetter of Credit Amount and (iii) the aggregate amount of unreimbursed drawingsunder all Letters of Credit).

“Revolving Loan Lender”:  each Lender having any of (i) a RevolvingLoan Commitment, (ii) Revolving Loans outstanding or (iii) a participation inany Letter of Credit.

“Revolving Note”:  as defined in Section 2.1(c).

“San Gabriel Valley Site Liabilities” means anyand all losses and obligations arising from or related to any of thefollowing:  (a) any hazardous substancesor other contamination present at, in, on or under, or that originated at ormigrated from, the Borrower’s or any Subsidiaries’ real property (includingtheir leased real property in City of Industry, California) on or prior to theClosing Date, including any obligations to or asserted by the CaliforniaRegional Water Quality Control Board, the United States EnvironmentalProtection Agency or other government agency; (b) any involvement in, with orat the San Gabriel Valley Superfund Site and/or the Puente Valley Area orOperable Unit thereof (collectively, the “San Gabriel Valley Superfund Site”);and (c) all pending and any future-asserted personal injury, property ornatural resource damage, toxic tort or other lawsuits or claims related tohazardous substances or other contaminants within the San Gabriel ValleySuperfund Site and/or any Hazardous Substances or other contamination presentat, in, on or under, or that originated at or migrated from, the Borrower’s orany Subsidiary’s real property (including their leased real property in theCity of Industry, California) on or prior to the Closing Date, including anycontamination-related claims or lawsuits filed or to be filed by watersuppliers located within the San Gabriel Valley Superfund Site.

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“Security Agreement”:  the Security Agreement dated as of theClosing Date made by the Borrower in favor of the Agent, for the benefit of theLenders, in form and substance satisfactory to the Agent, as it may be amendedor otherwise modified from time to time in accordance with the terms hereof.

“Single Employer Plan”:  any Plan which is covered by Title IV ofERISA, but which is not a Multiemployer Plan.

“Solvent”: when used with respect to any Person, that:

### (a)           thepresent fair salable value (on a going concern basis) of such Person’s assetsis in excess of the total amount of the probable liability of such Person’sdebts;

### (b)           suchPerson is generally able to pay its debts as they become due; and

### (c)           suchPerson does not have unreasonably small capital to carry on such Person’sbusiness as theretofore operated and all businesses in which such Person isabout to engage.

“Subsidiary”: as to any Person at any time of determination, a corporation, partnership,limited liability company or other entity of which shares of stock or otherownership interests having ordinary voting power (other than stock or suchother ownership interests having such power only by reason of the happening ofa contingency) to elect a majority of the board of directors or other managersof such corporation, partnership or other entity are at the time owned, or themanagement of which is otherwise controlled, directly or indirectly through oneor more intermediaries or Subsidiaries, or both, by such Person.  Unless otherwise qualified, all references toa “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to aSubsidiary or Subsidiaries of the Borrower.

“Subsidiary Guarantee”:  the Subsidiary Guarantee dated as of the ClosingDate made by Physicians Formula Cosmetics, Inc. and the other grantors fromtime to time becoming party thereto in accordance with the terms thereof, infavor of the Agent, for the benefit of the Lenders, in form and substancesatisfactory to the Agent, as it may be amended, modified or supplemented fromtime to time in accordance with the terms of this Agreement.

“Tangible Net Worth”:  as to any Person, net worth less anyintangible assets (including goodwill) plus accumulated amortization, in eachcase determined in accordance with GAAP.

 “Taxes”:  as defined in Section 2.14 hereof.

“Term Loan”: as defined in Section 2.2(a).

“Term Loan Commitment”:  the commitment of a Lender listed on thesignature pages hereof to make a Term Loan hereunder through its ApplicableLending Office as set forth on the signature pages hereof, as the same may beadjusted pursuant to the provisions hereof.

“Term Loan Commitment Percentage”:  with respect to each Term Loan Lender, thepercentage equivalent of the ratio which such Lender’s Term Loan Commitmentbears to the Aggregate Term Loan Commitment (or if the Term Loan Commitment hasterminated, the 

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percentageequivalent of the ratio which such Lender’s outstanding Term Loans bears to theunpaid principal balance of all Term Loans outstanding).

“Term Loan Lender”:  each Lender having a Term Loan Commitment orTerm Loans outstanding.

“Term Loan Maturity Date”:  November 13, 2011, or such earlier date asthe Term Notes shall become due and payable in full in accordance with theterms hereof (whether by acceleration or otherwise).

“Term Note”: as defined in Section 2.2(c).

“Term Reduction Installment”: as defined inSection 2.2(d) hereof.

“Termination Event”:  (a) a Reportable Event, (b) the institutionof proceedings to terminate a Single Employer Plan by the PBGC under Section4042 of ERISA, (c) the appointment by the PBGC of a trustee to administer anySingle Employer Plan or (d) the existence of any other event or condition thatwould reasonably be expected to constitute grounds under Section 4042 of ERISAfor the termination of, or the appointment by the PBGC of a trustee toadminister, any Single Employer Plan.

“Total Funded Debt”:  as of any date of determination,without duplication, the sum of all Indebtedness of the Borrower or anySubsidiary on such date referred to in clauses (i), (ii), (iii), (iv) or (vii)of the definition of “Indebtedness” contained in Section 1.1 hereof.

“Total Leverage Ratio”:  for the Borrower and its Subsidiaries on aconsolidated basis, the ratio of Total Funded Debt to Adjusted EBITDA.

“Tranche”: the collective reference to LIBOR Loans the Interest Periods withrespect to all of which begin on the same date and end on the same later date(whether or not such LIBOR Loans shall originally have been made on the sameday).

“Transaction Costs”:  (i) all legal, accounting, consulting,diligence, appraisal and similar fees and expenses paid by the Borrower inconnection with the closing of the transactions contemplated by this Agreement,including all investment banking fees paid in connection therewith, (ii) thefees paid on the Closing Date pursuant to the Fee Letter and (iii) all costsand expenses relating to the initial public offering of equity interests in thePledgor in an amount not to exceed $3,000,000 (excluding underwriting fees).

“Transferee”: as defined in Section 9.6(f) hereof.

“Type”: as to any Loan, its nature as a Base Rate Loan or a LIBOR Loan.

“UBOC”: as defined in the Recitals to this Agreement.

## 1.2           OtherDefinitional Provisions.  (a)       (a)   Unless otherwisespecified therein, all terms defined in this Agreement shall have the definedmeanings when used in any other Loan Document or any certificate or otherdocument made or delivered pursuant hereto or thereto.

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### (b)           Asused herein, in any other Loan Document, and in any certificate or otherdocument made or delivered pursuant hereto or thereto, accounting terms notdefined in Section 1.1 and accounting terms partly defined in Section 1.1, tothe extent not defined, shall have the respective meanings given to them underGAAP.  Unless otherwise provided herein,all financial calculations made with respect to the Borrower for the purpose ofdetermining compliance with the terms of this Agreement shall be made on aconsolidated basis and in accordance with GAAP. For the purpose of determining compliance with financial covenantshereunder for any period, acquisitions, divestitures, and asset sales occurringduring such period will be included in the calculation of such ratio for suchperiod on a pro forma basis, and will be deemed to have occurred on the firstday of such period.

### (c)           Thewords “hereof,” “herein” and “hereunder” and words of similar import when usedin this Agreement shall refer to this Agreement as a whole and not to anyparticular provision of this Agreement, and Section, subsection, Schedule andExhibit references are to this Agreement unless otherwise specified.  The words “include,” “includes” and “including”shall be deemed to be followed by the phrase “without limitation”.

### (d)           Anyfinancial ratios required to be maintained by the Borrower pursuant to thisAgreement shall be calculated by dividing the appropriate component by theother component, carrying the result to one place more than the number ofplaces by which such ratio is expressed in this Agreement and rounding theresult up or down to the nearest number (with a round-up if there is no nearestnumber) to the number of places by which such ratio is expressed in thisAgreement.

### (e)           Themeanings given to terms defined herein shall be equally applicable to both thesingular and plural forms of such terms.

### (f)            Referencesto agreements, other contractual instruments and other documents include allsubsequent amendments and other modifications to such agreement and documents,but only to the extent such amendments and other modifications are notprohibited by the terms of any Loan Document.

# SECTION 2.           AMOUNT AND TERMS OF LOANS AND LETTERSOF CREDIT; COMMITMENT AMOUNTS

## 2.1           RevolvingLoans and Letters of Credit; Revolving Loan Commitments.  (a)  Subject to the terms and conditions hereof, each Revolving Loan Lenderseverally agrees to (i) make loans on a revolving credit basis through itsApplicable Lending Office to the Borrower from time to time from and includingthe Closing Date to but excluding the Revolving Loan Commitment Expiration Date(each a “Revolving Loan”, and collectively, the “Revolving Loans”)in accordance with the terms of this Agreement and (ii) participatethrough its Applicable Lending Office in letters of credit issued for theaccount of the Borrower pursuant to Section 2.3 from time to time from andincluding the Closing Date to but excluding the Revolving Loan CommitmentExpiration Date (each a “Letter of Credit” and, collectively, the “Lettersof Credit”); provided, however, that (A) the sum of (1) theaggregate principal amount of all Revolving Loans outstanding, (2) theaggregate Letter of Credit Amount of all Letters of Credit outstanding and (3)the aggregate amount of unreimbursed drawings under all Letters of 

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### Credit shall not exceed the Aggregate Revolving Loan Commitment at anytime and (B) the sum of (1) the aggregate Letter of Credit Amount of allLetters of Credit outstanding and (2) the aggregate amount of unreimburseddrawings under all Letters of Credit shall not exceed $2,500,000 at anytime.  Within the limits of eachRevolving Loan Lender’s Revolving Loan Commitment, the Borrower may borrow,have Letters of Credit issued for the Borrower’s account, prepay RevolvingLoans, reborrow Revolving Loans, and have additional Letters of Credit issuedfor the Borrower’s account after the expiration of previously issued Letters ofCredit.

With respect to each Revolving Loan Lender, theprincipal amount of each (A) Revolving Loan to be made by such Revolving LoanLender and (B) participation of a Revolving Loan Lender in a Letter of Creditshall be in an amount equal to the product of (i) such Revolving LoanLender’s Revolving Loan Commitment Percentage (expressed as a fraction) and (ii) thetotal amount of the Revolving Loan(s) and/or Letter(s) of Credit requested; providedthat in no event shall any Revolving Loan Lender be obligated to make aRevolving Loan or participate in a Letter of Credit if after giving effect tosuch Revolving Loan or such participation the sum of such Revolving Loan Lender’s(x) Revolving Loans outstanding, (y) Revolving Loan CommitmentPercentage of the aggregate Letter of Credit Amount of all Letters of Creditoutstanding and (z) Revolving Loan Commitment Percentage of the aggregateamount of unreimbursed drawings under all Letters of Credit would exceed itsRevolving Loan Commitment or if the amount of such requested Revolving Loan orsuch Revolving Loan Lender’s Revolving Loan Commitment Percentage of such requestedLetter of Credit is in excess of such Revolving Loan Lender’s AvailableRevolving Loan Commitment.

### (b)           Subjectto Sections 2.10, 2.12 and 2.13, the Revolving Loans may from time to time be(i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combinationthereof, as determined by the Borrower and notified to the Agent in accordancewith either Section 2.1(d) or 2.6.  EachRevolving Loan Lender may make or maintain its Revolving Loans to the Borroweror participate in Letters of Credit to or for the account of the Borrower by orthrough any Applicable Lending Office.

### (c)           TheRevolving Loans made by each Revolving Loan Lender to the Borrower shall beevidenced by a promissory note of the Borrower, substantially in the form ofExhibit A-1 (a “Revolving Note”), with appropriate insertionstherein as to payee, date and principal amount, payable to the order of suchRevolving Loan Lender and representing the obligation of the Borrower to paythe aggregate unpaid principal amount of all Revolving Loans made by suchRevolving Loan Lender to the Borrower pursuant to Section 2.1(a), withinterest thereon as prescribed in Sections 2.8 and 2.9.  Each Revolving Loan Lender is herebyauthorized (but not required) to record the date and amount of each payment orprepayment of principal of its Revolving Loans made to the Borrower, eachcontinuation thereof, each conversion of all or a portion thereof to anotherType and, in the case of LIBOR Loans, the length of each Interest Period withrespect thereto, in the books and records of such Revolving Loan Lender, andany such recordation shall constitute primafacie evidence of theaccuracy of the information so recorded. The failure of any Revolving Loan Lender to make any such recordation ornotation in the books and records of such Revolving Loan Lender (or any errorin such recordation or notation) shall not affect the obligations of theBorrower hereunder or under the Revolving Notes.  Each Revolving Note shall (i) be dated theClosing Date, (ii) provide for the payment of 

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### interest in accordance with the terms of this Agreement and (iii) bestated to be payable on the Revolving Loan Commitment Expiration Date.

### (d)           TheBorrower shall give the Agent irrevocable written notice, substantially in theform of a Borrowing Notice (which notice must be received by the Agent prior to10:00 a.m., Los Angeles time, on the proposed borrowing date or, if all or anypart of the Revolving Loans are requested to be made as LIBOR Loans, threeEurodollar Business Days prior to the proposed borrowing date) requesting thatthe Revolving Loan Lenders make Revolving Loans on the proposed borrowing dateand specifying (i) the aggregate amount of Revolving Loans requested to bemade, (ii) subject to Sections 2.10, 2.12 and 2.13, whether the RevolvingLoans are to be LIBOR Loans, Base Rate Loans or a combination thereof and(iii) if the Revolving Loans are to be entirely or partly LIBOR Loans, therespective amounts of each such Type of Revolving Loan and the respectivelengths of the initial Interest Periods therefor.  Notwithstanding the foregoing, such noticemay be given by telephone, provided it is promptly confirmed on the same day inwriting by delivery to the Agent of a written notice, substantially in the formof a Borrowing Notice.  Upon receipt ofsuch telephonic notice, the Agent shall promptly notify each Revolving LoanLender thereof on the date of receipt of such notice.  On the proposed borrowing date, not laterthan 11:00 a.m., Los Angeles time, each Revolving Loan Lender shall makeavailable to the Agent the amount of such Revolving Loan Lender’s pro ratashare of the aggregate borrowing amount (as determined in accordance with thesecond paragraph of Section 2.1(a)) in immediately available funds bywiring such amount to such account as the Agent shall specify.  The Agent may, in the absence of notificationfrom any Revolving Loan Lender that such Revolving Loan Lender has not made itspro rata share available to the Agent on such date, credit the account of theBorrower on the books of the Agent with the aggregate amount of RevolvingLoans.

### (e)           Neitherthe Agent nor any Revolving Loan Lender shall be responsible for theobligations or Revolving Loan Commitments of any other Revolving Loan Lenderhereunder, nor will the failure of any Revolving Loan Lender to comply with theterms of this Agreement relieve any other Revolving Loan Lender or the Borrowerof its obligations under this Agreement and the Revolving Notes.  In the event that, at any time when theconditions set forth for borrowing in Section 4.2 have been satisfied, a Lenderfor any reason fails or refuses to fund its portion of a borrowing hereunder,then, until such time as such Lender has funded its portion of such borrowing,such non-funding Lender shall not have the right (i) to vote regarding anyissue on which voting is required or advisable under this Agreement or anyother Loan Document, and the amount of the Commitments and Loans of such Lendershall not be counted as outstanding for purposes of determining issues requiringthe vote or consent of all “Lenders” or “Majority Lenders” hereunder or(ii) to receive payments of principal, interest or fees in respect of suchLender’s borrowings.

### (f)            TheRevolving Loan Commitment of each Revolving Loan Lender and the Aggregate RevolvingLoan Commitment shall terminate on the Revolving Loan Commitment ExpirationDate.

### (g)           Alloutstanding Revolving Loans shall be due and payable on the Revolving LoanCommitment Expiration Date.

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## 2.2           Term Loans; TermLoan Commitments.  (a)   Subject to the terms and conditions hereof,each Term Loan Lender severally agrees to make a term loan (each, a “TermLoan” and collectively the “Term Loans”) to the Borrower on theClosing Date in an aggregate principal amount equal to the amount of the TermLoan Commitment of such Term Loan Lender. After the funding of the Term Loans on the Closing Date, the Term LoanCommitments shall expire.

### (b)           Subject to Sections2.10, 2.12 and 2.13, the Term Loans may from time to time be (i) LIBOR Loans,(ii) Base Rate Loans or (iii) a combination thereof, as determined by theBorrower and notified to the Agent in accordance with either Section 2.2(e) or2.6.  Each Term Loan Lender may make ormaintain its Term Loan to the Borrower by or through any Applicable LendingOffice.

### (c)           The Term Loan madeby each Term Loan Lender to the Borrower shall be evidenced by a promissorynote of the Borrower, substantially in the form of Exhibit A-2 (a “TermNote”).  Each Term Note shall includeappropriate insertions therein as to payee, date and principal amount, shall bepayable to the order of the applicable Term Loan Lender and shall represent theobligation of the Borrower to pay the aggregate unpaid principal amount of theTerm Loan made by such Term Loan Lender to the Borrower pursuant to Section2.2(a), with interest thereon as prescribed in Sections 2.8 and 2.9.  Each Term Loan Lender is hereby authorized(but not required) to record the date and amount of each payment or prepaymentof principal of a Term Loan made to the Borrower, each continuation thereof,each conversion of all or a portion thereof to another Type and, in the case ofLIBOR Loans, the length of each Interest Period with respect thereto, in thebooks and records of such Term Loan Lender, and any such recordation shallconstitute primafacie evidence of the accuracy of theinformation so recorded.  The failure ofany Term Loan Lender to make any such recordation or notation in the books andrecords of the Term Loan Lender (or any error in such recordation or notation)shall not affect the obligations of the Borrower hereunder or under the TermNotes.  Each Term Note shall (i) bedated the Closing Date, (ii) provide for the payment of interest inaccordance with this Agreement and (iii) be stated to be payable ininstallments of principal in accordance with, and subject to the provisions of,Section 2.2(d).

### (d)           On each date setforth below, the Borrower shall repay the principal of the Term Notes in anaggregate amount equal to the corresponding amount set forth below (each suchamount a “Term Reduction Installment”):

| December 31, 2006  |   | $      | 375,000 |   |
|--------------------|--------|--------|---------|--------|
|               |   |   |    |
| March 31, 2007     |   | $      | 375,000 |   |
| June 30, 2007      |   | $      | 375,000 |   |
| September 30, 2007 |   | $      | 375,000 |   |
| December 31, 2007  |   | $      | 562,500 |   |
|               |   |   |    |
| March 31, 2008     |   | $      | 562,500 |   |
| June 30, 2008      |   | $      | 562,500 |   |
| September 30, 2008 |   | $      | 562,500 |   |
| December 31, 2008  |   | $      | 750,000 |   |

 

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| March 31, 2009     |   | $      | 750,000   |   |
|--------------------|--------|--------|-----------|--------|
| June 30, 2009      |   | $      | 750,000   |   |
| September 30, 2009 |   | $      | 750,000   |   |
| December 31, 2009  |   | $      | 937,500   |   |
|               |   |   |      |
| March 31, 2010     |   | $      | 937,500   |   |
| June 30, 2010      |   | $      | 937,500   |   |
| September 30, 2010 |   | $      | 937,500   |   |
| December 31, 2010  |   | $      | 1,125,000 |   |
|               |   |   |      |
| March 31, 2011     |   | $      | 1,125,000 |   |
| June 30, 2011      |   | $      | 1,125,000 |   |
| September 30, 2011 |   | $      | 1,125,000 |   |

 

; provided, that any amount outstanding on theTerm Notes after the final Term Reduction Installment shall be paid on the TermLoan Maturity Date.  The aggregate amountpayable to any Term Loan Lender on any Term Loan reduction date set forth in thisSection 2.2(d) shall be determined in accordance with the provisions of Section2.11.

### (e)           The Borrower shallgive the Agent irrevocable written notice, substantially in the form of aBorrowing Notice (which notice must be received by the Agent prior to9:00 a.m., Los Angeles time, one Business Day prior to the Closing Dateor, if all or any part of the Term Loans are requested to be made as LIBORLoans, three Eurodollar Business Days prior to the Closing Date) requestingthat the Term Loan Lenders make the Term Loans in accordance with theirrespective Term Loan Commitments on the Closing Date.  Upon receipt of such notice the Agent shallpromptly notify each Term Loan Lender thereof on the date of receipt of suchnotice.  Not later than 11:00 a.m.,Los Angeles time, on the Closing Date each Term Loan Lender shall makeavailable to the Agent the amount of such Term Loan Lender’s Term LoanCommitment in immediately available funds by wiring such amount to such accountas the Agent shall specify.

### (f)            Neither the Agentnor any Term Loan Lender shall be responsible for the obligations or Term LoanCommitment of any other Term Loan Lender hereunder, nor will the failure of anyTerm Loan Lender to comply with the terms of this Agreement relieve any otherTerm Loan Lender or the Borrower of its obligations under this Agreement andthe Term Notes.

2.3           Issuance of Letters of Credit.

 

### (a)           Subject to thelimitations on Letters of Credit set forth in Section 2.1(a), the Borrowershall be entitled to request the issuance of standby and commercial Letters ofCredit from time to time from and including the Closing Date to but excludingthe date three Business Days prior to the Revolving Loan Commitment ExpirationDate, by giving the Agent a Letter of Credit Request at least three BusinessDays before the requested date of issuance of such Letter of Credit (whichshall be a Business Day).  Any Letter ofCredit Request received by the Agent later than 12:00 noon, Los Angelestime, shall be deemed to have been received on the next Business Day.  Each Letter of Credit Request shall be signedby a Responsible Officer, shall be irrevocable and shall be effective uponreceipt by the Agent.  Provided that avalid Letter of Credit Request has been received by the Agent and upon fulfillmentof the other applicable 

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### conditions setforth in Section 4.2, the Agent will issue the requested Letter of Creditfrom its office specified in Section 9.2. Each Letter of Credit shall have an expiration date as set forth in theLetter of Credit Request, provided that no Letter of Credit shall in any eventhave an expiration date later than the earlier of (i) one year after theissuance thereof and (ii) two Business Days prior to the Revolving LoanCommitment Expiration Date.

### (b)           Immediately upon theissuance of each Letter of Credit, the Agent shall be deemed to have sold andtransferred to each Revolving Loan Lender, and each Revolving Loan Lender shallbe deemed to have purchased and received from the Agent, in each caseirrevocably and without any further action by any party, an undivided interestand participation in such Letter of Credit, each drawing thereunder and theobligations of the Borrower under this Agreement in respect thereof in anamount equal to the product of (i) such Revolving Loan Lender’s RevolvingLoan Commitment Percentage and (ii) the maximum amount available to bedrawn under such Letter of Credit (assuming compliance with all conditions todrawing).

### (c)           The payment by theAgent of a draft drawn under any Letter of Credit shall constitute for allpurposes of this Agreement the making by the Agent in its individual capacityas a Revolving Loan Lender hereunder (in such capacity, the “Drawing Lender”)of a Base Rate Loan in the amount of such payment (but without any requirementof compliance with the conditions set forth in Section 4.2).  In the event that any such Loan by theDrawing Lender resulting from a drawing under any Letter of Credit is notrepaid by the Borrower by 11:00 a.m., Los Angeles time, on the day ofpayment of such drawing, the Agent shall promptly notify each other RevolvingLoan Lender.  Each Revolving Loan Lendershall, on the day of such notification (or if such notification is not given by12:00 noon, Los Angeles time, on such day, then on the next succeedingBusiness Day), make a Base Rate Loan, which shall be used to repay theapplicable portion of the Base Rate Loan of the Drawing Lender with respect tosuch Letter of Credit drawing, in an amount equal to the amount of suchRevolving Loan Lender’s participation in such drawing for application to repaythe Drawing Lender (but without any requirement of compliance with theapplicable conditions set forth in Section 4.2) and shall deliver to theAgent for the account of the Drawing Lender, on the day of such notification(or if such notification is not given by 12:00 noon, Los Angeles time, onsuch day, then on the next succeeding Business Day) and in immediatelyavailable funds, the amount of such Base Rate Loan.  In the event that any Revolving Loan Lenderfails to make available to the Agent for the account of the Drawing Lender theamount of such Base Rate Loan, the Drawing Lender shall be entitled to recoversuch amount on demand from such Revolving Loan Lender, together with interestthereon for each day from the date of non-payment until such amount is paid infull at the Federal Funds Effective Rate.

### (d)           The obligations ofthe Borrower with respect to any Letter of Credit, any Letter of Credit Requestand any other agreement or instrument relating to any Letter of Credit and anyBase Rate Loan made under Section 2.3(c) shall be absolute, unconditionaland irrevocable and shall be paid strictly in accordance with the terms of theaforementioned documents under all circumstances, including the following:

#### (i)            any lack of validity orenforceability of any Letter of Credit, this Agreement or any other LoanDocument;

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#### (ii)           the existence of any claim, setoff,defense or other right that the Borrower may have at any time against anybeneficiary or transferee of any Letter of Credit (or any Person for whom anysuch beneficiary or transferee may be acting), the Agent, any Revolving LoanLender (other than the defense of payment to a Revolving Loan Lender inaccordance with the terms of this Agreement) or any other Person, whether inconnection with this Agreement, any other Loan Document, the transactionscontemplated hereby or thereby or any unrelated transaction;

#### (iii)          any statement or other documentpresented under any Letter of Credit proving to be forged, fraudulent, invalidor insufficient in any respect, or any statement therein being untrue orinaccurate in any respect whatsoever; provided that payment by the Agent undersuch Letter of Credit against presentation of such draft or document shall nothave constituted gross negligence or willful misconduct; and

#### (iv)          any exchange, release ornon-perfection of any Collateral, Guarantor Collateral or other collateral, orany release, amendment or waiver of or consent to departure from any Guarantee,other Loan Document or other guaranty, for any of the Obligations of theBorrower in respect of the Letters of Credit.

### (e)           The Borrower shallpay to the Agent, with respect to each Letter of Credit issued hereunder, thefollowing fees:

#### (i)            with respect to each standby Letterof Credit, for the account of the Revolving Loan Lenders, for the period fromand including the day such Letter of Credit is issued to but excluding the daysuch Letter of Credit expires, a letter of credit fee equal to the product of(x) 3.500% per annum and (y) the Letter of Credit Amount of suchLetter of Credit from time to time, such letter of credit fee to be payable ininstallments quarterly in arrears on the last Business Day of each March, June,September and December and on the expiration date of such Letter of Credit;

#### (ii)           with respect to each commercialLetter of Credit, for the account of the Agent, negotiation, issuance andamendment fees in accordance with the Agent’s standard internal chargeguidelines (as such guidelines may change from time to time);

#### (iii)          with respect to each Letter of Creditissued hereunder, for the account of Agent, a fronting fee equal to 0.25%of the Letter of Credit Amount of such Letter of Credit, payable uponissuance of such Letter of Credit; and

#### (iv)          with respect to each Letter of Creditissued hereunder, for the account of Agent, from time to time such additionalfees and charges (including cable charges) as are generally associated withletters of credit, in accordance with the Agent’s standard internal chargeguidelines (as such guidelines may change from time to time) and the relatedLetter of Credit Request.

### (f)            The Borrower agreesto the provisions in the Letter of Credit Request form; provided, however,that the terms of the Loan Documents shall take precedence if there is anyinconsistency between the terms of the Loan Documents and the terms of saidform.

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### (g)           The Borrower assumesall risks of the acts or omissions of any beneficiary or transferee of anyLetter of Credit with respect to its use of such Letter of Credit.  Neither the Agent nor any Lender nor any oftheir respective officers or directors shall be liable or responsible for(i) the use that may be made of any Letter of Credit or any acts oromissions of any beneficiary or transferee in connection therewith; or(ii) the validity, sufficiency or genuineness of documents, or of anyendorsement thereof, even if such documents should prove to be in any or allrespects invalid, insufficient, fraudulent or forged (but provided that anypayment or non-payment by the Agent under such Letter of Credit againstpresentation of such documents shall not have constituted gross negligence orwillful misconduct).  Notwithstanding anyother provision of this Section 2.3 to the contrary, the Agent may accept any documentthat appears on its face to be in order, without responsibility for furtherinvestigation, regardless of any notice or information to the contrary.

## 2.4           OptionalPrepayments; Optional Commitment Reductions.  The Borrower may, at any time and from timeto time, subject to Section 2.15, prepay the Loans and/or permanently reducethe Aggregate Revolving Loan Commitment, in whole or in part, without premiumor penalty, upon at least three Business Days’ irrevocable written notice inthe case of LIBOR Loans and upon at least one Business Day’s irrevocablewritten notice in the case of Base Rate Loans from the Borrower to the Agentspecifying the date and amount of prepayment and/or commitment reduction andwhether, if a prepayment, the prepayment is of Revolving Loans or Term Loans ora combination thereof and, if of a combination thereof, the amount allocable toeach and whether the prepayment is of LIBOR Loans, Base Rate Loans or acombination thereof and, if of a combination thereof, the amount allocable toeach.  Upon receipt of any such noticefrom the Borrower, the Agent shall promptly notify each Lender thereof.  If any such notice is given, the amountspecified in such notice shall be due and payable by the Borrower on the datespecified therein, together with accrued interest to such date on the amountprepaid.  Each prepayment under thisSection 2.4 of Term Loans shall be applied to the remaining Term ReductionInstallments on a pro rata basis; provided that, if an Event of Defaulthas occurred and is continuing, such prepayment shall be applied in such orderand manner as the Agent shall determine in its sole discretion.  No Term Loans prepaid under this Section 2.4shall be available for reborrowing. Partial prepayments of Loans shall be in the aggregate principal amountof $500,000 or an integral multiple of $250,000 in excess thereof.

## 2.5           MandatoryPrepayments.  (a)  If at any time the sum of (A) theaggregate principal amount of all Revolving Loans outstanding, (B) theaggregate Letter of Credit Amount of all Letters of Credit outstanding and(C) the aggregate amount of unreimbursed drawings under all Letters ofCredit exceeds the Aggregate Revolving Loan Commitment, then the Borrowershall, within two Business Days after any Responsible Officer shall haveknowledge of such overadvance, without notice or request by the Agent, prepaythe Revolving Loans and/or, if one or more Letters of Credit are outstanding,pledge cash collateral to the Agent to secure reimbursement of amountsavailable to be drawn thereunder, in an aggregate amount equal to such excess.

### (b)           Within two BusinessDays after receipt by the Borrower or any of its Subsidiaries of any NetProceeds with respect to an Asset Disposition, the Borrower shall prepay theLoans (and such prepayment shall be applied as specified in Section 2.5(d)) inan amount equal to 100% of such Net Proceeds; provided that, so long as noEvent of Default has occurred and is

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continuing, no prepaymentshall be required with respect to an Asset Disposition to the extent that,within 90 days following such disposition, such Net Proceeds are used to investin assets of the same or similar type and use as those disposed of and providedthat the Agent shall have a first-priority Lien thereon (subject to Section 6.3).  On or prior to the date of any AssetDisposition, the Borrower agrees to provide the Agent with calculations used bythe Borrower in determining the amount of any such prepayment under thisSection 2.5(b).

### (c)           If the Borrower orany Subsidiary receives insurance proceeds or condemnation proceeds aggregatingmore than $200,000 (or in any amount after the occurrence and during thecontinuance of an Event of Default) at any time after the Closing Date withrespect to any Property which are not fully applied (or contractually committedpursuant to contract(s), which contracts must be reasonably approved by theAgent if such proceeds equal or exceed $500,000) toward the repair orreplacement of such damaged or condemned Property by the earlier of (i) 90 daysafter the receipt thereof and (ii) the occurrence of a Default, the Borrowershall prepay the Loans (and such prepayment shall be applied as specified inSection 2.5(d)) in an amount equal to the amount of such proceeds not soapplied.  The Borrower shall give theAgent prompt written notice of all insurance and condemnation proceeds receivedby it or any Subsidiary on or after the Closing Date in excess of $200,000 peroccurrence.

### (d)           Each prepayment ofthe Loans pursuant to Section 2.5(b)-(c) shall be applied to the outstandingprincipal balance of the Term Loans. Each prepayment shall be accompanied by payment in full of all accruedinterest thereon to and including the date of such prepayment, together withany additional amounts owing pursuant to Section 2.15.  Each prepayment of the Term Loans pursuant tothis Section 2.5(d) shall be applied to the outstanding principal balancethereof in inverse order of maturity, and no such amounts shall be availablefor reborrowing.

## 2.6           Conversion andContinuation Options.  (a)   The Borrower may elect from time to time toconvert LIBOR Loans to Base Rate Loans by the Borrower giving the Agent atleast two Business Days’ prior irrevocable written notice of such electionpursuant to a Continuation Notice, provided that any such conversion ofLIBOR Loans may only be made on the last day of an Interest Period with respectthereto.  Subject to Sections 2.10, 2.12and 2.13, the Borrower may elect from time to time to convert Base Rate Loansto LIBOR Loans by the Borrower giving the Agent at least three EurodollarBusiness Days’ prior irrevocable written notice of such election pursuant to aContinuation Notice.  Any such notice ofconversion to LIBOR Loans shall specify the length of the initial InterestPeriod or Interest Periods therefor. Upon receipt of any such notice the Agent shall promptly notify eachLender thereof.  All or any part ofoutstanding LIBOR Loans and, subject to Sections 2.10, 2.12 and 2.13, Base RateLoans, may be converted as provided herein, provided that (i) anysuch conversion may only be made if, after giving effect thereto, Section 2.7shall not have been contravened, (ii) no such Loan may be converted into aLIBOR Loan after the date that is, (x) with respect to Revolving Loans, one monthprior to the Revolving Loan Commitment Expiration Date and, (y) with respect toTerm Loans, one month prior to the Term Loan Maturity Date and (iii) theBorrower shall not have the right to elect to continue at the end of theapplicable Interest Period, or to convert to, a LIBOR Loan if an Event ofDefault shall have occurred and be continuing.

### (b)           Any LIBOR Loan maybe continued as such upon the expiration of the then current Interest Periodwith respect thereto by the Borrower giving notice to the Agent, in 

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### accordancewith the applicable provisions of the term “Interest Period” set forth inSection 1.1, of the length of the next Interest Period to be applicable tosuch LIBOR Loan, provided that no LIBOR Loan may be continued as such(i) if, after giving effect thereto, Section 2.7 would becontravened, (ii) after the date that is, (x) with respect to RevolvingLoans, one month prior to the Revolving Loan Commitment Expiration Date and,(y) with respect to Term Loans, one month prior to the Term Loan Maturity Dateor (iii) if an Event of Default shall have occurred and be continuing; andprovided, further, that if the Borrower shall fail to give anyrequired notice as described above in this Section or if such continuation isnot permitted pursuant to the preceding proviso, such Loans shall beautomatically converted to Base Rate Loans on the last day of suchthen-expiring Interest Period.

## 2.7           Minimum Amountsof Tranches; Minimum Borrowings.  Allborrowings, conversions and continuations of LIBOR Loans hereunder and allselections of Interest Periods hereunder shall be in such amounts and be madepursuant to such elections so that, after giving effect thereto, the aggregateprincipal amount of the Loans comprising each Tranche shall be equal to$1,000,000 or a whole multiple of $100,000 in excess thereof and, in any case,there shall not be more than 6 Tranches. All borrowings of Base Rate Loans (except those made pursuant to Section2.3(c)) shall be in a minimum amount of $500,000 or a whole multiple of$100,000 in excess thereof.

## 2.8           Interest Ratesand Payment Dates.

### (a)           Each Revolving Loanshall (i) if a LIBOR Loan, bear interest for each day during each InterestPeriod with respect thereto at a rate per annum equal to the LIBOR AdjustedRate plus 2.00% and (ii) if a Base Rate Loan, bear interest at a rate per annumequal to the Base Rate plus 0.50%.

### (b)           Each Term Loan shall(i) if a LIBOR Loan, bear interest for each day during each Interest Periodwith respect thereto at a rate per annum equal to the LIBOR Adjusted Rate plus2.00% and (ii) if a Base Rate Loan, bear interest at a rate per annum equal tothe Base Rate plus 0.50%.

### (c)           If any Event ofDefault shall have occurred and be continuing, all amounts outstandinghereunder shall, at the election of the Agent or the Majority Lenders (in thesole discretion of the Agent or the Majority Lenders, as applicable), bearinterest at a rate per annum equal to the rate determined pursuant to Section2.8(a) or (b), as applicable, plus 2% per annum, from the date of the occurrenceof such Event of Default until such Event of Default is no longer continuing(after as well as before judgment).

### (d)           Interest shall bepayable in arrears on each Interest Payment Date; provided, however,that interest accruing pursuant to paragraph (c) of this Section shall bepayable on demand.

## 2.9           Computation ofInterest and Fees.  Interest on theLoans and all other Obligations shall be calculated on the basis of a year of365 or 366 days, as applicable, for the actual days elapsed; provided thatinterest on LIBOR Loans shall be calculated on the basis of a 360-day year, forthe actual days elapsed.  Eachdetermination of an interest rate by the Agent pursuant to 

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## any provisionof this Agreement shall be conclusive and binding on the Borrower and theLenders in the absence of manifest error.

## 2.10         Inability toDetermine Interest Rate.  In theevent that, prior to the first day of any Interest Period, (a) the Agent shallhave determined (which determination shall be conclusive and binding upon theBorrower absent manifest error) that, by reason of circumstances affecting therelevant market, adequate and reasonable means do not exist for ascertainingthe LIBOR Adjusted Rate for such Interest Period or (b) the Agent shall havereceived notice from the Majority Lenders acting in good faith that the LIBORAdjusted Rate determined or to be determined for such Interest Period will notadequately and fairly reflect the cost to such Lenders (as conclusivelycertified by such Lenders) of making or maintaining their affected Loans duringsuch Interest Period, the Agent shall give telecopy or telephonic noticethereof to the Borrower and the Lenders as soon as practicable thereafter.  If such notice is given, (i) any LIBORLoans requested to be made on the first day of such Interest Period shallaccrue interest at the Base Rate, (ii) Loans that were to have beenconverted on the first day of such Interest Period to LIBOR Loans shall becontinued as Base Rate Loans and (iii) any outstanding LIBOR Loans shallbe converted, on the first day of such Interest Period, to Base RateLoans.  Until such notice has beenwithdrawn by the Agent, no further LIBOR Loans shall be made or continued assuch, nor shall the Borrower have the right to convert Base Rate Loans to LIBORLoans.

## 2.11         Pro Rata Treatmentand Payments.  Each payment(including each prepayment) by the Borrower on account of principal of andinterest on the Loans shall be made pro rata according to the respectiveRevolving Loan Commitment Percentages and Term Loan Commitment Percentages, asapplicable, then held by the Lenders. All payments (including prepayments) to be made by the Borrowerhereunder and under the Notes, whether on account of principal, interest, feesor otherwise, shall be made without setoff, deduction or counterclaim and shallbe made prior to 11:00 a.m., Los Angeles time, on the due date thereof to theAgent, for the account of the applicable Lenders, at the Agent’s officespecified in Section 9.2, in Dollars and in immediately available funds.  The Agent shall distribute such payments tothe applicable Lenders promptly upon receipt in like funds as received.  If any payment hereunder (other than paymentson the LIBOR Loans) becomes due and payable on a day other than a Business Day,such payment shall be extended to the next succeeding Business Day, and, withrespect to payments of principal, interest thereon shall be payable at the thenapplicable rate during such extension. If any payment on a LIBOR Loan becomes due and payable on a day otherthan a Eurodollar Business Day, the maturity thereof shall be extended to thenext succeeding Eurodollar Business Day (and interest shall continue to accruethereon at the applicable rate) unless the result of such extension would be toextend such payment into another calendar month, in which event such paymentshall be made on the immediately preceding Eurodollar Business Day.  The Borrower authorizes the Agent to debitany of its bank accounts with the Agent or to make a draw of Revolving Loansfor the purpose of effecting payment of principal, interest or other costs andexpenses payable by the Borrower to the Agent or any Lender under thisAgreement.

## 2.12         Illegality.  Notwithstanding any other provision herein,if any change after the Closing Date in any Requirement of Law or in theinterpretation or application thereof shall make it unlawful for any Lender orApplicable Lending Office to maintain LIBOR Loans as contemplated by thisAgreement, (a) the commitment of such Lender hereunder to continue 

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## LIBOR Loans assuch and convert Base Rate Loans to LIBOR Loans shall forthwith be suspendedduring such period of illegality and (b) the Loans of such Lender orApplicable Lending Office then outstanding as LIBOR Loans, if any, shall beconverted automatically to Base Rate Loans on the respective last days of thethen current Interest Periods with respect to such Loans or within such earlierperiod as required by law.  If any suchconversion of a LIBOR Loan occurs on a day which is not the last day of thethen current Interest Period with respect thereto, the Borrower shall pay tosuch Lender such amounts, if any, as may be required pursuant toSection 2.15.  To the extent that aLender’s LIBOR Loans have been converted to Base Rate Loans pursuant to this Section 2.12,all payments and prepayments of principal that otherwise would be applied tosuch Lender’s LIBOR Loans shall be applied instead to its Base Rate Loans.

## 2.13         Increased Costs.  (a)  In the event that any change after the Closing Date in any Requirementof Law or in the interpretation or application thereof or compliance by anyLender with any request or directive (whether or not having the force of lawbut, if not having the force of law, generally applicable to and complied withby banks and financial institutions of the same general type as such Lender inthe relevant jurisdiction) from any central bank or other GovernmentalAuthority made subsequent to the Closing Date:

#### (i)            shall impose,modify or hold applicable any reserve, special deposit, compulsory loan orsimilar requirements against assets held by, letters of credit issued by,deposits or other liabilities in or for the account of, advances, loans orother extensions of credit by, or any other acquisition of funds by, any officeof such Lender or Applicable Lending Office which is not otherwise included inthe determination of the LIBOR Adjusted Rate hereunder; or

#### (ii)           shall impose onsuch Lender or Applicable Lending Office any other condition;

and the result of any of the foregoing is to increasethe cost to the Agent of issuing any Letter of Credit, increase the cost to anyLender or any Applicable Lending Office of purchasing or maintaining anyparticipation in a Letter of Credit, or increase the cost to any Lender or anyApplicable Lending Office of converting into, continuing or maintaining LIBORLoans, or to reduce any amount receivable hereunder in respect of any of theforegoing, in any case by an amount which the Agent or such Lender, asapplicable, deems to be material, then, in any such case, the Borrowershall pay to the Agent, on behalf of the Agent, such Lender or ApplicableLending Office, within two Business Days after demand of the Agent, anyadditional amounts necessary to compensate the Agent or such Lender, as applicable,for such increased cost or reduced amount receivable.  If the Agent, any Lender or any ApplicableLending Office becomes entitled to claim any additional amounts pursuant tothis Section, it shall promptly notify the Borrower, through the Agent, of the eventby reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to thisSection submitted by the Agent, such Lender or Applicable Lending Office,through the Agent, to the Borrower, which shall demonstrate in reasonabledetail the computation of such amounts, shall be conclusive evidence of theaccuracy of the information so recorded, absent manifest error.  This covenant shall survive the terminationof this Agreement, the expiration of the Letters of Credit and the payment ofthe Notes and all other amounts payable hereunder.

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### (b)           If, after the dateof this Agreement, the introduction of or any change in any applicable law,rule, regulation or guideline regarding capital adequacy, or any change in theinterpretation or administration thereof by any Governmental Authority chargedwith the interpretation or administration thereof, affects the amount ofcapital required or expected to be maintained by any Lender or any corporationcontrolling any Lender, and such Lender (taking into consideration such Lender’sor such corporation’s policies with respect to capital adequacy) determinesthat the amount of capital maintained by such Lender or such corporation whichis attributable to or based upon the Loans, the Letters of Credit or thisAgreement must be increased as a consequence of such introduction or change byan amount deemed by such Lender to be material, then, within two Business Daysafter demand of the Agent at the request of such Lender, the Borrower shall payto the Agent on behalf of such Lender, additional amounts sufficient tocompensate such Lender or such corporation for the increased costs to suchLender or corporation of such increased capital.  Any such demand shall be accompanied by acertificate of such Lender setting forth in reasonable detail the computationof any such increased costs, which certificate shall be conclusive, absentmanifest error.  This obligation of theBorrower under this Section 2.13(b) shall survive the termination of thisAgreement, the expiration of the Letters of Credit and the payment of the Notesand all other amounts payable hereunder.

## 2.14         Taxes.  All payments made by the Borrower in respectof the Obligations shall be made free and clear of, and without deduction or withholdingfor or on account of, any present or future income, stamp or other taxes,levies, imposts, duties, charges, fees, deductions or withholdings, now orhereafter imposed, levied, collected, withheld or assessed by any GovernmentalAuthority or any political subdivision or taxing authority thereof or therein,other than Excluded Taxes (all such non-Excluded Taxes being hereinafter called“Taxes”).  If any Taxes arerequired to be withheld from any amounts payable to the Agent or any Lender inrespect of the Obligations, the amounts so payable to the Agent or such Lendershall be increased to the extent necessary to yield to the Agent or such Lender(after payment of all Taxes) interest or any such other amounts payablehereunder at the rates or in the amounts specified in this Agreement and theNotes.  The Borrower agrees to indemnifythe Agent and each Lender for the full amount of Taxes (including any Taxesimposed or asserted by any Governmental Authority on amounts payable under thisSection) paid by the Agent or such Lender. Notwithstanding the foregoing, the Borrower shall not be required to payany increased amounts to any Lender if such Taxes arise as a result of anybreach by such Lender of any representation or warranty given pursuant to Section9.6(h), it being agreed that any loss of an exemption by a Lender ascontemplated by Section 9.6(h)(iii) shall not constitute a breach by suchLender.  Whenever any Taxes are payableby the Borrower, as promptly as possible thereafter, the Borrower shall send tothe Agent, for its own account or for the account of such Lender, as the casemay be, a copy of an original official receipt received by the Borrower showingpayment thereof or such other evidence of payment reasonably satisfactory tothe Agent.  If the Borrower fails to payany Taxes when due to the appropriate taxing authority or fails to remit to theAgent the required receipts or other required documentary evidence, theBorrower shall indemnify the Agent and the Lenders for any incremental taxes,interest or penalties (and related reasonable fees and expenses of counsel)that may become payable by the Agent or any Lender as a result of any suchfailure.  The agreements in this Sectionshall survive the termination of this Agreement, the expiration of the Lettersof Credit and the payment of the Notes and all other amounts payable hereunder.

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## 2.15         Indemnity.  The Borrower agrees to indemnify each Lenderand to hold each Lender harmless from and to pay each Lender on demand theamount of any liability, loss or expense arising from the reemployment of fundsobtained by it or from fees payable to terminate the deposits from which suchfunds were obtained (including reasonable fees and expenses of counsel) whichsuch Lender may sustain or incur as a consequence of (a) default by theBorrower in payment when due of the principal amount of or interest on anyLIBOR Loan, (b) default by the Borrower in making a borrowing of,conversion into or continuation of LIBOR Loans after the Borrower has given anotice requesting the same in accordance with the provisions of this Agreement,(c) default by the Borrower in making any prepayment after the Borrowerhas given a notice thereof in accordance with the provisions of this Agreementor (d) the making by the Borrower of a prepayment or conversion of LIBORLoans on a day which is not the last day of an Interest Period with respectthereto (including any prepayment required as a result of acceleration of theLoans under Article 7).  A Lender’scertificate as to such liability, loss or expense shall be deemed conclusive,absent manifest error.  This covenantshall survive the termination of this Agreement, the expiration of the Lettersof Credit and the payment of the Notes and all other amounts payable hereunder.

## 2.16         Mitigation ofCosts.  If any Lender, by changingits Applicable Lending Office or taking any other reasonable action, so long asmaking such change or taking such other action is not disadvantageous to it inany financial, regulatory or other respect, can mitigate any adverse effect onthe Borrower under Section 2.12, 2.13 or 2.14, such Lender shall take suchaction.

## 2.17         Unused CommitmentFees.  The Borrower agrees to pay tothe Agent, for the account of the Revolving Loan Lenders, an unused commitment feeto be shared pro rata among the Revolving Loan Lenders for the period from andincluding the Closing Date to but excluding the Revolving Loan CommitmentExpiration Date, based on the aggregate amount, for each day during suchperiod, of the Available Revolving Loan Commitments, and computed at a rateequal to 0.25% per annum.  Such unusedcommitment fees shall be payable in installments quarterly in arrears on thelast Business Day of each March, June, September and December and on theRevolving Loan Commitment Expiration Date.

# SECTION 3.           REPRESENTATIONS AND WARRANTIES

To induce the Lenders to enter into this Agreement andto make the Loans and participate in the Letters of Credit, and to induce theAgent to issue the Letters of Credit, the Borrower hereby represents andwarrants to the Agent and each Lender that:

## 3.1           FinancialCondition.  The (i) auditedconsolidated financial statements of the Borrower and its Subsidiaries, auditedby the Accountants for the fiscal year ended December 31, 2005 and (ii) unauditedconsolidated financial statements of the Borrower and its Subsidiaries for thefiscal quarter ended September 30, 2006, copies of which have heretofore beenfurnished to the Agent, present, to the best knowledge of the Borrower, fairlyin all material respects the financial condition of the Borrower and itsSubsidiaries.  The foregoing financialstatements (the “Financial Statements”), including the related schedules andnotes thereto, have been prepared in accordance with GAAP applied consistentlythroughout the periods involved.  Neitherthe Borrower nor any Subsidiary has, as of such date, any Guarantee Obligation,contingent liability or liability for taxes, or any long-term lease or unusualforward or long-term 

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## commitment,including, without limitation, any interest rate or foreign currency swap orexchange transaction, in an aggregate amount for all such obligations,liabilities and commitments in excess of $200,000, which is not reflected inthe foregoing statements or in the notes thereto.  As of the Closing Date, since December 31,2005, there has been no event or condition that could result in a MaterialAdverse Effect.

## 3.2           CorporateExistence; Compliance with Law.  TheBorrower and each Subsidiary (a) is duly organized, validly existing and ingood standing under the laws of the jurisdiction of its organization, (b) hasthe corporate, partnership or limited liability company power, as the case maybe, and authority, and the legal right, to own and operate its Properties, tolease the property it operates as lessee and to conduct the business in whichit is currently engaged and in which it proposes to be engaged after theClosing Date, (c) is duly qualified as a foreign entity and in good standingunder the laws of each jurisdiction where its ownership, lease or operation ofproperty or the conduct of its business requires such qualification, each ofwhich jurisdictions is set forth on Schedule 3.2 hereto and (d) is incompliance with all Requirements of Law, except, with respect to clause (c) and(d) above, to the extent that the failure to comply therewith could not, in theaggregate, have a Material Adverse Effect.

## 3.3           Corporate Power;Authorization; Consents; Enforceable Obligations.  (a)  TheBorrower and each of its Subsidiaries has the corporate, partnership or limitedliability company power, as the case may be, and authority, and the legalright, to make, deliver and perform the Loan Documents to which it is or willbe a party, and to borrow hereunder (in the case of the Borrower), and theapplicable Loan Party has taken all necessary corporate, partnership or limitedliability company action, as applicable, to authorize (i) the borrowingson the terms and conditions of this Agreement and the Notes and (ii) theexecution, delivery and performance of the Loan Documents to which it is orwill be a party.

### (b)           No consent orauthorization of, filing with or other act by or in respect of, anyGovernmental Authority or any other Person is required (or, with respect tothose transactions and agreements previously entered into, was required) inconnection with the borrowings hereunder or the execution, delivery,performance, validity or enforceability of this Agreement, the Notes or theother Loan Documents except for (i) any consent, authorization, filing or otheract which has been made or obtained and is in full force and effect and (ii)material consents, authorizations, filings or other acts required by theBorrower in the ordinary course of business none of which it believes will notbe duly given, made or taken as needed in such ordinary course.  This Agreement has been, and each of theother Loan Documents to which the Borrower or any Subsidiary is or will be aparty will be, duly executed and delivered by it.  This Agreement constitutes, and each of theother Loan Documents when executed and delivered will constitute, a legal,valid and binding obligation of the Borrower and each Subsidiary (to the extentthe Borrower or such Subsidiary is a party thereto) enforceable against it inaccordance with its terms, except as enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or similar lawsaffecting the enforcement of creditors’ rights generally and by generalequitable principles (whether enforcement is sought by proceedings in equity orat law).

## 3.4           No Legal Bar.  The execution, delivery and performance ofthis Agreement and the other Loan Documents, the borrowings hereunder and theuse of the proceeds thereof will not 

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## violate anyRequirement of Law or material Contractual Obligation of the Borrower or anySubsidiary, and will not result in, or require, the creation or imposition ofany Lien on any of its properties or revenues pursuant to any such Requirementof Law or material Contractual Obligation, except pursuant to the LoanDocuments.

## 3.5           No MaterialLitigation.  Except as set forth inSchedule 3.5, no litigation, investigation or proceeding of or before anyarbitrator or Governmental Authority is pending or, to the knowledge of theBorrower, threatened (a) by or against the Borrower or any Subsidiary oragainst any of its or their properties or revenues or by or against anyAffiliate of the Borrower or any Subsidiary, with respect to this Agreement orthe other Loan Documents or any of the transactions contemplated hereby orthereby or (b) by or against the Borrower or any Subsidiary or against anyof its or their properties or revenues which could reasonably be expected tohave a Material Adverse Effect.

## 3.6           Ownership ofProperty; Liens; Condition of Properties. The Borrower and each Subsidiary has good and marketable title to allProperties purported to be owned thereby, free and clear of any Liens, exceptthose permitted by Section 6.3.  Theproperty and assets of the Borrower and its Subsidiaries constitute allproperty and assets necessary for the business of the Borrower and itsSubsidiaries, are in good order and repair (ordinary wear and tear and casualtyexcepted) and are fully covered by the insurance required under the LoanDocuments.  Neither the Borrower nor anySubsidiary has used (or permitted the filing of any financing statement under)any legal or operating name at any time during the five years immediatelypreceding the execution of this Agreement, except as identified on Schedule 3.6.

## 3.7           EnvironmentalMatters. Except as set forth in Schedule 3.7, and except for the existence of theSan Gabriel Valley Site Liabilities:

### (a)           Each of the Borrower and its Subsidiaries and anyproperty or facility, or the businesses conducted at such properties orfacilities, owned or operated, or to the knowledge of the Borrower, previouslyowned or operated, by the Borrower or its Subsidiaries, has complied with andis in compliance in all material respects with all Environmental and SafetyRequirements;

### (b)           There are no conditions of contamination by, nor isthere a present or threatened material Release of, Hazardous Substances at, in,on or under any property or facility owned or operated, or to the knowledge ofthe Borrower, previously owned or operated, by the Borrower and itsSubsidiaries nor is there any condition of contamination or present orthreatened material Release of Hazardous Substances on any nearby real propertywhich could migrate to a property or facility owned or operated, or to theknowledge of the Borrower previously owned or operated, by the Borrower and itsSubsidiaries;

### (c)           The Borrower and its Subsidiaries have obtained andcomplied in all material respects with, and is in compliance in all materialrespects with, all material permits, licenses and other authorizations that arerequired pursuant to Environmental and Safety Requirements for the occupationof its facilities and the operation of its business;

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### (d)           Tothe knowledge of the Borrower, and except as disclosed in the EnvironmentalReview of Physicians Formula Cosmetics, Incorporated dated October 2, 2003 byEnviron International Corporation (the “Environmental Report”), nomaterial Hazardous Substance Activity has ever occurred at any property or facilityowned or operated, or previously owned or operated, by the Borrower and itsSubsidiaries;

### (e)           Nojudicial proceedings or governmental or administrative action is pending or, tothe knowledge of the Borrower or its Subsidiaries, threatened under anyEnvironmental and Safety Requirement to which it is named as a party withrespect to anyproperty or facility owned or operated, or previously owned or operated, by theBorrower and its Subsidiaries or the business conducted at suchproperties, nor are there any consent decrees or other decrees, consent orders,administrative orders or other orders, or other judicial requirementsoutstanding under any Environmental and Safety Requirement with respect to suchproperties or such business;

### (f)            Neitherthe Borrower nor its Subsidiaries has received any written notice, report orother information regarding any actual or alleged violation of Environmentaland Safety Requirements, or any material liabilities or potential materialliabilities (whether accrued, absolute, contingent, unliquidated or otherwise),including any investigatory, remedial or corrective obligations, relating toany of them or its facilities arising under Environmental and SafetyRequirements;

### (g)           To the Borrower’s knowledge, and except as disclosedin the Environmental Report, none of the following exists at any property orfacility owned or operated by the Borrower or its Subsidiaries: (1) undergroundstorage tanks, (2) asbestos-containing material in any form or condition,(3) materials or equipment containing polychlorinated biphenyls, (4) landfills,surface impoundments, or disposal areas; and (5) mold;

### (h)           Tothe Borrower’s knowledge, neither the Borrower nor any of its Subsidiaries hastreated, stored, disposed of, arranged for or permitted the disposal of, transported,handled, or released any substance, including any Hazardous Substance, or ownedor operated any property or facility (and no such property or facility iscontaminated by any such substance) in a manner that has given or would giverise to any material liabilities, including any liability for response costs,corrective action costs, personal injury, property damage, natural resourcesdamages or attorney fees,****or any investigatory,corrective or remedial obligations, pursuant to any Environmental and SafetyRequirements;

### (i)            To the Borrower’s knowledge, neither the Borrower norany of its Subsidiaries has manufactured, sold, marketed, installed ordistributed products containing asbestos, and with respect to such entities, nobasis in law or fact exists to support an assertion of any material claim,action or obligation with respect to asbestos liabilities; and

### (j)            To theknowledge of the Borrower, all contracts and agreements identified or requiredto be identified on the Contracts Schedule pursuant to Section 5.12(a) of theAcquisition Agreement regarding any indemnification provided to or by theBorrower, the Company (as defined in the Acquisition Agreement) and any oftheir Subsidiaries with respect to Environmental and Safety Requirements or anyof the San Gabriel Valley Site Liabilities are, to 

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### theBorrower’s knowledge, valid, binding and enforceable in accordance with theirrespective terms (except to the extent that enforcement may be affected by lawsrelating to bankruptcy, reorganization, insolvency and creditor’s rights) andshall be in full force and effect without penalty in accordance with theirterms upon consummation of the transactions contemplated hereby.  To the Borrower’s knowledge, each of theBorrower, the Company (as defined in the Acquisition Agreement) and theirSubsidiaries has performed all material obligations required to be performed byit and is not in default under or in breach of nor in receipt of any claim ofdefault or breach under any such agreement. To the Borrower’s knowledge, no event has occurred which with thepassage of time or the giving of notice or both would result in a default,breach or event of noncompliance by the Borrower, Company (as defined in theAcquisition Agreement) or any of their Subsidiaries under any suchagreement.  To the Borrower’s knowledge,there have been no breaches of such agreement by any of the other partiesthereto.  To the Borrower’s knowledge, PierreFabre Dermo-Cosmetique S.A., a French société anonyme, has accurately described tothe Borrower the history and current status of the San Gabriel Valley SiteLiabilities through a combination of written documents, responses to duediligence inquiries and discussions with the Borrower’s counsel andenvironmental consultant, the substance of which disclosures is incorporatedherein by reference.

This Section 3.7 sets forth the sole representationsand warranties of the Borrower with respect to environmental, health and safetymatters, including without limitation all matters arising under Environmentaland Safety Requirements.

## 3.8           IntellectualProperty.  The Borrower and eachSubsidiary owns, or is licensed to use, all trademarks, trade names, patentsand copyrights necessary for the conduct of its business as currently conducted(the “Intellectual Property”). Except as set forth on Schedule 3.8, no claim which could reasonably beexpected to have a Material Adverse Effect has been asserted and is pending byany Person challenging or questioning the use of any such Intellectual Propertyor the validity or effectiveness of any such Intellectual Property, nor doesthe Borrower or any Subsidiary know of any valid basis for any such claim.  To the Borrower’s knowledge, the use of suchIntellectual Property by the Borrower and its Subsidiaries does not infringe onthe rights of any Person nor, to the Borrower’s knowledge, does the use byother Persons of such Intellectual Property infringe on the rights of theBorrower or any Subsidiary.  In the eventof the enforcement by the Agent of its rights as a secured creditor under theLoan Documents, the Agent will not be required to own or otherwise possess theright to use any patent, trademark or other intellectual property, or anylicense to use the same, in order to sell any Inventory of any Loan Party.

## 3.9           Taxes.  The Borrower and each Subsidiary has filed orcaused to be filed all material tax returns which are required to be filed andhas paid all material taxes shown to be due and payable on said returns or onany material assessments made against it or any of its property and all othertaxes, fees or other charges imposed on it or any of its property by anyGovernmental Authority (other than any not yet delinquent or the amount orvalidity of which are currently being contested in good faith by appropriateproceedings and with respect to which reserves in conformity with GAAP havebeen provided on the books of the Borrower or such Subsidiary, as appropriate);and no tax Lien has been filed, and no claim is being asserted with respect toany such tax, fee or other charge.

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## 3.10         FederalRegulations.  No Loan, no Letter ofCredit, and no part of the proceeds thereof are intended to be or will be used,directly or indirectly, for “purchasing” or “carrying” any Margin Stock withinthe respective meanings of each of the quoted terms under Regulation U orfor any purpose which violates the provisions of the Regulations of the Boardof Governors of the Federal Reserve System. If requested by the Agent, the Borrower will furnish to the Agent astatement to the foregoing effect in conformity with the requirements ofForm U-1 referred to in Regulation U.

## 3.11         ERISA Compliance.

### (a)           The Borrower andeach Subsidiary is in compliance in all respects with all applicable provisionsof ERISA, and all rules, regulations and orders implementing ERISA, except tothe extent that the failure to comply therewith could not, in the aggregate,have a Material Adverse Effect.

### (b)           Neither theBorrower, nor any Subsidiary or any ERISA Affiliate thereof maintains orcontributes to (or has maintained or contributed to) any Multiemployer Planunder which the Borrower, any Subsidiary or any ERISA Affiliate thereof couldhave any withdrawal liability.

### (c)           Neither theBorrower, nor any Subsidiary or any ERISA Affiliate thereof sponsors ormaintains any defined benefit pension plan under which there is an accumulatedfunding deficiency within the meaning of Section 412 of the Code, whether ornot waived.

### (d)           The liability foraccrued benefits under each defined benefit pension plan that will be sponsoredor maintained by the Borrower, any Subsidiary or any ERISA Affiliate thereof(determined on the basis of the actuarial assumptions utilized by the PBGC)does not exceed the aggregate fair market value of the assets under each suchdefined benefit pension plan.

### (e)           The aggregateliability of the Borrower, each Subsidiary and each ERISA Affiliate thereofarising out of or relating to a failure of any employee benefit plan within themeaning of Section 3(2) of ERISA to comply with provisions of ERISA or the Codecould not have a Material Adverse Effect.

### (f)            There does notexist any unfunded liability (determined on the basis of actuarial assumptionsutilized by the actuary for the plan in preparing the most recent annualreport) of the Borrower, any Subsidiary or any ERISA Affiliate thereof underany plan, program or arrangement providing post-retirement, life orhealth benefits.

### (g)           No Reportable Eventand no Prohibited Transaction (as defined in ERISA) has occurred or isoccurring with respect to any plan with which the Borrower or any Subsidiary isassociated.

## 3.12         Investment CompanyAct.  Neither the Borrower nor anySubsidiary is (i) an “investment company”, or (ii) a company “controlled” by an“investment company”, within the meaning of the Investment Company Act of 1940,as amended (the “Investment Company Act”), which is, in the case ofclause (ii), registered or required to be registered under the InvestmentCompany Act.

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## 3.13         Subsidiaries; Etc.  As of the Closing Date, the Borrower has no Subsidiariesother than those set forth on Schedule 3.13.

## 3.14         Purpose of Loansand Letters of Credit.  (a)  The proceeds of the Revolving Loans areintended to be and shall be used by the Borrower as follows:  (i) to refinance, in part, the Loans (asdefined in the Existing Credit Agreement), (ii) to pay fees and expensesin connection with preparation and negotiation of the Loan Documents andconsummation of the transactions contemplated thereby, (iii) for workingcapital and general corporate purposes of the Borrower and its Subsidiaries,(iv) any Permitted Acquisitions; provided that no Revolving Loans may beused for a Permitted Acquisition if, after such Permitted Acquisition, theAvailable Revolving Loan Commitment would be less than $3,000,000 and (v) topay costs and expenses relating to the initial public offering of equityinterests in the Pledgor in an amount not to exceed $3,000,000 (excludingunderwriting fees).

### (b)           The proceeds of theTerm Loans are intended to be and shall be used by the Borrower to refinance,in part, the Loans (as defined in the Existing Credit Agreement).

### (c)           The Letters ofCredit shall be used for general corporate purposes of the Borrower and itsSubsidiaries.

## 3.15         Accuracy andCompleteness of Information.  Allinformation (other than projections and proforma statements) contained in anyapplication, schedule, report, certificate, or any other document given to theAgent or any Lender by or on behalf of the Borrower or any Subsidiary inconnection with the Loan Documents or the Existing Credit Agreement is in allmaterial respects true, accurate and complete as of the date referred totherein, and no such Person has omitted to state therein (or failed to includein any such document) any material fact or any fact necessary to make suchinformation not misleading.  Allprojections given to the Agent or any Lender by or on behalf of the Borrower orany Subsidiary have been prepared with a reasonable basis and in good faithmaking use of such information as was available at the date such projection wasmade.  The projections and pro formafinancial information contained in such materials are based upon good faithestimates and assumptions believed by the Borrower to be reasonable at the timemade and as of the Closing Date, it being recognized that such projections asto future events are not to be viewed as facts and that actual results duringthe period or periods covered by any such projections may differ from theprojected results.

## 3.16         Real PropertyAssets.  Schedule 3.16 sets forth allreal property that, as of the Closing Date, is owned, leased, occupied, used,controlled, managed or operated by the Borrower and its Subsidiaries.

## 3.17         Permits, Etc..  The Borrower and its Subsidiaries have allpermits, licenses, authorizations and approvals required for each of themlawfully to own, lease, control, manage and operate its Properties andbusinesses, except for such permits, licenses, authorizations or approvals forwhich the failure to obtain or maintain could not have a Material AdverseEffect.  To the Borrower’s knowledge, nocondition exists or event has occurred which, in itself or with the giving ofnotice or lapse of time or both, would result in the suspension, revocation,impairment, forfeiture or non-renewal of any such permit, license,authorization or approval.

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## 3.18         Nature of Business.  Neither the Borrower nor any Subsidiary isengaged in any business other than developing, manufacturing, distributing,packaging, marketing and selling cosmetics for the consumer market, or forPersons who are, in turn, selling cosmetics for the consumer market.

## 3.19         Capital Structureand Equity Ownership. Schedule 3.19 hereto accurately and completely discloses, as of theClosing Date, (a) the number and classes of equity ownership rights andinterests in the Pledgor, the Borrower and each Subsidiary (whether existing ascommon or preferred stock, general or limited partnership interests, or limitedliability company membership interests, or warrants, options or otherinstruments convertible into such equity, and including, with respect to thePledgor, each shareholder’s interest therein on a fully-diluted basis) and(b) the ownership thereof.  All suchshares and interests are validly existing, fully paid and non-assessable.  As of the Closing Date, there are noEquityholder Agreements, other than as set forth on Schedule 3.19.

## 3.20         Insolvency.  After giving effect to the repayment of allIndebtedness to be repaid on the Closing Date in accordance with the terms ofthis Agreement, the funding of Loans and the issuance of any Letters of Crediton the Closing Date, the application of the proceeds of such Loans as providedherein and the payment of all estimated legal, underwriting, investmentbanking, accounting and other fees related hereto and thereto, the Borrower andits Subsidiaries, taken as a whole, will be Solvent as of and on the ClosingDate.

## 3.21         Labor Matters.  There are no strikes or other labor disputesagainst the Borrower or any Subsidiary pending, or to the Borrower’s knowledge,threatened against it or any Subsidiary, in each case which could reasonably beexpected to have a Material Adverse Effect.

## 3.22         Condemnation.  No taking of any of the Properties or anypart thereof through eminent domain, conveyance in lieu thereof, condemnationor similar proceeding is pending or, to the knowledge of the Borrower,threatened by any Governmental Authority (a) on the Closing Date or (b) afterthe Closing Date with respect to real property having an aggregate value inexcess of $100,000.

## 3.23         Absence ofFinancing Statements.  Except withrespect to Liens permitted by Section 6.3, there is no financing statement,security agreement, chattel mortgage, real estate mortgage or other documentfiled or recorded with any filing records, registry or other public office thatpurports to cover, affect or give notice of any present or possible future Lienon any assets or property of the Borrower or any of its Subsidiaries or anyrights relating thereto.

## 3.24         Perfection ofSecurity Interest.  All filings,assignments, pledges and deposits of documents or instruments have been made orare being made concurrently herewith and all other actions have been taken thatare necessary, under applicable law, to establish and perfect the Agent’ssecurity interest in the Collateral and the Guarantor Collateral.  Subject to Section 6.3 hereof, the Collateraland the Guarantor Collateral and the Agent’s rights with respect to theCollateral and the Guarantor Collateral are not subject to any setoff, claims,withholdings or other defenses.  Eachgrantor, respectively, under the Security Agreement, the Guarantor SecurityAgreement and the Pledge Agreement is the owner of the Collateral or theGuarantor Collateral, as applicable, free from any Lien, except for Liens permittedby Section 6.3.

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# SECTION 4.           CONDITIONS PRECEDENT

## 4.1           Conditions toClosing Date.  The agreement of eachLender to make the Loans requested to be made by it on the Closing Date and toparticipate in any Letters of Credit to be issued on the Closing Date and theagreement of the Agent to issue any Letters of Credit requested to be issued onthe Closing Date, in each case in accordance with the terms hereof, is subjectto the satisfaction, in each case in form and substance reasonably acceptableto the Agent, immediately prior to or concurrently with the making of suchLoans and/or the issuance of and participation in such Letters of Credit on theClosing Date, of the following conditions precedent:

### (a)           Credit Agreement.  The Agent shall have received this Agreement,executed and delivered by an officer of the Borrower, each Lender and theAgent.

### (b)           Other LoanDocuments.  The Agent shall havereceived each Note to be issued on the Closing Date, the Pledgor Guarantee, thePledge Agreement, the Subsidiary Guarantee, the Guarantor Security Agreement,the Fee Letter and each other Loan Document to be delivered on the ClosingDate, in each case dated as of the Closing Date and executed and delivered byan officer of the relevant Loan Party, as applicable.

### (c)           IncumbencyCertificate.  The Agent shall havereceived an incumbency certificate of each Loan Party, each dated the ClosingDate, executed by an appropriate officer thereof.

### (d)           CorporateProceedings, Etc.  The Agent shallhave received a copy of the resolutions of the Board of Directors, or similargoverning body, of each Loan Party authorizing (i) the Loan Documents towhich it is or will be a party and (ii) the borrowings contemplatedhereunder, in each case certified by an appropriate officer of such Loan Partyas of the Closing Date, which certificate states that the resolutions therebycertified have not been amended, modified, revoked or rescinded and are in fullforce and effect.

### (e)           CertainAgreements.  The Agent shall havereceived copies of (i) the Organic Documents of each Loan Party, certified asof the Closing Date as complete and correct copies thereof, and in full forceand effect, by an appropriate officer of such Loan Party, (ii) the employmentagreements for Jeff Rogers, Ingrid Jackel and Joseph Jaeger with the Borrowerand (iii) each management agreement to which the Borrower or any Subsidiary isparty, in each case certified as of the Closing Date as complete and correctcopies thereof, and in full force and effect, by an appropriate officer of suchLoan Party (or, with respect to any document referred to in this Section 4.1(e)which was delivered in connection with the closing of the Existing CreditAgreement and remains unchanged, a certificate of such officer to such effect).

### (f)            Costs.  The Agent shall have received payment orevidence of payment by the Borrower of all costs, expenses and taxes(including, without limitation, those payable pursuant to Section 9.5)accrued and unpaid and otherwise due and payable on or before the Closing Dateby the Borrower pursuant to this Agreement.

### (g)           Fees.  The Agent shall have received the fees to bepaid on the Closing Date pursuant to the Fee Letter.

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### (h)           LegalOpinions.  The Agent shall havereceived, with a counterpart for each Lender, the following executed legalopinions, each dated as of the Closing Date:

##### (A)          the executed legalopinion of Kirkland & Ellis LLP, counsel to the Loan Parties, in form andsubstance satisfactory to the Agent; and

##### (B)           such other legalopinions as the Agent may reasonably request.

### (i)            GoodStanding Certificates.  The Agentshall have received, with respect to each Loan Party, a certificate, dated nomore than 15 days prior to the Closing Date, of the Secretary of State (orother relevant state authority) of the state of formation of such Loan Partyand each other jurisdiction where such Loan Party is required to be qualifiedto do business under such jurisdiction’s law (each of which is set forth onSchedule 3.2), certifying as to the existence and good standing of, and thepayment of taxes by, each Loan Party in such state.

### (j)            NoDefault/Representations.  No Defaultshall have occurred and be continuing on the Closing Date or would occur aftergiving effect to the repayment of all Indebtedness to be repaid on the ClosingDate in accordance with the terms of this Agreement, the funding of Loans andthe issuance of any Letters of Credit on the Closing Date, the application of theproceeds of such Loans as provided herein and the payment of all estimatedlegal, underwriting, investment banking, accounting and other fees relatedhereto and thereto, and the representations and warranties contained in thisAgreement and each other Loan Document, and the representations and warrantiescontained in each certificate or other writing delivered to the Agent or theLenders in satisfaction of the conditions set forth in this Section 4.1prior to or on the Closing Date, except to the extent such representations andwarranties expressly relate to an earlier date, shall be correct in allmaterial respects on and as of the Closing Date, and the Agent shall havereceived a certificate of a Responsible Officer of the Borrower to such effectin the form of Exhibit B, dated as of the Closing Date.

### (k)           InsurancePolicies.  Subject to Section  5.14, the Agent shall have received evidencethat the insurance policies provided for in Section 5.5 are in full forceand effect, together with appropriate evidence showing the Agent as anadditional named insured, additional beneficiary, assignee or loss payee, asappropriate, for the benefit of the Lenders.

### (l)            Covenant Compliance Certificate.  TheAgent shall have received a Covenant Compliance Certificate with respect to theTotal Leverage Ratio, Fixed Charge Coverage Ratio and its Tangible Net Worthand based on results for the 12-month period ended September 30, 2006, preparedon a pro forma basis assuming repayment of all Indebtedness to be repaid on theClosing Date in accordance with the terms of this Agreement, the funding ofLoans and the issuance of any Letters of Credit on the Closing Date, theapplication of the proceeds of the Loans as provided herein and the payment ofall estimated legal, underwriting, investment banking, accounting and otherfees related hereto and thereto, and indicating a Total Leverage Ratio notgreater than 2.00:1, a Fixed Charge Coverage Ratio not less than 2.00:1 andTangible Net Worth of not less than -$20,000,000.

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### (m)          ExistingDebt.  The Agent shall have receivedevidence reasonably satisfactory to it that all Indebtedness and otherobligations of the Borrower under the Existing Credit Agreement and the NotePurchase Agreement have been repaid in full.

### (n)           InitialPublic Offering.  The initial publicoffering of equity interests in the Pledgor shall have been consummated and theAgent shall have received a certificate of a Responsible Officer of the Pledgorto such effect.

### (o)           AdditionalProceedings.  The Agent shall have receivedsuch other approvals, opinions and documents as any Lender, through the Agent,may reasonably request and all legal matters incident to the making of suchLoans and issuance of such Letters of Credit shall be reasonably satisfactoryto the Agent.

## 4.2           Conditionsto Each Loan or Letter of Credit. The agreement of each Lender to make the Loans requested to be made byit on the Closing Date, the agreement of each Lender to participate in anyLetters of Credit to be issued on the Closing Date, and the agreement of theAgent to issue any Letters of Credit to be issued on the Closing Date, and theagreement of each Lender to make each Revolving Loan, and the agreement of theAgent to issue each Letter of Credit from time to time requested to be made orissued by it, as applicable, is subject to the satisfaction, immediately priorto or concurrently with the making of such Loan or the issuance of such Letterof Credit, of the following conditions precedent:

### (a)           Representationsand Warranties; No Default.  Thefollowing statements shall be true and the Borrower’s acceptance of theproceeds of such Loan or its delivery of an executed Letter of Credit Requestshall be deemed to be a representation and warranty of the Borrower, on thedate of such Loan or as of the date of issuance of such Letter of Credit, asapplicable, that:

#### (i)            Therepresentations and warranties contained in this Agreement, each other LoanDocument and each certificate or other writing delivered to the Agent or theLenders in connection herewith are correct on and as of such date in allmaterial respects as though made on and as of such date except to the extentthat such representations and warranties expressly relate to an earlier date inwhich case such representations and warranties are correct on such earlier datein all material respects; and

#### (ii)           NoDefault has occurred and is continuing or would result from the making of theLoan or the issuance of such Letter of Credit to be made or issued on suchdate; and

#### (iii)          Noevent shall have occurred and be continuing, or condition exist, which theMajority Lenders reasonably believe could have a Material Adverse Effect.

### (b)           Legality.  The making of such Loan or the issuance ofsuch Letter of Credit, as applicable, shall not contravene any law, rule orregulation applicable to any Lender or the Borrower or any other Loan Party.

### (c)           BorrowingNotice or Letter of Credit Request. The Agent shall have received a Borrowing Notice or Letter of CreditRequest, as applicable, pursuant to the provisions of this Agreement from theBorrower.

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# SECTION 5.           AFFIRMATIVE COVENANTS.  The Borrower hereby agrees that from andafter the Closing Date, so long as any Note remains outstanding and unpaid, anyLetter of Credit is outstanding or any other amount is owing to any Lender orthe Agent hereunder:

## 5.1           FinancialStatements.  The Borrower shallfurnish to the Agent and the Lenders:

### (a)           assoon as available, but in any event within 90 days after the end of eachfiscal year of the Borrower, a copy of the audited consolidated balance sheetof the Borrower and its Subsidiaries as at the end of such year and the relatedaudited income statement, statement of stockholders’ equity and operating cashflow statement, reported on without qualification or exception by the Accountantsand accompanied by a certificate signed by such Accountants, at the time of thecompletion of the annual audit, (i) stating that the financial statementsfairly present in all material respects the consolidated financial condition ofthe Borrower as of the date thereof and for the period covered thereby and(ii) that, to the knowledge of such Accountants, no Default exists underSection 6.1, to the extent such Section relates to accounting matters;

### (b)           assoon as available, but in any event not later than 45 days after the end ofeach fiscal quarter of the Borrower, the unaudited consolidated balance sheetof the Borrower and its Subsidiaries as at the end of such quarter and therelated unaudited income statement and operating cash flow statement for suchquarter and the portion of the fiscal year through the end of such quarter, andincluding (i) a comparison of the results of such period with (A) the budgetedresults set forth in the budget referred to in Section 5.2(b) and (B) thesame period in the prior fiscal year and (ii) a discussion of any significantevents regarding the financial condition of the Borrower or any Subsidiaryduring such period (in such form and detail, and accompanied by such supportingmaterials as the Agent shall reasonably request), all certified by aResponsible Officer of the Borrower as being fairly stated in all materialrespects (subject to normal year-end audit adjustments and the absence offootnotes); and

### (c)           assoon as available, but in any event not later than 30 days after the end ofeach of the first two fiscal months of each fiscal quarter of the Borrower, theunaudited consolidated balance sheet of the Borrower and its Subsidiaries forsuch month and the related unaudited income statement and operating cash flowstatement for such month and the portion of the fiscal year through the end ofsuch month, and including (i) a comparison of the results of such period with(A) the budgeted results set forth in the budget referred to inSection 5.2(b) and (B) the same period in the prior fiscal year, allcertified by a Responsible Officer of the Borrower as being fairly stated inall material respects (subject to normal year-end audit adjustments and theabsence of footnotes);

all such financial statements to be complete andcorrect in all material respects and to be prepared in reasonable detail and inaccordance with GAAP applied consistently throughout the periods reflectedtherein and with prior periods.

## 5.2           Certificates;Other Information.  The Borrowershall:

### (a)           furnishto the Agent concurrently with the delivery of the financial statementsreferred to in Section 5.1(a) and (b), a Covenant Compliance Certificate withrespect to such quarter or fiscal year, as the case may be;

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### (b)           furnishto the Agent as soon as available, but in any event within 30 days afterthe beginning of each fiscal year of the Borrower, a copy of (i) the annualoperating budget for the Borrower and its Subsidiaries for such fiscal year(broken down into a monthly format as to income statement, balance sheet andstatement of cash flows) and (ii) a complete financial forecast of the resultsof the Borrower and its Subsidiaries covering the period up to and includingthe latest of the (x) Revolving Loan Commitment Expiration Date and (y) TermLoan Maturity Date, in each case in form and detail reasonably satisfactory tothe Agent;

### (c)           furnishto the Agent within five Business Days after the same are filed, copies of allfinancial statements, and material reports and notices which the Borrower orany Subsidiary may make to, or file with, the Securities and ExchangeCommission or any successor or analogous Governmental Authority;

### (d)           furnishto the Agent promptly but, in any event, within five Business Days after theBorrower’s receipt thereof, copies of all financial reports (including, withoutlimitation, management letters), if any, submitted to the Borrower by theAccountants in connection with any annual or interim audit of the booksthereof;

### (e)           furnishto the Agent as soon as possible and in any event within five days after aResponsible Officer has knowledge of the occurrence of a Default or, in thegood faith determination of a Responsible Officer of the Borrower, a MaterialAdverse Effect, the written statement by a Responsible Officer of the Borrower,setting forth the details of such Default, Event of Default or Material AdverseEffect and the action which the Borrower proposes to take with respect thereto;

### (f)            furnishto the Agent (i) as soon as possible and in any event within five Business Daysafter the Borrower knows or has reason to know that any Termination Event withrespect to any Plan has occurred, a statement of a Responsible Officer of theBorrower describing such Termination Event and the action, if any, which theBorrower proposes to take with respect thereto, (ii) promptly and in any eventwithin five Business Days after receipt thereof by the Borrower, any Subsidiaryor any of its or their ERISA Affiliates from the PBGC, copies of each noticereceived by the Borrower, any Subsidiary or any of its or their ERISAAffiliates of the PBGC’s intention to terminate any Plan or to have a trusteeappointed to administer any Plan, (iii) promptly and in any event withinfive days after the filing thereof with the Internal Revenue Service, copies ofeach Schedule B (Actuarial Information) to the annual report (Form 5500 Series)with respect to each Single Employer Plan maintained for or covering employeesof the Borrower or any of its Subsidiaries if the present value of the accruedbenefits under the Plan exceeds its assets by an amount which could cause aMaterial Adverse Effect and (iv) promptly and in any event within five BusinessDays after receipt thereof by the Borrower, any Subsidiary or any of its ortheir ERISA Affiliates from a sponsor of a Multiemployer Plan or from the PBGC,a copy of each notice received by the Borrower, any Subsidiary or any of itsERISA Affiliates concerning the imposition or amount of withdrawal liabilityunder Section 4202 of ERISA or indicating that such Multiemployer Plan mayenter reorganization status under Section 4241 of ERISA;

### (g)           furnishto the Agent promptly after the commencement thereof, but in any event notlater than five days after service of process with respect thereto on, or theobtaining of 

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### knowledge by,a Responsible Officer of the Borrower, notice of each action, suit orproceeding before any court or governmental authority or other regulatory bodyor any arbitrator as to which there is a reasonable possibility of adetermination that could have a Material Adverse Effect; and

### (h)           furnishto the Agent promptly such additional financial and other information as theAgent or any Lender may from time to time reasonably request.

## 5.3           Paymentof Obligations.  The Borrower shall,and shall cause each of its Subsidiaries to, pay, discharge or otherwisesatisfy at or before maturity or before they become delinquent, as the case maybe, all its obligations of whatever nature, except where the failure to sosatisfy such obligations could not have a Material Adverse Effect or exceptwhere the amount or validity thereof is currently being contested in good faithby appropriate proceedings and reserves in conformity with GAAP with respectthereto have been provided on the books of the Borrower or such Subsidiary, asapplicable.

## 5.4           Conductof Business and Maintenance of Existence. The Borrower shall, and shall cause each of its Subsidiaries to, (i)continue to engage in business of the same general type described in Section3.18, (ii) preserve, renew and keep in full force and effect its corporate orother legal existence, as applicable, (iii) except where the loss thereof couldnot, in the aggregate, have a Material Adverse Effect, take all appropriateaction to maintain all rights, registrations, licenses, privileges andfranchises necessary or desirable in the normal conduct of its business, and(iv) except to the extent that failure to comply therewith could not, in theaggregate, have a Material Adverse Effect, comply with all ContractualObligations and Requirements of Law, such compliance to include, withoutlimitation, (a) paying before the same become delinquent all taxes, assessmentsand governmental charges or levies imposed upon it or upon its income orprofits or upon any of its Properties and (b) paying all lawful claims which ifunpaid might become a Lien upon any of its Properties.

## 5.5           Maintenanceof Property; Insurance.  (a)   The Borrower shall, and shall causeeach of its Subsidiaries to, keep all property material or necessary to itsbusiness in good working order and condition (ordinary wear and tear andcasualty excepted).

### (b)           TheBorrower shall, and shall cause each of its Subsidiaries to, maintain withfinancially sound and reputable insurance companies or associations insuranceon such of its property in at least such amounts and against such risks as areusually insured against in the same general area by companies engaged in thesame or a similar business; and furnish to the Agent, upon request, fullinformation as to the insurance carried. The Borrower shall also maintain keyman life insurance on the life ofIngrid Jackel, in the amount of at least $3,000,000, and shall at all timescause the Agent to be the assignee of, beneficiary of or additional insuredunder, such insurance pursuant to such assignment agreements and relateddocumentation as the Agent shall request; provided that, notwithstanding anyterm contained in any such agreement or related documentation or herein to thecontrary, the proceeds of such insurance may be retained by the Borrower andused for working capital (but not applied as a Restricted Payment).  All such policies of insurance shall (i)designate the Agent, on behalf of the Lenders, as additional insured or losspayee, as appropriate, and (ii) provide that the insurance companies will givethe Agent at least 30 days’ prior written notice before any such policy orpolicies of insurance shall be 

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### materially altered or canceled. The Borrower shall deliver to the Agent insurance certificates certifiedby the Borrower’s insurance brokers, as to the existence and effectiveness ofeach policy of insurance and evidence of payment of all premiums then due andpayable therefor.  In addition, theBorrower shall notify the Agent promptly of any occurrence causing a materialloss of any insured Property and the estimated (or actual, if available) amountof such loss.

### (c)           Eachpolicy for liability insurance shall provide for all losses to be paid onbehalf of the Agent and the Borrower, as their respective interests may appear,and each policy for property damage insurance shall, to the extent applicableto equipment and inventory, provide for all losses (except for losses of lessthan $200,000 per occurrence) to be paid directly to the Agent.

### (d)           Reimbursementunder any liability insurance maintained by the Borrower or any Subsidiarypursuant to this Section 5.5 may be paid directly to the Person who shall haveincurred liability covered by such insurance. In the case of any loss involving damage to equipment or inventory as towhich Section 5.5(e) is not applicable, the Borrower will make or cause to bemade the necessary repairs to or replacements of such equipment or inventory,and any proceeds of insurance maintained by the Borrower pursuant to thisSection 5.5 shall be paid by the Agent to the Borrower, upon presentation ofinvoices and other evidence of obligations, as reimbursement for the costs ofsuch repairs or replacements.

### (e)           Uponthe actual or constructive total loss (in excess of $200,000 per occurrence) ofany equipment or inventory during the continuance of a Default, all insuranceproceeds in respect of such equipment or inventory shall be paid to the Agentand applied in the manner set forth in Section 2.5(d).

## 5.6           Inspectionof Property; Books and Records; Discussions.  The Borrower shall, and shall cause eachSubsidiary to, keep proper books of records and account in which full, true andcorrect entries in conformity with GAAP and all Requirements of Law shall bemade of all material dealings and transactions in relation to its business andactivities; and upon reasonable notice and at such reasonable times duringusual business hours, permit representatives of the Agent and any Lender tovisit and inspect any of its properties and examine and make abstracts from anyof its books and records at any reasonable time and as often as may reasonablybe desired and to discuss the business, operations, properties and financialand other condition of the Borrower and its Subsidiaries with officers of theBorrower and its Subsidiaries and with its Accountants (provided that theBorrower shall be given the opportunity to be present during any suchdiscussions with its Accountants).  Inaddition, the Agent shall be permitted to conduct collateral audits of theBorrower and the Subsidiaries twice during each 12-month period (or morefrequently if a Default has occurred and is continuing).

## 5.7           Useof Proceeds.  The Borrower will usethe Letters of Credit, and the proceeds of the Loans, as set forth in Section3.14, and not for the purchasing or carrying of any Margin Stock.

## 5.8           HedgingObligations.  The Borrower shall not,and shall not permit any of its Subsidiaries to, incur any Hedging Obligation,except that the Borrower or any Subsidiary may enter into any Hedging Obligationthat (i) is of a non-speculative nature and (ii) is for the 

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## purpose of hedging the Borrower’s or such Subsidiary’s reasonablyestimated interest rate exposure.

## 5.9           Acquisitionof Real Property.  The Borrower shallsubmit to the Agent any documents relating to any fee simple real propertyinterest to be acquired by the Borrower or any Subsidiary for consideration inexcess of $500,000.  The Majority Lendersmay require that any such property interest become part of the Collateral orthe Guarantor Collateral (as applicable), and that the Borrower provide theAgent with title insurance, a favorable environmental report, opinion(s) ofcounsel and such other documents and agreements as the Agent may reasonablyrequest with respect thereto.

## 5.10         Leaseand License Compliance.  (a)  The Borrower shall, and shall cause eachSubsidiary to, perform and carry out the material provisions of all leases,licenses, permits and other occupancy agreements relating to real property orreal property interests which are material to the business of the Borrower orany Subsidiary (the “Occupancy Agreements”), and shall appear in and defend anyaction in which the validity of any Occupancy Agreement is at issue and shallcommence and maintain any action or proceeding necessary to establish ormaintain the validity of any Occupancy Agreement and to enforce the materialprovisions thereof.  The Borrower shallpromptly give notice to the Agent of any material default by it or any of itsSubsidiaries or, to the knowledge of the Borrower, by any other party to anOccupancy Agreement.

### (b)           Withrespect to each Property leased by the Borrower or any Domestic Subsidiary, theBorrower shall cause a Landlord Consent to be executed and notarized by thelandlord thereof, and delivered to the Agent and, if requested by the Agent,recorded against such Property in the relevant real property records; providedthat the Borrower need not deliver a Landlord Consent for its corporateapartment located in Altadena, California; providedfurther that,with respect to the Property located at 5308 Irwindale Avenue, Irwindale,California leased by the Borrower, the Borrower shall use commerciallyreasonable efforts to cause a Landlord Consent to be executed and notarized bythe landlord thereof, and delivered to the Agent and, if requested by theAgent, recorded against such Property in the relevant real property recordswithin 30 days after the Closing Date.

## 5.11         Environmentaland Safety Requirements.  Withoutmodifying or limiting in any fashion any other indemnity provided for in thisAgreement, the Borrower shall, and shall cause each Subsidiary to, defend,indemnify and hold harmless the Agent and the Lenders, and their respectiveemployees, agents, officers and directors, shareholders, attorneys, successorsand assigns (collectively, “Environmental Indemnitees”) from and againstany and all claims, demands, judgments, fines, encumbrances, liens,liabilities, losses, damages of any type (including all consequential damages,all stigma damages and all damages for personal injury, including death ordisease, or damage or destruction to property of others or damage ordestruction to natural resources, whether foreseeable or unforeseeable), costs,penalties, fines, settlements, costs and expenses of whatever kind or natureknown or unknown, contingent or otherwise, arising out of, or in any wayrelating to (i) any breach by the Borrower ofany representation or warranty made by the Borrower in this Agreement or any ofthe Schedules attached hereto, or in any of the certificates furnished by theBorrower pursuant to this Agreement, or any representation and warranty made bythe Borrower or its Subsidiaries in the 

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## Acquisition Agreement; (ii) the San Gabriel Valley Site Liabilities; (iii)any Hazardous Substances in, on, under, from or at any property or facilityowned or operated, or previously owned or operated, by the Borrower and itsSubsidiaries; (iv) any past, present orfuture violation of any Environmental and Safety Requirements for any property or facilityowned or operated, or previously owned or operated, by the Borrower and itsSubsidiaries; (v) any investigation,inquiry, order (whether voluntary or involuntary), hearing, action or otherproceeding under any Environmental and Safety Requirement or by or before anygovernmental or quasi-governmental agency in connection with any actual oralleged Hazardous Substance Activity; (vi) anyorders, requirements or demands of Governmental Authorities pursuant toEnvironmental and Safety Requirements; (vii) any notice that any EnvironmentalIndemnitee is a potentially responsible party under any Environmental andSafety Requirement with regard to any Hazardous Substance in, on, under, fromor at any property orfacility owned or operated, or previously owned or operated, by the Borrowerand its Subsidiaries; and (viii) allcosts and expenses of investigation, monitoring, corrective action,containment, abatement, removal, repair, cleanup, restoration and remedialwork, penalties and fines, attorneys’ fees and disbursements, consultants’fees, contractors’ fees, environmental fees and taxes, experts’ fees,laboratory fees, and other response costs, except to the extent that any of theforegoing arise from or are caused by the gross negligence or willfulmisconduct of any Environmental Indemnitee.  This indemnity shall continue in fullforce and effect and survive the termination of this Agreement, expiration ofthe Letters of Credit and the payment of the Notes and all other amountspayable hereunder.

## 5.12         EmployeeMatters.  The Borrower shall give tothe Agent prompt notice of any material dispute arising out of, or materialuncured default occurring under, any employee contract of the Borrower or anySubsidiary either (i) relating to an officer of the Borrower or any Subsidiaryor (ii) providing for salary payments equal to or in excess of $200,000per year, or if any of such contracts shall be terminated or not renewed onsubstantially similar terms.

## 5.13         CovenantsRegarding Additional Subsidiaries. (a)  The Borrower will cause eachof its Domestic Subsidiaries hereafter formed or acquired to execute anddeliver to the Agent, concurrently with the formation or acquisition thereof, a joinder, substantially in the form attached as anExhibit to the Subsidiary Guarantee, causing such Domestic Subsidiary to becomea Guarantor under the Subsidiary Guarantee and agrantor under the Guarantor Security Agreement, together with appropriate Liensearches requested by the Agent indicating the Agent’s first priority Lien onsuch Domestic Subsidiary’s personal property (subject to Section 6.3) and, inconnection with such deliveries, cause to be delivered to the Agent (A) afavorable written opinion of counsel satisfactory to the Agent as to suchmatters relating thereto as any Lender through the Agent may reasonablyrequest, in form and substance satisfactory to the Agent, (B) any stockcertificates or other certificates, accompanied by stock powers duly executedin blank, with regard to the Capital Stock of such Domestic Subsidiary, (C)such other agreements, instruments, approvals or other documents as any Lenderthrough the Agent may reasonably request with respect thereto and(D) certified copies of the organizational documents, resolutions andincumbency certificates of such Domestic Subsidiary.

### (b)           TheBorrower will cause the shareholder(s), partner(s) or member(s) of each of itsForeign Subsidiaries hereafter formed or acquired to execute and deliver to theAgent, concurrently with the formation or acquisition thereof, a pledge of 65%of the Capital Stock having voting power in such Foreign Subsidiary (or suchgreater amount of such equity interests 

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### as shall not cause the Borrower to incur material adverse taxconsequences under Section 956 of the Code) and 100% of any other Capital Stockin such Foreign Subsidiary, along with (A) such agreements, certificates,filings, notices, consents and other actions as the Agent may request toevidence and perfect such pledge and (B) an executed legal opinion of localcounsel to such pledgor, in form and substance, and from a firm of attorneys,reasonably satisfactory to the Agent.

## 5.14         CovenantRegarding Insurance Endorsements. Within thirty days following the Closing Date, the Borrower shalldeliver to the Agent appropriate evidence showing the Agent as an additionalnamed insured, additional beneficiary, assignee or loss payee, as appropriate,for the benefit of the Lenders under the insurance policies provided for inSection 5.5.

# SECTION 6.           NEGATIVE COVENANTS

The Borrower hereby agrees that from and after theClosing Date, so long as any Note remains outstanding and unpaid, any Letter ofCredit is outstanding, or any other amount is owing to any Lender or the Agenthereunder:

## 6.1           FinancialCondition Covenants.  The Borrowershall not:

### (a)           TotalLeverage Ratio.  Permit the TotalLeverage Ratio, as of the end of any fiscal quarter set forth below, to begreater than the ratio set forth opposite such period:

| Quarter                                             | ** ** | **Ratio** | ** ** |
|-----------------------------------------------------|------------|-----------|------------|
|                                                |       |      |       |
| January 1, 2007 to and including December 31, 2007  |       | 2.00:1    |       |
|                                                |       |      |       |
| January 1, 2008  to and including December 31, 2008 |       | 1.75:1    |       |
|                                                |       |      |       |
| January 1, 2009 and  thereafter                     |       | 1.50:1    |       |

 

### (b)           FixedCharge Coverage Ratio.  Permit theFixed Charge Coverage Ratio, as of the end of any fiscal quarter set forthbelow, to be less than the ratio set forth opposite such period:

| Quarter                                             | ** ** | **Ratio** | ** ** |
|-----------------------------------------------------|------------|-----------|------------|
| January 1, 2007  to and including December 31, 2007 |       | 2.00:1    |       |
| January 1, 2008 and  thereafter                     |       | 2.25:1    |       |

 

### (c)           MinimumTangible Net Worth.  Permit TangibleNet Worth of the Borrower and its Subsidiaries, on a consolidated basis, as ofthe end of any fiscal quarter, to be less than the amount set forth belowopposite such period:

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| Quarter                                             | ** ** | **Amount** | ** **                         |
|-----------------------------------------------------|------------|------------|------------------------------------|
|                                                |       |       |                               |
| January 1, 2007  to and including March 31, 2007    |       | -          | $                                  | 17,000,000 |   |
|                                                |       |       |                               |   |
| April 1, 2007 to  and including June 30, 2007       |       | -          | $                                  | 13,000,000 |   |
|                                                |       |       |                               |   |
| July 1, 2007 to  and including September 30, 2007   |       | -          | $                                  | 11,000,000 |   |
|                                                |       |       |                               |   |
| October 1, 2007  to and including December 31, 2007 |       | -          | $                                  | 7,000,000 |   |
|                                                |       |       |                               |   |
| January 1, 2008  to and including March 31, 2008    |       | -          | $                                  | 3,000,000 |   |
|                                                |       |       |                               |   |
| April 1, 2008 to  and including June 30, 2008       |       | -          | $    1,000,000 |   |
|                                                |       |       |                               |   |
| July 1, 2008 to  and including September 30, 2008   |       |       | $                                  | 2,000,000 |   |
|                                                |       |       |                               |   |
| October 1, 2008  to and including December 31, 2008 |       |       | $                                  | 4,700,000 |   |
|                                                |       |       |                               |   |
| January 1, 2009 and  thereafter                     |       |       | $                                  | 14,000,000 |   |

 

### (d)           CapitalExpenditures.  Permit CapitalExpenditures of the Borrower and its Subsidiaries on a consolidated basis forany fiscal year to be more than $3,000,000 (or more than $1,500,000 from theClosing Date to December 31, 2006); providedthat CapitalExpenditures shall not include expenditures to the extent that suchexpenditures (x) constitute a reinvestment of proceeds from Asset Dispositionsin an aggregate amount not exceeding $500,000 in any fiscal year or(y) are made from proceeds from an Equity Offering (it being agreed thateach Covenant Compliance Certificate delivered under Section 5.2(a) shall, withrespect to any expenditures during the period covered thereby that wereexcluded from the calculation of Capital Expenditures as a result of thisproviso, include a description of such expenditure in form and detailsatisfactory to the Agent); providedfurther, that in theevent the Borrower and its Subsidiaries do not expend the entire CapitalExpenditure limitation in any fiscal year, such excess may be used to makeCapital Expenditures in the immediately following fiscal year, but notthereafter.

## 6.2           Limitationon Indebtedness.  The Borrower shallnot, and shall not permit any Subsidiary to, create, incur, issue, assume orsuffer to exist any Indebtedness except for:

### (a)           Indebtednesscreated hereunder and under the other Loan Documents;

### (b)           Indebtedness(i) evidenced by performance bonds issued in the ordinary course of business orreimbursement obligations in respect thereof in an aggregate amount at any timenot exceeding $100,000 or (ii) for bank overdrafts incurred in the ordinarycourse of business that are promptly repaid;

### (c)           tradecredit incurred to acquire goods, supplies, services and incurred in theordinary course of business; providedthat any such Indebtednesswhich is more than 90 days past due does not exceed $500,000 in the aggregate,is being contested by the Loan Parties in good faith by appropriateproceedings, and that adequate reserves with respect thereto have beenestablished on the books of the Loan Parties to the extent required by GAAP;

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### (d)           CapitalizedLease Obligations in a principal amount not exceeding $1,000,000 outstanding atanytime;

### (e)           Indebtednessnot to exceed an aggregate amount of $1,000,000 at any time outstanding securedby any purchase money Lien incurred in connection with the acquisition by theBorrower or any Subsidiary of equipment;

### (f)            Indebtednessowing by any wholly-owned Domestic Subsidiary to the Borrower or any otherwholly-owned Domestic Subsidiary, and Indebtedness owing by the Borrower to anywholly-owned Domestic Subsidiary; provided that such inter-companyIndebtedness is evidenced by a note which has been collaterally assigned to theAgent as security for the Obligations;

### (g)           Indebtednessincurred by the Borrower or any Subsidiary arising from agreements providingfor indemnification, adjustment of purchase price or similar obligations whichare in amounts, and on terms, which are commercially reasonable, and areincurred in connection with any Permitted Acquisition or any Asset Dispositionpermitted hereunder;

### (h)           unsecuredIndebtedness not referred to in any other clause of this Section 6.2 in anaggregate principal amount not exceeding $500,000 at any time; and

### (i)            Indebtednessin an amount not exceeding $3,000,000 incurred by the Borrower to one or moreof its insurance companies, incurred in the ordinary course of business tofinance payment of its insurance premiums.

## 6.3           Limitationon Liens.  The Borrower shall not,and shall not permit any Subsidiary to, create, incur, assume or suffer toexist any Lien upon any of its property, assets or revenues, whether now ownedor hereafter acquired, except for:

### (a)           Lienscreated hereunder or under any of the other Loan Documents;

### (b)           Liensfor taxes not yet delinquent or which are being contested in good faith byappropriate proceedings, provided that adequate reserves with respectthereto are maintained on the books of the Borrower or a Subsidiary, asapplicable, in conformity with GAAP;

### (c)           Lienscreated by operation of law or contract not securing the payment ofIndebtedness for money borrowed or guaranteed, including landlords’, carriers’,warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liensarising in the ordinary course of business which are not overdue for a periodof more than 45 days and, if overdue, for which adequate reserves have beenposted under GAAP;

### (d)           pledgesor deposits in connection with workers’ compensation, unemployment insuranceand other social security legislation and deposits securing liability toinsurance carriers under insurance or self-insurance arrangements;

### (e)           depositsto secure the performance of bids, trade contracts (other than for borrowedmoney), leases, statutory obligations, surety and appeal bonds, performancebonds and other obligations of a like nature incurred in the ordinary course ofbusiness;

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### (f)            easements,rights-of-way, restrictions and other similar encumbrances on real propertyincurred in the ordinary course of business which, in the aggregate, could notcause a Material Adverse Effect;

### (g)           subjectto the terms of any Control Agreement, customary rights of setoff and bankers’liens existing in the ordinary course of business upon deposits of the Borrowerand its Subsidiaries;

### (h)           precautionaryLiens filed by equipment lessors pursuant to operating leases of the Borrowerand its Subsidiaries; provided that no such Lien covers any propertyother than the property subject to such lease;

### (i)            Liensarising from any judgment against a Loan Party not constituting an Event ofDefault, provided that (i) the liability under such judgment, together withthat under any other judgment secured by a Lien, shall not exceed $1,000,000 inthe aggregate and (ii) such judgment is covered by insurance under which theinsurer has acknowledged liability in writing;

### (j)            Lienssecuring Indebtedness permitted by Section 6.2(e); providedthatno such Lien covers any property other than the property acquired in connectionwith the incurrence of such Indebtedness; and

### (k)           Lienssecuring Indebtedness permitted by Section 6.2(i), providedthatsuch Liens attach to the proceeds of such insurance only, and not to any otherassets of the Loan Parties.

## 6.4           Limitationon Fundamental Changes.  The Borrowershall not, and shall not permit any Subsidiary to, (a) amend its OrganicDocuments in any way that could have a Material Adverse Effect, (b) enterinto any merger, consolidation or amalgamation, or liquidate, wind up ordissolve itself (or suffer any liquidation or dissolution) except any merger,consolidation or amalgamation of a Subsidiary into the Borrower, with theBorrower being the survivor thereof, or between or among the Domestic Subsidiaries;providedthat the Borrower shall give the Agent thirty days’prior written notice thereof and shall comply with all reasonable actionsrequested by the Agent to protect and maintain its Liens granted pursuant tothe Loan Documents; or (c) except as permitted by Section 6.5, convey, sell,lease, assign, transfer or otherwise dispose of, all or substantially all ofits property, business or assets.

## 6.5           Limitationon Sale of Assets.  The Borrowershall not, and shall not permit any of its Subsidiaries to, make any AssetDisposition unless (i) such Asset Disposition is for fair market value,(ii) the consideration for such Asset Disposition is at least 75% cash,(iii) no Default has occurred and is continuing or would result from suchAsset Disposition and (iv) the consideration for such Asset Disposition, whenaggregated with the consideration for all previous Asset Dispositions duringthe same fiscal year, does not exceed $1,000,000.

## 6.6           Limitationon Restricted Payments.  The Borrowershall not, and shall not permit any of its Subsidiaries to, (a) if a corporation, declare or pay any dividend(other than dividends payable solely in common stock of the Borrower or itsSubsidiaries) on, or make any payment on account of, or set apart assets for asinking or other analogous fund for, the purchase, redemption, defeasance,retirement or other acquisition of, any shares of any class of Capital Stock ofthe Borrower or its Subsidiaries or any warrants or options to purchase anysuch Capital 

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## Stock, whether now or hereafter outstanding, and(b) if a partnership or a limited liability company, make anydistribution with respect to the ownership interests therein, or, in eithercase, any other distribution in respect thereof, either directly or indirectly,whether in cash or property or in obligations of the Borrower or any Subsidiary(such declarations, payments, setting apart, purchases, redemptions,defeasance, retirements, acquisitions and distributions being herein called “RestrictedPayments”); provided, however, that

#### (i)            theSubsidiaries may make Restricted Payments to the Borrower;

#### (ii)           theBorrower may make Restricted Payments, in an aggregate amount in any fiscalyear of the Borrower not exceeding $500,000, to the Pledgor to allow thePledgor to pay operating expenses relating to the Borrower and the fees andexpenses of the Pledgor’s and the Borrower’s officers and directors, providedthat such amount shall be limited to $100,000 during any period during which anEvent of Default has occurred and is continuing; and

#### (iii)          theBorrower may make Restricted Payments to the Pledgor from time to time so longas (1) no Default or Event of Default has occurred and is continuing at thetime of such Restricted Payment or would occur as a consequence of such RestrictedPayment; and (2) if after giving effect to such Restricted Payment, theLiquidity Amount shall be greater than or equal to $3,000,000.

## 6.7           Limitationon Acquisitions, Investments, Loans and Advances.  The Borrower shall not, and shall not permitany Subsidiary to, consummate any Acquisition, make any advance, loan,extension of credit or capital contribution to, or purchase any stock, bonds,notes, debentures or other securities of or any assets constituting a businessunit of, or make any other investment in (any of the foregoing, an “investment”),any Person, except:

### (a)           CashEquivalents;

### (b)           extensionsof trade credit in the ordinary course of business;

### (c)           theBorrower’s ownership interest in its Subsidiaries;

### (d)           PermittedAcquisitions;

### (e)           investmentsreceived in connection with bankruptcy or reorganization of, or settlement ofdelinquent accounts and disputes with, customers and suppliers;

### (f)            investmentsin the form of promissory notes in favor of the Borrower, acquired by theBorrower as consideration for an Asset Disposition permitted by Section 6.5,each of which notes shall be delivered to, and endorsed in favor of, the Agentto be held by the Agent as collateral under the Security Agreement;

### (g)           loansor advances to employees of the Borrower or any Subsidiary for moving, travelor emergency expenses, in an aggregate amount not exceeding $500,000outstanding at any time;

### (h)           investmentsoutstanding on the Closing Date and set forth on Schedule 6.7; and

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### (i)            withinfive days of the Closing Date, the Borrower shall be permitted to distribute tocertain stockholders of the Pledgor proceeds in the approximate amount of$22,000,000 from the initial public offering of equity interests in the Pledgorthat the Borrower is holding on behalf of the Pledgor.

## 6.8           Transactionswith Affiliates.  Except as set forthon Schedule 6.8, the Borrower shall not, and shall not permit any Subsidiaryto, enter into any transaction, including, without limitation, any purchase,sale, lease or exchange of property or the rendering of any service, with anySubsidiary (other than wholly-owned Subsidiaries) or any Affiliate, unless suchtransaction is in the ordinary course of the Borrower’s or such Subsidiary’sbusiness and is upon terms no less favorable to the Borrower or suchSubsidiary, than it would obtain in a comparable arm’s length transaction witha Person not an Affiliate; provided that nothing in this Section 6.8 shall bedeemed to prohibit payment of Restricted Payments in accordance with Section6.6.

## 6.9           FiscalYear.  The Borrower shall not permitthe fiscal year of the Borrower or any Subsidiary to end on a day other thanDecember 31.

## 6.10         Prohibitionson Certain Agreements, Modifications to Certain Agreements.  The Borrower shall not, nor shall it permitany Subsidiary to, enter into or permit to exist any indenture, agreement,instrument or other arrangement, other than the Loan Documents, that, directlyor indirectly, prohibits or restrains, or has the effect of prohibiting orrestraining, or imposes materially adverse conditions upon, the incurrence orpayment of indebtedness, the granting of Liens (except with respect toCapitalized Lease Obligations and Indebtedness permitted by Section 6.2(e), andthen only with respect to the property encumbered thereby), the declaration orpayment of dividends, the making of loans, advances or investments or the sale,assignment, transfer or other disposition of Property (except with respect toCapitalized Lease Obligations and Indebtedness permitted by Section 6.2(e), andthen only with respect to the property encumbered thereby), or which imposesany financial covenants on the Borrower or any Subsidiary.

## 6.11         Sale-LeasebackTransactions.  The Borrower shallnot, and shall not permit any Subsidiary to, sell, assign or otherwise transferany of its Properties, rights or assets (whether now owned or hereafteracquired) to any Person and thereafter directly or indirectly lease back thesame or similar property.

## 6.12         UnfundedLiabilities.  The Borrower shall notpermit unfunded liabilities for any and all Plans maintained for or coveringemployees of the Borrower or any Subsidiary to exceed $500,000 in the aggregateat any time.

## 6.13         Lineof Business.  Neither the Borrowernor any of its Subsidiaries shall engage in any business other than asdescribed in Section 3.18.

# SECTION 7.           EVENTS OF DEFAULT

If anyof the following events shall occur and be continuing:

### (a)           TheBorrower shall fail to pay any principal of any Note when due, or the Borrowershall fail to pay any interest on any Note when due, or any other amountpayable 

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### hereunder or under any Loan Document within two Business Days after anysuch interest or other amount becomes due; or

### (b)           Anyrepresentation or warranty made by any Loan Party herein or in any other LoanDocument, as applicable, or which is contained in any certificate, document orfinancial or other statement furnished at any time under or in connection withthis Agreement or any other Loan Document shall prove to have been incorrect inany material respect when made; or

### (c)           TheBorrower shall default in the observance or performance of any agreementcontained in Section 5.2(e), 5.4, 5.5, 5.6, 5.7, 5.13 or 5.14, or any provisionof Section 6; or

### (d)           AnyLoan Party shall default in the observance or performance of any otheragreement contained in this Agreement or the other Loan Documents (other thanas provided in paragraphs (a) through (c) of this Section), and such defaultshall continue unremedied for a period of 30 days after the earlier of(i) notice thereof from the Agent to the Borrower and (ii) actualknowledge thereof by a Responsible Officer of such Loan Party, as applicable;or

### (e)           Anymaterial provision of any Loan Document shall at any time for any reason bedeclared null and void, or the validity or enforceability of any Loan Documentshall at any time be contested by any Loan Party in writing, or a proceedingshall be commenced by any Loan Party, or by any Governmental Authority or otherPerson having jurisdiction over any Loan Party, seeking to establish theinvalidity or unenforceability thereof, or any Loan Party shall deny in writingthat it has any liability or obligation purported to be created under any LoanDocument, or any Loan Document shall cease to be in full force and effect; or

### (f)            AnyLoan Party shall (i) default in any payment of principal or interest,regardless of the amount, due in respect of any (A) Indebtedness (otherthan the Notes), issued under the same indenture or other agreement, if themaximum principal amount of Indebtedness covered by such indenture or agreementis $1,000,000 or greater or (B) Guarantee Obligation with respect to anamount of $1,000,000 or greater, in either case beyond the period of grace, ifany, provided in the instrument or agreement under which such Indebtedness orGuarantee Obligation was created, whether or not such default has been waivedby the holders of such Indebtedness or Guarantee Obligation; or(ii) default in the observance or performance of any other materialagreement or condition relating to any such Indebtedness or GuaranteeObligation or contained in any instrument or agreement evidencing, securing orrelating thereto, or any other event shall occur or condition exist, the effectof which default or other event or condition is to cause, or to permit theholder or holders of such Indebtedness or beneficiary or beneficiaries of suchGuarantee Obligation (or a trustee or agent on behalf of such holder or holdersor beneficiary or beneficiaries) to cause, with the giving of notice if required,such Indebtedness to become due prior to its stated maturity or such GuaranteeObligation to become payable or such Indebtedness to be required to be defeasedor purchased; or

### (g)           (i)            The Borrower or any other Loan Partyshall commence any voluntary case, proceeding or other action (A) under anyexisting or future law of any jurisdiction, domestic or foreign, relating tobankruptcy, insolvency, reorganization or relief of debtors, seeking to have anorder for relief entered with respect to it, or seeking to adjudicate it abankrupt or insolvent, or seeking reorganization, arrangement, adjustment,winding-up, 

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### liquidation, dissolution, composition or other relief with respect toit or its debts, or (B) seeking appointment of a receiver, trustee, custodian orother similar official for it or for all or any substantial part of its assets,or the Borrower or any other Loan Party shall make a general assignment for thebenefit of its creditors; or (ii) there shall be commenced against the Borroweror any other Loan Party any involuntary case, proceeding or other action of anature referred to in clause (i) above which (A) results in the entry of anorder for relief or any such adjudication or appointment and (B) remainsundismissed, undischarged, unstayed or unbonded for a period of 60 days; or(iii) there shall be commenced against the Borrower or any other Loan Party anycase, proceeding or other action seeking issuance of a warrant of attachment,execution, distraint or similar process against all or any substantial part ofits assets which results in the entry of an order for any such relief whichshall not have been vacated, discharged, stayed or bonded pending appeal within60 days from the entry thereof; or (iv) the Borrower or any other Loan Partyshall take any action in writing in furtherance of, or indicating its consentto, approval of, or acquiescence in, any of the acts set forth in clause (i),(ii), or (iii) above; or (v) the Borrower or any other Loan Party shallgenerally not, or shall be unable to, or shall admit in writing its inabilityto, pay its debts as they become due or there shall be a general assignment forthe benefit of creditors; or

### (h)           (i)   Any Person shall engage in any non-exempt “prohibitedtransaction” (as defined in Section 406 of ERISA or Section 4975 of the Code)involving any Plan, (ii) any “accumulated funding deficiency” (as defined inSection 302 of ERISA), whether or not waived, shall exist with respect to anyPlan, (iii) a Reportable Event shall occur with respect to, or proceedingsshall commence to have a trustee appointed, or a trustee shall be appointed, toadminister or to terminate any Single Employer Plan, which Reportable Event orcommencement of proceedings or appointment of a trustee would reasonably beexpected to result in the termination of such Plan for purposes of Title IV ofERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IVof ERISA (other than a standard termination) or (v) the Borrower or anyCommonly Controlled Entity would reasonably be expected to incur any liabilityin connection with a withdrawal from, or the Insolvency or Reorganization of, aMultiemployer Plan; or

### (i)            Oneor more judgments or decrees shall be entered against one or more of the LoanParties involving in the aggregate a liability for all Loan Parties (not paidor fully covered by insurance under which the insurer has acknowledgedliability in writing) of $1,000,000 or more, and all such judgments or decreesshall not have been vacated, discharged, stayed or bonded pending appeal within60 days from the entry thereof or in any event five days before the date of anysale pursuant to such judgment or decree; or any non-monetary judgment or ordershall be entered against any Loan Party that could have a Material AdverseEffect and either (i) enforcement proceedings shall have been commenced byany Person upon such judgment which has not been stayed pending appeal or(ii) there shall be any period of 10 consecutive days during which a stayof enforcement of such judgment or order, by reason of a pending appeal orotherwise, shall not be in effect; or

### (j)            either(i) any Person or “group”(within the meaning of Rules 13d-3 and 13d-5 under the SecuritiesExchange Act of 1934, as amended) otherthan Summit Partners, L.P. and its Affiliates shall have obtained the power(whether or not exercised) to elect a majority of the members of the board ofdirectors (or similar governing body) of Pledgor; or (ii) the Pledgor is

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### no longer the legal and beneficial owner of 100% of the Capital Stockof the Borrower; or (iii) the Borrower ceases to own 100% of the Capital Stockof each Subsidiary; or

### (k)           TheAgent shall at any time cease to have a valid and perfected first-priority Lienfor any reason on and in 100% of the Capital Stock of the Borrower and eachDomestic Subsidiary, or, with respect to the Capital Stock of each ForeignSubsidiary, the percentage specified in Section 5.13(b); or

### (l)            Anymaterial provision of any Loan Document, after delivery thereof pursuant to theprovisions hereof, shall, for any reason other than pursuant to the termsthereof, cease to be valid or enforceable in accordance with its terms, or anyLien created under any Loan Document shall for any reason other than pursuantto the terms thereof, cease to be a valid and perfected first priority (exceptas permitted by Section 6.3) Lien in any material portion of the Collateral,the Guarantor Collateral or the property purported to be covered thereby;

then, and in any such event, (A) if such event isan Event of Default specified in paragraph (g) above, automatically eachCommitment and the commitment to issue Letters of Credit shall immediatelyterminate and the Loans made to the Borrower hereunder (with accrued interestthereon) and all other Obligations shall immediately become due and payableand, to the extent any Letters of Credit are then outstanding, the Borrowershall make a Cash Collateral Deposit, to be held by the Agent as collateralunder the Security Agreement, in the amount equal to the aggregate Letter ofCredit Amount of such Letters of Credit and (B) if such event is any otherEvent of Default, with the consent of the Majority Lenders the Agent may,or upon the request of the Majority Lenders the Agent shall, take any or all ofthe following actions:  (i) bywritten notice to the Borrower declare the Commitments and the commitment toissue Letters of Credit to be terminated forthwith, whereupon the Commitmentsand the commitment to issue Letters of Credit shall immediately terminate; and(ii) by written notice to the Borrower, declare the Loans (with accruedinterest thereon) and all other Obligations under this Agreement and the Notesto be due and payable forthwith, whereupon (x) the same shall immediatelybecome due and payable and (y) to the extent any Letters of Credit arethen outstanding, the Borrower shall make a Cash Collateral Deposit, to be heldby the Agent as collateral under the Security Agreement, in an amount equal tothe aggregate Letter of Credit Amount of the Letters of Credit outstanding.  In all cases, with the consent of theMajority Lenders, the Agent may, or upon the request of the Majority Lendersthe Agent shall, enforce any or all of the Liens and other rights and remediescreated pursuant to any Loan Document or available at law or in equity.  Presentment, demand, protest and, except asexpressly provided above in this Section, all other notices of any kind arehereby expressly waived by the Borrower.

Notwithstanding anythingto the contrary in this Agreement or any other Loan Document, on or after theoccurrence and continuation of (i) an Event of Default under Section 7(g), (ii)the acceleration of the Loans and all other Obligations pursuant to theimmediately preceding paragraph, (iii) the exercise of rights and remedies bythe Agent and the Lenders pursuant to the immediately preceding paragraph or(iv) failure to pay in full all of the Obligations pertaining to the RevolvingLoan Commitment on the Revolving Loan Commitment Expiration Date or to repay infull all of the Obligations pertaining to the Term Loans on the Term LoanMaturity Date, the proceeds resulting from the collection, liquidation, sale orother disposition of the Collateral or of the Guarantor Collateral shall beapplied, first, to the reasonable costs and 

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expenses (including reasonable attorneys’ fees) ofretaking, holding, storing, processing and preparing for sale, selling,collecting and liquidating the Collateral and the Guarantor Collateral, and allother reasonable costs and expenses incurred by the Agent, until each of suchitems is paid in full; second, to the payment of all accrued and unpaidinterest and commitment fees due and owing to the Lenders under this Agreement,pro rata based on each Lender’s Commitment Percentage thereof, until each ofsuch items is paid in full; third, to the satisfaction of all otherObligations (other than contingent indemnification obligations for which noclaim has been made and is outstanding, but including cash collateralization ofall Obligations in respect of outstanding Letters of Credit), pro rata based oneach Lender’s Commitment Percentage thereof; and fourth, any surplusremaining after the satisfaction of all other Obligations (other thancontingent indemnification obligations for which no claim has been made and isoutstanding), provided no Commitment or Letter of Credit is outstanding, to bepaid over to the Borrower or to whomsoever may be lawfully entitled to receivesuch surplus.

# SECTION 8.           THE AGENT

## 8.1           Appointment.  Each Lender hereby irrevocably designates andappoints Union Bank of California, N.A., as Agent of such Lender under thisAgreement and the other Loan Documents, and each such Lender irrevocablyauthorizes Union Bank of California, N.A., as the Agent, for such Lender, totake such action on its behalf under the provisions of this Agreement and theother Loan Documents and to exercise such powers and perform such duties as areexpressly delegated to the Agent, by the terms of this Agreement and the otherLoan Documents, together with such other powers as are reasonably incidentalthereto.  Notwithstanding any provisionto the contrary elsewhere in this Agreement, the Agent shall not have anyduties or responsibilities, except those expressly set forth herein, or anyfiduciary relationship with any Lender, and no implied covenants, functions,responsibilities, duties, obligations or liabilities shall be read into thisAgreement or any other Loan Document or otherwise exist against the Agent insuch capacity.

## 8.2           Delegationof Duties.  The Agent may execute anyof its duties under this Agreement and the other Loan Documents by or throughagents or attorneys-in-fact and shall be entitled to advice of counselconcerning all matters pertaining to such duties.  The Agent shall not be responsible for thenegligence or misconduct of any agents or attorneys-in-fact selected by it withreasonable care.

## 8.3           ExculpatoryProvisions.  Neither the Agent norany of its officers, directors, employees, agents, attorneys-in-fact,Subsidiaries or Affiliates shall be (i) liable for any action lawfullytaken or omitted to be taken by it or such Person under or in connection withthis Agreement or any other Loan Document (except for its or such Person’s owngross negligence or willful misconduct) or (ii) responsible in any mannerto any of the Lenders for any recitals, statements, representations orwarranties made by the Borrower, any other Loan Party or any officer thereof,contained in this Agreement or any other Loan Document or in any certificate,report, statement or other document referred to or provided for in, or receivedby the Agent under or in connection with, this Agreement or any other LoanDocument or for the value, validity, effectiveness, genuineness, enforceabilityor sufficiency of this Agreement or the Notes or any other Loan Document or forany failure of the Borrower or any other Loan Party to perform its obligationshereunder or thereunder.  The Agent shallnot be under any obligation to any Lender 

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## to ascertain or to inquire as to the observance or performance of anyof the agreements contained in, or conditions of, this Agreement or any otherLoan Document, or to inspect the properties, books or records of the Borroweror any other Loan Party.

## 8.4           Relianceby Agent.  The Agent shall beentitled to rely, and shall be fully protected in relying, upon any note,writing, resolution, notice (including any telephonic notice), consent,certificate, affidavit, letter, cablegram, telegram, telecopy, telex orteletype message, statement, order or other document or conversation reasonablybelieved by it to be genuine and correct and to have been signed, sent or madeby the proper Person or Persons and upon advice and statements of legal counsel(including, without limitation, counsel to the Borrower), the Accountants andindependent accountants and other experts selected by the Agent.  The Agent may deem and treat the payee of anyNote as the owner thereof for all purposes unless a written notice ofassignment, negotiation or transfer thereof shall have been filed with theAgent.  The Agent shall be fullyjustified in failing or refusing to take any action under this Agreement or anyother Loan Document unless it shall first receive such advice or concurrence ofthe Majority Lenders or all Lenders, as it deems appropriate, or it shall firstbe indemnified to its satisfaction by the Lenders against any and all liabilityand expense (except those incurred solely as a result of the Agent’s grossnegligence or willful misconduct) which may be incurred by it by reason oftaking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or inrefraining from acting, under this Agreement and the Notes and the other LoanDocuments in accordance with a request of the Majority Lenders or all Lenders,as may be required, and such request and any action taken or failure to actpursuant thereto shall be binding upon all the Lenders and all future holdersof the Notes.

## 8.5           Noticeof Default.  Neither the Agent norany Lender shall be deemed to have knowledge or notice of the occurrence of anyDefault hereunder unless such Person has received notice from the Agent, aLender or the Borrower referring to this Agreement, describing such Default andstating that such notice is a “notice of default”.  In the event that the Agent or any Lenderreceives such a notice, the Agent or such Lender, as the case may be, shallgive notice thereof to the Agent and the Lenders.  The Agent shall take such action with respectto such Default as shall be reasonably directed by the Majority Lenders or allLenders as appropriate; provided that unless and until the Agent shallhave received such directions, the Agent may (but shall not be obligated to)take such action, or refrain from taking such action, with respect to suchDefault as it shall deem advisable in the best interests of the Lenders or asthe Agent shall believe necessary to protect the Agent and the Lenders’interests in the Collateral or the Guarantor Collateral.

## 8.6           Non-Relianceon Agent and Other Lenders.  EachLender expressly acknowledges that none of the Agent or any of its respectiveofficers, directors, employees, agents, attorneys-in-fact, Subsidiaries orAffiliates has made any representations or warranties to it and that no act bythe Agent hereafter taken, including any review of the affairs of the Borroweror any other Loan Party, shall be deemed to constitute any representation orwarranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and withoutreliance upon the Agent or any other Lender, and based on such documents andinformation as it has deemed appropriate, made its own appraisal of andinvestigation into the business, operations, property, financial and othercondition and creditworthiness of the Borrower and the Guarantors and made itsown decision to make its Loans and participate in Letters of Credit hereunderand 

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## enter into this Agreement.  EachLender also represents that it will, independently and without reliance uponthe Agent or any other Lender, and based on such documents and information asit shall deem appropriate at the time, continue to make its own creditanalysis, appraisals and decisions in taking or not taking action under thisAgreement and the other Loan Documents, and to make such investigation as itdeems necessary to inform itself as to the business, operations, property,financial and other condition and creditworthiness of the Borrower and theother Loan Parties.  The Agent agrees topromptly furnish to each Lender a copy of all notices, reports and otherdocuments received by it from the Borrower; providedthat theAgent shall not have any duty or responsibility to provide any Lender with anycredit or other information concerning the business, operations, property,condition (financial or otherwise), prospects or creditworthiness of theBorrower or any other Loan Party which may otherwise come into the possessionof the Agent or any of its officers, directors, employees, agents,attorneys-in-fact, Subsidiaries or Affiliates except such as may come into thepossession of the employees of Agent then having the responsibility for theadministration of this Agreement.

## 8.7           Indemnification.  The Lenders hereby indemnify the Agent in itscapacity as such (to the extent not reimbursed by the Borrower and withoutlimiting the obligation of the Borrower to do so), ratably according to therespective amounts of their Aggregate Total Commitment Percentages, from andagainst any and all liabilities, obligations, losses, damages, penalties,actions, judgments, suits, reasonable costs (including, without limitation, theallocated cost of internal counsel), reasonable expenses or disbursements ofany kind whatsoever which may at any time (including, without limitation, atany time following the payment of the Notes) be imposed on, incurred by orasserted against the Agent, in its capacity as such, but not as a Lenderhereunder, in any way relating to or arising out of this Agreement, any of theother Loan Documents or any documents contemplated by or referred to herein ortherein or the transactions contemplated hereby or thereby or any action takenor omitted by the Agent under or in connection with any of the foregoing; providedthat (a) no Lender shall be liable for the payment of any portion of suchliabilities, obligations, losses, damages, penalties, actions, judgments,suits, costs, expenses or disbursements to the extent resulting from the Agent’sgross negligence or willful misconduct; (b) the Agent shall not be permitted tosetoff any amounts owed hereunder against any Lender’s pro rata share of anypayment to be made to such Lender pursuant to Section 2.11; and (c) upon thereasonable request of any Lender (which request shall not be made more thanonce in any month), the Agent shall provide such Lender with copies of invoicesor other reasonably detailed written evidence of such expenses anddisbursements.  The agreements in thisSection shall survive the termination of this Agreement, the expiration of theLetters of Credit and the payment of the Notes and all other amounts payablehereunder.

## 8.8           Agentin Its Individual Capacity.  TheAgent and its Affiliates may make loans to, accept deposits from and generallyengage in any kind of business with the Borrower and the other Loan Parties asthough the Agent were not the Agent hereunder and under the other LoanDocuments.  With respect to the Agent,the Loans made by the Agent, the Letters of Credit participated in by the Agentand the Notes issued to the Agent shall have the same rights and powers underthis Agreement and the other Loan Documents as any Lender and the Agent mayexercise the same as though it were not the Agent and the terms “Lender” and “Lenders”shall include the Agent in its individual capacity.

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## 8.9           SuccessorAgent.  The Agent may resign as Agentupon ten days’ notice to the Lenders and the Borrower.  If the Agent shall resign as Agent under thisAgreement and the other Loan Documents, then the Majority Lenders shall appoint(with the approval of the Borrower, such approval not to be unreasonablywithheld and not to be required if an Event of Default shall have occurred andbe continuing) from among the Lenders a successor agent for the Lenders,whereupon such successor agent shall succeed to the rights, powers and dutiesof the Agent and the term “Agent” shall mean such successor agent, effectiveupon its appointment, and the former Agent’s rights, powers and duties as Agentshall be terminated, without any other or further act or deed on the part ofsuch former Agent or any of the parties to this Agreement or any holders of theNotes.  Notice of such appointment shallbe given by such successor agent to the Borrower and each Lender.  After any retiring Agent’s resignation asAgent, the provisions of this Section shall inure to its benefit as to anyactions taken or omitted to be taken by it while it was Agent, under thisAgreement and the other Loan Documents. In addition, after the replacement of the Agent hereunder, the retiringAgent shall remain a party hereto and shall continue to have all the rights andobligations of an Agent under this Agreement with respect to Letters of Creditissued by it prior to such replacement, but shall not be required to issueadditional Letters of Credit.

# SECTION 9.           MISCELLANEOUS

## 9.1           Amendmentsand Waivers.  Neither this Agreement,any Note, any other Loan Document, nor any terms hereof or thereof may beamended, supplemented or modified except in accordance with the provisions ofthis Section.  With the prior writtenconsent of the Majority Lenders and the Borrower, the Borrower may, from timeto time, enter into written amendments, supplements or modifications hereto andto the other Loan Documents for the purposes of adding any provisions to thisAgreement or the other Loan Documents or changing in any manner the rights ofthe Lenders, the Borrower or any other Loan Party hereunder or thereunder orwaiving, on such terms and conditions as may be specified in such instrument,any of the requirements of this Agreement or the Notes or the other LoanDocuments or any Default and its consequences; provided, however,that no such waiver and no such amendment, supplement or modificationshall:  (a) reduce the amount or extendthe maturity of any Note or any installment due thereon, or reduce the rate orextend the time of payment of interest thereon, or reduce the amount or extendthe time of payment of any fee, indemnity or reimbursement payable to anyLender hereunder, in each case without the written consent of the Lenderaffected thereby, or increase any Commitment of any Lender without the writtenconsent of such Lender; or (b) (i) amend, modify or waive any provision of thisSection 9.1 or reduce the percentage specified in or otherwise modify thedefinition of Majority Lenders, or consent to the assignment or transfer by anyLoan Party of any of its rights and obligations under this Agreement and theother Loan Documents; or (ii) release any Loan Party from any liability underits respective Loan Documents; or (iii) release any material portion ofthe Collateral or any material portion of the Guarantor Collateral, except inconnection with any Asset Disposition permitted by this Agreement; or (iv)amend, modify or waive, directly or indirectly, any of the provisions ofSection 2.1(e), 2.2(f), 2.12 or the last paragraph of Section 7; or (v) amend,modify or waive any provision of this Agreement requiring the consent orapproval of all Lenders, in each case without the written consent of all theLenders; or (c) amend, modify or waive any provision of Section 8 without thewritten consent of the Agent, or any provision affecting the rights and dutiesof the Agent as the issuer of Letters of Credit without the written consent ofthe Agent.  

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## Any such waiver and any such amendment, supplement or modificationshall apply equally to each of the Lenders and shall be binding upon theBorrower, the other Loan Parties, the Lenders, the Agent, and all futureholders of the Notes.  In the case of anywaiver, the Borrower, the other Loan Parties, the Lenders and the Agent, shallbe restored to their former position and rights hereunder and under theoutstanding Notes and any other Loan Documents, and any Default waived shall bedeemed to be cured and not continuing; but no such waiver shall extend to anysubsequent or other Default, or impair any right consequent thereon.

## 9.2           Notices.  All notices, requests and demands or othercommunications to or upon the respective parties hereto to be effective shallbe in writing unless otherwise expressly provided herein (including bytelecopy), and, unless otherwise expressly provided herein, shall be deemed tohave been duly given or made when delivered by hand, or 3 days after beingdeposited in the United States mail, certified and postage prepaid and returnreceipt requested, or, in the case of telecopy notice, when received, in eachcase addressed to the parties at their addresses as set forth on the signaturepages hereof, or in the Assignment and Acceptance pursuant to which a Personbecomes a party hereto, or to such other address as may be hereafter notifiedby the respective parties hereto; provided that any notice, request ordemand to or upon the Agent or the Lenders pursuant to Section 2.1, 2.2, 2.3,2.4 or 2.6 shall not be effective until received.

### The Agent shall be entitled to rely and actupon telephonic notices purportedly given by or on behalf of the Borrower evenif (i) such notices were not made in a manner specified herein, were incompleteor were not preceded or followed by any other form of notice specified herein,(ii) such notices are found not to have been authorized by the Borrower or(iii) the terms thereof, as understood by the recipient, varied from anyconfirmation thereof.  The Borrower shallindemnify the Agent and each Lender from all losses, costs, expenses andliabilities resulting from the reliance by the Agent on any such notice.

## 9.3           NoWaiver; Cumulative Remedies.  Nofailure to exercise and no delay in exercising, on the part of the Agent or anyLender, any right, remedy, power or privilege hereunder shall operate as awaiver thereof; nor shall any single or partial exercise of any right, remedy,power or privilege hereunder preclude any other or further exercise thereof orthe exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privilegesherein provided are cumulative and not exclusive of any rights, remedies,powers and privileges provided by law.

## 9.4           Survivalof Representations and Warranties. All representations and warranties made hereunder or the Existing CreditAgreement and in any document, certificate or statement delivered pursuanthereto or in connection herewith or the Existing Credit Agreement shall survivethe execution and delivery of this Agreement.

## 9.5           Paymentof Expenses and Taxes.  The Borroweragrees, whether or not the transactions contemplated hereby are consummated,(a) to pay or reimburse the Agent for all its reasonable costs andout-of-pocket expenses incurred in connection with the preparation andexecution of, and any amendment, supplement or modification to, this Agreementand the Notes and the other Loan Documents and any other documents prepared inconnection herewith or therewith, and the consummation and administration ofthe transactions contemplated hereby and 

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## thereby (including the transactions to occur on the Closing Date),including, without limitation, due diligence expenses, syndication expenses,and the reasonable fees and disbursements of outside counsel to the Agent(including any local counsel to the Agent) and as to any amendment, supplementor modification to this Agreement or any other Loan Document and theadministration of the transactions contemplated thereby, and with respect tothe foregoing, the allocated reasonable costs of internal counsel to the Agent,(b) after the occurrence and during the continuance of a Default, to pay orreimburse the Agent and each Lender, for all its reasonable costs andout-of-pocket expenses incurred in connection with the enforcement orpreservation of any rights under this Agreement, the other Loan Documents andany such other documents or in connection with any refinancing or restructuringof the credit arrangements provided under this Agreement in the nature of a “work-out”or of any insolvency or bankruptcy proceeding, including, without limitation,reasonable legal fees and disbursements of outside counsel to the Agent andeach Lender and the allocated reasonable cost of internal counsel to the Agentand each Lender, (c) to pay, and indemnify and hold harmless each Lender andthe Agent from, any and all recording and filing fees and any and allliabilities with respect to, or resulting from any delay in paying, stamp,excise and other taxes, if any, which may be payable or determined to bepayable in connection with the execution and delivery of, or consummation oradministration of any of the transactions contemplated by, this Agreement orany amendment, supplement or modification of, or any waiver or consent under orin respect of, this Agreement, the Notes, the other Loan Documents and any suchother documents, (d) to pay all costs and expenses of the Agent and the Lendersincurred in connection with the collateral audits contemplated by Section 5.6and (e) to pay and indemnify and hold harmless each Lender and the Agent fromand against, any and all other liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs (including, without limitation, theallocated reasonable cost of internal counsel and the reasonable legal fees anddisbursements of outside counsel to the Lenders and the Agent), expenses ordisbursements of any kind or nature whatsoever with respect to the execution,delivery and enforcement of this Agreement, the Notes, the other Loan Documentsor the use of the Letters of Credit or the proceeds of the Loans and any suchother documents (all the foregoing, collectively, the “indemnified liabilities”),provided, that the Borrower shall have no obligation hereunder to theAgent or any Lender with respect to indemnified liabilities arising from thegross negligence or willful misconduct of the Agent or such Lender or theiragents or attorneys-in-fact.  Theagreements in this Section shall survive the termination of this Agreement, theexpiration of the Letters of Credit and the payment of the Notes and all otheramounts payable hereunder.

## 9.6           Successorsand Assigns; Participation; Purchasing Lenders.

### (a)           ThisAgreement shall be binding upon and inure to the benefit of the Borrower, theLenders, the Agent, all future holders of the Notes and their respectivesuccessors and assigns, except that the Borrower may not assign, transfer ordelegate any of its rights or obligations under this Agreement without theprior written consent of each Lender.

### (b)           AnyLender may at any time sell to one or more banks or other entities (“Participants”)participating interests in the rights of such Lender hereunder and under theother Loan Documents; provided any such sale must result in theParticipant acquiring at least a $1,000,000 (with concurrent sales to one ormore Affiliates of a Participant being treated as a single assignment forpurposes of meeting such minimum amount) risk participation interest in 

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### the aggregate amount of obligations under this Agreement and the otherLoan Documents.  A Participant shall havethe right only to vote on the extension of regularly scheduled maturity ofprincipal or interest under a Note, extension of the expiration of a Letter ofCredit, reduction of the principal amount or rate of interest of a Note,reduction of the amount to be reimbursed under any Letter of Credit, or therelease of any significant portion of the Collateral or the GuarantorCollateral.  In the event of any suchsale by a Lender of participating interests to a Participant, such Lender’sobligations under this Agreement to the other parties to this Agreement shallremain unchanged, such Lender shall remain solely responsible for theperformance thereof, such Lender shall remain the holder of its Note and theparticipant in such Letters of Credit for all purposes under this Agreement andthe other Loan Documents, and the Borrower and the Agent shall continue to dealsolely and directly with such Lender in connection with such Lender’s rightsand obligations under this Agreement and the other Loan Documents.

### (c)           AnyLender may at any time sell to any of its Affiliates or Related Funds or to anyLender, any Affiliate or Related Fund thereof or to one or more additionallenders that are approved by the Borrower (“Purchasing Lenders”), such approvalnot to be unreasonably withheld or delayed and not to be required if a Defaulthas occurred and is continuing, and the Agent, such approval not to beunreasonably withheld or delayed, all or any part of its rights and obligationsunder this Agreement, the Notes and the other Loan Documents pursuant to anAssignment and Acceptance executed by such Purchasing Lender and suchtransferor Lender, and delivered to the Agent for its acceptance and recordingin the Register (as defined below), accompanied by a $3,500 processing fee(except the payment of such fee shall not be required in connection with anassignment by a Lender to an Affiliate of such Lender or a Related Fund); provided,however, that (i) any such sale (other than a sale of all of the sellingLender’s interest hereunder) must result in the Purchasing Lender having aninterest in at least $5,000,000 in aggregate amount of obligations under thisAgreement and the other Loan Documents (except such minimum amount shall notapply to an assignment by a Lender to (x) an Affiliate of such Lender or aRelated Fund of such Lender, (y) another Lender or (z) a group of new Lenders,each of whom is an Affiliate or Related Fund of each other to the extent theaggregate amount assigned to all such new Lenders is at least $5,000,000) and(ii) no approval of the Borrower or the Agent shall be required in connectionwith any assignment by a Lender to an Affiliate of such Lender, another Lenderor a Related Fund.  Upon such executionand delivery from and after the transfer effective date determined pursuant tosuch assignment document, (x) the Purchasing Lender thereunder shall be a partyhereto and, to the extent provided in the Assignment and Acceptance, have therights and obligations of a Lender hereunder with Commitments as set forththerein, and (y) the transferor Lender thereunder shall, to the extent of suchassigned portion and as provided in the Assignment and Acceptance, be releasedfrom its obligations under this Agreement and the other Loan Documents (and, inthe case of an Assignment and Acceptance covering all or the remaining portionof a transferor Lender’s rights and obligations under this Agreement, suchtransferor Lender shall cease to be a party hereto).  Any such Assignment and Acceptance shall bedeemed to amend this Agreement to the extent, and only to the extent, necessaryto reflect the addition of such Purchasing Lender and the resulting adjustmentof Commitment Percentages arising from the purchase by such Purchasing Lenderof all or a portion of the rights and obligations of such transferor Lenderunder this Agreement and the other Loan Documents.  The Borrower, at its own expense, shallexecute and deliver to the Agent in exchange for the surrendered Note or Notesa new Note or Notes to the order of such Purchasing Lender in an amount equalto the Commitments assumed by it, and if 

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### the transferor Lender has retained a Commitment hereunder, a new Noteor Notes to the order of the transferor Lender in an amount equal to suchCommitment retained by it hereunder. Such new Notes shall be dated the Closing Date.  Notwithstanding anything to the contrarycontained in this Section 9.6(c), a Lender may assign any or all of its rightsunder the Loan Documents to an Affiliate of such Lender or a Related Fund ofsuch Lender without delivering an Assignment and Acceptance to the Agent or anyother Person (a “Related Party Assignment”); provided, however, that (i)the assigning Lender promptly delivers notice to the Agent of such assignmentidentifying the assignee in detail reasonably acceptable to the Agent, (ii) theBorrower and the Agent may continue to deal solely and directly with suchassigning Lender until an Assignment and Acceptance has been delivered to theAgent for recordation in the Register, and provided that the failure of suchassigning Lender to deliver an Assignment and Acceptance to the Agent shall notaffect the legality, validity, or binding effect of such assignment and (iii)an Assignment and Acceptance between the assigning Lender and an Affiliate ofsuch Lender or a Related Fund of such Lender shall be effective as of the datespecified in such Assignment and Acceptance.

### (d)           TheAgent shall maintain at its address referred to in Section 9.2 a copy ofeach Assignment and Acceptance delivered to it and a register (the “Register”)for the recordation of the names and addresses of the Lenders and theCommitments of, and principal amounts of the Loans owing to and, if applicable,the Letters of Credit participated in by, each Lender from time to time.  The entries in the Register shall beconclusive, in the absence of manifest error, and the Borrower, the Agent andthe Lenders may treat each Person whose name is recorded in the Register as theowner of the Loans recorded therein for all purposes of this Agreement.  The Register shall be available forinspection by the Borrower or any Lender at any reasonable time and from timeto time upon reasonable prior notice.

### (e)           Uponits receipt of an Assignment and Acceptance executed by a transferor Lender andPurchasing Lender (and, in the case of a Purchasing Lender that is not then aLender or an Affiliate or Related Fund thereof, by the Borrower (if required)and the Agent (if required)) the Agent shall (i) promptly accept suchAssignment and Acceptance and (ii) on the effective date determinedpursuant thereto record the information contained therein in the Register.

### (f)            TheBorrower authorizes each Lender to disclose to any Participant or PurchasingLender (each, a “Transferee”) and any prospective Transferee any and allinformation in such Lender’s possession concerning the Borrower, the other LoanParties and the Affiliates thereof which has been delivered to such Lender byor on behalf of the Borrower pursuant to this Agreement or any other LoanDocument or which has been delivered to such Lender by or on behalf of theBorrower in connection with such Lender’s credit evaluation of the Borrower andthe other Loan Parties; provided that such Transferee or prospectiveTransferee agrees in writing to maintain the confidentiality of suchinformation in accordance with the provisions of Section 9.15.

### (g)           Nothingherein shall prohibit any Lender from pledging or assigning any of its interestand rights under this Agreement and its Notes to any Federal Reserve Bank inaccordance with applicable law.  In addition, the Borrower hereby acknowledgesthat each Lender and each of its Affiliates and Related Funds may at any timepledge or grant a security interest in all or any portion of the Loans made byit as collateral security to secure obligations of such Lender, Affiliates ofsuch Lender and Related Funds; provided that no such pledge or grant 

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### ofa security interest shall release a Lender from any of its obligationshereunder or substitute any such pledgee or assignee for such Lender as a partyhereto.

### (h)           EachLender (and each Person becoming a Lender pursuant to Section 9.6(c))represents, warrants and agrees with the Agent as follows:

#### (i)            SuchLender is entitled to receive any payments hereunder without the withholding ofany tax and will furnish to Agent and the Borrower such forms, certifications,statements and other documents as Agent may request from time to time toevidence such Lender’s exemption from withholding of any tax imposed by any jurisdictionor to enable Agent to comply with any applicable laws or regulations relatingthereto;

#### (ii)           Withoutlimiting the effect of the foregoing, if such Lender is not created ororganized under the laws of the United States or any state thereof, such Lenderis lawfully engaged in the conduct of a business within the United States andpayments made hereunder are or are reasonably expected to be effectivelyconnected with the conduct of that trade or business and are or will beincludible in its gross income or, if such Lender is not engaged in a UnitedStates trade or business with which such payments are effectively connected,such Lender is entitled to the benefits of a tax convention which exempts theincome from United States withholding tax and that it has satisfied allrequirements to qualify for the exemption from tax.

#### (iii)          SuchLender agrees that it will, immediately upon the request of the Agent, furnishto the Agent a copy to the Borrower Form W-9, W-8BEN or W-8ECI (as applicableto it) of the Internal Revenue Service, or such other forms, certifications,statements or documents, duly executed and completed by such Lender as evidenceof such Lender’s exemption from the withholding of United States tax withrespect thereto.  If such Lender determinesthat, as a result of any change in any Requirement of Law or in any officialapplication or interpretation thereof, it ceases to qualify for exemption fromany tax imposed by any jurisdiction with respect to payments made hereunder,such Lender shall promptly notify the Agent and the Borrower of such fact andthe Agent may, but shall not be required to withhold the amount of any suchapplicable tax from amounts paid to such Lender hereunder.  The Agent shall not be obligated to make anypayments hereunder to such Lender in respect to the Obligations owing to suchLender hereunder until such Lender shall have furnished to the Agent therequested form, certification, statement or document, and may withhold theamount of such applicable tax from amounts paid to such Lender hereunder.

#### (iv)          EachLender shall reimburse, indemnify and hold the Agent and the Borrower harmlessfrom any and all liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs, expenses or disbursements of any kind or naturewhatsoever which may be imposed upon, incurred by or asserted against the Agentor the Borrower, as the case may be, due to its reliance upon therepresentation hereby made that such Lender is exempt from withholding of tax.  Unless the Agent receives written notice tothe contrary, such Lender shall be deemed to have made the representationscontained in this Section 9.6(h) for the current and each subsequent tax yearof such Lender.

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## 9.7           Adjustments;Set-Off.

### (a)           Ifany Lender (a “benefitted Lender”) shall at any time receive any paymentof all or part of its Loans or its participations in Letters of Credit, orinterest thereon, or fees, or receive any collateral in respect thereof(whether voluntarily or involuntarily, by set-off, pursuant to events orproceedings of the nature referred to in Section 7(g) or 8.8, orotherwise), in a greater proportion than any such payment to or collateralreceived by any other Lender, if any, in respect of such other Lender’s Loans,its participation in Letters of Credit, or interest thereon, or fees, suchbenefitted Lender shall purchase for cash from the other Lenders such portionof each such other Lender’s Loans, participations in Letters of Credit, orfees, or shall provide such other Lenders with the benefits of any suchcollateral, or the proceeds thereof, as shall be necessary to cause suchbenefitted Lender to share the excess payment or benefits of such collateral orproceeds ratably with each of the Lenders; provided, however,that if all or any portion of such excess payment or benefits is thereafterrecovered from such benefitted Lender, such purchase shall be rescinded, andthe purchase price and benefits returned, to the extent of such recovery, butwithout interest.  The Borrower agreesthat each Lender so purchasing a portion of another Lender’s Loans or itsparticipations in Letters of Credit may exercise all rights of payment(including, without limitation, rights of set-off) with respect to such portionas fully as if such Lender were the direct holder of such portion.

### (b)           Subjectto Section 9.7(a), in addition to any rights and remedies of the Lendersprovided by law, with the prior consent of the Agent, each Lender shall havethe right, exercisable upon the occurrence and during the continuance of anEvent of Default, without prior notice to the Borrower, any such notice beingexpressly waived by the Borrower to the extent permitted by applicable law, toset-off and appropriate and apply against any such Obligations any and alldeposits (general or special, time or demand, provisional or final), in anycurrency, and any other credits, indebtedness or claims in any currency, ineach case whether direct or indirect, absolute or contingent, matured orunmatured, at any time held or owing by such Lender or Affiliate or any branchor agency thereof or bank controlling such Lender to or for the credit or theaccount of the Borrower to the extent such Obligations are then due andpayable.  Each Lender agrees promptly tonotify the Borrower after any such set-off and application made by such Lender,provided that the failure to give such notice shall not affect thevalidity of such set-off and application.

## 9.8           Counterparts.  This Agreement may be executed by one or moreof the parties to this Agreement on any number of separate counterparts, andall of said counterparts taken together shall be deemed to constitute one andthe same instrument.  Delivery of anexecuted counterpart of a signature page to this Agreement by telecopier shallbe effective as delivery of a manually executed counterpart of this Agreement.

## 9.9           Severability.  Any provision of this Agreement which isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

## 9.10         Integration.  This Agreement, together with the other LoanDocuments, represents the entire agreement of the Borrower, the Agent and theLenders with respect to the subject matter hereof, and there are no promises,undertakings, representations or warranties by the 

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## Agent or any Lender relative to the subject matter hereof not expresslyset forth or referred to herein or in the other Loan Documents.

## 9.11         GOVERNINGLAW.  THIS AGREEMENT AND THE NOTESAND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THENOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,THE LAW OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAWRULES).

## 9.12         JudicialReference; Consent to Jurisdiction.

### (a)           ALL CLAIMS, CAUSES OF ACTION OR OTHERDISPUTES CONCERNING THE LOAN DOCUMENTS (EACH A “CLAIM”), INCLUDING ANYAND ALL QUESTIONS OF LAW OR FACT RELATING THERETO, SHALL, AT THE WRITTENREQUEST OF ANY PARTY TO THIS AGREEMENT, BE DETERMINED BY JUDICIAL REFERENCEPURSUANT TO THE CALIFORNIA CODE OF CIVIL PROCEDURE (“REFERENCE”).  THE PARTIES SHALL SELECT A SINGLE NEUTRALREFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE.  IN THE EVENT THAT THE PARTIES CANNOT AGREEUPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT.  THE REFEREE SHALL REPORT A STATEMENT OFDECISION TO THE COURT.  NOTHING INTHIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISESELF-HELP REMEDIES, FORECLOSE AGAINST COLLATERAL OR OBTAIN PROVISIONALREMEDIES.  THE PARTIES SHALL BEAR THEFEES AND EXPENSES OF THE REFEREE EQUALLY UNLESS THE REFEREE ORDERSOTHERWISE.  THE REFEREE SHALL ALSODETERMINE ALL ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION, ANDENFORCEABILITY OF THIS PARAGRAPH.  THE PARTIESACKNOWLEDGE THAT THE CLAIMS WILL NOT BE ADJUDICATED BY A JURY.

### (b)           Subjectto Section 9.12(a), each party hereto hereby irrevocably and unconditionally

#### (i)            submits for itselfand its property in any legal action or proceeding relating to this Agreementand the other Loan Documents to which it is a party, or for recognition andenforcement of any judgment in respect thereof, to the non-exclusive generaljurisdiction of the courts of the State of California, the courts of the UnitedStates of America for the Central District of California, and appellate courtsfrom any thereof;

#### (ii)           consents that anysuch action or proceeding may be brought in such courts and waives anyobjection that it may now or hereafter have to the venue of any such action orproceeding in any such court or that such action or proceeding was brought inan inconvenient forum and agrees not to plead or claim the same;

#### (iii)          agrees that serviceof process in any such action or proceeding may be effected by mailing a copythereof by registered or certified mail (or any substantially similar form ofmail), postage prepaid, to any party at its address set forth inSection 9.2;

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#### (iv)          agrees that nothingherein shall affect the right to effect service of process in any other mannerpermitted by law or shall limit the right to sue in any other jurisdiction; and

#### (v)           waives, to themaximum extent not prohibited by law, any right it may have to claim or recoverin any legal action or proceeding referred to in this subsection any punitivedamages.

## 9.13         Acknowledgements.  The Borrower hereby acknowledges that:

### (a)           ithas been advised by counsel in the negotiation, execution and delivery of thisAgreement and the other Loan Documents;

### (b)           neitherthe Agent nor any Lender has any fiduciary relationship to the Borrower solelyby virtue of any of the Loan Documents, and the relationship pursuant to theLoan Documents between the Agent and the Lenders, on one hand, and theBorrower, on the other hand, is solely that of creditor and debtor; and

### (c)           nojoint venture exists among the Lenders or among the Borrower and the Lenders.

## 9.14         Headings.  Section headings herein are included forconvenience of reference only and shall not constitute a part of this Agreementfor any other purpose.

## 9.15         Confidentiality.  The Lenders shall take normal and reasonableprecautions to maintain the confidentiality of all non-public informationobtained pursuant to the requirements of this Agreement which has beenidentified in writing as such by any Loan Party but may, in any event, makedisclosures (a) reasonably required by any bona fide transferee, assigneeor participant in connection with the contemplated transfer or assignment ofany of the Commitments, the Loans, any participation in Letters of Credit orparticipation in any of the foregoing or (b) as required or requested byany governmental agency or representative thereof or as required pursuant tolegal process or (c) to its attorneys and accountants or (d) asrequired by law or (e) in connection with litigation involving any Lenderor the Agent; provided that (i) such transferee, assignee or participantagrees in writing to comply with the provisions of this Section 9.15 unlessspecifically prohibited by applicable law or court order and (ii) in no eventshall any Lender or the Agent be obligated or required to return any materialsfurnished by the Borrower or its Subsidiaries.

## 9.16         PatriotAct.  Each Lender subject to TitleIII of the Uniting and Strengthening America by Providing Appropriate ToolsRequired to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)(the “Patriot Act”) hereby notifies the Borrower that, pursuant to therequirements of the Patriot Act, such Lender is required to obtain, verify andrecord information that identifies the Borrower, which information includes thename and address of the Borrower and other information that will allow suchLender to identify the Borrower in accordance with the Patriot Act.

[Remainder of page intentionally left blank.]

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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be dulyexecuted and delivered in Los Angeles, California by their proper and dulyauthorized officers as of the day and year first above written.

 
|        | PHYSICIANS FORMULA, INC.,          |                    |
|--------|------------------------------------|-------------------------|
|   | a New York corporation             |                    |
|   |                               |                    |
|   |                               |                    |
|   | By:                                | /s/ Joseph Jaeger       |   |
|   | Name:                              | Joseph Jaeger           |
|   | Title:                             | Chief Financial Officer |
|   |                               |                    |
|   |                               |                    |
|   | Address for Notices:               |                    |
|   |                               |                    |
|   | 1055 West 8th Street               |                    |
|   | Azusa, CA 91702                    |                    |
|   | Attention: Chief Executive Officer |                    |
|   | Telephone: (626) 334-3395          |                    |
|   | Facsimile: (626) 334-8008          |                    |
|        |                                    |                         |  |  |  |

 

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|        | UNION BANK OF CALIFORNIA, N.A.,        |                |
|--------|----------------------------------------|---------------------|
|   | as Agent and as sole Lender            |                |
|   |                                   |                |
|   | By:                                    | /s/ Craig R. Cappai |   |
|   | Name: Craig R. Cappai                  |                |
|   | Title: Vice President                  |                |
|   |                                   |                |
|   | Revolving Loan Commitment: $20,000,000 |                |
|   | Term Loan Commitment: $15,000,000      |                |
|   |                                   |                |
|   | Address for Notices:                   |                |
|   |                                   |                |
|   | Union Bank of California, N.A.         |                |
|   | 445 South Figueroa Street, 13th Floor  |                |
|   | Los Angeles, CA 90071                  |                |
|   | Attention: Craig Cappai                |                |
|   | Telephone: (213) 236-7517              |                |
|   | Facsimile: (213) 236-7619              |                |
|   |                                   |                |
|   | Applicable Lending Office for          |                |
|   | Base Rate Loans:                       |                |
|   |                                   |                |
|   | 445 South Figueroa Street              |                |
|   | Los Angeles, CA 90071                  |                |
|   |                                   |                |
|   | Applicable Lending Office for          |                |
|   | LIBOR Loans:                           |                |
|   |                                   |                |
|   | 445 South Figueroa Street              |                |
|   | Los Angeles, CA 90071                  |                |
|   |                                   |                |
|   | Applicable Lending Office for          |                |
|   | participations in Letters of Credit:   |                |
|   |                                   |                |
|   | 445 South Figueroa Street              |                |
|   | Los Angeles, CA 90071                  |                |
|        |                                        |                     |  |  |

 

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