Document:

exhibitcomerica.htm

Exhibit 10.36

AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

DATED AS OF NOVEMBER 3, 2010

 

OBAGI MEDICAL PRODUCTS, INC.

 

AND

 

OMP, INC.

 

COMERICA BANK

 

AS ADMINISTRATIVE AGENT AND LEAD ARRANGER

 

Detroit_1026630_7

  

  

  

TABLE OF CONTENTS

	
1

	
DEFINITIONS.

	
1

	  	
1.1

	
Certain Defined Terms

	
1

	
2

	
REVOLVING CREDIT.

	
22

	  	
2.1

	
Commitment

	
22

	  	
2.2

	
Accrual of Interest and Maturity; Evidence of Indebtedness.

	
22

	  	
2.3

	
Requests for and Refundings and Conversions of Advances

	
23

	  	
2.4

	
Disbursement of Advances.

	
25

	  	
2.5

	
[Reserved.]

	
26

	  	
2.6

	
Interest Payments; Default Interest.

	
26

	  	
2.7

	
Optional Prepayments.

	
27

	  	
2.8

	
Prime Referenced Rate Advance in Absence of Election or Upon Default

	
27

	  	
2.9

	
Revolving Credit Facility Fee

	
28

	  	
2.1

	
Mandatory Repayment of Revolving Credit Advances.

	
28

	  	
2.11

	
Optional Reduction or Termination of Revolving Credit Aggregate Commitment

	
29

	  	
2.12

	
Use of Proceeds of Advances

	
30

	
3

	
LETTERS OF CREDIT.

	
30

	  	
3.1

	
Letters of Credit

	
30

	  	
3.2

	
Conditions to Issuance

	
30

	  	
3.3

	
Notice

	
31

	  	
3.4

	
Letter of Credit Fees; Increased Costs

	
31

	  	
3.5

	
Other Fees

	
33

	  	
3.6

	
Participation Interests in and Drawings and Demands for Payment Under Letters of Credit.

	
33

	  	
3.7

	
Obligations Irrevocable

	
35

	  	
3.8

	
Risk Under Letters of Credit.

	
36

	  	
3.9

	
Indemnification

	
37

	  	
3.1

	
Right of Reimbursement

	
38

	
4

	
TERM LOANS.

	
38

	  	
4.1

	
Term Loans

	
38

	  	
4.2

	
Accrual of Interest and Maturity; Evidence of Indebtedness.

	
38

	  	
4.3

	
Repayment of Principal.

	
39

	  	
4.4

	
Requests for and Refundings and Conversions of Advances of Term Loans.

	
39

	  	
4.5

	
Disbursement of Term Loan Advances.

	
43

	  	
4.6

	
Prime Referenced Rate Advance in Absence of Election or Upon Default

	
44

	  	
4.7

	
Interest Payments; Default Interest.

	
44

	  	
4.8

	
Optional Prepayment of Term Loans.

	
45

	  	
4.9

	
Use of Proceeds

	
46

	
5

	
CONDITIONS.

	
46

 

  

  

  

	  	
5.1

	
Conditions of Initial Advances

	
46

	  	
5.2

	
Continuing Conditions

	
49

	
6

	
REPRESENTATIONS AND WARRANTIES.

	
49

	  	
6.1

	
Corporate Authority

	
49

	  	
6.2

	
Due Authorization

	
49

	  	
6.3

	
Good Title; Leases; Assets; No Liens

	
50

	  	
6.4

	
Taxes

	
50

	  	
6.5

	
No Defaults

	
50

	  	
6.6

	
Enforceability of Agreement and Loan Documents

	
50

	  	
6.7

	
Compliance with Laws

	
51

	  	
6.8

	
Non-contravention

	
51

	  	
6.9

	
Litigation

	
51

	  	
6.1

	
Consents, Approvals and Filings, Etc

	
51

	  	
6.11

	
Agreements Affecting Financial Condition

	
52

	  	
6.12

	
No Investment Company or Margin Stock

	
52

	  	
6.13

	
ERISA

	
52

	  	
6.14

	
Conditions Affecting Business or Properties

	
53

	  	
6.15

	
Environmental and Safety Matters

	
53

	  	
6.16

	
Subsidiaries

	
53

	  	
6.17

	
Management Agreements

	
53

	  	
6.18

	
Material Contracts

	
53

	  	
6.19

	
Franchises, Patents, Copyrights, Tradenames, etc

	
53

	  	
6.2

	
Capital Structure

	
54

	  	
6.21

	
Accuracy of Information

	
54

	  	
6.22

	
Solvency

	
54

	  	
6.23

	
Employee Matters

	
55

	  	
6.24

	
Licenses

	
55

	  	
6.25

	
No Misrepresentation

	
55

	  	
6.26

	
Corporate Documents and Corporate Existence

	
55

	
7

	
AFFIRMATIVE COVENANTS.

	
55

	  	
7.1

	
Financial Statements

	
55

	  	
7.2

	
Certificates; Other Information

	
56

	  	
7.3

	
Payment of Obligations

	
58

	  	
7.4

	
Conduct of Business and Maintenance of Existence; Compliance with Laws.

	
58

	  	
7.5

	
Maintenance of Property; Insurance

	
58

	  	
7.6

	
Inspection of Property; Books and Records, Discussions

	
59

	  	
7.7

	
Notices

	
59

	  	
7.8

	
Hazardous Material Laws.

	
60

	  	
7.9

	
Financial Covenants.

	
61

	  	
7.1

	
Governmental and Other Approvals

	
61

	  	
7.11

	
Compliance with ERISA; ERISA Notices.

	
61

	  	
7.12

	
Defense of Collateral

	
62

	  	
7.13

	
Future Subsidiaries; Additional Collateral.

	
62

	  	
7.14

	
Accounts

	
63

 

  

  

  

	  	
7.15

	
Inbound Licenses

	
63

	  	
7.16

	
Use of Proceeds

	
63

	  	
7.17

	
Further Assurances and Information.

	
63

	  	
7.18

	
Collateral Access Agreements.

	
64

	
8

	
NEGATIVE COVENANTS.

	
64

	  	
8.1

	
Limitation on Debt

	
65

	  	
8.2

	
Limitation on Liens

	
65

	  	
8.3

	
Acquisitions

	
66

	  	
8.4

	
Limitation on Mergers, Dissolution or Sale of Assets

	
66

	  	
8.5

	
Restricted Payments

	
67

	  	
8.6

	
Limitation on Capital Expenditures

	
68

	  	
8.7

	
Limitation on Investments, Loans and Advances

	
68

	  	
8.8

	
Transactions with Affiliates

	
69

	  	
8.9

	
Sale-Leaseback Transactions

	
69

	  	
8.1

	
Limitations on Other Restrictions

	
69

	  	
8.11

	
Prepayment of Debt

	
69

	  	
8.12

	
Amendment of Subordinated Debt Documents

	
70

	  	
8.13

	
Modification of Certain Agreements

	
70

	  	
8.14

	
Management Fees

	
70

	  	
8.15

	
Fiscal Year

	
70

	
9

	
DEFAULTS.

	
70

	  	
9.1

	
Events of Default

	
70

	  	
9.2

	
Exercise of Remedies

	
72

	  	
9.3

	
Rights Cumulative

	
73

	  	
9.4

	
Waiver by Borrowers of Certain Laws

	
73

	  	
9.5

	
Waiver of Defaults

	
73

	  	
9.6

	
Set Off

	
73

	
10

	
PAYMENTS, RECOVERIES AND COLLECTIONS.

	
74

	  	
10.1

	
Payment Procedure.

	
74

	  	
10.2

	
Application of Proceeds of Collateral

	
75

	  	
10.3

	
Pro-rata Recovery

	
76

	  	
10.4

	
Treatment of a Defaulting Lender.

	
76

	
11

	
CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.

	
77

	  	
11.1

	
Reimbursement of Prepayment Costs

	
77

	  	
11.2

	
Eurodollar Lending Office

	
78

	  	
11.3

	
Circumstances Affecting LIBOR Rate Availability

	
78

	  	
11.4

	
Laws Affecting LIBOR Rate Availability

	
79

	  	
11.5

	
Increased Cost of Advances Carried at the LIBOR Rate

	
79

	  	
11.6

	
Capital Adequacy and Other Increased Costs.

	
80

	  	
11.7

	
Right of Lenders to Fund through Branches and Affiliates

	
81

	  	
11.8

	
Margin Adjustment

	
81

 

  

  

  

	
12

	
AGENT.

	
82

	  	
12.1

	
Appointment of Agent

	
82

	  	
12.2

	
Deposit Account with Agent or any Lender

	
82

	  	
12.3

	
Scope of Agent’s Duties

	
82

	  	
12.4

	
Successor Agent

	
83

	  	
12.5

	
Credit Decisions

	
83

	  	
12.6

	
Authority of Agent to Enforce This Agreement

	
83

	  	
12.7

	
Indemnification of Agent

	
84

	  	
12.8

	
Knowledge of Default

	
84

	  	
12.9

	
Agent’s Authorization; Action by Lenders

	
85

	  	
12.1

	
Enforcement Actions by the Agent

	
85

	  	
12.11

	
Collateral Matters.

	
85

	  	
12.12

	
Agents in their Individual Capacities

	
86

	  	
12.13

	
Agent’s Fees

	
86

	  	
12.14

	
Documentation Agent or other Titles

	
86

	  	
12.15

	
No Reliance on Agent’s Customer Identification Program.

	
86

	
13

	
MISCELLANEOUS.

	
87

	  	
13.1

	
Accounting Principles

	
87

	  	
13.2

	
Consent to Jurisdiction

	
87

	  	
13.3

	
Law of California

	
87

	  	
13.4

	
Interest

	
88

	  	
13.5

	
WAIVER OF JURY TRIAL

	
88

	  	
13.6

	
Closing Costs and Other Costs; Indemnification.

	
90

	  	
13.7

	
Notices.

	
91

	  	
13.8

	
Further Action

	
92

	  	
13.9

	
Successors and Assigns; Participations; Assignments.

	
92

	  	
13.1

	
Counterparts

	
95

	  	
13.11

	
Amendment and Waiver

	
95

	  	
13.12

	
Confidentiality

	
97

	  	
13.13

	
Substitution or Removal of Lenders.

	
97

	  	
13.14

	
Withholding Taxes

	
99

	  	
13.15

	
Taxes and Fees

	
100

	  	
13.16

	
USA Patriot Act Notice

	
100

	  	
13.17

	
Complete Agreement; Conflicts

	
101

	  	
13.18

	
Severability

	
101

	  	
13.19

	
Table of Contents and Headings; Section References

	
101

	  	
13.2

	
Construction of Certain Provisions

	
101

	  	
13.21

	
Independence of Covenants

	
101

	  	
13.22

	
Electronic Transmissions.

	
101

	  	
13.23

	
Advertisements

	
102

	  	
13.24

	
Reliance on and Survival of Provisions

	
102

	  	
13.25

	
Joint and Several Liability.

	
102

	  	
13.26

	
Amendment and Restatement; Assignment and Assumptions

	
104

 

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EXHIBITS

A FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE

B FORM OF REVOLVING CREDIT NOTE

C FORM OF NOTICE OF LETTERS OF CREDIT

D FORM OF TERM NOTE

E FORM OF ASSIGNMENT AGREEMENT

F FORM OF GUARANTY

G FORM OF COVENANT COMPLIANCE REPORT

H FORM OF INTELLECTUAL PROPERTY REPORT

I FORM OF LESSOR’S ACKNOWELDGMENT

J REAFFIRMATION OF LOAN DOCUMENTS

K FORM OF REQUEST FOR TERM LOAN ADVANCE

L FORM OF TERM LOAN RATE REQUEST

SCHEDULES

SCHEDULE 1.1                                APPLICABLE MARGIN GRID

SCHEDULE 1.2                                PERCENTAGES AND ALLOCATIONS

SCHEDULE 1.3                                COMPLIANCE INFORMATION

SCHEDULE 5.1(b)                                FINANCING STATEMENT JURISDICTIONS

SCHEDULE 5.1(c)                                JURISDICTIONS

SCHEDULE 6.3(a)                                REAL PROPERTY LOCATIONS

SCHEDULE 6.4                                TAXES

SCHEDULE 6.7                                LAWS

SCHEDULE 6.9                                LITIGATION

SCHEDULE 6.10                                CONSENTS, APPROVALS AND FILINGS

SCHEDULE 6.13                                ERISA

SCHEDULE 6.15                                ENVIRONMENTAL MATTERS

SCHEDULE 6.16                                SUBSIDIARIES

SCHEDULE 6.17                                MANAGEMENT AND EMPLOYMENT AGREEMENTS

SCHEDULE 6.18                                MATERIAL CONTRACTS

SCHEDULE 6.19                                FRANCHISES, PATENTS, COPYRIGHTS AND TRADEMARKS

SCHEDULE 6.20                                CAPITAL STRUCTURE

SCHEDULE 6.23                                EMPLOYEE MATTERS

SCHEDULE 6.24                                IN-LICENSES

SCHEDULE 8.1                                EXISTING DEBT

SCHEDULE 8.2                                PERMITTED LIENS

SCHEDULE 8.7                                PERMITTED INVESTMENTS

SCHEDULE 8.8                                TRANSACTIONS WITH AFFILIATES

SCHEDULE 13.7                                NOTICES

 

Detroit_1026630_7

  

  

  

 

AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

This amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) is made as of the 3rd day of November, 2010, by and among the financial institutions from time to time signatory hereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”), Arranger, Syndication Agent and Documentation Agent, and Obagi Medical Products, Inc. (“Obagi”) and OMP, Inc. (“OMP” and together with Obagi, the “Borrowers” and each individually, a “Borrower”).

 

RECITALS

 

A.           Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of November 21, 2008 (as amended, restated or otherwise modified from time to time, the “Prior Credit Agreement”).

 

B.           Borrowers have requested that the Lenders continue to extend credit and letters of credit to it, and the Lenders are prepared to extend such credit as aforesaid, but only on the terms and conditions set forth in this Agreement.

 

NOW THEREFORE, in consideration of the covenants contained herein, the Borrowers, the Lenders, and the Agent agree as follows:

 

	
1.  

	
DEFINITIONS.

 

1.1 Certain Defined Terms

 

. For the purposes of this Agreement the following terms will have the following meanings:

 

“Account(s)” shall mean any account or account receivable as defined under the UCC, including without limitation, with respect to any Person, any right of such Person to payment for goods sold or leased or for services rendered.

 

“Account Control Agreement(s)” shall mean those certain account control agreements, or similar agreements that are delivered pursuant to Section 7.14 of this Agreement or otherwise, as the same may be amended, restated or otherwise modified from time to time.

 

“Account Debtor” shall mean the party who is obligated on or under any Account.

 

“Advance(s)” shall mean, as the context may indicate, a borrowing requested by a Borrower, and made by the Revolving Credit Lenders under Section 2.1 hereof, the Term Loan Lenders under Section 4.1 hereof, including without limitation any readvance, refunding or conversion of such borrowing pursuant to Section 2.3 or 4.4 hereof, and any advance deemed to have been made in respect of a Letter of Credit under Section 3.6(a) hereof, and shall include, as applicable, a Eurodollar-based Advance and a Prime Referenced Rate Advance.

 

“Affected Lender” shall have the meaning set forth in Section 13.13 hereof.

 

  

1

  

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control another Person for the purposes of this definition if such Person possesses, directly or indirectly, the power (i) to vote 10% (or 20% with respect to a Borrower or Subsidiary of Borrower) or more of the Equity Interests having ordinary voting power for the election of directors or managers of such other Person or (ii) to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agent” shall have the meaning set forth in the preamble, and include any successor agents appointed in accordance with Section 12.4 hereof.

 

“Agent’s Correspondent” shall mean for Eurodollar-based Advances, Agent’s Grand Cayman Branch (or for the account of said branch office, at Agent’s main office in Santa Clara, California, United States).

 

 “Applicable Fee Percentage” shall mean, as of any date of determination thereof, the applicable percentage used to calculate certain of the fees due and payable hereunder, determined by reference to the appropriate columns in the Pricing Matrix attached to this Agreement as Schedule 1.1.

 

“Applicable Interest Rate” shall mean, with respect to each Revolving Credit Advance and Term Loan Advance, the Eurodollar-based Rate or the Prime Referenced Rate, in each case as selected by the Borrowers from time to time subject to the terms and conditions of this Agreement.

 

“Applicable Margin” shall mean, as of any date of determination thereof, the applicable interest rate margin, determined by reference to the appropriate columns in the Pricing Matrix attached to this Agreement as Schedule 1.1, such Applicable Margin to be adjusted solely as specified in Section 11.8 hereof.

 

“Asset Sale” shall mean the sale, transfer or other disposition by any Credit Party of any asset (other than the sale or transfer of less than one hundred percent (100%) of the stock or other ownership interests of any Subsidiary) to any Person (other than to a Borrower or a Guarantor).

 

“Assignment Agreement” shall mean an Assignment Agreement substantially in the form of Exhibit E hereto.

 

“Authorized Signer” shall mean each person who has been authorized by a Borrower to execute and deliver any requests for Advances hereunder pursuant to a written authorization delivered to the Agent and whose signature card or incumbency certificate has been received by the Agent.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code and the rules promulgated thereunder.

 

  

2

  

“Borrower” and “Borrowers” shall have the meaning ascribed to such terms in the preamble to this Agreement.

 

“Borrower Representative” shall mean, initially, Obagi, or any other Borrower identified as the Borrower Representative in a written notice delivered to Agent and signed by all Borrowers.

 

“Business Day” shall mean any day other than a Saturday or a Sunday on which commercial banks are open for domestic and international business (including dealings in foreign exchange) in Los Angeles, California and New York, New York, and in the case of a Business Day which relates to a Eurodollar-based Advance, on which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” shall mean, for any period, with respect to any Person (without duplication), the aggregate of all expenditures incurred by such Person and its Subsidiaries during such period for the acquisition or leasing (pursuant to a Capitalized Lease) of fixed or capital assets or additions to equipment, plant and property that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries.

 

“Capitalized Lease” shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) with respect to which the discounted present value of the rental obligations of such Person as lessee thereunder, in conformity with GAAP, is required to be capitalized on the balance sheet of that Person.

 

“Cash” shall mean unrestricted cash and cash equivalents.

 

“Change of Control” shall mean (a) an event or series of events whereby any Person or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) shall either (x) acquire beneficial ownership of more than 50% of any outstanding class of common stock of any Borrower having ordinary voting power in the election of directors of such Borrower or (y) obtain the power (whether or not exercised) to elect a majority of such Borrower’s directors or (b) the occurrence of an event or series of events that would trigger a violation of any change of control or change in control provision in any of the Subordinated Debt Documents.

 

“Collateral” shall mean all property or rights in which a security interest, mortgage, lien or other encumbrance for the benefit of the Lenders is or has been granted or arises or has arisen, under or in connection with this Agreement, the other Loan Documents, or otherwise to secure the Indebtedness.

 

“Collateral Access Agreement” shall mean an agreement in form and substance satisfactory to the Agent in its sole discretion, pursuant to which a mortgagee or lessor of real property on which Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of inventory or other property owned by any Credit Party, that acknowledges the Liens under the Collateral Documents and subordinates or waives any Liens held by such Person on such property and, includes such other agreements with respect to the Collateral as Agent may require in its sole discretion, as the same may be amended, restated or otherwise modified from time to time.

 

  

3

  

“Collateral Documents” shall mean the Security Agreement, the Account Control Agreements, the Collateral Access Agreements, and all other security documents (and any joinders thereto) executed by any Credit Party in favor of the Agent on or after the Effective Date, in connection with any of the foregoing collateral documents, in each case, as such collateral documents may be amended or otherwise modified from time to time.

 

“Comerica Bank” shall mean Comerica Bank, and its successors or assigns.

 

“Consolidated” (or “consolidated”) or “Consolidating” (or “consolidating”) shall mean, when used with reference to any financial term in this Agreement, the aggregate for two or more Persons of the amounts signified by such term for all such Persons determined on a consolidated (or consolidating) basis in accordance with GAAP, applied on a consistent basis. Unless otherwise specified herein, “Consolidated” and “Consolidating” shall refer to Borrowers and their respective Subsidiaries, determined on a Consolidated or Consolidating basis.

 

“Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any material agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Covenant Compliance Report” shall mean the report to be furnished by Borrowers to the Agent pursuant to Section 7.2(a) hereof, substantially in the form attached hereto as Exhibit G and certified by a Responsible Officer of the Borrower Representative, in which report Borrowers shall set forth the information specified therein and which shall include a statement of then applicable level for the Applicable Margin and Applicable Fee Percentages as specified in Schedule 1.1 attached to this Agreement.

 

“Credit Parties” shall mean the Borrowers and any Guarantors, and “Credit Party” shall mean any one of them, as the context indicates or otherwise requires.

 

“Daily Adjusting LIBOR Rate” shall mean for any day a per annum interest rate which is equal to the quotient of the following:

 

(a) the LIBOR Rate;

 

divided by

	

(b) 

 

	
a percentage (expressed as a decimal) equal to 1.00 minus the maximum rate on such date at which Agent is required to maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Agent is required to maintain reserves against a category of liabilities which includes eurodollar deposits or includes a category of assets which includes eurodollar loans, the rate at which such reserves are required to be maintained on such category;

 

such sum to be rounded upward, if necessary, in the discretion of the Agent, to the seventh decimal place.

  

4

  

“Debt” shall mean as to any Person, without duplication (a) all Funded Debt of a Person, (b) all Guarantee Obligations of such Person, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (d) all indebtedness of such Person arising in connection with any Hedging Transaction entered into by such Person, (e) all recourse Debt of any partnership of which such Person is the general partner, and (f) any Off Balance Sheet Liabilities.

 

“Default” shall mean any event that with the giving of notice or the passage of time, or both, would constitute an Event of Default under this Agreement.

 

“Defaulting Lender” shall mean a Lender which, in the reasonable determination of the Agent (a) has failed to fund its Percentage of any Advance or to purchase participations in any Reimbursement Obligations as required under this Agreement, unless such Lender is disputing its funding obligation in good faith, (b) has otherwise failed to pay to the Agent or any other Lender any other amount required to be paid by it under the terms of this Agreement or any other Loan Document, unless such Lender is disputing such obligation to pay any such amount in good faith, (c) has been, or whose holding company has been, determined to be insolvent or that has become subject to a bankruptcy, receivership or other similar proceeding, or (d) has had a substantial portion of its assets or management (or a substantial portion of the assets or management of its holding company) taken over by any governmental authority or any governmental authority has restricted its ability to act under this Agreement, including its ability to enter into amendments, waivers or modifications of this Agreement or any of the other Loan Documents (provided that the exercise of the customary rights of a shareholder by a governmental authority which owns shares in such Lender (or its holding company) shall not be covered by this clause (d)), provided, however, in all cases that a Defaulting Lender shall no longer be deemed a Defaulting Lender when (i) the Defaulting Lender shall have cured the conditions which shall have caused it to be a Defaulting Lender hereunder and (ii) the Agent has agreed that such Lender shall no longer be deemed a Defaulting Lender hereunder.

 

“Defaulting Lender’s Unfunded Portion” shall mean such Defaulting Lender’s Revolving Credit Percentage of the Revolving Credit Aggregate Commitment minus the sum of (a) the aggregate principal amount of all Revolving Credit Advances funded by the Defaulting Lender under the Revolving Credit, plus (b) such Defaulting Lender’s Revolving Credit Percentage of the aggregate outstanding principal amount of all Letter of Credit Obligations.

 

“Distribution” is defined in Section 8.5 hereof.

 

“Dollars” and the sign “$” shall mean lawful money of the United States of America.

 

“Domestic Subsidiary” shall mean any Subsidiary of a Borrower incorporated or organized under the laws of the United States of America, or any state or other political subdivision thereof or which is considered to be a “disregarded entity” for United States federal income tax purposes and which is not a “controlled foreign corporation” as defined under Section 957 of the Internal Revenue Code, in each case provided such Subsidiary is owned by such Borrower or a Domestic Subsidiary of such Borrower, and “Domestic Subsidiaries” shall mean any or all of them.

 

  

5

  

“EBITDA” shall mean, as of any date of determination, Net Income of Borrowers for the four preceding fiscal quarters ending on such date, plus, to the extent deducted in computation of such Net Income, the sum of (a) income tax expense of Borrowers for such period, (b) interest expense of Borrowers for such period, (c) depreciation and amortization expense of Borrowers for such period, and (d) all non-cash stock compensation remitted by Borrowers during such period, all as determined in accordance with GAAP.

 

“Effective Date” shall mean the date on which all the conditions precedent set forth in Sections 5.1 and 5.2 have been satisfied.

 

“Electronic Transmission” shall mean each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise made or communicated by e-mail or e-fax, or otherwise to or from an E-System or other equivalent service.

 

“Eligible Assignee” shall mean (a) a Lender; (b) an Affiliate of a Lender; (c) any Person (other than a natural person) that is or will be engaged in the business of making, purchasing, holding or otherwise investing in commercial loans or similar extensions of credit in the ordinary course of its business, provided that such Person is administered or managed by a Lender, an Affiliate of a Lender or an entity or Affiliate of an entity that administers or manages a Lender; or (d) any other Person (other than a natural person) approved by the (i) Agent (and in the case of an assignment of a commitment under the Revolving Credit and the Issuing Lender), and (ii) unless an Event of Default has occurred and is continuing, the Borrowers (each such approval not to be unreasonably withheld or delayed); provided that (x) notwithstanding the foregoing, “Eligible Assignee” shall not include any of the Borrowers, or any of the Borrowers’ Affiliates or Subsidiaries; and provided further that notwithstanding clause (d)(ii) of this definition, (y) no assignment shall be made to an entity which is a competitor of any Credit Party without the consent of the Borrowers, which consent may be withheld in the sole discretion of the Borrowers, and (z) no assignment shall be made to an Impaired Lender without the consent of the Agent, in the case of an assignment of a commitment under the Revolving Credit, and the Issuing Lender.

 

“Equity Interest” shall mean (i) in the case of any corporation, all capital stock and any securities exchangeable for or convertible into capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents of corporate stock (however designated) in or to such association or entity, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person, and including, in all of the foregoing cases described in clauses (i), (ii), (iii) or (iv), any warrants, rights or other options to purchase or otherwise acquire any of the interests described in any of the foregoing cases.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor act or code and the regulations in effect from time to time thereunder.

 

  

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“E-System” shall mean any electronic system and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Agent, any of its Affiliates or any other Person, providing for access to data protected by passcodes or other security system.

 

“Eurodollar-based Advance” shall mean any Advance which bears interest at the Eurodollar-based Rate.

 

“Eurodollar-based Rate” shall mean a per annum interest rate which is equal to the sum of the Applicable Margin, plus the quotient of:

 

	
  

	
(i)

	
the LIBOR Rate;

 

divided by

 

	
  

	
(ii)

	
a percentage (expressed as a decimal) equal to 1.00 minus the maximum rate on such date at which Agent is required to maintain reserves on ‘Eurocurrency Liabilities’ as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Agent is required to maintain reserves against a category of liabilities which includes eurocurrency deposits or includes a category of assets which includes eurocurrency loans, the rate at which such reserves are required to be maintained on such category;

 

such sum to be rounded upward, if necessary, in the discretion of the Agent to the seventh decimal place.

 

“Eurodollar-Interest Period” shall mean, for any Eurodollar-based Advance, an Interest Period of one, two, three or six months (or any shorter or longer periods agreed to in advance by the Borrowers, Agent and the Lenders) as selected by Borrowers, for such Eurodollar-based Advance pursuant to Section 2.3 or 4.4 hereof, as the case may be.

 

“Eurodollar Lending Office” shall mean, (a) with respect to the Agent, Agent’s office located at its Grand Caymans Branch or such other branch of Agent, domestic or foreign, as it may hereafter designate as its Eurodollar Lending Office by written notice to Borrowers and the Lenders and (b) as to each of the Lenders, its office, branch or affiliate located at its address set forth on the signature pages hereof (or identified thereon as its Eurodollar Lending Office), or at such other office, branch or affiliate of such Lender as it may hereafter designate as its Eurodollar Lending Office by written notice to Borrowers and Agent.

 

“Event of Default” shall mean each of the Events of Default specified in Section 9.1 hereof.

 

“Federal Funds Effective Rate” shall mean, for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a 

 

  

7

  

Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent, all as conclusively determined by the Agent, such sum to be rounded upward, if necessary, in the discretion of the Agent, to the nearest whole multiple of 1/100th of 1%.

 

“Fees” shall mean the Revolving Credit Facility Fee, the Letter of Credit Fees and the other fees and charges (including any agency fees) payable by Borrowers to the Lenders, the Issuing Lender or Agent hereunder.

 

“Final Maturity Date” shall mean the last to occur of (i) the Revolving Credit Maturity Date, or (ii) the Term Loan Maturity Date.

 

“Fiscal Year” shall mean the twelve-month period ending on each December 31.

 

“Fronting Exposure” shall mean, at any time there is a Defaulting Lender, with respect to the Issuing Lender, such Defaulting Lender’s Percentage of the outstanding Letter of Credit Obligations with respect to Letters of Credit issued by such Issuing Lender.

 

“Funded Debt” of any Person shall mean, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services as of such date (other than operating leases and trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) the principal component of all obligations of such Person under Capitalized Leases, (c) all reimbursement obligations (actual, contingent or otherwise) of such Person in respect of letters of credit, bankers acceptances or similar obligations issued or created for the account of such Person, (d) all liabilities of the type described in (a), (b) and (c) above that are secured by any Liens on any property owned by such Person as of such date even though such Person has not assumed or otherwise become liable for the payment thereof, the amount of which is determined in accordance with GAAP; provided, however that so long as such Person is not personally liable for any such liability, the amount of such liability shall be deemed to be the lesser of the fair market value at such date of the property subject to the Lien securing such liability and the amount of the liability secured, and (e) all Guarantee Obligations in respect of any liability which constitutes Funded Debt; provided, however that Funded Debt shall not include any indebtedness under any Hedging Transaction prior to the occurrence of a termination event with respect thereto.

 

“GAAP” shall mean, as of any applicable date of determination, generally accepted accounting principles in the United States of America, as applicable on such date, consistently applied, as in effect from time to time.

 

“Governmental Obligations” means noncallable direct general obligations of the United States of America or obligations the payment of principal of and interest on which is unconditionally guaranteed by the United States of America.

 

“Guarantee Obligation” shall mean as to any Person (the “guaranteeing person”) any obligation of the guaranteeing Person in respect of any obligation of another Person (the “primary obligor”) (including, without limitation, any bank under any letter of credit), the creation of which was induced by a reimbursement agreement, guaranty agreement, keepwell 

 

  

8

  

agreement, purchase agreement, counterindemnity or similar obligation issued by the guaranteeing person, in either case guaranteeing or in effect guaranteeing any Debt, leases, dividends or other obligations (the “primary obligations”) of the primary obligor in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the applicable Person in good faith.

 

“Guarantor(s)” shall mean each Domestic Subsidiary of a Borrower (excluding any Domestic Subsidiary that is a Borrower) which has executed and delivered to the Agent a Guaranty (or a joinder to a Guaranty), and a Security Agreement (or a joinder to the Security Agreement).

 

“Guaranty” shall mean, collectively, those guaranty agreements executed and delivered from time to time after the Effective Date (whether by execution of joinder agreements or otherwise) pursuant to Section 7.13 hereof or otherwise, in each case in the form attached hereto as Exhibit F, as amended, restated or otherwise modified from time to time.

 

“Hazardous Material” shall mean any hazardous or toxic waste, substance or material defined or regulated as such in or for purposes of the Hazardous Material Laws.

 

“Hazardous Material Law(s)” shall mean all laws, codes, ordinances, rules, regulations and other governmental restrictions and requirements issued by any federal, state, local or other governmental or quasi-governmental authority or body (or any agency, instrumentality or political subdivision thereof) pertaining to any substance or material which is regulated for reasons of health, safety or the environment and which is present or alleged to be present on or about or used in any facilities owned, leased or operated by any Credit Party, or any portion thereof including, without limitation, those relating to soil, surface, subsurface ground water conditions and the condition of the indoor and outdoor ambient air; any so-called “superfund” or “superlien” law; and any other United States federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of 

 

  

9

  

conduct concerning, any Hazardous Material, as now or at any time during the term of the Agreement in effect.

 

“Hedging Agreement” shall mean any agreement relating to a Hedging Transaction entered into between the Borrowers and any Lender or an Affiliate of a Lender.

 

“Hedging Transaction” means each interest rate swap transaction, basis swap transaction, forward rate transaction, equity transaction, equity index transaction, foreign exchange transaction, cap transaction, floor transaction (including any option with respect to any of these transactions and any combination of any of the foregoing).

 

“Hereof”, “hereto”, “hereunder” and similar terms shall refer to this Agreement and not to any particular paragraph or provision of this Agreement.

 

“Impaired Lender” means a Defaulting Lender and any other Lender (a) which the Agent, or the Issuing Lender believes, in good faith, has defaulted (and continues to be in default) in fulfilling its obligations under any other syndicated credit facilities or as a participant in any other credit facility and such Lender is not in good faith disputing that such a failure has occurred, or (b) which, if carrying an investment grade rating of at least BBB- from S&P or Baa3 from Moody’s at the time it became a party to this Agreement, no longer carries a rating of at least BBB- from S&P or Baa3 from Moody’s, provided, however, in all cases that an Impaired Lender shall no longer be deemed an Impaired Lender when (i) the Impaired Lender shall have cured the conditions which shall have caused it to be an Impaired Lender hereunder and (ii) the Agent has agreed that such Lender shall no longer be deemed an Impaired Lender hereunder.

 

“Income Taxes” shall mean for any period the aggregate amount of taxes based on income or profits for such period with respect to the operations of Borrowers and their respective Subsidiaries (including, without limitation, all corporate franchise, capital stock, net worth and value-added taxes assessed by state and local governments) determined in accordance with GAAP on a Consolidated basis (to the extent such income and profits were included in computing Consolidated Net Income).

 

“Indebtedness” shall mean all indebtedness and liabilities (including without limitation principal, interest (including without limitation interest accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document after an applicable maturity date and interest accruing at the then applicable rate provided in this Agreement or any other applicable Loan Document after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Credit Parties whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, expenses and other charges) arising under this Agreement or any of the other Loan Documents, whether direct or indirect, absolute or contingent, of any Credit Party to any of the Lenders or Affiliates thereof or to the Agent, in any manner and at any time, whether arising under this Agreement, the Guaranty or any of the other Loan Documents (including without limitation, payment obligations under Hedging Transactions evidenced by Hedging Agreements), due or hereafter to become due, now owing or that may hereafter be incurred by any Credit Party to any of the Lenders or Affiliates thereof or to the Agent, and which shall be deemed to include protective advances made by Agent with respect to the Collateral under or pursuant to the terms of any Loan

 

  

10

  

 Document and any liabilities of any Credit Party to Agent or any Lender arising in connection with any Lender Products, in each case whether or not reduced to judgment, with interest according to the rates and terms specified, and any and all consolidations, amendments, renewals, replacements, substitutions or extensions of any of the foregoing; provided, however that for purposes of calculating the Indebtedness outstanding under this Agreement or any of the other Loan Documents, the direct and indirect and absolute and contingent obligations of the Credit Parties (whether direct or contingent) shall be determined without duplication.

 

“Intercompany Note” shall mean any promissory note issued or to be issued by any Credit Party to evidence an intercompany loan in form and substance satisfactory to Agent.

 

“Interest Period” shall mean with respect to a Eurodollar-based Advance, a Eurodollar-Interest Period, commencing on the day a Eurodollar-based Advance is made, or on the effective date of an election of the Eurodollar-based Rate made under Section 2.3 or 4.4 hereof; provided, however that (i) any Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day, except that as to an Interest Period in respect of a Eurodollar-based Advance, if the next succeeding Business Day falls in another calendar month, such Interest Period shall end on the next preceding Business Day, (ii) when an Interest Period in respect of a Eurodollar-based Advance begins on a day which has no numerically corresponding day in the calendar month during which such Interest Period is to end, it shall end on the last Business Day of such calendar month, and (iii) no Interest Period in respect of any Advance shall extend beyond the Revolving Credit Maturity Date or the Term Loan Maturity Date.

 

“Internal Revenue Code” shall mean the Internal Revenue Code of 1986 of the United States of America, as amended from time to time, and the regulations promulgated thereunder.

 

“Inventory” shall mean any inventory as defined under the UCC.

 

“Investment” shall mean, when used with respect to any Person, (a) any loan, investment or advance made by such Person to any other Person (including, without limitation, any Guarantee Obligation) in respect of any Equity Interest, Debt, obligation or liability of such other Person and (b) any other investment made by such Person (however acquired) in Equity Interests in any other Person, including, without limitation, any investment made in exchange for the issuance of Equity Interest of such Person and any investment made as a capital contribution to such other Person.

 

“Issuing Lender” shall mean Comerica Bank in its capacity as issuer of one or more Letters of Credit hereunder, or its successor designated by Borrowers and the Revolving Credit Lenders.

 

“Issuing Office” shall mean such office as Issuing Lender shall designate as its Issuing Office.

 

“Lender Products” shall mean any one or more of the following types of services or facilities extended to the Credit Parties by any Lender: (i) credit cards, (ii) credit card processing services, (iii) debit cards, (iv) purchase cards, (v) Automated Clearing House (ACH) 

 

  

11

  

transactions, (vi) cash management, including controlled disbursement services, and (vii) establishing and maintaining deposit accounts.

 

“Lenders” shall have the meaning set forth in the preamble, and shall include the Revolving Credit Lenders, the Term Loan Lenders, and any assignee which becomes a Lender pursuant to Section 13.9 hereof.

 

“Letter of Credit Agreement” shall mean, collectively, the letter of credit application and related documentation executed and/or delivered by the Borrowers in respect of each Letter of Credit, in each case satisfactory to the Issuing Lender, as amended, restated or otherwise modified from time to time.

 

“Letter of Credit Documents” shall have the meaning ascribed to such term in Section 3.7(a) hereof.

 

“Letter of Credit Fees” shall mean the fees payable in connection with Letters of Credit pursuant to Section 3.4(a) and (b) hereof.

 

“Letter of Credit Maximum Amount” shall mean Two Million Dollars ($2,000,000)

 

“Letter of Credit Obligations” shall mean at any date of determination, the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, and (b) the aggregate amount of Reimbursement Obligations which remain unpaid as of such date.

 

“Letter of Credit Payment” shall mean any amount paid or required to be paid by the Issuing Lender in its capacity hereunder as issuer of a Letter of Credit as a result of a draft or other demand for payment under any Letter of Credit.

 

“Letter(s) of Credit” shall mean any standby letters of credit issued by Issuing Lender at the request of or for the account of Borrowers pursuant to Article 3 hereof.

 

“LIBOR Rate” shall mean,

 

	
  

	
(a)

	
with respect to the principal amount of any Eurodollar-based Advance outstanding hereunder, the per annum rate of interest determined on the basis of the rate for deposits in United States Dollars for a period equal to the relevant Eurodollar-Interest Period, commencing on the first day of such Eurodollar-Interest Period, appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 8:00 a.m. (California time) (or as soon thereafter as practical), two (2) Business Days prior to the first day of such Eurodollar-Interest Period. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service), the “LIBOR Rate” shall be determined by reference to such other publicly available service for displaying LIBOR rates as may be agreed upon by Agent and Borrower, or, in the absence of such agreement, the “LIBOR Rate” shall, instead, be the per annum rate equal to the average (rounded upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)) of the rate at which Agent is offered dollar deposits at or about 8:00 a.m. (California time) (or as soon 

 

  

12

  

	  	
 

	
thereafter as practical), two (2) Business Days prior to the first day of such Eurodollar-Interest Period in the interbank LIBOR market in an amount comparable to the principal amount of the relevant Eurodollar-based Advance which is to bear interest at such Eurodollar-based Rate and for a period equal to the relevant Eurodollar-Interest Period; and

 

	
  

	
(b)

	
with respect to the principal amount of any Advance carried at the Daily Adjusting LIBOR Rate outstanding hereunder, the per annum rate of interest determined on the basis of the rate for deposits in United States Dollars for a period equal to one (1) month appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 8:00 a.m. (California time) (or as soon thereafter as practical) on such day, or if such day is not a Business Day, on the immediately preceding Business Day. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service), the “LIBOR Rate” shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by Agent and Borrower, or, in the absence of such agreement, the “LIBOR Rate” shall, instead, be the per annum rate equal to the average of the rate at which Agent is offered dollar deposits at or about 8:00 a.m. (California time) (or as soon thereafter as practical) on such day in the interbank eurodollar market in an amount comparable to the principal amount of the Indebtedness hereunder which is to bear interest at such “LIBOR Rate” and for a period equal to one (1) month.

 

“Lien” shall mean any security interest in or lien on or against any property arising from any pledge, assignment, hypothecation, mortgage, security interest, deposit arrangement, trust receipt, conditional sale or title retaining contract, sale and leaseback transaction, Capitalized Lease, consignment or bailment for security, or any other type of lien, charge, encumbrance, title exception, preferential or priority arrangement affecting property (including with respect to stock, any stockholder agreements, voting rights agreements, buy-back agreements and all similar arrangements), whether based on common law or statute.

 

“Liquidity” shall mean the sum of Borrowers’ Cash plus the Unused Revolving Credit Availability.

 

“Loan Documents” shall mean, collectively, this Agreement, the Notes (if issued), the Letter of Credit Agreements, the Letters of Credit, the Guaranty, the Subordination Agreements, the Collateral Documents, each Hedging Agreement, and any other documents, certificates or agreements that are executed and required to be delivered pursuant to any of the foregoing documents, as such documents may be amended, restated or otherwise modified from time to time.

 

“Majority Lenders” shall mean at any time (a) so long as the Revolving Credit Aggregate Commitment has not been terminated, Lenders holding more than 50.0% of the sum of (i) the Revolving Credit Aggregate Commitment plus (ii) the aggregate principal amount of Indebtedness then outstanding under the Term Loan and (b) if the Revolving Credit Aggregate Commitment has been terminated (whether by maturity, acceleration or otherwise), Lenders 

 

  

13

  

holding more than 50.0% of the aggregate principal amount then outstanding under the Revolving Credit and the Term Loan; provided that, for purposes of determining Majority Lenders hereunder, the Letter of Credit Obligations shall be allocated among the Revolving Credit Lenders based on their respective Revolving Credit Percentages; provided further that so long as there are fewer than three Lenders, considering any Lender and its Affiliates as a single Lender, “Majority Lenders” shall mean all Lenders.

 

“Majority Revolving Credit Lenders” shall mean at any time (a) so long as the Revolving Credit Aggregate Commitment has not been terminated, the Revolving Credit Lenders holding more than 50.0% of the Revolving Credit Aggregate Commitment and (b) if the Revolving Credit Aggregate Commitment has been terminated (whether by maturity, acceleration or otherwise), Revolving Credit Lenders holding more than 50.0% of the aggregate principal amount then outstanding under the Revolving Credit; provided that, for purposes of determining Majority Revolving Credit Lenders hereunder, the Letter of Credit Obligations shall be allocated among the Revolving Credit Lenders based on their respective Revolving Credit Percentages; provided further that so long as there are fewer than three Revolving Credit Lenders, considering any Revolving Credit Lender and its Affiliates as a single Revolving Credit Lender, “Majority Revolving Credit Lenders” shall mean all Revolving Credit Lenders.

 

“Majority Term Loan Lenders” shall mean at any time with respect to the Term Loan, Term Loan Lenders holding more than 50.0% of the aggregate principal amount then outstanding under the Term Loan; provided, however, that so long as there are fewer than three Term Loan Lenders, considering any Term Loan Lender and its Affiliates as a single Term Loan Lender, “Majority Term Loan Lenders” shall mean all Term Loan Lenders.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), business, performance, operations, properties or prospects of the Credit Parties taken as a whole, (b) the ability of any Credit Party to perform its obligations under this Agreement, the Notes (if issued) or any other Loan Document to which it is a party, or (c) the validity or enforceability of this Agreement, any of the Notes (if issued) or any of the other Loan Documents or the rights or remedies of the Agent or the Lenders hereunder or thereunder.

 

“Material Contract” shall mean (i) unless otherwise defined or limited in this Agreement, each agreement or contract to which any Credit Party is a party or in respect of which any Credit Party has any liability, that by its terms (without reference to any indemnity or reimbursement provision therein) provides for aggregate future guaranteed payments in respect of any such individual agreement or contract of at least $250,000 and (ii) any other agreement or contract the loss of which would be reasonably likely to result in a Material Adverse Effect; provided that Material Contracts shall not be deemed to include any Pension Plans, collective bargaining agreements, or casualty or liability or other insurance policies maintained in the ordinary course of business.

 

 “Multiemployer Plan” shall mean a Pension Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Net Cash Proceeds” shall mean the aggregate cash payments received by any Credit Party from any Asset Sale, the issuance of Equity Interests or the issuance of Subordinated Debt, 

 

  

14

  

as the case may be, net of the ordinary and customary direct costs incurred in connection with such sale or issuance, as the case may be, such as legal, accounting and investment banking fees, sales commissions, and other third party charges, and net of property taxes, transfer taxes and any other taxes paid or payable by such Credit Party in respect of any sale or issuance.

 

“Net Income” shall mean for any period the net income (as determined in accordance with GAAP) of a Person for such period but excluding in any event: (i) any gains or losses on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and any taxes on the excluded gains and any tax deductions or credits on account of any excluded losses; (ii) net earnings of any entity in which such Person has an ownership interest, unless such net earnings shall have been actually received by such Person in the form of cash distributions; and (iii)extraordinary items as defined by GAAP.

 

“Non-Defaulting Lender” shall mean any Lender that is not, as of the date of relevance, a Defaulting Lender.

 

“Notes” shall mean the Revolving Credit Notes and the Term Loan Notes.

 

“Obagi” shall have the meaning ascribed to such term in the preamble of this Agreement.

 

“Off Balance Sheet Liability(ies)” of a Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivables sold by such Person, (ii) any liability under any sale and leaseback transaction which is not a Capitalized Lease, (iii) any liability under any so-called “synthetic lease” transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of Debt or any of the liabilities set forth in subsections (i)-(iii) of this definition, but which does not constitute a liability on the balance sheets of such Person.

 

“OMP” shall have the meaning ascribed to such term in the preamble of this Agreement.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Pension Plan” shall mean any plan established and maintained by a Credit Party, or contributed to by a Credit Party, which is qualified under Section 401(a) of the Internal Revenue Code and subject to the minimum funding standards of Section 412 of the Internal Revenue Code.

 

“Percentage” shall mean, as applicable, the Revolving Credit Percentage, the Term Loan Percentage or the Weighted Percentage.

 

“Permitted Investments” shall mean with respect to any Person:

 

(a) Governmental Obligations;

 

(b) Obligations of a state or commonwealth of the United States or the obligations of the District of Columbia or any possession of the United States, or any political subdivision of any of the foregoing, which are described in Section 103(a) of the Internal Revenue Code and are graded in any of the highest three (3) major grades as determined by at least one Rating Agency; 

 

  

15

  

or secured, as to payments of principal and interest, by a letter of credit provided by a financial institution or insurance provided by a bond insurance company which in each case is itself or its debt is rated in one of the highest three (3) major grades as determined by at least one Rating Agency;

 

(c) Banker’s acceptances, commercial accounts, demand deposit accounts, certificates of deposit, other time deposits or depository receipts issued by or maintained with any Lender or any Affiliate thereof, or any bank, trust company, savings and loan association, savings bank or other financial institution whose deposits are insured by the Federal Deposit Insurance Corporation and whose reported capital and surplus equal at least $250,000,000, provided that such minimum capital and surplus requirement shall not apply to demand deposit accounts maintained by any Credit Party in the ordinary course of business;

 

(d) Commercial paper rated at the time of purchase within the two highest classifications established by not less than two Rating Agencies, and which matures within 270 days after the date of issue;

 

(e) Secured repurchase agreements against obligations itemized in paragraph (a) above, and executed by a bank or trust company or by members of the association of primary dealers or other recognized dealers in United States government securities, the market value of which must be maintained at levels at least equal to the amounts advanced; and

 

(f) Any fund or other pooling arrangement which exclusively purchases and holds the investments itemized in (a) through (e) above.

 

“Permitted Liens” shall mean with respect to any Person:

 

(a) Liens for (i) taxes or governmental assessments or charges or (ii) customs duties in connection with the importation of goods to the extent such Liens attach to the imported goods that are the subject of the duties, in each case (x) to the extent not yet due, (y) as to which the period of grace, if any, related thereto has not expired or (z) which are being contested in good faith by appropriate proceedings, provided that in the case of any such contest, any proceedings for the enforcement of such liens have been suspended and adequate reserves with respect thereto are maintained on the books of such Person in conformity with GAAP;

 

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, processor’s, landlord’s liens or other like liens arising in the ordinary course of business which secure obligations that are not overdue for a period of more than thirty (30) days or which are being contested in good faith by appropriate proceedings, provided that in the case of any such contest, (x) any proceedings commenced for the enforcement of such Liens have been suspended and (y) appropriate reserves with respect thereto are maintained on the books of such Person in conformity with GAAP;

 

(c) (i) Liens incurred in the ordinary course of business to secure the performance of statutory obligations arising in connection with progress payments or advance payments due under contracts with the United States government or any agency thereof entered into in the ordinary course of business and (ii) Liens incurred or deposits made in the ordinary course of business to secure the performance of statutory obligations (not otherwise permitted under 

 

  

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subsection (g) of this definition), bids, leases, fee and expense arrangements with trustees and fiscal agents, trade contracts, surety and appeal bonds, performance bonds and other similar obligations (exclusive of obligations incurred in connection with the borrowing of money, any lease-purchase arrangements or the payment of the deferred purchase price of property), provided, that in each case full provision for the payment of all such obligations has been made on the books of such Person as may be required by GAAP;

 

(d) any attachment or judgment lien that remains unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period ending on the earlier of (i) thirty (30) consecutive days from the date of its attachment or entry (as applicable) or (ii) the commencement of enforcement steps with respect thereto, other than the filing of notice thereof in the public record;

 

(e) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, or any interest of any lessor or sublessor under any lease permitted hereunder which, in each case, does not materially interfere with the business of such Person;

 

(f) Liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits and similar statutory obligations (excluding Liens arising under ERISA), provided that no enforcement proceedings in respect of such Liens are pending and provisions have been made for the payment of such liens on the books of such Person as may be required by GAAP; and

 

(g) continuations of Liens that are permitted under subsections (a)-(f) hereof, provided such continuations do not violate the specific time periods set forth in subsections (b) and (d) and provided further that such Liens do not extend to any additional property or assets of any Credit Party or secure any additional obligations of any Credit Party.

 

Regardless of the language set forth in this definition, no Lien over the Equity Interests of any Credit Party granted to any Person other than to Agent for the benefit of the Lenders shall be deemed a “Permitted Lien” under the terms of this Agreement.

 

“Person” shall mean a natural person, corporation, limited liability company, partnership, limited liability partnership, trust, incorporated or unincorporated organization, joint venture, joint stock company, firm or association or a government or any agency or political subdivision thereof or other entity of any kind.

 

“Prime Referenced Rate” shall mean for any day, that rate of interest which is equal to the sum of the Applicable Margin plus the Prime Rate for such day; provided, however, that in no event and at no time shall the Prime Referenced Rate be less than the sum of the Daily Adjusting LIBOR Rate for any date of determination plus two and one-half percent (21⁄2%) per annum, and in the event that the Daily Adjusting LIBOR Rate is unavailable as determined under Sections 11.3 or 11.4 hereof, the Prime Referenced Rate shall be not less than (21⁄2%) per annum.

 

“Prime Referenced Rate Advance” shall mean an Advance which bears interest at the Prime Referenced Rate.

 

  

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“Prime Rate” shall mean the per annum rate of interest announced by the Agent, at its main office from time to time as its “prime rate” (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by the Agent to any of its customers), which Prime Rate shall change simultaneously with any change in such announced rate.

 

“Purchasing Lender” shall have the meaning set forth in Section 13.13.

 

“Rating Agency” shall mean Moody’s Investor Services, Inc., Standard and Poor’s Ratings Services, their respective successors or any other nationally recognized statistical rating organization which is acceptable to the Agent.

 

“Reaffirmation of Loan Documents” shall mean the Reaffirmation of Loan Documents executed and delivered by the Borrowers on the Effective Date pursuant to Section 5.1 hereof in the form of the Reaffirmation of Loan Documents attached hereto as Exhibit J.

 

“Register” is defined in Section 13.9(g) hereof.

 

“Reimbursement Obligation(s)” shall mean the aggregate amount of all unreimbursed drawings under all Letters of Credit (excluding for the avoidance of doubt, reimbursement obligations that are deemed satisfied pursuant to a deemed disbursement under Section 3.6(a)).

 

“Request for Advance” shall mean a Request for Revolving Credit Advance or a Request for Term Loan Advance, as the context requires.

 

“Request for Revolving Credit Advance” shall mean a request for a Revolving Credit Advance issued by a Borrower under Section 2.3 of this Agreement in the form attached hereto as Exhibit A.

 

“Request for Term Loan Advance” shall mean a request for a Term Loan Advance issued by a Borrower under Section 4.4 of this Agreement in the form attached hereto as Exhibit K.

 

“Requirement of Law” shall mean as to any Person, the certificate of incorporation and bylaws, the partnership agreement or other organizational or governing documents of such Person and any law, treaty, rule or regulation or determination of an arbitration or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” shall mean, with respect to any Person, the chief executive officer, chief financial officer, treasurer, president or controller of such Person, or with respect to compliance with financial covenants, the chief financial officer or the treasurer of such Person, or any other officer of such Person having substantially the same authority and responsibility.

 

“Revolving Credit” shall mean the revolving credit loans to be advanced to Borrowers by the applicable Revolving Credit Lenders pursuant to Article 2 hereof, in an aggregate amount (subject to the terms hereof), not to exceed, at any one time outstanding, the Revolving Credit Aggregate Commitment.

 

  

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“Revolving Credit Advance” shall mean a borrowing requested by a Borrower and made by the Revolving Credit Lenders under Section 2.1 of this Agreement, including without limitation any readvance, refunding or conversion of such borrowing pursuant to Section 2.3 hereof and any deemed disbursement of an Advance in respect of a Letter of Credit under Section 3.6(a) hereof, and may include, subject to the terms hereof, Eurodollar-based Advances and Prime Referenced Rate Advances.

 

“Revolving Credit Aggregate Commitment” shall mean Twenty Million Dollars ($20,000,000), subject to reduction or termination under Section 2.11 or 9.2 hereof.

 

“Revolving Credit Commitment Amount” shall mean with respect to any Revolving Credit Lender, (i) if the Revolving Credit Aggregate Commitment has not been terminated, the amount specified opposite such Revolving Credit Lender’s name in the column entitled “Revolving Credit Commitment Amount” on Schedule 1.2, as adjusted from time to time in accordance with the terms hereof; and (ii) if the Revolving Credit Aggregate Commitment has been terminated (whether by maturity, acceleration or otherwise), the amount equal to its Percentage of the aggregate principal amount outstanding under the Revolving Credit (including the outstanding Letter of Credit Obligations).

 

“Revolving Credit Facility Fee” shall mean the fee payable to Agent for distribution to the Revolving Credit Lenders in accordance with Section 2.9 hereof.

 

“Revolving Credit Lenders” shall mean the financial institutions from time to time parties hereto as lenders of the Revolving Credit.

 

“Revolving Credit Maturity Date” shall mean the earlier to occur of (i) July 1, 2012, and (ii) the date on which the Revolving Credit Aggregate Commitment shall terminate in accordance with the provisions of this Agreement.

 

“Revolving Credit Notes” shall mean the revolving credit notes described in Section 2.2 hereof, made by Borrowers to each of the Revolving Credit Lenders in the form attached hereto as Exhibit B, as such notes may be amended or supplemented from time to time, and any other notes issued in substitution, replacement or renewal thereof from time to time.

 

“Revolving Credit Percentage” means, with respect to any Revolving Credit Lender, the percentage specified opposite such Revolving Credit Lender’s name in the column entitled “Revolving Credit Percentage” on Schedule 1.2, as adjusted from time to time in accordance with the terms hereof.

 

“Security Agreement” shall mean, the security agreement executed and delivered by the Borrowers on November 21, 2008 pursuant to Section 5.1 hereof, and any such agreements executed and delivered after the Effective Date (whether by execution of a joinder agreement to any existing security agreement or otherwise) pursuant to Section 7.13 hereof or otherwise, as amended, restated or otherwise modified from time to time.

 

“Stock Repurchase Program” shall have the meaning ascribed to such term in Section 8.5 of this Agreement.

 

  

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“Subordinated Debt” shall mean any unsecured Funded Debt of any Credit Party and other obligations under the Subordinated Debt Documents and any other Funded Debt of any Credit Party which has been subordinated in right of payment and priority to the Indebtedness, all on terms and conditions satisfactory to the Agent.

 

“Subordinated Debt Documents” shall mean and include any documents evidencing any Subordinated Debt, in each case, as the same may be amended, modified, supplemented or otherwise modified from time to time in compliance with the terms of this Agreement.

 

“Subordination Agreements” shall mean, collectively, any subordination agreements entered into by any Person from time to time in favor of Agent in connection with any Subordinated Debt, the terms of which are acceptable to the Agent, in each case as the same may be amended, restated or otherwise modified from time to time, and “Subordination Agreement” shall mean any one of them.

 

“Subsidiary(ies)” shall mean any other corporation, association, joint stock company, business trust, limited liability company, partnership or any other business entity of which more than fifty percent (50%) of the outstanding voting stock, share capital, membership, partnership or other interests, as the case may be, is owned either directly or indirectly by any Person or one or more of its Subsidiaries, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by any Person and/or its Subsidiaries. Unless otherwise specified to the contrary herein or the context otherwise requires, Subsidiary(ies) shall refer to the Subsidiary(ies) of Borrowers.

 

“Tangible Effective Net Worth” shall mean, as of any date of determination, the aggregate net book value of the assets of Borrowers as of such date (excluding all amounts owing to Borrowers, or either of them, by officers, directors, shareholders and other affiliates and all patents, patent rights, trademarks, trade names, franchises, copyrights, licenses, goodwill and all other intangible assets of Borrowers), after all appropriate deductions in accordance with GAAP (including, without limitation, reserves for doubtful receivables, obsolescence, depreciation and amortization), plus the aggregate amount of Subordinated Debt of Borrowers, all as determined on a consolidated basis for the Borrowers and in accordance with GAAP.

 

“Term Commitment” means Fifteen Million Dollars ($15,000,000).

 

“Term Loan” shall mean the term loans to be made to Borrowers by the Term Loan Lenders pursuant to Section 4.1 hereof, in an aggregate principal amount not to exceed the Term Commitment.

 

“Term Loan Advance” shall mean a borrowing requested by Borrowers and made by the Term Loan Lenders pursuant to Section 4.1 hereof, including without limitation any refunding or conversion of such borrowing pursuant to Section 4.4 hereof, and may include, subject to the terms hereof, Eurodollar-based Advances and Prime Referenced Rate Advances.

 

“Term Loan Amount” shall mean with respect to any Term Loan Lender, the amount equal to its Term Loan Percentage of the aggregate principal amount outstanding under the Term Loan.

 

  

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“Term Loan Draw Period” shall mean the period commencing on the Effective Date and ending on the date of the earlier to occur of (i) the aggregate outstanding principal balance of the Term Loans equaling the Term Commitment, (ii) May 3, 2011, or (iii) Borrowers written request to Bank to commence the terming out of the Term Loan.

 

 “Term Loan Lenders” shall mean the financial institutions from time to time parties hereto as lenders of the Term Loan.

 

“Term Loan Maturity Date” shall mean the date that is five (5) years after the last day of the Term Loan Draw Period.

 

“Term Loan Notes” shall mean the term notes described in Section 4.2(e) hereof, made by Borrowers to each of the Term Loan Lenders in the form attached hereto as Exhibit D, as such notes may be amended or supplemented from time to time, and any other notes issued in substitution, replacement or renewal thereof from time to time.

 

“Term Loan Percentage” shall mean with respect to any Term Loan Lender, the percentage specified opposite such Term Loan Lender’s name in the column entitled “Term Loan Percentage” on Schedule 1.2, as adjusted from time to time in accordance with the terms hereof.

 

“Term Loan Rate Request” shall mean a request for the refunding or conversion of any Advance of a Term Loan submitted by Borrowers under Section 4.4 of this Agreement in the form attached hereto as Exhibit L.

 

 “Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect in any applicable state; provided that, unless specified otherwise or the context otherwise requires, such terms shall refer to the Uniform Commercial Code as in effect in the State of California.

 

“Unused Revolving Credit Availability” shall mean, on any date of determination, the amount equal to the Revolving Credit Aggregate Commitment minus (x) the aggregate outstanding principal amount of all Advances and (y) the Letter of Credit Obligations.

 

“USA Patriot Act” is defined in Section 6.7 hereof.

 

“Weighted Percentage” shall mean with respect to any Lender, its percentage share as set forth in Schedule 1.2, as such Schedule may be revised by the Agent from time to time, which percentage shall be calculated as follows:

 

	
  

	
(a)

	
as to such Lender, so long as the Revolving Credit Aggregate Commitment has not been terminated, its weighted percentage calculated by dividing (i) the sum of (x) its Revolving Credit Commitment Amount plus its Term Loan Amount, by (ii) the sum of (x) the Revolving Credit Aggregate Commitment plus (y) the aggregate principal amount of Indebtedness outstanding under the Term Loan; and

 

  

21

  

	
  

	
(b)

	
as to such Lender, if the Revolving Credit Aggregate Commitment has been terminated (whether by maturity, acceleration or otherwise), its weighted percentage calculated by dividing (i) the sum of (x) its applicable Revolving Credit Commitment Amount plus its Term Loan Amount, by (ii) the sum of the aggregate principal amount outstanding under (x) the Revolving Credit (including any outstanding Letter of Credit Obligations), and (y) the Term Loan.

 

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

 

“Wisconsin Letter of Credit” shall mean the $5,000 Letter of Credit dated May 28, 2008, with an expiration date of December 31, 2010, and more particularly described on Schedule 8.1.

 

	
2.  

	
REVOLVING CREDIT.

 

2.1 Commitment

 

. Subject to the terms and conditions of this Agreement (including without limitation Section 2.3 hereof), each Revolving Credit Lender severally and for itself alone agrees to make Advances of the Revolving Credit in Dollars to Borrowers from time to time on any Business Day during the period from the Effective Date hereof until (but excluding) the Revolving Credit Maturity Date in an aggregate amount, not to exceed at any one time outstanding such Lender’s Revolving Credit Percentage of the Revolving Credit Aggregate Commitment. Subject to the terms and conditions set forth herein, advances, repayments and readvances may be made under the Revolving Credit.

 

2.2 Accrual of Interest and Maturity; Evidence of Indebtedness.

 

(a) Borrowers hereby jointly and severally and unconditionally promise to pay to the Agent for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Advance (plus all accrued and unpaid interest) of such Revolving Credit Lender to Borrowers on the Revolving Credit Maturity Date and on such other dates and in such other amounts as may be required from time to time pursuant to this Agreement. Subject to the terms and conditions hereof, each Revolving Credit Advance shall, from time to time from and after the date of such Advance (until paid), bear interest at its Applicable Interest Rate.

 

(b) Each Revolving Credit Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of Borrowers to the appropriate lending office of such Revolving Credit Lender resulting from each Revolving Credit Advance made by such lending office of such Revolving Credit Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Revolving Credit Lender from time to time under this Agreement.

 

(c) The Agent shall maintain the Register pursuant to Section 13.9(g), and a subaccount therein for each Revolving Credit Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each Revolving Credit Advance made hereunder, the type thereof and each Eurodollar-Interest Period applicable to any Eurodollar-based Advance (ii) the amount of any principal or interest due and payable or to become due and payable from Borrowers to each Revolving Credit Lender hereunder in respect of the Revolving Credit 

 

  

22

  

Advances and (iii) both the amount of any sum received by the Agent hereunder from Borrowers in respect of the Revolving Credit Advances and each Revolving Credit Lender’s share thereof.

 

(d) The entries made in the Register maintained pursuant to paragraph (c) of this Section 2.2 shall, absent manifest error, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of Borrowers therein recorded; provided, however, that the failure of any Revolving Credit Lender or the Agent to maintain the Register or any account, as applicable, or any error therein, shall not in any manner affect the obligation of Borrowers to repay the Revolving Credit Advances (and all other amounts owing with respect thereto) made to Borrowers by the Revolving Credit Lenders in accordance with the terms of this Agreement.

 

(e) Borrowers agree that, upon written request to the Agent by any Revolving Credit Lender, Borrowers will execute and deliver, to such Revolving Credit Lender, at Borrowers’ own expense, a Revolving Credit Note evidencing the outstanding Revolving Credit Advances owing to such Revolving Credit Lender.

 

2.3 Requests for and Refundings and Conversions of Advances

 

. Borrowers may request an Advance of the Revolving Credit, a refund of any Revolving Credit Advance in the same type of Advance or to convert any Revolving Credit Advance to any other type of Revolving Credit Advance only by delivery to Agent of a Request for Revolving Credit Advance executed by an Authorized Signer for the Borrowers, subject to the following:

 

(a) each such Request for Revolving Credit Advance shall set forth the information required on the Request for Revolving Credit Advance, including without limitation:

 

	
(i)  

	
the proposed date of such Revolving Credit Advance (or the refunding or conversion of an outstanding Revolving Credit Advance), which must be a Business Day;

 

	
(ii)  

	
whether such Advance is a new Revolving Credit Advance or a refunding or conversion of an outstanding Revolving Credit Advance; and

 

	
(iii)  

	
whether such Revolving Credit Advance is to be a Prime Referenced Rate Advance or a Eurodollar-based Advance, and, except in the case of a Prime Referenced Rate Advance, the first Eurodollar-Interest Period applicable thereto, provided, however, that the initial Revolving Credit Advance made under this Agreement shall be a Prime Referenced Rate Advance, which may then be converted into a Eurodollar-based Advance in compliance with this Agreement.

 

(b) each such Request for Revolving Credit Advance shall be delivered to Agent by 12:00 p.m. (California time) three (3) Business Days prior to the proposed date of the Revolving Credit Advance, except in the case of a Prime Referenced Rate Advance, for which the Request for Revolving Credit Advance must be delivered by 12:00 p.m. (California time) on the proposed date for such Revolving Credit Advance;

 

  

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(c) on the proposed date of such Revolving Credit Advance, the sum of (x) the aggregate principal amount of all Revolving Credit Advances outstanding on such date (including, without duplication the Advances that are deemed to be disbursed by Agent under Section 3.6(a) hereof in respect of Borrowers’ Reimbursement Obligations hereunder), plus (y) the Letter of Credit Obligations as of such date, in each case after giving effect to all outstanding requests for Revolving Credit Advances and for the issuance of any Letters of Credit, shall not exceed the Revolving Credit Aggregate Commitment;

 

(d) in the case of a Prime Referenced Rate Advance, the principal amount of the initial funding of such Advance, as opposed to any refunding or conversion thereof, shall be at least $250,000 or the remainder available under the Revolving Credit Aggregate Commitment if less than $250,000;

 

(e) in the case of a Eurodollar-based Advance, the principal amount of such Advance, plus the amount of any other outstanding Revolving Credit Advance to be then combined therewith having the same Eurodollar-Interest Period, if any, shall be at least $250,000 in the case of the first such advance (or a larger integral multiple of at least $100,000), and thereafter in amounts in integral amounts of at least $100,000, or the remainder available under the Revolving Credit Aggregate Commitment if less than $100,000 and at any one time there shall not be in effect more than five (5) different Eurodollar-Interest Periods;

 

(f) a Request for Revolving Credit Advance, once delivered to Agent, shall not be revocable by Borrowers and shall constitute a certification by Borrowers as of the date thereof that:

 

	
(i)  

	
all conditions to the making of Revolving Credit Advances set forth in this Agreement have been satisfied, and shall remain satisfied to the date of such Revolving Credit Advance (both before and immediately after giving effect to such Revolving Credit Advance);

 

	
(ii)  

	
there is no Default or Event of Default in existence, and none will exist upon the making of such Revolving Credit Advance (both before and immediately after giving effect to such Revolving Credit Advance); and

 

	
(iii)  

	
the representations and warranties of the Borrowers contained in this Agreement and the other Loan Documents are true and correct in all material respects and shall be true and correct in all material respects as of the date of the making of such Revolving Credit Advance (both before and immediately after giving effect to such Revolving Credit Advance), other than any representation or warranty that expressly speaks only as of a different date;

 

Agent, acting on behalf of the Revolving Credit Lenders, may also, at its option, lend under this Section 2.3 upon the telephone or email request of an Authorized Signer of the Borrowers to make such requests and, in the event Agent, acting on behalf of the Revolving Credit Lenders, makes any such Advance upon a telephone or email request, an Authorized Signer shall fax or deliver by electronic file to Agent, on the same day as such telephone or email 

 

  

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request, an executed Request for Revolving Credit Advance. Borrowers hereby authorize Agent to disburse Advances under this Section 2.3 pursuant to the telephone or email instructions of any person purporting to be an Authorized Signer. Notwithstanding the foregoing, Borrowers acknowledge that Borrowers shall bear all risk of loss resulting from disbursements made upon any telephone or email request. Each telephone or email request for an Advance from an Authorized Signer for the Borrowers shall constitute a certification of the matters set forth in the Request for Revolving Credit Advance form as of the date of such requested Advance.

 

2.4 Disbursement of Advances.

 

(a) Upon receiving any Request for Revolving Credit Advance from a Borrower under Section 2.3 hereof, Agent shall promptly notify each Revolving Credit Lender by wire, telex or telephone (confirmed by wire, telecopy or telex) of the amount of such Advance being requested and the date such Revolving Credit Advance is to be made by each Revolving Credit Lender in an amount equal to its Revolving Credit Percentage of such Advance. Unless such Revolving Credit Lender’s commitment to make Revolving Credit Advances hereunder shall have been suspended or terminated in accordance with this Agreement, each such Revolving Credit Lender shall make available the amount of its Revolving Credit Percentage of each Revolving Credit Advance in immediately available funds to Agent, as follows:

 

	
(i)  

	
for Prime Referenced Rate Advances at the office of Agent located at 75 E Trimble Road, San Jose, CA 95131, not later than 1:00 p.m. (California time) on the date of such Advance; and

 

	
(ii)  

	
for Eurodollar-based Advances, at the Agent’s Correspondent for the account of the Eurodollar Lending Office of the Agent, not later than 12:00 p.m. (the time of the Agent’s Correspondent) on the date of such Advance.

 

(b) Subject to submission of an executed Request for Revolving Credit Advance by a Borrower without exceptions noted in the compliance certification therein, Agent shall make available to Borrowers the aggregate of the amounts so received by it from the Revolving Credit Lenders in like funds and currencies:

 

	
(i)  

	
for Prime Referenced Rate Advances, not later than 4:00 p.m. (California time) on the date of such Revolving Credit Advance, by credit to an account of Borrowers maintained with Agent or to such other account or third party as Borrowers may reasonably direct in writing, provided such direction is timely given; and

 

	
(ii)  

	
for Eurodollar-based Advances, not later than 4:00 p.m. (the time of the Agent’s Correspondent) on the date of such Revolving Credit Advance, by credit to an account of Borrowers maintained with Agent’s Correspondent or to such other account or third party as Borrowers may direct, provided such direction is timely given.

 

(c) Agent shall deliver the documents and papers received by it for the account of each Revolving Credit Lender to such Revolving Credit Lender. Unless Agent shall have been 

 

  

25

  

notified by any Revolving Credit Lender prior to the date of any proposed Revolving Credit Advance that such Revolving Credit Lender does not intend to make available to Agent such Revolving Credit Lender’s Percentage of such Advance, Agent may assume that such Revolving Credit Lender has made such amount available to Agent on such date, as aforesaid. Agent may, but shall not be obligated to, make available to Borrowers the amount of such payment in reliance on such assumption. If such amount is not in fact made available to Agent by such Revolving Credit Lender, as aforesaid, Agent shall be entitled to recover such amount on demand from such Revolving Credit Lender. If such Revolving Credit Lender does not pay such amount forthwith upon Agent’s demand therefor and the Agent has in fact made a corresponding amount available to Borrowers, the Agent shall promptly notify Borrowers and Borrowers shall pay such amount to Agent, if such notice is delivered to Borrowers prior to 1:00 p.m. (California time) on a Business Day, on the day such notice is received, and otherwise on the next Business Day, and such amount paid by Borrowers shall be applied as a prepayment of the Revolving Credit (without any corresponding reduction in the Revolving Credit Aggregate Commitment), reimbursing Agent for having funded said amounts on behalf of such Revolving Credit Lender. The Borrowers shall retain their claim against such Revolving Credit Lender with respect to the amounts repaid by them to Agent and, if such Revolving Credit Lender subsequently makes such amounts available to Agent, Agent shall promptly make such amounts available to the Borrowers as a Revolving Credit Advance. Agent shall also be entitled to recover from such Revolving Credit Lender or Borrowers, as the case may be, but without duplication, interest on such amount in respect of each day from the date such amount was made available by Agent to Borrowers, to the date such amount is recovered by Agent, at a rate per annum equal to:

 

	
(i)  

	
in the case of such Revolving Credit Lender, for the first two (2) Business Days such amount remains unpaid, the Federal Funds Effective Rate, and thereafter, at the rate of interest then applicable to such Revolving Credit Advances; and

 

	
(ii)  

	
in the case of Borrowers, the rate of interest then applicable to such Advance of the Revolving Credit.

 

Until such Revolving Credit Lender has paid Agent such amount, such Revolving Credit Lender shall have no interest in or rights with respect to such Advance for any purpose whatsoever. The obligation of any Revolving Credit Lender to make any Revolving Credit Advance hereunder shall not be affected by the failure of any other Revolving Credit Lender to make any Advance hereunder, and no Revolving Credit Lender shall have any liability to Borrowers or any of its Subsidiaries, the Agent, any other Revolving Credit Lender, or any other party for another Revolving Credit Lender’s failure to make any loan or Advance hereunder.

 

2.5 [Reserved.]

 

2.6 Interest Payments; Default Interest.

 

(a) Interest on the unpaid balance of all Prime Referenced Rate Advances of the Revolving Credit from time to time outstanding shall accrue from the date of such Advance to the date repaid, at a per annum interest rate equal to the Prime Referenced Rate, as applicable, and shall be payable in immediately available funds commencing on December 1, 2010, and on 

 

  

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the first day of each month thereafter. Whenever any payment under this Section 2.6(a) shall become due on a day which is not a Business Day, the date for payment thereof shall be extended to the next Business Day. Interest accruing at the Prime Referenced Rate shall be computed on the basis of a 360 day year and assessed for the actual number of days elapsed, and in such computation effect shall be given to any change in the interest rate resulting from a change in the Prime Referenced Rate, on the date of such change in the Prime Referenced Rate.

 

(b) Interest on each Eurodollar-based Advance of the Revolving Credit shall accrue at its Eurodollar-based Rate, and shall be payable in immediately available funds on the last day of the Eurodollar-Interest Period, applicable thereto (and, if any Eurodollar-Interest Period shall exceed three months, then on the last Business Day of the third month of such Eurodollar-Interest Period, and at three month intervals thereafter). Interest accruing at the Eurodollar-based Rate shall be computed on the basis of a 360 day year and assessed for the actual number of days elapsed from the first day of the Eurodollar-Interest Period applicable thereto to but not including the last day thereof.

 

(c) In the case of any Event of Default under Section 9.1(i), immediately upon the occurrence thereof, and in the case of any other Event of Default, immediately upon receipt by Agent of notice from the Majority Revolving Credit Lenders, interest shall be payable on demand on all Revolving Credit Advances from time to time outstanding at a per annum rate equal to the Applicable Interest Rate in respect of each such Advance plus, in the case of Eurodollar-based Advances, two percent (2%) for the remainder of the then existing Interest Period, if any, and at all other such times, and for all Prime Referenced Rate Advances and from time to time outstanding, at a per annum rate equal to the Prime Referenced Rate, plus two percent (2%).

 

2.7 Optional Prepayments.

 

(a) (i) The Borrowers may prepay all or part of the outstanding principal of any Prime Referenced Rate Advance(s) of the Revolving Credit at any time, provided that, after giving effect to any partial prepayment, the aggregate balance of Prime Referenced Rate Advance(s) of the Revolving Credit remaining outstanding shall be at least Two Hundred Fifty Thousand Dollars ($250,000), and (ii) the Borrowers may prepay all or part of the outstanding principal of any Eurodollar-based Advance of the Revolving Credit at any time (subject to not less than five (5) Business Day’s notice to Agent) provided that, after giving effect to any partial prepayment, the unpaid portion of such Advance which is to be refunded or converted under Section 2.3 hereof shall be at least Two Hundred Fifty Thousand Dollars ($250,000).

 

(b) Any prepayment of a Prime Referenced Rate Advance made in accordance with this Section shall be without premium or penalty and any prepayment of any other type of Advance shall be subject to the provisions of Section 11.1 hereof, but otherwise without premium or penalty.

 

2.8 Prime Referenced Rate Advance in Absence of Election or Upon Default

 

. If, as to any outstanding Eurodollar-based Advance of the Revolving Credit, (a) Agent has not received payment of all outstanding principal and accrued interest on the last day of the Interest Period applicable thereto, or does not receive a timely Request for Advance meeting the requirements of 

 

  

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Section 2.3 hereof with respect to the refunding or conversion of such Advance, or (b) on the last day of the applicable Interest Period a Default or an Event of Default shall have occurred and be continuing, then, on the last day of the applicable Interest Period the principal amount of any Eurodollar-based Advance which has not been prepaid shall, absent a contrary election of the Majority Revolving Credit Lenders, be converted automatically to a Prime Referenced Rate Advance and the Agent shall thereafter promptly notify Borrowers of said action. All accrued and unpaid interest on any Advance converted to a Prime Referenced Rate Advance under this Section 2.8 shall be due and payable in full on the date such Advance is converted.

 

2.9 Revolving Credit Facility Fee

 

. From the Effective Date to the Revolving Credit Maturity Date, the Borrowers shall pay to the Agent for distribution to the Revolving Credit Lenders pro-rata in accordance with their respective Revolving Credit Percentages, a Revolving Credit Facility Fee annually in arrears commencing January 1, 2011, and on the first day of each year thereafter (in respect of the prior twelve months or any portion thereof). The Revolving Credit Facility Fee shall be determined by multiplying 0.275% times the Revolving Credit Aggregate Commitment then in effect (whether used or unused). The Revolving Credit Facility Fee shall be computed on the basis of a year of three hundred sixty (360) days and assessed for the actual number of days elapsed. Whenever any payment of the Revolving Credit Facility Fee shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next Business Day. Upon receipt of such payment, Agent shall make prompt payment to each Revolving Credit Lender of its share of the Revolving Credit Facility Fee based upon its respective Revolving Credit Percentage. It is expressly understood that the Revolving Credit Facility Fees described in this Section are not refundable.

 

2.10 Mandatory Repayment of Revolving Credit Advances.

 

(a) If at any time and for any reason the aggregate outstanding principal amount of Revolving Credit Advances, plus the outstanding Letter of Credit Obligations, shall exceed the Revolving Credit Aggregate Commitment, Borrowers shall immediately reduce any pending request for a Revolving Credit Advance on such day by the amount of such excess and, to the extent any excess remains thereafter, repay any Revolving Credit Advances in an amount equal to the lesser of the outstanding amount of such Advances and the amount of such remaining excess, with such amounts to be applied between the Revolving Credit Advances as determined by the Agent and then, to the extent that any excess remains after payment in full of all Revolving Credit Advances, to provide cash collateral in support of any Letter of Credit Obligations in an amount equal to the lesser of (x) 110% of the amount of such Letter of Credit Obligations and (y) the amount of such remaining excess, with such cash collateral to be provided on the basis set forth in Section 9.2 hereof. Borrowers acknowledge that, in connection with any repayment required hereunder, it shall also be responsible for the reimbursement of any prepayment or other costs required under Section 11.1 hereof. Any payments made pursuant to this Section shall be applied first to outstanding Prime Referenced Rate Advances under the Revolving Credit, and then to Eurodollar-based Advances of the Revolving Credit.

 

(b) To the extent that, on the date any mandatory repayment of the Revolving Credit Advances under this Section 2.10 or payment pursuant to the terms of any of the Loan Documents is due, the Indebtedness under the Revolving Credit or any other Indebtedness to be prepaid is being carried, in whole or in part, at the Eurodollar-based Rate and no Default 

 

  

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or Event of Default has occurred and is continuing, Borrowers may deposit the amount of such mandatory prepayment in a cash collateral account to be held by the Agent, for and on behalf of the Revolving Credit Lenders, on such terms and conditions as are reasonably acceptable to Agent and upon such deposit the obligation of Borrowers to make such mandatory prepayment shall be deemed satisfied. Subject to the terms and conditions of said cash collateral account, sums on deposit in said cash collateral account shall be applied (until exhausted) to reduce the principal balance of the Revolving Credit on the last day of each Eurodollar-Interest Period attributable to the Eurodollar-based Advances of such Revolving Credit Advance, thereby avoiding breakage costs under Section 11.1 hereof; provided, however, that if a Default or Event of Default shall have occurred at any time while sums are on deposit in the cash collateral account, Agent may, in its sole discretion, elect to apply such sums to reduce the principal balance of such Eurodollar-based Advances prior to the last day of the applicable Eurodollar-Interest Period and the Borrowers will be obligated to pay any resulting breakage costs under Section 11.1.

 

2.11 Optional Reduction or Termination of Revolving Credit Aggregate Commitment

 

. Borrowers may, upon at least five (5) Business Days’ prior written notice to the Agent, permanently reduce the Revolving Credit Aggregate Commitment in whole at any time, or in part from time to time, without premium or penalty, provided that: (i) each partial reduction of the Revolving Credit Aggregate Commitment shall be in an aggregate amount equal to Five Million Dollars ($5,000,000) or a larger integral multiple of One Hundred Thousand Dollars ($100,000); (ii) each reduction shall be accompanied by the payment of the Revolving Credit Facility Fee, if any, accrued and unpaid to the date of such reduction; (iii) Borrowers shall prepay in accordance with the terms hereof the amount, if any, by which the aggregate unpaid principal amount of Revolving Credit Advances (including, without duplication, any deemed Advances made under Section 3.6 hereof) outstanding hereunder, plus the Letter of Credit Obligations, exceeds the amount of the then applicable Revolving Credit Aggregate Commitment as so reduced, together with interest thereon to the date of prepayment; and (iv) no reduction shall reduce the Revolving Credit Aggregate Commitment to an amount which is less than the aggregate undrawn amount of any Letters of Credit outstanding at such time; provided, however that if the termination or reduction of the Revolving Credit Aggregate Commitment requires the prepayment of a Eurodollar-based Advance and such termination or reduction is made on a day other than the last Business Day of the then current Interest Period applicable to such Eurodollar-based Advance, then, pursuant to Section 11.1, Borrowers shall compensate the Revolving Credit Lenders for any losses or, so long as no Default or Event of Default has occurred and is continuing, Borrowers may deposit the amount of such prepayment in a collateral account as provided in Section 2.10(b). Reductions of the Revolving Credit Aggregate Commitment and any accompanying prepayments of Advances of the Revolving Credit shall be distributed by Agent to each Revolving Credit Lender in accordance with such Revolving Credit Lender’s Revolving Percentage thereof, and will not be available for reinstatement by or readvance to Borrowers. Any reductions of the Revolving Credit Aggregate Commitment hereunder shall reduce each Revolving Credit Lender’s portion thereof proportionately (based on the applicable Percentages), and shall be permanent and irrevocable. Any payments made pursuant to this Section shall be applied first to outstanding Prime Referenced Rate Advances under the Revolving Credit, and then to Eurodollar-based Advances of the Revolving Credit.

 

  

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2.12 Use of Proceeds of Advances

 

. Advances of the Revolving Credit shall be used to finance working capital and other lawful corporate purposes.

 

	
3.  

	
LETTERS OF CREDIT.

 

3.1 Letters of Credit

 

. Subject to the terms and conditions of this Agreement, Issuing Lender may through the Issuing Office, at any time and from time to time from and after the date hereof until thirty (30) days prior to the Revolving Credit Maturity Date, upon the written request of Borrowers accompanied by a duly executed Letter of Credit Agreement and such other documentation related to the requested Letter of Credit as the Issuing Lender may require, issue Letters of Credit in Dollars for the account of Borrowers, in an aggregate amount for all Letters of Credit issued hereunder at any one time outstanding not to exceed the Letter of Credit Maximum Amount. Each Letter of Credit shall be in a minimum face amount of One Hundred Thousand Dollars ($100,000) (or $5,000 in the case of the Wisconsin Letter of Credit or such lesser amount as may be agreed to by Issuing Lender) and each Letter of Credit (including any renewal thereof) shall expire not later than the first to occur of (i) one year after the date of issuance thereof and (ii) ten (10) Business Days prior to the Revolving Credit Maturity Date in effect on the date of issuance thereof. The submission of all applications in respect of and the issuance of each Letter of Credit hereunder shall be subject in all respects to the International Standby Practices 98, and any successor documentation thereto and to the extent not inconsistent therewith, the laws of the State of California. In the event of any conflict between this Agreement and any Letter of Credit Document other than any Letter of Credit, this Agreement shall control.

 

3.2 Conditions to Issuance

 

. No Letter of Credit shall be issued (including the renewal or extension of any Letter of Credit previously issued) at the request and for the account of Borrowers unless, as of the date of issuance (or renewal or extension) of such Letter of Credit:

 

(a) (i) after giving effect to the Letter of Credit requested, the Letter of Credit Obligations do not exceed the Letter of Credit Maximum Amount; and (ii) after giving effect to the Letter of Credit requested, the Letter of Credit Obligations on such date plus the aggregate amount of all Revolving Credit Advances (including all Advances deemed disbursed by Agent under Section 3.6(a) hereof in respect of Borrowers’ Reimbursement Obligations) hereunder requested or outstanding on such date do not exceed the Revolving Credit Aggregate Commitment;

 

(b) the representations and warranties of the Credit Parties contained in this Agreement and the other Loan Documents are true and correct in all material respects and shall be true and correct in all material respects as of date of the issuance of such Letter of Credit (both before and immediately after the issuance of such Letter of Credit), other than any representation or warranty that expressly speaks only as of a different date;

 

(c) there is no Default or Event of Default in existence, and none will exist upon the issuance of such Letter of Credit;

 

(d) Borrowers shall have delivered to Issuing Lender at its Issuing Office, not less than three (3) Business Days prior to the requested date for issuance (or such shorter time as the 

 

  

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Issuing Lender, in its sole discretion, may permit), the Letter of Credit Agreement related thereto, together with such other documents and materials as may be required pursuant to the terms thereof, and the terms of the proposed Letter of Credit shall be reasonably satisfactory to Issuing Lender;

 

(e) no order, judgment or decree of any court, arbitrator or governmental authority shall purport by its terms to enjoin or restrain Issuing Lender from issuing the Letter of Credit requested, or any Revolving Credit Lender from taking an assignment of its Revolving Credit Percentage thereof pursuant to Section 3.6 hereof, and no law, rule, regulation, request or directive (whether or not having the force of law) shall prohibit the Issuing Lender from issuing, or any Revolving Credit Lender from taking an assignment of its Revolving Credit Percentage of, the Letter of Credit requested or letters of credit generally;

 

(f) there shall have been (i) no introduction of or change in the interpretation of any law or regulation, (ii) no declaration of a general banking moratorium by banking authorities in the United States, California or the respective jurisdictions in which the Revolving Credit Lenders, the Borrowers and the beneficiary of the requested Letter of Credit are located, and (iii) no establishment of any new restrictions by any central bank or other governmental agency or authority on transactions involving letters of credit or on banks generally that, in any case described in this clause (f), would make it unlawful or unduly burdensome for the Issuing Lender to issue or any Revolving Credit Lender to take an assignment of its Revolving Credit Percentage of the requested Letter of Credit or letters of credit generally;

 

(g) if any Revolving Credit Lender is an Impaired Lender, the Issuing Lender has entered into arrangements satisfactory to it to eliminate the Issuing Lender’s risk with respect to the participation in Letters of Credit by all such Impaired Lenders, including creation of a cash collateral account or delivery of other security to assure payment of such Impaired Lenders Percentage of all outstanding Letter of Credit Obligations; and

 

(h) Issuing Lender shall have received the issuance fees required in connection with the issuance of such Letter of Credit pursuant to Section 3.4 hereof.

 

Each Letter of Credit Agreement submitted to Issuing Lender pursuant hereto shall constitute the certification by Borrowers of the matters set forth in Sections 5.2 hereof. The Agent shall be entitled to rely on such certification without any duty of inquiry.

 

3.3 Notice

 

. The Issuing Lender shall deliver to the Agent, concurrently with or promptly following its issuance of any Letter of Credit, a true and complete copy of each Letter of Credit. Promptly upon its receipt thereof, Agent shall give notice, substantially in the form attached as Exhibit C, to each Revolving Credit Lender of the issuance of each Letter of Credit, specifying the amount thereof and the amount of such Revolving Credit Lender’s Percentage thereof.

 

3.4 Letter of Credit Fees; Increased Costs

 

(a) Borrowers shall pay letter of credit fees as follows:

 

  

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(i)  

	
A per annum letter of credit fee with respect to the undrawn amount of each Letter of Credit issued pursuant hereto (based on the amount of each Letter of Credit) in the amount of the Applicable Fee Percentage (determined with reference to Schedule 1.1 to this Agreement) shall be paid to the Agent for distribution to the Revolving Credit Lenders in accordance with their Revolving Credit Percentages.

 

	
(ii)  

	
A letter of credit facing fee on the face amount of each Letter of Credit shall be paid to the Agent for distribution to the Issuing Lender for its own account, in accordance with the terms of any applicable fee letter.

 

(b) All payments by Borrowers to the Agent for distribution to the Issuing Lender or the Revolving Credit Lenders under this Section 3.4 shall be made in Dollars in immediately available funds at the Issuing Office or such other office of the Agent as may be designated from time to time by written notice to Borrowers by the Agent. The fees described in clauses (a)(i) and (ii) above (i) shall be nonrefundable under all circumstances, (ii) in the case of fees due under clause (a)(i) above, shall be payable annually in advance and (iii) in the case of fees due under clause (a)(ii) above, shall be payable upon the issuance of such Letter of Credit and upon any amendment thereto or extension thereof. The fees due under clause (a)(i) above shall be determined by multiplying the Applicable Fee Percentage times the undrawn amount of the face amount of each such Letter of Credit on the date of determination, and shall be calculated on the basis of a 360 day year and assessed for the actual number of days from the date of the issuance thereof to the stated expiration thereof. The parties hereto acknowledge that, unless the Issuing Lender otherwise agrees, any material amendment and any extension to a Letter of Credit issued hereunder shall be treated as a new Letter of Credit for the purposes of the letter of credit facing fee.

 

(c) If any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof, adopted after the date hereof, shall either (i) impose, modify or cause to be deemed applicable any reserve, special deposit, limitation or similar requirement against letters of credit issued or participated in by, or assets held by, or deposits in or for the account of, Issuing Lender or any Revolving Credit Lender or (ii) impose on Issuing Lender or any Revolving Credit Lender any other condition regarding this Agreement, the Letters of Credit or any participations in such Letters of Credit, and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost or expense to Issuing Lender or such Revolving Credit Lender of issuing or maintaining or participating in any of the Letters of Credit (which increase in cost or expense shall be determined by the Issuing Lender’s or such Revolving Credit Lender’s reasonable allocation of the aggregate of such cost increases and expenses resulting from such events), then, upon demand by the Issuing Lender or such Revolving Credit Lender, as the case may be, Borrowers shall, within thirty (30) days following demand for payment, pay to Issuing Lender or such Revolving Credit Lender, as the case may be, from time to time as specified by the Issuing Lender or such Revolving Credit Lender, additional amounts which shall be sufficient to compensate the Issuing Lender or such Revolving Credit Lender for such increased cost and expense (together with interest on each such amount from ten (10) days after the date such payment is due until payment in full thereof at the Prime Referenced Rate), provided that if the Issuing Lender or such Revolving Credit Lender could take any reasonable action, without cost 

 

  

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or unreasonable administrative or other burden or restriction to such Lender, to mitigate or eliminate such cost or expense, it agrees to do so within a reasonable time after becoming aware of the foregoing matters. Each demand for payment under this Section 3.4(c) shall be accompanied by a certificate of Issuing Lender or the applicable Revolving Credit Lender setting forth the amount of such increased cost or expense incurred by the Issuing Lender or such Revolving Credit Lender, as the case may be, as a result of any event mentioned in clause (i) or (ii) above, and in reasonable detail, the methodology for calculating and the calculation of such amount, which certificate shall be prepared in good faith and shall be conclusive evidence, absent manifest error, as to the amount thereof.

 

3.5 Other Fees

 

. In connection with the Letters of Credit, and in addition to the Letter of Credit Fees, Borrowers shall pay, for the sole account of the Issuing Lender, standard documentation, administration, payment and cancellation charges assessed by Issuing Lender or the Issuing Office, at the times, in the amounts and on the terms set forth or to be set forth from time to time in the standard fee schedule of the Issuing Office in effect from time to time.

 

3.6 Participation Interests in and Drawings and Demands for Payment Under Letters of Credit.

 

(a) Upon issuance by the Issuing Lender of each Letter of Credit hereunder (and on the Effective Date with respect to each existing Letter of Credit), each Revolving Credit Lender shall automatically acquire a pro rata participation interest in such Letter of Credit and each related Letter of Credit Payment based on its respective Revolving Credit Percentage.

 

(b) If the Issuing Lender shall honor a draft or other demand for payment presented or made under any Letter of Credit, Borrowers agree to pay to the Issuing Lender an amount equal to the amount paid by the Issuing Lender in respect of such draft or other demand under such Letter of Credit and all reasonable expenses paid or incurred by the Agent relative thereto not later than 1:00 p.m. (California time), in Dollars, on (i) the Business Day that Borrowers received notice of such presentment and honor, if such notice is received prior to 11:00 a.m. (California time) or (ii) the Business Day immediately following the day that Borrowers received such notice, if such notice is received after 11:00 a.m. (California time).

 

(c) If the Issuing Lender shall honor a draft or other demand for payment presented or made under any Letter of Credit, but Borrowers do not reimburse the Issuing Lender as required under clause (b) above and the Revolving Credit Aggregate Commitment has not been terminated (whether by maturity, acceleration or otherwise), the Borrowers shall be deemed to have immediately requested that the Revolving Credit Lenders make a Prime Referenced Rate Advance of the Revolving Credit (which Advance may be subsequently converted at any time into a Eurodollar-based Advance pursuant to Section 2.3 hereof) in the principal amount equal to the amount paid by the Issuing Lender in respect of such draft or other demand under such Letter of Credit and all reasonable expenses paid or incurred by the Agent relative thereto. Agent will promptly notify the Revolving Credit Lenders of such deemed request, and each such Lender shall make available to the Agent an amount equal to its pro rata share (based on its Revolving Credit Percentage) of the amount of such Advance.

 

  

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(d) If the Issuing Lender shall honor a draft or other demand for payment presented or made under any Letter of Credit, but Borrowers do not reimburse the Issuing Lender as required under clause (b) above, and (i) the Revolving Credit Aggregate Commitment has been terminated (whether by maturity, acceleration or otherwise), or (ii) any reimbursement received by the Issuing Lender from Borrowers is or must be returned or rescinded upon or during any bankruptcy or reorganization of any Credit Party or otherwise, then Agent shall notify each Revolving Credit Lender, and each Revolving Credit Lender will be obligated to pay the Agent for the account of the Issuing Lender its pro rata share (based on its Revolving Credit Percentage) of the amount paid by the Issuing Lender in respect of such draft or other demand under such Letter of Credit and all reasonable expenses paid or incurred by the Agent relative thereto (but no such payment shall diminish the obligations of the Borrowers hereunder). Upon receipt thereof, the Agent will deliver to such Revolving Credit Lender a participation certificate evidencing its participation interest in respect of such payment and expenses. To the extent that a Revolving Credit Lender fails to make such amount available to the Agent by 11:00 am (California time) on the Business Day next succeeding the date such notice is given, such Revolving Credit Lender shall pay interest on such amount in respect of each day from the date such amount was required to be paid, to the date paid to Agent, at a rate per annum equal to the Federal Funds Effective Rate. The failure of any Revolving Credit Lender to make its pro rata portion of any such amount available under to the Agent shall not relieve any other Revolving Credit Lender of its obligation to make available its pro rata portion of such amount, but no Revolving Credit Lender shall be responsible for failure of any other Revolving Credit Lender to make such pro rata portion available to the Agent.

 

(e) In the case of any Advance made under this Section 3.6, each such Advance shall be disbursed notwithstanding any failure to satisfy any conditions for disbursement of any Advance set forth in Article 2 hereof or Article 5 hereof, and, to the extent of the Advance so disbursed, the Reimbursement Obligation of Borrowers to the Agent under this Section 3.6 shall be deemed satisfied (unless, in each case, taking into account any such deemed Advances, the aggregate outstanding principal amount of Advances of the Revolving Credit, plus the Letter of Credit Obligations (other than the Reimbursement Obligations to be reimbursed by this Advance) on such date exceed the then applicable Revolving Credit Aggregate Commitment).

 

(f) If the Issuing Lender shall honor a draft or other demand for payment presented or made under any Letter of Credit, the Issuing Lender shall provide notice thereof to Borrowers on the date such draft or demand is honored, and to each Revolving Credit Lender on such date unless Borrowers shall have satisfied its reimbursement obligations by payment to the Agent (for the benefit of the Issuing Lender) as required under this Section 3.6. The Issuing Lender shall further use reasonable efforts to provide notice to Borrowers prior to honoring any such draft or other demand for payment, but such notice, or the failure to provide such notice, shall not affect the rights or obligations of the Issuing Lender with respect to any Letter of Credit or the rights and obligations of the parties hereto, including without limitation the obligations of Borrowers under this Section 3.6.

 

(g) Notwithstanding the foregoing, however, no Revolving Credit Lender shall be deemed to have acquired a participation in a Letter of Credit if the officers of the Issuing Lender immediately responsible for matters concerning this Agreement shall have received written notice from Agent or any Lender at least two (2) Business Days prior to the date of the issuance 

 

  

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or extension of such Letter of Credit or, with respect to any Letter of Credit subject to automatic extension, at least five (5) Business Days prior to the date that the beneficiary under such Letter of Credit must be notified that such Letter of Credit will not be renewed, that the issuance or extension of Letters of Credit should be suspended based on the occurrence and continuance of a Default or Event of Default and stating that such notice is a “notice of default”; provided, however that the Revolving Credit Lenders shall be deemed to have acquired such a participation upon the date on which such Default or Event of Default has been waived by the requisite Lenders, as applicable. In the event that the Issuing Lender receives such a notice, the Issuing Lender shall have no obligation to issue any Letter of Credit until such notice is withdrawn by Agent or such Lender or until the requisite Lenders have waived such Default or Event of Default in accordance with the terms of this Agreement. Nothing in this Agreement shall be construed to require or authorize any Revolving Credit Lender to issue any Letter of Credit, it being recognized that the Issuing Lender shall be the sole issuer of Letters of Credit under this Agreement.

 

3.7 Obligations Irrevocable

 

. The obligations of Borrowers to make payments to Agent for the account of Issuing Lender or the Revolving Credit Lenders with respect to Letter of Credit Obligations under Section 3.6 hereof, shall be unconditional and irrevocable and not subject to any qualification or exception whatsoever, including, without limitation:

 

(a) Any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement, any other documentation relating to any Letter of Credit, this Agreement or any of the other Loan Documents (the “Letter of Credit Documents”);

 

(b) Any amendment, modification, waiver, consent, or any substitution, exchange or release of or failure to perfect any interest in collateral or security, with respect to or under any Letter of Credit Document;

 

(c) The existence of any claim, setoff, defense or other right which Borrowers may have at any time against any beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent, the Issuing Lender or any Revolving Credit Lender or any other Person, whether in connection with this Agreement, any of the Letter of Credit Documents, the transactions contemplated herein or therein or any unrelated transactions;

 

(d) Any draft or other statement or document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(e) Payment by the Issuing Lender to the beneficiary under any Letter of Credit against presentation of documents which do not comply with the terms of such Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit;

 

(f) Any failure, omission, delay or lack on the part of the Agent, Issuing Lender or any Revolving Credit Lender or any party to any of the Letter of Credit Documents or any other Loan Document to enforce, assert or exercise any right, power or remedy conferred upon the

 

  

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 Agent, Issuing Lender, any Revolving Credit Lender or any such party under this Agreement, any of the other Loan Documents or any of the Letter of Credit Documents, or any other acts or omissions on the part of the Agent, Issuing Lender, any Revolving Credit Lender or any such party; or

 

(g) Any other event or circumstance that would, in the absence of this Section 3.7, result in the release or discharge by operation of law or otherwise of Borrowers from the performance or observance of any obligation, covenant or agreement contained in Section 3.6 hereof.

 

No setoff, counterclaim, reduction or diminution of any obligation or any defense of any kind or nature which Borrowers have or may have against the beneficiary of any Letter of Credit shall be available hereunder to Borrowers against the Agent, Issuing Lender or any Revolving Credit Lender. With respect to any Letter of Credit, nothing contained in this Section 3.7 shall be deemed to prevent Borrowers, after satisfaction in full of the absolute and unconditional obligations of Borrowers hereunder with respect to such Letter of Credit, from asserting in a separate action any claim, defense, set off or other right which they (or any of them) may have against Agent, Issuing Lender or any Revolving Credit Lender in connection with such Letter of Credit.

 

3.8 Risk Under Letters of Credit.

 

(a) In the administration and handling of Letters of Credit and any security therefor, or any documents or instruments given in connection therewith, Issuing Lender shall have the sole right to take or refrain from taking any and all actions under or upon the Letters of Credit.

 

(b) Subject to other terms and conditions of this Agreement, Issuing Lender shall issue the Letters of Credit and shall hold the documents related thereto in its own name and shall make all collections thereunder and otherwise administer the Letters of Credit in accordance with Issuing Lender’s regularly established practices and procedures and will have no further obligation with respect thereto. In the administration of Letters of Credit, Issuing Lender shall not be liable for any action taken or omitted on the advice of counsel, accountants, appraisers or other experts selected by Issuing Lender with due care and Issuing Lender may rely upon any notice, communication, certificate or other statement from Borrowers, beneficiaries of Letters of Credit, or any other Person which Issuing Lender believes to be authentic. Issuing Lender will, upon request, furnish the Revolving Credit Lenders with copies of Letter of Credit Documents related thereto.

 

(c) In connection with the issuance and administration of Letters of Credit and the assignments hereunder, Issuing Lender makes no representation and shall have no responsibility with respect to (i) the obligations of Borrowers or the validity, sufficiency or enforceability of any document or instrument given in connection therewith, or the taking of any action with respect to same, (ii) the financial condition of, any representations made by, or any act or omission of Borrowers or any other Person, or (iii) any failure or delay in exercising any rights or powers possessed by Issuing Lender in its capacity as issuer of Letters of Credit in the absence of its gross negligence or willful misconduct. Each of the Revolving Credit Lenders expressly acknowledges that it has made and will continue to make its own evaluations of Borrowers’ 

 

  

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creditworthiness without reliance on any representation of Issuing Lender or Issuing Lender’s officers, agents and employees.

 

(d) If at any time Issuing Lender shall recover any part of any unreimbursed amount for any draw or other demand for payment under a Letter of Credit, or any interest thereon, Agent or Issuing Lender, as the case may be, shall receive same for the pro rata benefit of the Revolving Credit Lenders in accordance with their respective Percentages and shall promptly deliver to each Revolving Credit Lender its share thereof, less such Revolving Credit Lender’s pro rata share of the costs of such recovery, including court costs and attorney’s fees. If at any time any Revolving Credit Lender shall receive from any source whatsoever any payment on any such unreimbursed amount or interest thereon in excess of such Revolving Credit Lender’s Percentage of such payment, such Revolving Credit Lender will promptly pay over such excess to Agent, for redistribution in accordance with this Agreement.

 

3.9 Indemnification

 

. Borrowers hereby indemnify and agree to hold harmless the Revolving Credit Lenders, the Issuing Lender and the Agent and their respective Affiliates, and the respective officers, directors, employees and agents of such Persons (each an “L/C Indemnified Person”), from and against any and all claims, damages, losses, liabilities, costs or expenses of any kind or nature whatsoever which the Revolving Credit Lenders, the Issuing Lender or the Agent or any such Person may incur or which may be claimed against any of them by reason of or in connection with any Letter of Credit (collectively, the “L/C Indemnified Amounts”), and none of the Issuing Lender, any Revolving Credit Lender or the Agent or any of their respective officers, directors, employees or agents shall be liable or responsible for:

 

(a) the use which may be made of any Letter of Credit or for any acts or omissions of any beneficiary in connection therewith;

 

(b) the validity, sufficiency or genuineness of documents or of any endorsement thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged;

 

(c) payment by the Issuing Lender to the beneficiary under any Letter of Credit against presentation of documents which do not strictly comply with the terms of any Letter of Credit (unless such payment resulted from the gross negligence or willful misconduct of the Issuing Lender), including failure of any documents to bear any reference or adequate reference to such Letter of Credit;

 

(d) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit; or

 

(e) any other event or circumstance whatsoever arising in connection with any Letter of Credit.

 

It is understood that in making any payment under a Letter of Credit the Issuing Lender will rely on documents presented to it under such Letter of Credit as to any and all matters set forth therein without further investigation and regardless of any notice or information to the contrary.

 

  

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With respect to subparagraphs (a) through (e) hereof, (i) no Borrower shall be required to indemnify any L/C Indemnified Person for any L/C Indemnified Amounts to the extent such amounts result from the gross negligence or willful misconduct of such L/C Indemnified Person or any officer, director, employee or agent of such L/C Indemnified Person and (ii) the Agent and the Issuing Lender shall be liable to each Borrower to the extent, but only to the extent, of any direct, as opposed to consequential or incidental, damages suffered by any Borrower which were caused by the gross negligence or willful misconduct of the Issuing Lender or any officer, director, employee or agent of the Issuing Lender or by the Issuing Lender’s wrongful dishonor of any Letter of Credit after the presentation to it by the beneficiary thereunder of a draft or other demand for payment and other documentation strictly complying with the terms and conditions of such Letter of Credit.

 

3.10 Right of Reimbursement

 

. Each Revolving Credit Lender agrees to reimburse the Issuing Lender on demand, pro rata in accordance with its respective Revolving Credit Percentage, for (i) the reasonable out-of-pocket costs and expenses of the Issuing Lender to be reimbursed by Borrowers pursuant to any Letter of Credit Agreement or any Letter of Credit, to the extent not reimbursed by Borrowers or any other Credit Party and (ii) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, fees, reasonable out-of-pocket expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Issuing Lender in any way relating to or arising out of this Agreement (including Section 3.6(c) hereof), any Letter of Credit, any documentation or any transaction relating thereto, or any Letter of Credit Agreement, to the extent not reimbursed by Borrowers, except to the extent that such liabilities, losses, costs or expenses were incurred by Issuing Lender as a result of Issuing Lender’s gross negligence or willful misconduct or by the Issuing Lender’s wrongful dishonor of any Letter of Credit after the presentation to it by the beneficiary thereunder of a draft or other demand for payment and other documentation strictly complying with the terms and conditions of such Letter of Credit.

 

	
4.  

	
TERM LOANS.

 

4.1 Term Loans

 

. Subject to the terms and conditions hereof, each Term Loan Lender, severally and for itself alone, agrees to make Term Loan Advances of the Term Loan in Dollars to Borrowers from time to time on any Business Day during the Term Loan Draw Period, in an aggregate amount not to exceed at any time such Lender’s Term Loan Percentage of the Term Commitment.

 

4.2 Accrual of Interest and Maturity; Evidence of Indebtedness.

 

(a) Borrowers hereby unconditionally promise to pay to the Agent for the account of each Term Loan Lender such Lender’s Percentage of the then unpaid aggregate principal amount of the Term Loan outstanding on the Term Loan Maturity Date and on such other dates and in such other amounts as may be required from time to time pursuant to this Agreement. Subject to the terms and conditions hereof, the unpaid principal Indebtedness outstanding under the Term Loan shall, from the Effective Date (until paid), bear interest at the Applicable Interest Rate. There shall be no readvance or reborrowings of any principal reductions of the Term Loan.

 

  

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(b) Each Term Loan Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of Borrowers to the appropriate lending office of such Term Loan Lender resulting from each Advance of the Term Loan, as applicable made by such lending office of such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Term Loan Lender from time to time under this Agreement.

 

(c) The Agent shall maintain the Register pursuant to Section 13.9(g), and a subaccount therein for each Term Loan Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each Advance of the Term Loans made hereunder, the type thereof and each Eurodollar-Interest Period applicable to any Eurodollar-based Advance, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrowers to each Term Loan Lender hereunder in respect of the Advances of the Term Loan, and (iii) both the amount of any sum received by the Agent hereunder from Borrowers in respect of the Advances of the Term Loans and each Term Loan Lender’s share thereof.

 

(d) The entries made in the Register pursuant to paragraph (c) of this Section 4.2 shall, absent manifest error, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of Borrowers therein recorded; provided, however, that the failure of any Term Loan Lender or the Agent to maintain the Register or any such account, as applicable, or any error therein, shall not in any manner affect the obligation of Borrowers to repay the Advances of each of the Term Loans (and all other amounts owing with respect thereto) made to Borrowers by the Term Loan Lenders in accordance with the terms of this Agreement.

 

(e) Borrowers agree that, upon written request to the Agent by any Term Loan Lender, Borrowers will execute and deliver to such Term Loan Lender, at Borrowers’ expense, a Term Loan Note evidencing the outstanding Advances under the Term Loan, owing to such Term Loan Lender.

 

4.3 Repayment of Principal.

 

(a) Borrowers shall repay the Term Loan in equal monthly principal installment payments, each in an amount equal to 1/60th of the aggregate principal amount of Advances of the Term Loan made under Section 4.1 outstanding at the end of the Term Loan Draw Period, commencing on the first day of the first month following the last day of the Term Loan Draw Period, until the Term Loan Maturity Date, when all remaining outstanding principal plus accrued interest thereon shall be due and payable in full.

 

(b) Whenever any payment under this Section 4.3 shall become due on a day that is not a Business Day, the date for payment thereunder shall be extended to the next Business Day.

 

4.4 Requests for and Refundings and Conversions of Advances of Term Loans.

 

(a) During the Term Loan Draw Period, Borrowers may request an Advance of the Term Loan, a refund of any Term Loan Advance in the same type of Advance or to convert any Term Loan Advance to any other type of Term Loan Advance only by delivery to Agent of a 

 

  

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Request for Term Loan Advance executed by an Authorized Signer for the Borrowers, subject to the following:

 

	
(i)  

	
each such Request for Term Loan Advance shall set forth the information required on the Request for Term Loan Advance, including without limitation:

 

	
(A)  

	
the proposed date of such Term Loan Advance (or the refunding or conversion of an outstanding Term Loan Advance), which must be a Business Day;

 

	
(B)  

	
whether such Advance is a new Term Loan Advance or a refunding or conversion of an outstanding Term Loan Advance; and

 

	
(C)  

	
whether such Term Loan Advance is to be a Prime Referenced Rate Advance or a Eurodollar-based Advance, and, except in the case of a Prime Referenced Rate Advance, the first Eurodollar-Interest Period applicable thereto, provided, however, that the initial Term Loan Advance made under this Agreement shall be a Prime Referenced Rate Advance, which may then be converted into a Eurodollar-based Advance in compliance with this Agreement.

 

	
(ii)  

	
each such Request for Term Loan Advance shall be delivered to Agent by 12:00 p.m. (California time) three (3) Business Days prior to the proposed date of the Term Loan Advance, except in the case of a Prime Referenced Rate Advance, for which the Request for Term Loan Advance must be delivered by 12:00 p.m. (California time) on the proposed date for such Term Loan Advance;

 

	
(iii)  

	
on the proposed date of such Term Loan Advance, the aggregate principal amount of all Term Loan Advances outstanding on such date after giving effect to all outstanding requests for Term Loan Advances, shall not exceed the Term Commitment;

 

	
(iv)  

	
in the case of a Prime Referenced Rate Advance, the principal amount of the initial funding of such Advance, as opposed to any refunding or conversion thereof, shall be at least $250,000 or the remainder available under the Term Commitment if less than $250,000;

 

	
(v)  

	
in the case of a Eurodollar-based Advance, the principal amount of such Advance, plus the amount of any other outstanding Term Loan Advance to be then combined therewith having the same Eurodollar-Interest Period, if any, shall be at least $250,000 in the case of the first such advance (or a larger integral multiple of at least $100,000), and thereafter in amounts in integral amounts of at least $100,000, or the remainder available under the 

 

  

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Term Commitment if less than $100,000 and at any one time there shall not be in effect more than five (5) different Eurodollar-Interest Periods;

 

	
(vi)  

	
a Request for Term Loan Advance, once delivered to Agent, shall not be revocable by Borrowers and shall constitute a certification by Borrowers as of the date thereof that:

 

	
(A)  

	
all conditions to the making of Term Loan Advances set forth in this Agreement have been satisfied, and shall remain satisfied to the date of such Term Loan Advance (both before and immediately after giving effect to such Term Loan Advance);

 

	
(B)  

	
there is no Default or Event of Default in existence, and none will exist upon the making of such Term Loan Advance (both before and immediately after giving effect to such Term Loan Advance); and

 

	
(C)  

	
the representations and warranties of the Borrowers contained in this Agreement and the other Loan Documents are true and correct in all material respects and shall be true and correct in all material respects as of the date of the making of such Term Loan Advance (both before and immediately after giving effect to such Term Loan Advance), other than any representation or warranty that expressly speaks only as of a different date;

 

Agent, acting on behalf of the Term Loan Lenders, may also, at its option, lend under this Section 4.4 upon the telephone or email request of an Authorized Signer of the Borrowers to make such requests and, in the event Agent, acting on behalf of the Term Loan Lenders, makes any such Advance upon a telephone or email request, an Authorized Signer shall fax or deliver by electronic file to Agent, on the same day as such telephone or email request, an executed Request for Term Loan Advance. Borrowers hereby authorize Agent to disburse Term Loan Advances under this Section 4.4 pursuant to the telephone or email instructions of any person purporting to be an Authorized Signer. Notwithstanding the foregoing, Borrowers acknowledge that Borrowers shall bear all risk of loss resulting from disbursements made upon any telephone or email request. Each telephone or email request for a Term Loan Advance from an Authorized Signer for the Borrowers shall constitute a certification of the matters set forth in the Request for Term Loan Advance form as of the date of such requested Term Loan Advance.

 

(b) After the end of the Term Loan Draw Period, Borrowers may refund all or any portion of any Advance of either or both Term Loans as a Term Loan Advance with a like Eurodollar-Interest Period or convert each such Advance of such Term Loan to an Advance with a different Eurodollar-Interest Period, but only after delivery to Agent of a Term Loan Rate 

 

  

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Request executed in connection with such Term Loan by an Authorized Signer and subject to the terms hereof and to the following:

 

	
(i)  

	
each Term Loan Rate Request shall set forth the information required on the Term Loan Rate Request form with respect to such Term Loan, including without limitation:

 

	
(A)  

	
whether the Term Loan Advance is a refunding or conversion of an outstanding Term Loan Advance;

 

	
(B)  

	
in the case of a refunding or conversion of an outstanding Term Loan Advance, the proposed date of such refunding or conversion, which must be a Business Day; and

 

	
(C)  

	
whether such Term Loan Advance (or any portion thereof) is to be a Prime Referenced Rate Advance or a Eurodollar-based Advance, and, in the case of a Eurodollar-based Advance, the Eurodollar-Interest Period(s) applicable thereto.

 

	
(ii)  

	
each such Term Loan Rate Request shall be delivered to Agent (i) by 10:00 a.m. (California time) three (3) Business Days prior to the proposed date of the refunding or conversion of a Eurodollar-based Advance or (ii) by 10:00 a.m. (California time) on the proposed date of the refunding or conversion of a Prime Referenced Rate Advance;

 

	
(iii)  

	
the principal amount of such Advance of such Term Loan plus the amount of any other Advance of such Term Loan to be then combined therewith having the same Applicable Interest Rate and Eurodollar-Interest Period, if any, shall be (i) in the case of a Prime Referenced Rate Advance, at least Five hundred Thousand Dollars ($500,000), or the remaining principal balance outstanding under the applicable Term Loan, whichever is less, and (ii) in the case of a Eurodollar-based Advance, at least Five Hundred Thousand Dollars ($500,000) or the remaining principal balance outstanding under the applicable Term Loan, whichever is less, or in each case a larger integral multiple of One Hundred Thousand Dollars ($100,000);

 

	
(iv)  

	
no Term Loan Advance shall have a Eurodollar-Interest Period ending after the Term Loan Maturity Date and, notwithstanding any provision hereof to the contrary, Borrowers shall select Eurodollar-Interest Periods (or the Prime Referenced Rate) for sufficient portions of the Term Loans such that Borrowers may make the required principal payments hereunder on a timely basis and otherwise in accordance with Section 4.5 below;

 

	
(v)  

	
at no time shall there be more than five (5) Eurodollar-Interest Periods in effect for Advances of each Term Loan; and

 

  

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(vi)  

	
a Term Loan Rate Request, once delivered to Agent, shall not be revocable by Borrowers.

 

4.5 Disbursement of Term Loan Advances.

 

(a) Upon receiving any Request for Term Loan Advance from a Borrower under Section 4.4 hereof, Agent shall promptly notify each Term Loan Lender by wire, telex or telephone (confirmed by wire, telecopy or telex) of the amount of such Advance being requested and the date such Term Loan Advance is to be made by each Term Loan Lender in an amount equal to its Term Loan Percentage of such Advance. Unless such Term Loan Lender’s commitment to make Term Loan Advances hereunder shall have been suspended or terminated in accordance with this Agreement, each such Term Loan Lender shall make available the amount of its Term Loan Percentage of each Term Loan Advance in immediately available funds to Agent, as follows:

 

	
(i)  

	
for Prime Referenced Rate Advances at the office of Agent located at 75 E Trimble Road, San Jose, CA 95131, not later than 1:00 p.m. (California time) on the date of such Advance; and

 

	
(ii)  

	
for Eurodollar-based Advances, at the Agent’s Correspondent for the account of the Eurodollar Lending Office of the Agent, not later than 12:00 p.m. (the time of the Agent’s Correspondent) on the date of such Advance.

 

(b) Subject to submission of an executed Request for Term Loan Advance by a Borrower without exceptions noted in the compliance certification therein, Agent shall make available to Borrowers the aggregate of the amounts so received by it from the Term Loan Lenders in like funds and currencies:

 

	
(i)  

	
for Prime Referenced Rate Advances, not later than 4:00 p.m. (California time) on the date of such Term Loan Advance, by credit to an account of Borrowers maintained with Agent or to such other account or third party as Borrowers may reasonably direct in writing, provided such direction is timely given; and

 

	
(ii)  

	
for Eurodollar-based Advances, not later than 4:00 p.m. (the time of the Agent’s Correspondent) on the date of such Term Loan Advance, by credit to an account of Borrowers maintained with Agent’s Correspondent or to such other account or third party as Borrowers may direct, provided such direction is timely given.

 

(c) Agent shall deliver the documents and papers received by it for the account of each Term Loan Lender to such Term Loan Lender. Unless Agent shall have been notified by any Term Loan Lender prior to the date of any proposed Term Loan Advance that such Term Loan Lender does not intend to make available to Agent such Term Loan Lender’s Percentage of such Advance, Agent may assume that such Term Loan Lender has made such amount available to Agent on such date, as aforesaid. Agent may, but shall not be obligated to, make available to Borrowers the amount of such payment in reliance on such assumption. If such amount is not in 

 

  

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fact made available to Agent by such Term Loan Lender, as aforesaid, Agent shall be entitled to recover such amount on demand from such Term Loan Lender. If such Term Loan Lender does not pay such amount forthwith upon Agent’s demand therefor and the Agent has in fact made a corresponding amount available to Borrowers, the Agent shall promptly notify Borrowers and Borrowers shall pay such amount to Agent, if such notice is delivered to Borrowers prior to 1:00 p.m. (California time) on a Business Day, on the day such notice is received, and otherwise on the next Business Day, and such amount paid by Borrowers shall be applied as a prepayment of the Term Loan (without any corresponding reduction in the Term Commitment), reimbursing Agent for having funded said amounts on behalf of such Term Loan Lender. The Borrowers shall retain their claim against such Term Loan Lender with respect to the amounts repaid by them to Agent and, if such Term Loan Lender subsequently makes such amounts available to Agent, Agent shall promptly make such amounts available to the Borrowers as a Term Loan Advance. Agent shall also be entitled to recover from such Term Loan Lender or Borrowers, as the case may be, but without duplication, interest on such amount in respect of each day from the date such amount was made available by Agent to Borrowers, to the date such amount is recovered by Agent, at a rate per annum equal to:

 

	
(i)  

	
in the case of such Term Loan Lender, for the first two (2) Business Days such amount remains unpaid, the Federal Funds Effective Rate, and thereafter, at the rate of interest then applicable to such Revolving Credit Advances; and

 

	
(ii)  

	
in the case of Borrowers, the rate of interest then applicable to such Advance of the Term Loan.

 

Until such Term Loan Lender has paid Agent such amount, such Term Loan Lender shall have no interest in or rights with respect to such Advance for any purpose whatsoever. The obligation of any Term Loan Lender to make any Term Loan Advance hereunder shall not be affected by the failure of any other Term Loan Lender to make any Advance hereunder, and no Term Loan Lender shall have any liability to Borrowers or any of its Subsidiaries, the Agent, any other Term Loan Lender, or any other party for another Term Loan Lender’s failure to make any loan or Advance hereunder.

 

4.6 Prime Referenced Rate Advance in Absence of Election or Upon Default

 

. In the event Borrowers shall fail with respect to any Eurodollar-based Advance of a Term Loan to timely exercise their option to refund or convert such Advance in accordance with Section 4.4 hereof (and such Advance has not been paid in full on the last day of the Eurodollar-Interest Period applicable thereto according to the terms hereof), or, if on the last day of the applicable Eurodollar-Interest Period, a Default or Event of Default shall exist, then, on the last day of the applicable Eurodollar-Interest Period, the principal amount of such Advance which has not been prepaid shall be automatically converted to a Prime Referenced Rate Advance and the Agent shall thereafter promptly notify Borrowers thereof. All accrued and unpaid interest on any Advance converted to a Prime Referenced Rate Advance under this Section 4.5 shall be due and payable in full on the date such Advance is converted.

 

  

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4.7 Interest Payments; Default Interest.

 

(a) Interest on the unpaid principal of all Prime Referenced Rate Advances of the Term Loans from time to time outstanding shall accrue until paid at a per annum interest rate equal to the Prime Referenced Rate, and shall be payable in immediately available funds monthly in arrears commencing on the first day of the calendar month after the date of each applicable Term Loan Advance, and on the first day of each calendar month thereafter. Whenever any payment under this Section 4.7 shall become due on a day that is not a Business Day, the date for payment shall be extended to the next Business Day. Interest accruing at the Prime Referenced Rate shall be computed on the basis of a 360 day year and assessed for the actual number of days elapsed, and in such computation effect shall be given to any change in the interest rate resulting from a change in the Prime Referenced Rate on the date of such change in the Prime Referenced Rate.

 

(b) Interest on the unpaid principal of each Eurodollar-based Advance of the Term Loans having a related Eurodollar-Interest Period of three (3) months or less shall accrue at its applicable Eurodollar-based Rate and shall be payable in immediately available funds on the last day of the Eurodollar-Interest Period applicable thereto. Interest shall be payable in immediately available funds on each Eurodollar-based Advance of the Term Loans outstanding from time to time having a Eurodollar-Interest Period of six (6) months or longer, at intervals of three (3) months after the first day of the applicable Eurodollar-Interest Period, and shall also be payable on the last day of the Eurodollar-Interest Period applicable thereto. Interest accruing at the Eurodollar-based Rate shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed from the first day of the Eurodollar-Interest Period applicable thereto to, but not including, the last day thereof.

 

(c) Notwithstanding anything to the contrary in Section 4.7(a) or (b) hereof, all accrued and unpaid interest on any Term Loan Advance refunded or converted pursuant to Section 4.4 hereof shall be due and payable in full on the date such Term Loan Advance is refunded or converted.

 

(d) In the case of any Event of Default under Section 9.1(i), immediately upon the occurrence thereof, and in the case of any other Event of Default, upon notice from the Majority Term Loan Lenders in regards to the Term Loan, interest shall be payable on demand on the principal amount of all Advances of the Term Loan from time to time outstanding, as applicable, at a per annum rate equal to the Applicable Interest Rate in respect of each such Advance, plus, in the case of Eurodollar-based Advances, two percent (2%) for the remainder of the then existing Eurodollar-Interest Period, if any, and at all other such times and for all Prime Referenced Rate Advances, at a per annum rate equal to the Prime Referenced Rate plus two percent (2%).

 

4.8 Optional Prepayment of Term Loans.

 

(a) Subject to clause (b) hereof, Borrowers (at their option), may prepay all or any portion of the outstanding principal of any Term Loan Advance bearing interest at the Prime Referenced Rate at any time, and may prepay all or any portion of the outstanding principal of any Term Loan bearing interest at the Eurodollar-based Rate upon one (1) Business Day’s notice

 

  

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 to the Agent by wire, telecopy or by telephone (confirmed by wire or telecopy), with accrued interest on the principal being prepaid to the date of such prepayment. Any prepayment of a portion of a Term Loan as to which the Applicable Interest Rate is the Prime Referenced Rate shall be without premium or penalty and any prepayment of a portion of a Term Loan as to which the Applicable Interest Rate is the Eurodollar-based Rate shall be without premium or penalty, except to the extent set forth in Section 11.1.

 

(b) Each partial prepayment of a Term Loan shall be applied to all installments of such Term Loan due thereunder in the inverse order of their maturities, to all such principal payments as follows: first to that portion of such Term Loan outstanding as a Prime Referenced Rate Advance, second to that portion of such Term Loan outstanding as Eurodollar-based Advances which have Eurodollar-Interest Periods ending on the date of payment, and last to any remaining Advances of such Term Loan being carried at the Eurodollar-based Rate.

 

(c) All prepayments of the Term Loan shall be made to the Agent for distribution ratably to the applicable Term Loan Lenders in accordance with their respective Term Loan Percentages.

 

4.9 Use of Proceeds

 

. Proceeds of the Term Loan shall be used by Borrowers to finance a portion of a Stock Repurchase, as permitted under the terms of Section 8.5(a), and for working capital purposes.

 

	
5.  

	
CONDITIONS.

 

The obligations of the Lenders to make Advances or loans pursuant to this Agreement and the obligation of the Issuing Lender to issue Letters of Credit are subject to the following conditions:

 

5.1 Conditions of Initial Advances

 

. The obligations of the Lenders to make initial Advances or loans pursuant to this Agreement and the obligation of the Issuing Lender to issue initial Letters of Credit, in each case, on the Effective Date only, are subject to the following conditions:

 

(a) Notes, this Agreement and the other Loan Documents. Borrowers shall have executed and delivered to Agent for the account of each Lender requesting Notes, the Revolving Credit Notes and/or the Term Notes, as applicable; Borrowers shall have executed and delivered this Agreement; and each Credit Party shall have executed and delivered the other Loan Documents to which such Credit Party is required to be a party (including all schedules and other documents to be delivered pursuant hereto); and such Notes (if any), this Agreement and the other Loan Documents shall be in full force and effect.

 

(b) Corporate Authority. Agent shall have received, with a counterpart thereof for each Lender, from each Borrower, a certificate of its Secretary or Assistant Secretary dated as of the Effective Date as to:

 

	
(i)  

	
corporate resolutions (or the equivalent) of each Borrower authorizing the transactions contemplated by this Agreement and the other Loan Documents, approval of this Agreement and the other Loan Documents, in 

 

  

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each case to which such Borrower is party, and authorizing the execution and delivery of this Agreement and the other Loan Documents, and in the case of Borrowers, authorizing the execution and delivery of requests for Advances and the issuance of Letters of Credit hereunder,

 

	
(ii)  

	
the incumbency and signature of the officers or other authorized persons of such Borrower executing any Loan Document and in the case of the Borrowers, the officers who are authorized to execute any Requests for Advance, or requests for the issuance of Letters of Credit,

 

	
(iii)  

	
a certificate of good standing or continued existence (or the equivalent thereof) from the state of its incorporation or formation, and from every state or other jurisdiction where such Borrower is qualified to do business, which jurisdictions are listed on Schedule 5.1(b) attached hereto, and

 

	
(iv)  

	
copies of such Borrower’s certificate of incorporation and bylaws or other constitutional documents, as in effect on the Effective Date.

 

(c) Collateral Documents, Guaranties and other Loan Documents. The Agent shall have received the following documents, each in form and substance satisfactory to Agent and fully executed by each party thereto:

 

	
(i)  

	
The Reaffirmation of Loan Documents.

 

	
(ii)  

	
(A) Certified copies of uniform commercial code requests for information, or a similar search report certified by a party acceptable to the Agent, dated a date reasonably prior to the Effective Date, listing all effective financing statements in the jurisdiction noted on Schedule 5.1(c) which name any Borrower (under their present names or under any previous names used within five (5) years prior to the date hereof) as debtors, together with (x) copies of such financing statements, and (y) authorized Uniform Commercial Code (Form UCC-3) Termination Statements, if any, necessary to release all Liens and other rights of any Person in any Collateral described in the Collateral Documents previously granted by any Person (other than Liens permitted by Section 8.2 of this Agreement) and (B) intellectual property search reports results from the United States Patent and Trademark Office and the United States Copyright Office for the Credit Parties dated a date reasonably prior to the Effective Date.

 

	
(iii)  

	
Any documents (including, without limitation, financing statements, amendments to financing statements and assignments of financing statements, stock powers executed in blank and any endorsements) requested by Agent and reasonably required to be provided in connection with the Collateral Documents to create, in favor of the Agent (for and on behalf of the Lenders), a first priority perfected security interest in the Collateral thereunder shall have been filed, registered or recorded, or shall 

 

 

  

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shall have been filed, registered or recorded, or shall have been delivered to Agent in proper form for filing, registration or recordation.

 

 

(d) Insurance. The Agent shall have received evidence reasonably satisfactory to it that the Credit Parties have obtained the insurance policies required by Section 7.5 hereof and that such insurance policies are in full force and effect.

 

(e) Compliance with Certain Documents and Agreements. Each Borrower shall have each performed and complied in all material respects with all agreements and conditions contained in this Agreement and the other Loan Documents, to the extent required to be performed or complied with by such Borrower. No Person (other than Agent, Lenders and Issuing Lender) party to this Agreement or any other Loan Document shall be in material default in the performance or compliance with any of the terms or provisions of this Agreement or the other Loan Documents or shall be in material default in the performance or compliance with any of the material terms or material provisions of, in each case to which such Person is a party.

 

(f) Opinions of Counsel. The Borrowers shall furnish Agent prior to the initial Advance under this Agreement, with signed copies for each Lender, opinions of counsel to the Borrowers, including opinions of local counsel to the extent deemed necessary by the Agent, in each case dated the Effective Date and covering such matters as reasonably required by and otherwise reasonably satisfactory in form and substance to the Agent and each of the Lenders.

 

(g) Payment of Fees. Borrowers shall have paid to Agent an upfront fee in the amount of $75,000 and any other fees, costs or expenses due and outstanding to the Agent or the Lenders as of the Effective Date (including reasonable fees, disbursements and other charges of counsel to Agent).

 

(h) Financial Statements. Borrowers shall have delivered to the Lenders and the Agent, in form and substance satisfactory to Agent: (a) audited consolidated and consolidating (if any) financial statements of Obagi and its Consolidated Subsidiaries for the Fiscal Year ended December 31, 2009, and presented in accordance with GAAP, and (b) quarterly consolidated and consolidating (if any) financial statements prepared by Borrowers for the fiscal quarter ended June 30, 2010.

 

(i) Appraisals; Audits; Due Diligence. Agent and Lenders shall have received, in each case in form and substance satisfactory to the Agent, (a) an audit of all accounts receivable and inventory of Borrowers and their respective Subsidiaries, (b) appraisals of all fixed assets of Borrowers and their respective Subsidiaries, and (c) such other reports or due diligence materials as Agent and the Majority Lenders may reasonably request.

 

(j) Management Agreement and Employment Agreements. Agent shall have received copies of all management agreements and all employment agreements of the Credit Parties which shall remain in effect following the Effective Date as set forth on Schedule 6.17 hereof, the terms of which are reasonably acceptable to Agent and the Majority Lenders.

 

(k) Material Contracts. Agent shall have received copies of each Material Contract that by its terms provides for aggregate future guaranteed payments to or from Credit Parties of at least $500,000.

 

  

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(l) Governmental and Other Approvals. Agent shall have received copies of all authorizations, consents, approvals, licenses, qualifications or formal exemptions, filings, declarations and registrations with, any court, governmental agency or regulatory authority or any securities exchange or any other person or party (whether or not governmental) received by any Borrower in connection with the transactions contemplated by the Loan Documents to occur on the Effective Date.

 

(m) Closing Certificate. The Agent shall have received, with a signed counterpart for each Lender, a certificate of a Responsible Officer of Borrower Representative dated the Effective Date (or, if different, the date of the initial Advance hereunder), stating that to the best of his or her respective knowledge after due inquiry, (a) the conditions set forth in this Section 5 have been satisfied to the extent required to be satisfied by any Borrower; (b) the representations and warranties made by the Credit Parties in this Agreement or any of the other Loan Documents, as applicable, are true and correct in all material respects; (c) no Default or Event of Default shall have occurred and be continuing; and (d) since June 30, 2010 nothing shall have occurred which has had, or could reasonably be expected to have, a material adverse change on the business, results of operations, conditions, property or prospects (financial or otherwise) of Borrowers.

 

5.2 Continuing Conditions

 

. The obligations of each Lender to make Advances (including the initial Advance) under this Agreement and the obligation of the Issuing Lender to issue any Letters of Credit shall be subject to the continuing conditions that:

 

(a) No Default or Event of Default shall exist as of the date of the Advance or the request for the Letter of Credit, as the case may be; and

 

(b) Each of the representations and warranties contained in this Agreement and in each of the other Loan Documents shall be true and correct in all material respects as of the date of the Advance or Letter of Credit (as the case may be) as if made on and as of such date (other than any representation or warranty that expressly speaks only as of a different date).

 

	
6.  

	
REPRESENTATIONS AND WARRANTIES.

 

Borrowers represent and warrant to the Agent, the Lenders and the Issuing Lender as follows:

 

6.1 Corporate Authority

 

. Each Credit Party is a corporation (or other business entity) duly organized and existing in good standing under the laws of the state or jurisdiction of its incorporation or formation, as applicable, and each Credit Party is duly qualified and authorized to do business as a foreign corporation in each jurisdiction where the character of its assets or the nature of its activities makes such qualification and authorization necessary except where failure to be so qualified or be in good standing could not reasonably be expected to have a Material Adverse Effect. Each Credit Party has all requisite corporate, limited liability or partnership power and authority to own all its property (whether real, personal, tangible or intangible or of any kind whatsoever) and to carry on its business.

 

6.2 Due Authorization

 

. Execution, delivery and performance of this Agreement, and the other Loan Documents, to which each Credit Party is party, and the issuance of the Notes by 

 

  

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Borrowers (if requested) are within such Person’s corporate power, have been duly authorized, are not in contravention of any law applicable to such Credit Party or the terms of such Credit Party’s organizational documents and, except as have been previously obtained or as referred to in Section 6.10, below, do not require the consent or approval of any governmental body, agency or authority or any other third party except to the extent that such consent or approval is not material to the transactions contemplated by the Loan Documents.

 

6.3 Good Title; Leases; Assets; No Liens

 

. (a) Each Credit Party, to the extent applicable, has good and valid title (or, in the case of real property, good and marketable title) to all assets owned by it, subject only to the Liens permitted under Section 8.2 hereof, and each Credit Party has a valid leasehold or interest as a lessee or a licensee in all of its leased real property;

 

(b) Schedule 6.3(a) hereof identifies all of the real property owned or leased, as lessee thereunder, by the Credit Parties on the Effective Date, including all warehouse or bailee locations;

 

(c) The Credit Parties will collectively own or collectively have a valid leasehold interest in all assets that were owned or leased (as lessee) by the Credit Parties immediately prior to the Effective Date to the extent that such assets are necessary for the continued operation of the Credit Parties’ businesses in substantially the manner as such businesses were operated immediately prior to the Effective Date;

 

(d) Each Credit Party owns or has a valid leasehold interest in all real property necessary for its continued operations and, to the best knowledge of Borrowers, no material condemnation, eminent domain or expropriation action has been commenced or threatened against any such owned or leased real property; and

 

(e) There are no Liens on and no financing statements on file with respect to any of the assets owned by the Credit Parties, except for the Liens permitted pursuant to Section 8.2 of this Agreement.

 

6.4 Taxes

 

. Except as set forth on Schedule 6.4 hereof, Obagi and each of its Subsidiaries, as applicable, has filed on or before their respective due dates or within the applicable grace periods, all United States federal, state, local and other tax returns which are required to be filed or has obtained extensions for filing such tax returns and is not delinquent in filing such returns in accordance with such extensions and has paid all material taxes which have become due pursuant to those returns or pursuant to any assessments received by any such Person, as the case may be, to the extent such taxes have become due, except to the extent such taxes are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate provision has been made on the books of such Person as may be required by GAAP.

 

6.5 No Defaults

 

. Neither Obagi nor any of its Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which would cause or would reasonably be expected to cause a Material Adverse Effect, except as set forth on Schedule 6.9 hereof.

 

  

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6.6 Enforceability of Agreement and Loan Documents

 

. This Agreement and each of the other Loan Documents to which any Credit Party is a party (including without limitation, each Request for Advance), have each been duly executed and delivered by its duly authorized officers and constitute the valid and binding obligations of such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as enforcement thereof may be limited by applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or similar laws affecting the enforcement of creditor’s rights, generally and by general principles of equity (regardless of whether enforcement is considered in a proceeding in law or equity).

 

6.7 Compliance with Laws

 

. Except as disclosed on Schedule 6.7, Obagi and each of its Subsidiaries has complied with all applicable federal, state and local laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) including but not limited to Hazardous Material Laws, and is in compliance with any Requirement of Law, except to the extent that failure to comply therewith could not reasonably be expected to have a Material Adverse Effect; and (b) neither the extension of credit made pursuant to this Agreement or the use of the proceeds thereof by Obagi or its Subsidiaries will, to Borrowers’ knowledge, violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto, or The United and Strengthening America by providing appropriate Tools Required to Intercept and Obstruct Terrorism (“USA Patriot Act”) Act of 2001, Public Law 10756, October 26, 2001 or Executive Order 13224 of September 23, 2001 issued by the President of the United States (66 Fed. Reg. 49049 (2001)).

 

6.8 Non-contravention

 

. The execution, delivery and performance of this Agreement and the other Loan Documents (including each Request for Advance) to which each Credit Party is a party are not in contravention of the terms of any indenture, agreement or undertaking to which such Credit Party is a party or by which it or its properties are bound where such violation could reasonably be expected to have a Material Adverse Effect.

 

6.9 Litigation

 

. Except as set forth on Schedule 6.9 hereof or as disclosed to Agent in writing from time to time pursuant to Section 7.7 hereof, there is no suit, action, proceeding, including, without limitation, any bankruptcy proceeding or governmental investigation pending against or to the knowledge of Borrowers, threatened against Obagi or any of its Subsidiaries (other than any suit, action or proceeding in which Obagi or any of its Subsidiaries is the plaintiff and in which no counterclaim or cross-claim against such Person has been filed), or any judgment, decree, injunction, rule, or order of any court, government, department, commission, agency, instrumentality or arbitrator outstanding against Obagi or any of its Subsidiaries, nor is Obagi or any of its Subsidiaries in violation of any applicable law, regulation, ordinance, order, injunction, decree or requirement of any governmental body or court which could in any of the foregoing events reasonably be expected to have a Material Adverse Effect. Notwithstanding the disclosure on Schedule 6.9, or in writing from a Borrower to Agent time to time, of certain suits, actions and proceedings, neither Agent nor any Lender waives any of their rights or remedies under this Agreement in the event that such suit, action or proceeding has a Material Adverse Effect or otherwise results in an Event of Default.

 

  

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6.10 Consents, Approvals and Filings, Etc

 

. Except as set forth on Schedule 6.10 hereof, no material authorization, consent, approval, license, qualification or formal exemption from, nor any filing, declaration or registration with, any court, governmental agency or regulatory authority or any securities exchange or any other Person (whether or not governmental) is required in connection with (a) the execution, delivery and performance: (i) by any Credit Party of this Agreement and any of the other Loan Documents to which such Credit Party is a party or (ii) by the Credit Parties of the grant of Liens granted, conveyed or otherwise established (or to be granted, conveyed or otherwise established) by or under this Agreement or the other Loan Documents, as applicable, and (b) otherwise necessary to the operation of its business, except in each case for (x) such matters which have been previously obtained, and (y) such filings to be made concurrently herewith or promptly following the Effective Date, as are required by the Collateral Documents to perfect Liens in favor of the Agent. All such material authorizations, consents, approvals, licenses, qualifications, exemptions, filings, declarations and registrations which have previously been obtained or made, as the case may be, are in full force and effect and, to the best knowledge of Borrowers, are not the subject of any attack or threatened attack (in each case in any material respect) by appeal or direct proceeding or otherwise.

 

6.11 Agreements Affecting Financial Condition

 

. Neither Obagi nor any of its Subsidiaries is party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect.

 

6.12 No Investment Company or Margin Stock

 

. Neither Obagi nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act of 1940, as amended. Neither Obagi nor any of its Subsidiaries is engaged principally, or as one of its important activities, directly or indirectly, in the business of extending credit for the purpose of purchasing or carrying margin stock. None of the proceeds of any of the Advances will be used by Obagi or any of its Subsidiaries to purchase or carry margin stock. Terms for which meanings are provided in Regulation U of the Board of Governors of the Federal Reserve System or any regulations substituted therefore, as from time to time in effect, are used in this paragraph with such meanings.

 

6.13 ERISA

 

. Neither Obagi nor any of its Subsidiaries maintains or contributes to any Pension Plan subject to Title IV of ERISA, except as set forth on Schedule 6.13 hereto or otherwise disclosed to the Agent in writing. There is no accumulated funding deficiency within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA, or any outstanding liability with respect to any Pension Plans owed to the PBGC other than future premiums due and owing pursuant to Section 4007 of ERISA, and no “reportable event” as defined in Section 4043(c) of ERISA has occurred with respect to any Pension Plan other than an event for which the notice requirement has been waived by the PBGC. Neither Obagi nor any of its Subsidiaries has engaged in a prohibited transaction with respect to any Pension Plan, other than a prohibited transaction for which an exemption is available and has been obtained, which could subject Obagi or any of its Subsidiaries to a material tax or penalty imposed by Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA. Each Pension Plan is being maintained and funded in accordance with its terms and is in material compliance with the requirements of the Internal Revenue Code and ERISA. Neither Obagi nor any of its Subsidiaries has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could 

 

  

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reasonably be expected to have resulted in any Withdrawal Liability and, except as notified to Agent in writing following the Effective Date, no such Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA) or insolvent (within the meaning of Section 4245 of ERISA).

 

6.14 Conditions Affecting Business or Properties

 

. Neither the respective businesses nor the properties of Obagi or any of its Subsidiaries is affected by any fire, explosion, accident, strike, lockout or other dispute, drought, storm, hail, earthquake, embargo, Act of God, or other casualty (except to the extent such event is covered by insurance sufficient to ensure that upon application of the proceeds thereof, no Material Adverse Effect could reasonably be expected to occur) which could reasonably be expected to have a Material Adverse Effect.

 

6.15 Environmental and Safety Matters

 

. Except as set forth in Schedules 6.9, 6.10 and 6.15:

 

(a) all facilities and property owned or leased by the Credit Parties are in material compliance with all Hazardous Material Laws;

 

(b) to the best knowledge of Borrowers, there have been no unresolved and outstanding past, and there are no pending or threatened:

 

	
(i)  

	
claims, complaints, notices or requests for information received by any Credit Party with respect to any alleged violation of any Hazardous Material Law, or

 

	
(ii)  

	
written complaints, notices or inquiries to any Credit Party regarding potential liability of any Credit Parties under any Hazardous Material Law; and

 

(c) to the best knowledge of Borrowers, no conditions exist at, on or under any property now or previously owned or leased by any Credit Party which, with the passage of time, or the giving of notice or both, are reasonably likely to give rise to liability under any Hazardous Material Law or create a significant adverse effect on the value of the property.

 

6.16 Subsidiaries

 

. Except as disclosed on Schedule 6.16 hereto as of the Effective Date, and thereafter, except as disclosed to the Agent in writing from time to time, no Credit Party has any Subsidiaries.

 

6.17 Management Agreements

 

. Schedule 6.17 attached hereto is an accurate and complete list of all management and significant employment agreements in effect on or as of the Effective Date to which any Credit Party is a party or is bound.

 

6.18 Material Contracts

 

. Schedule 6.18 attached hereto is an accurate and complete list of all Material Contracts in effect on or as of the Effective Date to which any Credit Party is a party or is bound.

 

6.19 Franchises, Patents, Copyrights, Tradenames, etc

 

. Obagi and each of its Subsidiaries possess all franchises, patents, copyrights, trademarks, trade names, licenses and 

 

  

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permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others, except as disclosed on Schedule 6.9 hereto. Schedule 6.19 contains a true and accurate list of all trade names and any and all other names used by Obagi or any of its Subsidiaries during the five-year period ending as of the Effective Date.

 

6.20 Capital Structure

 

. Schedule 6.20 attached hereto sets forth all issued and outstanding Equity Interests of each Credit Party, including the number of authorized, issued and outstanding Equity Interests of each Credit Party, the par value of such Equity Interests and, with respect to OMP only, the holders of such Equity Interests, all on and as of June 30, 2010. All issued and outstanding Equity Interests of each Credit Party are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens (except for the benefit of Agent) and such Equity Interests were issued in compliance with all applicable state, federal and foreign laws concerning the issuance of securities. Except as disclosed on Schedule 6.20, there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit Party, of any Equity Interests of any Credit Party.

 

6.21 Accuracy of Information

 

. (a) The audited financial statements for the Fiscal Year ended December 31, 2009, furnished to Agent and the Lenders prior to the Effective Date fairly present in all material respects the financial condition of Obagi and its Consolidated Subsidiaries and the results of their operations for the periods covered thereby, and have been prepared in accordance with GAAP. The projections delivered to the Agent prior to the Effective Date are based upon good faith estimates and assumptions believed by management of each of the Borrowers to be accurate and reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein.

 

(b) From December 31, 2009 through the Effective Date, there has been no material adverse change in the business, operations, condition, property or prospects (financial or otherwise) of Obagi or its Subsidiaries taken as a whole.

 

(c)           To the best knowledge of the Credit Parties, as of the Effective Date, (i) Obagi and its Subsidiaries do not have any material contingent obligations (including any liability for taxes) not disclosed by or reserved against in the opening balance sheet to be delivered hereunder and (ii) there are no unrealized or anticipated losses from any present commitment of Obagi and its Subsidiaries which contingent obligations and losses in the aggregate could reasonably be expected to have a Material Adverse Effect, except as set forth on Schedule 6.9 hereto.

 

6.22 Solvency

 

. After giving effect to the consummation of the transactions contemplated by this Agreement and other Loan Documents, Obagi and each of its Subsidiaries will be solvent, able to pay its indebtedness as it matures and will have capital sufficient to carry on its businesses and all business in which it is about to engage. This Agreement is being executed and delivered by the Borrower Representative to Agent and the Lenders in good faith and in exchange for fair, equivalent consideration. The Credit Parties do not intend to nor does management of the Credit Parties believe that Obagi or any of its Subsidiaries will incur debts

 

  

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 beyond their ability to pay as they mature. Neither Obagi nor any of its Subsidiaries contemplate filing a petition in bankruptcy or for an arrangement or reorganization under the Bankruptcy Code or any similar law of any jurisdiction now or hereafter in effect relating to Obagi or any of its Subsidiaries, nor does any Credit Party have any knowledge of any threatened bankruptcy or insolvency proceedings against Obagi or any of its Subsidiaries.

 

6.23 Employee Matters

 

. There are no strikes, slowdowns, work stoppages, unfair labor practice complaints, grievances, arbitration proceedings or controversies pending or, to the best knowledge of the Borrower Representative, threatened against Obagi or any of its Subsidiaries by any employees of Obagi or any of its Subsidiaries, other than non-material employee grievances or controversies arising in the ordinary course of business. Set forth on Schedule 6.23 are all union contracts or agreements to which Obagi or any of its Subsidiaries is party as of the Effective Date and the related expiration dates of each such contract.

 

6.24 Licenses

 

. Except as disclosed on Schedule 6.24 or as disclosed to Agent in writing from time to time, neither Borrower is a party to, nor is bound by, any inbound license agreement that prohibits or otherwise restricts such Borrower from assigning or granting a security interest in such inbound license agreement or any related property. For the purpose of clarity, the parties agree that inbound license agreements shall not include commonly available off-the-shelf software programs that are licensed by either Borrower pursuant to “shrink wrap” licenses.

 

6.25 No Misrepresentation

 

. Neither this Agreement nor any other Loan Document, certificate, information or report furnished or to be furnished by or on behalf of Obagi or any of its Subsidiaries to Agent or any Lender in connection with any of the transactions contemplated hereby or thereby, when made or furnished contains a misstatement of material fact, or omits to state a material fact required to be stated in order to make the statements contained herein or therein, taken as a whole, not misleading in the light of the circumstances under which such statements were made. There is no fact, other than information known to the public generally, known to any Credit Party after diligent inquiry, that could reasonably be expected to have a Material Adverse Effect that has not expressly been disclosed to Agent in writing.

 

6.26 Corporate Documents and Corporate Existence

 

. As to each Credit Party, (a) it is an organization as described on Schedule 1.3 hereto and has provided the Agent and the Lenders with complete and correct copies of its certificate of incorporation, by-laws and all other applicable charter and other organizational documents, and, if applicable, a good standing certificate and (b) its correct legal name, business address, type of organization and jurisdiction of organization, tax identification number and other relevant identification numbers are set forth on Schedule 1.3 hereto.

 

	
7.  

	
AFFIRMATIVE COVENANTS.

 

Each Borrower covenants and agrees, so long as any Lender has any commitment to extend credit hereunder, or any of the Indebtedness remains outstanding and unpaid, that it will, and, as applicable, it will cause each of its Subsidiaries to:

 

  

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7.1 Financial Statements

 

. Furnish to the Agent, in form and detail satisfactory to Agent, with sufficient copies for each Lender, the following documents:

 

(a) as soon as available, but in any event within ninety (90) days after the end of each Fiscal Year, a copy of the audited Consolidated and unaudited Consolidating (if any) financial statements of Obagi and its Consolidated Subsidiaries as at the end of such Fiscal Year and the related audited Consolidated and unaudited Consolidating (if any) statements of income, stockholders equity, and cash flows of Obagi and its Consolidated Subsidiaries for such Fiscal Year or partial Fiscal Year and underlying assumptions, setting forth in each case in comparative form the figures for the previous Fiscal Year, certified as being fairly stated in all material respects by an independent, nationally recognized certified public accounting firm reasonably satisfactory to the Agent; and

 

(b) as soon as available, but in any event within forty five (45) days after the end of each fiscal quarter of Obagi (except the last quarter of each Fiscal Year), Borrower prepared unaudited Consolidated and Consolidating (if any) balance sheets of Obagi and its Consolidated Subsidiaries as at the end of such quarter and the related unaudited statements of income, stockholders equity and cash flows of Obagi and its Consolidated Subsidiaries for the portion of the Fiscal Year through the end of such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous Fiscal Year, and certified by a Responsible Officer of the Borrower Representative as being fairly stated in all material respects.

 

All such financial statements shall be complete and correct in all material respects and be prepared in reasonable detail and in accordance with GAAP throughout the periods reflected therein and with prior periods (except as approved by a Responsible Officer and disclosed therein), provided, however, that the financial statements delivered pursuant to clause (b) hereof will not be required to include footnotes and will be subject to change from audit and year-end adjustments.

 

7.2 Certificates; Other Information

 

. Furnish to the Agent, in form and detail acceptable to Agent, with sufficient copies for each Lender, the following documents:

 

(a) Concurrently with the delivery of the financial statements described in Sections 7.1(a) and 7.1(b) of this Agreement for each fiscal year-end and fiscal quarter-end, respectively, a Covenant Compliance Report duly executed by a Responsible Officer of Borrower Representative;

 

(b) Promptly upon receipt thereof, copies of all significant reports submitted by Obagi’s firm of certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of Obagi and its Consolidated Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their services;

 

(c) Any financial reports, statements, press releases, other material information or written notices delivered to the holders of the Subordinated Debt pursuant to any applicable Subordinated Debt Documents (to the extent not otherwise required hereunder), as and when delivered to such Persons;

 

  

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(d) Within ninety (90) days after the end of each Fiscal Year, projections for Obagi and its Consolidated Subsidiaries for the next succeeding Fiscal Year, on a quarterly basis, including a balance sheet, as at the end of each relevant period and for the period commencing at the beginning of the Fiscal Year and ending on the last day of such relevant period, such projections certified by a Responsible Officer of the Borrower Representative as being based on reasonable estimates and assumptions taking into account all facts and information known (or reasonably available to any Borrower or Subsidiary) by a Responsible Officer of the Borrower Representative;

 

(e) Within forty five (45) days after and as of the end of each fiscal quarter, including the last month of each Fiscal Year, or more frequently as requested by the Agent or the Majority Revolving Credit Lenders the monthly aging of the accounts receivable and accounts payable of the Borrowers;

 

(f) Within forty five (45) days of the last day of each fiscal quarter, a report signed by each Borrower, in form reasonably acceptable to Agent and in the form of Exhibit H attached hereto, listing any applications or registrations that Borrowers, or either of them, have made or filed in respect of any Intellectual Property Collateral (as defined in the Security Agreement) and the status of any outstanding applications or registrations, as well as any material change in either Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of a Borrower in or to any Intellectual Property Collateral;

 

(g) Within forty five (45) days of the last day of each fiscal quarter, a customer contract report signed by each Borrower, in form and detail reasonably acceptable to Agent, which report shall include, without limitation, a listing of (i) each of Borrowers’ customer contract or agreement that provides for aggregate future payments in respect of such individual contract or agreement of at least $500,000 (a “Major Contract”), (ii) all Major Contracts that have been executed since the last customer contract report was submitted to Agent and (iii) all Major Contracts that have expired, been suspended or been terminated since the last customer contract report was submitted to Agent. In addition, upon Agent’s or any Lender’s request, Borrowers shall provide Agent with copies of any of the Major Contracts requested by Agent or any Lender; provided, however, that in the event any such Major Contract contains confidentiality provisions that prohibit Borrowers from disclosing the terms and conditions thereof without the prior written consent of the other party thereto, Borrowers shall provide copies of such Major Contract to Agent only to the extent it is able to secure the prior written consent of such other party of such disclosure, after having taken reasonable commercial efforts to secure such consent;

 

(h) Any additional information as required by any Loan Document, and such additional schedules, certificates and reports respecting all or any of the Collateral, the items or amounts received by the Credit Parties in full or partial payment thereof, and any goods (the sale or lease of which shall have given rise to any of the Collateral) possession of which has been obtained by the Credit Parties, all to such extent as Agent may reasonably request from time to time, any such schedule, certificate or report to be certified as true and correct in all material respects by a Responsible Officer of the applicable Credit Party and shall be in such form and detail as Agent may reasonably specify; and

 

  

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(i) Such additional financial and/or other information as Agent or any Lender may from time to time reasonably request, promptly following such request.

 

7.3 Payment of Obligations

 

. Pay, discharge or otherwise satisfy, at or before maturity or before they become delinquent, as the case may be, all of its material obligations of whatever nature, including without limitation all assessments, governmental charges, claims for labor, supplies, rent or other obligations, except where the amount or validity thereof is currently being appropriately contested in good faith and reserves in conformity with GAAP with respect thereto have been provided on the books of Obagi or its Subsidiaries, as applicable.

 

7.4 Conduct of Business and Maintenance of Existence; Compliance with Laws.

 

(a) Continue to engage in their respective business and operations substantially as conducted immediately prior to the Effective Date;

 

(b) Preserve, renew and keep in full force and effect its existence and maintain its qualifications to do business in each jurisdiction where such qualifications are necessary for its operations, except as otherwise permitted pursuant to Section 8.4;

 

(c) Take all action it deems necessary in its reasonable business judgment to maintain all rights, privileges, licenses and franchises necessary for the normal conduct of its business except where the failure to so maintain such rights, privileges or franchises could not, either singly or in the aggregate, reasonably be expected to have a Material Adverse Effect;

 

(d) Comply with all Contractual Obligations and Requirements of Law, except to the extent that failure to comply therewith could not, either singly or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

 

(e) (i) Continue to be a Person whose property or interests in property is not blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Order”), (ii) not engage in the transactions prohibited by Section 2 of that Order or become associated with Persons such that a violation of Section 2 of the Order would arise, and (iii) not become a Person on the list of Specially Designated National and Blocked Persons, or (iv) otherwise not become subject to the limitation of any OFAC regulation or executive order.

 

7.5 Maintenance of Property; Insurance

 

. (a) Keep all material property it deems, in its reasonable business judgment, useful and necessary in its business in working order (ordinary wear and tear excepted); (b) maintain insurance coverage with financially sound and reputable insurance companies on physical assets and against other business risks in such amounts and of such types as are customarily carried by companies similar in size and nature (including without limitation casualty and public liability and property damage insurance), and in the event of acquisition of additional property, real or personal, or of the incurrence of additional risks of any nature, increase such insurance coverage in such manner and to such extent as prudent business judgment and present practice or any applicable Requirements of Law would dictate; (c) in the case of all insurance policies covering any Collateral, such insurance policies shall provide that the loss payable thereunder shall be payable to the applicable Credit Party, and to the Agent (as 

 

  

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mortgagee, or, in the case of personal property interests, lender loss payee) as their respective interests may appear; (d) in the case of all public liability insurance policies, such policies shall list the Agent as an additional insured, as Agent may reasonably request; and (e) if requested by Agent, certificates evidencing such policies, including all endorsements thereto, to be deposited with Agent, such certificates being in form and substance reasonably acceptable to Agent.

 

7.6 Inspection of Property; Books and Records, Discussions

 

. Permit Agent and each Lender, through their authorized attorneys, accountants and representatives on an annual basis, unless an Event of Default or Default exists or is continuing (a) at all reasonable times during normal business hours, upon the request of Agent or such Lender, to examine each Credit Party’s books, accounts, records, ledgers and assets and properties; (b) from time to time, during normal business hours, upon the request of the Agent, to conduct full or partial collateral audits of the Accounts and Inventory of the Credit Parties and appraisals of all or a portion of the fixed assets (including real property) of the Credit Parties, such audits and appraisals to be completed by an appraiser as may be selected by Agent and consented to by Borrowers (such consent not to be unreasonably withheld), with all reasonable costs and expenses of such audits to be reimbursed by the Credit Parties, provided that so long as no Event of Default or Default exists, Borrowers shall not be required to reimburse Agent for such audits or appraisals more frequently than once each Fiscal Year; (c) during normal business hours and at their own risk, to enter onto the real property owned or leased by any Credit Party to conduct inspections, investigations or other reviews of such real property; and (d) at reasonable times during normal business hours and at reasonable intervals, to visit all of the Credit Parties’ offices, discuss each Credit Party’s respective financial matters with their respective officers, as applicable, and, by this provision, Borrowers authorize, and will cause each of their respective Subsidiaries to authorize, its independent certified or chartered public accountants to discuss the finances and affairs of any Credit Party and examine any of such Credit Party’s books, reports or records held by such accountants.

 

7.7 Notices

 

. Promptly give written notice to the Agent of:

 

(a) the occurrence of any Default or Event of Default of which any Credit Party has knowledge;

 

(b) any (i) litigation or proceeding existing at any time between Obagi or any of its Subsidiaries and any Governmental Authority or other third party, or any investigation of Obagi or any of its Subsidiaries conducted by any Governmental Authority, which in any case if adversely determined would have a Material Adverse Effect or (ii) any material adverse change in the financial condition of Obagi or any of its Subsidiaries since the date of the last audited financial statements delivered pursuant to Section 7.1(a) hereof;

 

(c) the occurrence of any event which any Credit Party believes could reasonably be expected to have a Material Adverse Effect, promptly after concluding that such event could reasonably be expected to have such a Material Adverse Effect;

 

(d) promptly after becoming aware thereof, the taking by the Internal Revenue Service or any foreign taxing jurisdiction of a written tax position (or any such tax position taken by Obagi or any of its Subsidiaries in a filing with the Internal Revenue Service or any foreign 

 

  

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taxing jurisdiction) which could reasonably be expected to have a Material Adverse Effect, setting forth the details of such position and the financial impact thereof;

 

(e) (i) all jurisdictions in which Obagi or any of its Subsidiaries proposes to become qualified after the Effective Date to transact business, (ii) the acquisition or creation of any new Subsidiaries, (iii) any material change after the Effective Date in the authorized and issued Equity Interests of Obagi or any of its Subsidiaries or any other material amendment to Obagi’s or any of its Subsidiaries’ charter, by-laws or other organizational documents, such notice, in each case, to identify the applicable jurisdictions, capital structures or amendments as applicable, provided that such notice shall be given not less than ten (10) Business Days prior to the proposed effectiveness of such changes, acquisition or creation, as the case may be (or such shorter period to which Agent may consent);

 

(f) not less than fifteen (15) Business Days (or such other shorter period to which Agent may agree) prior to the proposed effective date thereof, any proposed material amendments, restatements or other modifications to any Subordinated Debt Documents; and

 

(g) any default or event of default by any Person under any Subordinated Debt Document, concurrently with delivery or promptly after receipt (as the case may be) of any notice of default or event of default under the applicable document, as the case may be.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Borrower Representative setting forth details of the occurrence referred to therein and, in the case of notices referred to in clauses (a), (b), (c), (d) and (g) hereof stating what action the applicable Person has taken or proposes to take with respect thereto.

 

7.8 Hazardous Material Laws.

 

(a) Use and operate all of its facilities and properties in material compliance with all applicable Hazardous Material Laws, keep all material required permits, approvals, certificates, licenses and other authorizations required under such Hazardous Material Laws in effect and remain in compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Hazardous Material Laws;

 

(b) (i) Promptly notify Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries received by any Credit Party relating to its facilities and properties or compliance with Hazardous Material Laws which, if adversely determined, could reasonably be expected to have a Material Adverse Effect and (ii) promptly cure and have dismissed with prejudice to the reasonable satisfaction of Agent and the Majority Lenders any material actions and proceedings relating to compliance with Hazardous Material Laws to which Obagi or any of its Subsidiaries is named a party, other than such actions or proceedings being contested in good faith and with the establishment of reasonable reserves;

 

(c) To the extent necessary to comply in all material respects with Hazardous Material Laws, remediate or monitor contamination arising from a release or disposal of Hazardous Material, which solely, or together with other releases or disposals of Hazardous Materials could reasonably be expected to have a Material Adverse Effect;

 

  

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(d) Provide such information and certifications which Agent or any Lender may reasonably request from time to time to evidence compliance with this Section 7.8.

 

7.9 Financial Covenants.

 

(a) Minimum Quick Ratio. Maintain, on a consolidated basis, as of the end of each fiscal quarter, a ratio of (i) the sum of the aggregate Cash of Borrowers plus the aggregate amount of Accounts of Borrowers as of such date of determination, to (ii) current liabilities of Borrowers of not less than (a) 1.00 to 1.00 for the fiscal quarters ended September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011 and (b) 1.25 to 1.00 for the fiscal quarter ending September 30, 2011 and the last day of each fiscal quarter thereafter.

 

(b) Total Liabilities to Tangible Effective Net Worth. Maintain, on a consolidated basis, as of the end of each fiscal quarter, commencing with the fiscal quarter ended September 30, 2010, a ratio of Borrowers’ total liabilities to Tangible Effective Net Worth of not more than 2.00 to 1.00.

 

(c) Minimum EBITDA. Maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrowers for the four fiscal quarter period then ending, commencing with the fiscal quarter ended September 30, 2010, EBITDA of not less than Twelve Million Dollars ($12,000,000).

 

7.10 Governmental and Other Approvals

 

. Apply for, obtain and/or maintain in effect, as applicable, all authorizations, consents, approvals, licenses, qualifications, exemptions, filings, declarations and registrations (whether with any court, governmental agency, regulatory authority, securities exchange or otherwise) which are necessary or reasonably requested by Agent in connection with the execution, delivery and performance by any Credit Party of, as applicable, this Agreement, the other Loan Documents, the Subordinated Debt Documents, or any other documents or instruments to be executed and/or delivered by any Credit Party, as applicable in connection therewith or herewith, except where the failure to so apply for, obtain or maintain could not reasonably be expected to have a Material Adverse Effect.

 

7.11 Compliance with ERISA; ERISA Notices.

 

(a) Comply in all material respects with all material requirements imposed by ERISA and the Internal Revenue Code, including, but not limited to, the minimum funding requirements for any Pension Plan, except to the extent that any noncompliance could not reasonably be expected to have a Material Adverse Effect.

 

(b) Promptly notify Agent upon the occurrence of any of the following events in writing: (i) the termination, other than a standard termination, as defined in ERISA, of any Pension Plan subject to Subtitle C of Title IV of ERISA by Obagi or any of its Subsidiaries; (ii) the appointment of a trustee by a United States District Court to administer any Pension Plan subject to Title IV of ERISA; (iii) the commencement by the PBGC, of any proceeding to terminate any Pension Plan subject to Title IV of ERISA; (iv) the failure of Obagi or any of its Subsidiaries to make any payment in respect of any Pension Plan required under Section 412 of the Internal Revenue Code or Section 302 of ERISA; (v) the withdrawal of Obagi or any of its Subsidiaries from any Multiemployer Plan if any such Person reasonably believes that such 

 

  

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withdrawal would give rise to the imposition of Withdrawal Liability with respect thereto; or (vi) the occurrence of (x) a “reportable event” which is required to be reported by Obagi or any of its Subsidiaries under Section 4043 of ERISA other than any event for which the reporting requirement has been waived by the PBGC or (y) a “prohibited transaction” as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code other than a transaction for which a statutory exemption is available or an administrative exemption has been obtained.

 

7.12 Defense of Collateral

 

. Defend the Collateral from any Liens other than Liens permitted by Section 8.2.

 

7.13 Future Subsidiaries; Additional Collateral.

 

(a) With respect to each Person which becomes a Domestic Subsidiary of any Borrower (directly or indirectly) subsequent to the Effective Date cause such new Domestic Subsidiary to execute and deliver to the Agent, for and on behalf of each of the Lenders (unless waived by Agent), in Agent’s sole discretion, either:

 

	
(i)  

	
within thirty (30) days after the date such Person becomes a Domestic Subsidiary (or such longer time period as the Agent may determine), a joinder agreement to this Agreement, the Note, and any applicable Collateral Documents whereby such Domestic Subsidiary becomes obligated as a Borrower under this Agreement, the Note and the applicable Collateral Documents; or

 

	
(ii)  

	
within thirty (30) days after the date such Person becomes a Domestic Subsidiary (or such longer time period as the Agent may determine), and at Agent’s request,

 

	
  

	
(a)

	
within thirty (30) days after the date such Person becomes a Domestic Subsidiary (or such longer time period as the Agent may determine), a Guaranty, or in the event that a Guaranty already exists, a joinder agreement to the Guaranty whereby such Domestic Subsidiary becomes obligated as a Guarantor under the Guaranty; and

 

	
  

	
(b)

	
within thirty (30) days after the date such Person becomes a Domestic Subsidiary (or such longer time period as the Agent may determine), a joinder agreement to the Security Agreement whereby such Domestic Subsidiary grants a Lien over its assets as set forth in the Security Agreement, and such Domestic Subsidiary shall take such additional actions as may be necessary to ensure a valid first priority perfected Lien over such assets of such Domestic Subsidiary, subject only to the other Liens permitted pursuant to Section 8.2 of this Agreement; and

 

	
  

	
(c)

	
within the time period specified in and to the extent required under this Section 7.13, Collateral Access Agreements and/or other documents required to be delivered in connection therewith;

 

  

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(b) With respect to the acquisition of any leasehold interest in real property by any Credit Party after the Effective Date, not later than thirty (30) days after the acquisition is consummated or the owner of the applicable leasehold interest becomes a Domestic Subsidiary (or such longer time period as Agent may determine), the applicable Credit Party shall deliver to the Agent a copy of the applicable lease agreement and shall execute or cause to be executed, at Agent’s option, unless otherwise waived by Agent, a Collateral Access Agreement in form and substance reasonably acceptable to Agent together with such other documentation as may be reasonably required by Agent; in each case in form reasonably satisfactory to the Agent, in its reasonable discretion, together with such supporting documentation, including without limitation corporate authority items, certificates and opinions of counsel, as reasonably required by the Agent. Upon the Agent’s request, Credit Parties shall take, or cause to be taken, such additional steps as are necessary or advisable under applicable law to perfect and ensure the validity and priority of the Liens granted under this Section 7.13.

 

7.14 Accounts

 

. Maintain all deposit accounts and securities accounts of any Credit Party with Agent or a Lender, provided that, with respect to any such accounts maintained with any Lender (other than Agent), such Credit Party (i) shall cause to be executed and delivered an Account Control Agreement in form and substance satisfactory to Agent and (ii) has taken all other steps necessary, or in the opinion of the Agent, desirable to ensure that Agent has a perfected security interest in such account. Notwithstanding the foregoing, until September 5, 2011, OMP shall be permitted to maintain brokerage account number F 81327700 with Thomas Weisal Partners (the “TWP Account”) solely for the purpose of facilitating the Stock Repurchase Program, which account shall not be governed by an Account Control Agreement. On or before September 5, 2011 Borrowers shall close the TWP Account or deliver to Agent a fully executed Account Control Agreement governing the TWP Account.

 

7.15 Inbound Licenses

 

. Prior to entering into or becoming bound by any inbound license agreement: (i) provide written notice to Agent of the material terms of such inbound license agreement with a description of its likely impact on such Borrower’s business or financial condition, and (ii) in good faith use commercially reasonable efforts to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for such Borrower’s interest in such inbound licenses or contract rights to be deemed Collateral and for Agent, for and on behalf of the Lenders, to have a security interest in such licenses or contract rights that might otherwise be restricted by the terms of the applicable license agreement, whether now existing or entered into in the future, provided, however, that such Borrower’s failure to obtain any such consent or waiver shall not constitute a Default under this Agreement. For the purpose of clarity, the parties agree that inbound licenses shall not include commonly available off-the-shelf software programs that are licensed by such Borrower pursuant to “shrink wrap” licenses.

 

7.16 Use of Proceeds

 

. Use all Advances of the Revolving Credit as set forth in Section 2.12 hereof. Borrowers shall not use any portion of the proceeds of any such advances for the purpose of purchasing or carrying any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) in any manner which violates the provisions of Regulation T, U or X of said Board of Governors or for any other purpose in violation of any applicable statute or regulation.

 

  

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7.17 Further Assurances and Information.

 

(a) Take such actions as the Agent or Majority Lenders may from time to time reasonably request to establish and maintain first priority perfected security interests in and Liens on all of the Collateral, subject only to those Liens permitted under Section 8.2 hereof, including executing and delivering such additional pledges, assignments, mortgages, lien instruments or other security instruments covering any or all of the Credit Parties’ assets as Agent may reasonably require, such documentation to be in form and substance reasonably acceptable to Agent, and prepared at the expense of the Borrowers.

 

(b) Execute and deliver or cause to be executed and delivered to Agent within a reasonable time following Agent’s request, and at the expense of the Borrowers, such other documents or instruments as Agent may reasonably require to effectuate more fully the purposes of this Agreement or the other Loan Documents.

 

(c) Provide the Agent and the Lenders with any other information required by Section 326 of the USA Patriot Act or necessary for the Agent and the Lenders to verify the identity of any Credit Party as required by Section 326 of the USA Patriot Act.

 

7.18 Collateral Access Agreements.

 

(a) Borrowers shall furnish, or cause to be furnished to Agent, for the real property locations at 2205 E. Carson Street, Suite B1-B3, Long Beach, CA 90820 and 3760 Kilroy Airport Way, Suites 500 and 610, Long Beach, CA 90806 (i) a true, complete and accurate copy of the fully executed applicable lease, bailment or warehouse agreement, as the case may be; and (ii) a Collateral Access Agreement substantially in the form attached hereto as Exhibit I with respect to each such location.

 

(b) Agent shall not require a Collateral Access Agreement for any real property location (other than as provided in Section 7.18(a)) so long as (i) no Event of Default or Default exists or is continuing, and (ii) all Inventory at such real property location consists solely of Inventory which would be properly classified as “raw materials” or as “finished goods inventory” under and in accordance with GAAP, and any such “finished goods inventory” is shipped from such real property location as soon as practicable after the goods become “finished goods inventory”, such time frame being in the ordinary course of business consistent with past practice with each bulk product supplier or contract manufacturer, but in no event not later than the time period required by the applicable purchase order, product specifications or manufacturing contract; provided, however, for any real property location leased by either Borrower that does not meet these requirements, Borrowers shall furnish, or cause to be furnished to Agent, as soon as possible, but in any event within thirty (30) days after written request by Agent, (i) a true, complete and accurate copy of the fully executed applicable lease, bailment or warehouse agreement, as the case may be, and (ii) a Collateral Access Agreement with respect to such real property location.

 

	
8.  

	
NEGATIVE COVENANTS.

 

Each Borrower covenants and agrees that, so long as any Lender has any commitment to extend credit hereunder, or any of the Indebtedness remains outstanding and unpaid, it will not, 

 

  

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and, as applicable, it will not permit any of its Subsidiaries to without first obtaining the consent of Agent, which consent (so long as Default or Event of Default exists or is continuing) will not be unreasonably withheld or delayed:

 

8.1 Limitation on Debt

 

. Create, incur, assume or suffer to exist any Debt, except:

 

(a) Indebtedness of any Credit Party to Agent and the Lenders under this Agreement and/or the other Loan Documents;

 

(b) any Debt existing on the Effective Date and set forth in Schedule 8.1 attached hereto and any renewals or refinancing of such Debt (provided that (i) the aggregate principal amount of such renewed or refinanced Debt shall not exceed the aggregate principal amount of the original Debt outstanding on the Effective Date (less any principal payments and the amount of any commitment reductions made thereon on or prior to such renewal or refinancing), (ii) the renewal or refinancing of such Debt shall be on substantially the same or better terms as in effect with respect to such Debt on the Effective Date, and shall otherwise be in compliance with this Agreement, and (iii) at the time of such renewal or refinancing no Default or Event of Default has occurred and is continuing or would result from the renewal or refinancing of such Debt;

 

(c) any Debt of such Borrower or any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets, whether pursuant to a loan or a Capitalized Lease provided that both at the time of and immediately after giving effect to the incurrence thereof (i) no Default or Event of Default shall have occurred and be continuing, and (ii) the aggregate amount of all such Debt at any one time outstanding (including, without limitation, any Debt of the type described in this clause (c) which is set forth on Schedule 8.1 hereof) shall not exceed $1,000,000, and any renewals or refinancings of such Debt on terms substantially the same or better than those in effect at the time of the original incurrence of such Debt;

 

(d) Subordinated Debt;

 

(e) Debt under any Hedging Transactions, provided that such transaction is entered into for risk management purposes and not for speculative purposes;

 

(f) Debt arising from judgments or decrees not deemed to be a Default or Event of Default under subsection (g) of Section 9.1; and

 

(g) Debt owing to a Person that is a Credit Party, but only to the extent permitted under Section 8.7 hereof.

 

8.2 Limitation on Liens

 

. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:

 

(a) Permitted Liens;

 

(b) Liens securing Debt permitted by Section 8.1(c), provided that (i) such Liens are created upon fixed or capital assets acquired by the applicable Credit Party after the date of this Agreement (including without limitation by virtue of a loan or a Capitalized Lease), (ii) any such Lien is created solely for the purpose of securing indebtedness representing or incurred to 

 

  

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finance the cost of the acquisition of the item of property subject thereto, (iii) the principal amount of the Debt secured by any such Lien shall at no time exceed 100% of the sum of the purchase price or cost of the applicable property, equipment or improvements and the related costs and charges imposed by the vendors thereof and (iv) the Lien does not cover any property other than the fixed or capital asset acquired; provided, however, that no such Lien shall be created over any owned real property of any Credit Party for which Agent has received a Mortgage or for which such Credit Party is required to execute a Mortgage pursuant to the terms of this Agreement;

 

(c) Liens created pursuant to the Loan Documents; and

 

(d) other Liens, existing on the Effective Date, set forth on Schedule 8.2 and renewals, refinancings and extensions thereof on substantially the same or better terms as in effect on the Effective Date and otherwise in compliance with this Agreement.

 

Regardless of the provisions of this Section 8.2, no Lien over the Equity Interests of any Borrower or any Subsidiary of any Borrower (except for those Liens for the benefit of Agent and the Lenders) shall be permitted under the terms of this Agreement.

 

8.3 Acquisitions

 

. Except for (a) acquisitions permitted under Section 8.7(g) and (b) the acquisition of certain intellectual property rights to technologies described in Schedule 6.9 from Jose Ramirez and/or JR Chem LLC pursuant to the ongoing discussions between the Borrowers and such parties, as described more fully in Schedule 6.9 under the heading “Jose Ramirez and JR,” purchase or otherwise acquire or become obligated for the purchase of all or substantially all or any material portion of the assets or business interests or a division or other business unit of any Person, or any Equity Interest of any Person, or any business or going concern.

 

8.4 Limitation on Mergers, Dissolution or Sale of Assets

 

. Enter into any merger or consolidation or convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, Equity Interests (other than in connection with future public offerings of its Common Stock, or as permitted by its charter or pursuant to any equity incentive plans now or hereafter adopted), receivables and leasehold interests, but excluding sales of its products in the ordinary course of business), whether now owned or hereafter acquired or liquidate, wind up or dissolve, except:

 

(a) Inventory leased or sold in the ordinary course of business;

 

(b) obsolete, damaged, uneconomic or worn out machinery, parts, property or equipment, or property or equipment no longer used or useful in the conduct of the applicable Credit Party’s business;

 

(c) mergers or consolidations of any Subsidiary of a Borrower with or into any Borrower or any Guarantor so long as such Borrower or such Guarantor shall be the continuing or surviving entity; provided that at the time of each such merger or consolidation, both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or result from such merger or consolidation;

 

  

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(d) any Subsidiary of a Borrower may liquidate or dissolve into a Borrower or a Guarantor if Borrowers determine in good faith that such liquidation or dissolution is in the best interests of Borrowers, so long as no Default or Event of Default has occurred and is continuing or would result therefrom;

 

(e) sales or transfers, including without limitation upon voluntary liquidation from any Subsidiary to a Borrower or a Guarantor, provided that the applicable Borrower or Guarantor takes such actions as Agent may reasonably request to ensure the perfection and priority of the Liens in favor of the Lenders over such transferred assets;

 

(f) (i) Asset Sales (exclusive of asset sales permitted pursuant to all other subsections of this Section 8.4) in which the sales price is at least equal to the fair market value of the assets sold and the consideration received is cash or cash equivalents or Debt of any Credit Party being assumed by the purchaser, provided that the aggregate amount of such Asset Sales does not exceed $100,000 in any Fiscal Year and no Default or Event of Default has occurred and is continuing at the time of each such sale (both before and after giving effect to such Asset Sale), and (ii) other Asset Sales approved by the Majority Lenders in their sole discretion;

 

(g) the sale or disposition of Permitted Investments and other cash equivalents in the ordinary course of business;

 

(h) dispositions of owned or leased vehicles in the ordinary course of business; and

 

(i) suspensions or terminations of foreign qualifications so long as such qualifications are no longer required in such jurisdictions in order for Borrowers or any of their Subsidiaries to conduct business.

 

The Lenders hereby consent and agree to the release by Agent of any and all Liens on the property sold or otherwise disposed of in compliance with this Section 8.4.

 

8.5 Restricted Payments

 

. Declare or make any distributions, dividend, payment or other distribution of assets, properties, cash, rights, obligations or securities (collectively, “Distributions”) on account of any of its Equity Interests, as applicable, or purchase, redeem or otherwise acquire for value any of its Equity Interests, as applicable, or any warrants, rights or options to acquire any of its Equity Interests, now or hereafter outstanding (collectively, “Purchases”), except that:

 

(a) at any time prior to August 5, 2011, Obagi may repurchase its Equity Interests with an aggregate purchase or redemption price not to exceed $50,300,000 (the “Stock Repurchase Program”), provided that (i) immediately after giving effect to any such repurchase, Borrowers have, on a consolidated basis, Liquidity of not less than $10,000,000, (ii) such repurchase does not otherwise violate the terms of this Agreement and (iii) no Default or Event of Default has occurred and is continuing at the time of such repurchase or would result from the making of such repurchase;

 

(b) during any Fiscal Year, Borrowers may make Cash distributions and dividends on account of their Equity Interests in an aggregate amount not to exceed twenty five percent (25%) of Net Income of Borrowers for the preceding Fiscal Year of Borrowers;

 

  

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(c) each Credit Party may pay cash Distributions to any Borrower; and

 

(d) each Credit Party may declare and make Distributions payable in the Equity Interests of such Credit Party, provided that the issuance of such Equity Interests does not otherwise violate the terms of this Agreement and no Default or Event of Default has occurred and is continuing at the time of making such Distribution or would result from the making of such Distribution.

 

8.6 Limitation on Capital Expenditures

 

. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for Capital Expenditures, the amount of which in any Fiscal Year shall not exceed $3,000,000 per Fiscal Year for the Borrowers in the aggregate.

 

8.7 Limitation on Investments, Loans and Advances

 

. Make or allow to remain outstanding any Investment (whether such investment shall be of the character of investment in shares of stock, evidences of indebtedness or other securities or otherwise) in, or any loans or advances to, any Person other than:

 

(a) Permitted Investments;

 

(b) Investments existing on the Effective Date and listed on Schedule 8.7 hereof;

 

(c) sales on open account in the ordinary course of business;

 

(d) intercompany loans or intercompany Investments made by Obagi or any of its Subsidiaries to or in any Guarantor or any Borrower; provided that, in the case of any intercompany loans or intercompany Investments made by any Borrower in any Guarantor, the aggregate amount from time to time outstanding in respect thereof shall not exceed $50,000; and provided, further, that in each case, no Default or Event of Default shall have occurred and be continuing at the time of making such intercompany loan or intercompany Investment or result from such intercompany loan or intercompany Investment being made and that any intercompany loans shall be evidenced by and funded under an Intercompany Note pledged to the Agent under the appropriate Collateral Documents;

 

(e) Investments in respect of Hedging Transactions provided that such transaction is entered into for risk management purposes and not for speculative purposes;

 

(f) loans and advances to employees, officers and directors of Obagi or any of its Subsidiaries for moving, entertainment, travel and other similar expenses in the ordinary course of business in the aggregate at any time outstanding;

 

(g) Investments in any joint ventures provided that both at the time of and immediately after giving effect to any such joint venture Investment (i) no Default or Event of Default shall have occurred and be continuing or shall result from the making of such joint venture Investment, (ii) the aggregate Cash amount of all such joint venture Investments during the current Fiscal Year does not exceed $2,000,000 at any time, (iii) the aggregate Equity Interest given by a Borrower in connection with any such joint venture Investment does not exceed twenty percent (20%) of the aggregate amount of such Borrower’s Equity Interest

 

  

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 or joint venturer partner’s outstanding capital stock or other equity securities, and (iv) with respect to any joint venture investment entered into for the purpose of purchasing all or substantially all or any material portion of the assets or business interests or a division or other business unit of any person (each a “Target”), or any equity interest of any Target, such Target has maintained positive net income for the twelve month period immediately preceding (x) the date of such joint venture investment and (y) the date of the purchase of such Target.

 

(h) other Investments not described above provided that both at the time of and immediately after giving effect to any such Investment (i) no Default or Event of Default shall have occurred and be continuing or shall result from the making of such Investment and (ii) the aggregate amount of all such Investments shall not exceed $1,000,000 at any time outstanding.

 

In valuing any Investments for the purpose of applying the limitations set forth in this Section 8.7 (except as otherwise expressly provided herein), such Investment shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation, but less any amount repaid or recovered on account of capital or principal.

 

8.8 Transactions with Affiliates

 

. Except as set forth in Schedule 8.8, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliates of the Credit Parties except: (a) transactions with Affiliates that are the Borrowers or Guarantors; (b) transactions otherwise permitted under this Agreement, including, without limit, the repurchase of Equity Interests from an Affiliate in connection with the Stock Repurchase; and (c) transactions in the ordinary course of a Credit Party’s business and upon fair and reasonable terms no less favorable to such Credit Party than it would obtain in a comparable arms length transaction from unrelated third parties.

 

8.9 Sale-Leaseback Transactions

 

. Enter into any arrangement with any Person providing for the leasing by a Credit Party of real or Personal property which has been or is to be sold or transferred by such Credit Party to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Credit Party, as the case may be.

 

8.10 Limitations on Other Restrictions

 

. Except for this Agreement or any other Loan Document, enter into any agreement, document or instrument which would (i) restrict the ability of any Subsidiary of a Borrower to pay or make dividends or distributions in cash or kind to any Borrower or any Guarantor, to make loans, advances or other payments of whatever nature to any Credit Party, or to make transfers or distributions of all or any part of its assets to any Credit Party; or (ii) restrict or prevent any Credit Party from granting Agent on behalf of Lenders Liens upon, security interests in and pledges of their respective assets, except to the extent such restrictions exist in documents creating Liens permitted by Section 8.2(b) hereunder.

 

8.11 Prepayment of Debt

 

. Make any prepayment (whether optional or mandatory), repurchase, redemption, defeasance or any other payment in respect of any Subordinated Debt.

 

  

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8.12 Amendment of Subordinated Debt Documents

 

. Amend, modify or otherwise alter (or suffer to be amended, modified or altered) the Subordinated Debt Documents except as permitted in the applicable Subordinated Debt Documents and Subordination Agreements, or if no such restrictions exist in the applicable Subordinated Debt Documents or Subordination Agreements, without the prior written consent of the Agent.

 

8.13 Modification of Certain Agreements

 

. Make, permit or consent to any amendment or other modification to the constitutional documents of any Credit Party or any Material Contract except to the extent that any such amendment or modification (i) does not violate the terms and conditions of this Agreement or any of the other Loan Documents, (ii) does not materially adversely affect the interest of the Lenders as creditors and/or secured parties under any Loan Document, (iii) is negotiated and executed in the ordinary course of such Borrower’s business and (iv) could not reasonably be expected to have a Material Adverse Effect; provided, however, that Borrowers shall be entitled to further amend that certain consulting services and confidentiality agreement, dated as of July 18, 2005, as amended, by and among Jose Ramirez and JR Chem LLC, on the one hand, and Obagi, on the other hand, pursuant to the ongoing discussions between the parties to such agreement as described more fully in Schedule 6.9 without the prior consent of Agent.

 

8.14 Management Fees

 

. Pay or otherwise advance, directly or indirectly, any management, consulting or other fees to an Affiliate, other than expense reimbursements and director fees not to exceed $25,000 in the aggregate per calendar year to Stonington Partners (Borrower’s larger stockholder) for attending Board of Director and other committee meetings.

 

8.15 Fiscal Year

 

. Permit the Fiscal Year of any Credit Party to end on a day other than December 31.

 

	
9.  

	
DEFAULTS.

 

9.1 Events of Default

 

. The occurrence of any of the following events shall constitute an Event of Default hereunder:

 

(a) non-payment when due of (i) the principal or interest on the Indebtedness under the Revolving Credit and the Term Loans or (ii) any Reimbursement Obligation or (iii) any Fees;

 

(b) non-payment of any other amounts due and owing by a Borrower under this Agreement or by any Credit Party under any of the other Loan Documents to which it is a party, other than as set forth in subsection (a) above, within three (3) Business Days after the same is due and payable;

 

(c) default in the observance or performance of any of the conditions, covenants or agreements of Borrowers set forth in Sections 7.1, 7.2, 7.4(a) and (e), 7.5, 7.6, 7.7, 7.9, 7.13, 7.14, 7.15, 7.16 or Article 8 in its entirety;

 

(d) default in the observance or performance of any of the other conditions, covenants or agreements set forth in this Agreement or any of the other Loan Documents by any Credit Party and continuance thereof for a period of thirty (30) consecutive days;

 

  

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(e) any representation or warranty made by any Credit Party herein or in any certificate, instrument or other document submitted pursuant hereto proves untrue or misleading in any material adverse respect when made;

 

(f) (i) default by Obagi or any of its Subsidiaries in the payment of any indebtedness for borrowed money, whether under a direct obligation or guaranty (other than Indebtedness hereunder) of Obagi or any of its Subsidiaries in excess of Two Hundred Fifty Thousand Dollars ($250,000) (or the equivalent thereof in any currency other than Dollars) individually or in the aggregate when due and continuance thereof beyond any applicable period of cure and or (ii) failure to comply with the terms of any other obligation of Obagi or any of its Subsidiaries with respect to any indebtedness for borrowed money (other than Indebtedness hereunder) in excess of Two Hundred Fifty Thousand Dollars ($250,000) (or the equivalent thereof in any currency other than Dollars) individually or in the aggregate, which continues beyond any applicable period of cure and which would permit the holder or holders thereto to accelerate such other indebtedness for borrowed money, or require the prepayment, repurchase, redemption or defeasance of such indebtedness;

 

(g) the rendering of any judgment(s) (not covered by adequate insurance from a solvent carrier which is defending such action without reservation of rights) for the payment of money in excess of the sum of Two Hundred Fifty Thousand Dollars ($250,000) (or the equivalent thereof in any currency other than Dollars) individually or in the aggregate against Obagi or any of its Subsidiaries, and such judgments shall remain unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of thirty (30) consecutive days from the date of its entry;

 

(h) the occurrence of (i) a “reportable event”, as defined in ERISA, which is determined by the PBGC to constitute grounds for a distress termination of any Pension Plan subject to Title IV of ERISA maintained or contributed to by or on behalf of Obagi or any of its Subsidiaries for the benefit of any of its employees or for the appointment by the appropriate United States District Court of a trustee to administer such Pension Plan and such reportable event is not corrected and such determination is not revoked within sixty (60) days after notice thereof has been given to the plan administrator of such Pension Plan (without limiting any of Agent’s or any Lender’s other rights or remedies hereunder), or (ii) the termination or the institution of proceedings by the PBGC to terminate any such Pension Plan, or (iii) the appointment of a trustee by the appropriate United States District Court to administer any such Pension Plan, or (iv) the reorganization (within the meaning of Section 4241 of ERISA) or insolvency (within the meaning of Section 4245 of ERISA) of any Multiemployer Plan, or receipt of notice from any Multiemployer Plan that it is in reorganization or insolvency, or the complete or partial withdrawal by Obagi or any of its Subsidiaries from any Multiemployer Plan, which in the case of any of the foregoing, could reasonably be expected to have a Material Adverse Effect;

 

(i) except as expressly permitted under this Agreement, Obagi or any of its Subsidiaries shall be dissolved (other than a dissolution of a Subsidiary of a Borrower which is not a Guarantor or a Borrower) or liquidated (or any judgment, order or decree therefor shall be entered) except as otherwise permitted herein; or if a creditors’ committee shall have been appointed for the business of Obagi or any of its Subsidiaries; or if Obagi or any of its 

 

  

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Subsidiaries shall have made a general assignment for the benefit of creditors or shall have been adjudicated bankrupt and if not an adjudication based on a filing by Obagi or any of its Subsidiaries, it shall not have been dismissed within sixty (60) days, or shall have filed a voluntary petition in bankruptcy or for reorganization or to effect a plan or arrangement with creditors or shall fail to pay its debts generally as such debts become due in the ordinary course of business (except as contested in good faith and for which adequate reserves are made in such party’s financial statements); or shall file an answer to a creditor’s petition or other petition filed against it, admitting the material allegations thereof for an adjudication in bankruptcy or for reorganization; or shall have applied for or permitted the appointment of a receiver or trustee or custodian for any of its property or assets; or such receiver, trustee or custodian shall have been appointed for any of its property or assets (otherwise than upon application or consent of Obagi or any of its Subsidiaries) and shall not have been removed within sixty (60) days; or if an order shall be entered approving any petition for reorganization of Obagi or any of its Subsidiaries and shall not have been reversed or dismissed within sixty (60) days;

 

(j) a Change of Control, unless consented to in writing by Lenders;

 

(k) the validity, binding effect or enforceability of any subordination provisions relating to any Subordinated Debt shall be contested by any Person party thereto (other than any Lender, Agent or Issuing Lender), or such subordination provisions shall fail to be enforceable by Agent and the Lenders in accordance with the terms thereof, or the Indebtedness shall for any reason not have the priority contemplated by this Agreement or such subordination provisions;

 

(l) an event that has a Material Adverse Effect on any Credit Party; or

 

(m) any Loan Document shall at any time for any reason cease to be in full force and effect (other than in accordance with the terms thereof or the terms of any other Loan Document), as applicable, or the validity, binding effect or enforceability thereof shall be contested by any party thereto (other than any Lender, Agent or Issuing Lender), or any Person shall deny that it has any or further liability or obligation under any Loan Document, or any such Loan Document shall be terminated (other than in accordance with the terms thereof or the terms of any other Loan Document), invalidated, revoked or set aside or in any way cease to give or provide to the Lenders and the Agent the benefits purported to be created thereby, or any Loan Document purporting to grant a Lien to secure any Indebtedness shall, at any time after the delivery of such Loan Document, fail to create a valid and enforceable Lien on any Collateral purported to be covered thereby or such Lien shall fail to cease to be a perfected Lien with the priority required in the relevant Loan Document.

 

9.2 Exercise of Remedies

 

. If an Event of Default has occurred and is continuing hereunder: (a) the Agent may, and shall, upon being directed to do so by the Majority Revolving Credit Lenders, declare the Revolving Credit Aggregate Commitment terminated; (b) the Agent may, and shall, upon being directed to do so by the Majority Lenders, declare the entire unpaid principal Indebtedness, including the Notes, immediately due and payable, without presentment, notice or demand, all of which are hereby expressly waived by the Borrowers; (c) upon the occurrence of any Event of Default specified in Section 9.1(i) and notwithstanding the lack of any declaration by Agent under preceding clauses (a) or (b), the entire unpaid principal Indebtedness shall become automatically and immediately due and payable, and the Revolving 

 

  

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Credit Aggregate Commitment shall be automatically and immediately terminated; (d) the Agent shall, upon being directed to do so by the Majority Revolving Credit Lenders, demand immediate delivery of cash collateral, and each Borrower agrees to deliver such cash collateral upon demand, in an amount equal to 110% of the maximum amount that may be available to be drawn at any time prior to the stated expiry of all outstanding Letters of Credit, for deposit into an account controlled by the Agent; (e) the Agent may, and shall, upon being directed to do so by the Majority Lenders, notify Borrowers or any Credit Party that interest shall be payable on demand on all Indebtedness (other than Revolving Credit Advances and Term Loan Advances with respect to which Sections 2.6 and 4.6 hereof shall govern) owing from time to time to the Agent or any Lender, at a per annum rate equal to the then applicable Prime Referenced Rate plus two percent (2%); and (f) the Agent may, and shall, upon being directed to do so by the Majority Lenders or the Lenders, as applicable (subject to the terms hereof), exercise any remedy permitted by this Agreement, the other Loan Documents or law.

 

 

9.3 Rights Cumulative

 

. No delay or failure of Agent and/or Lenders in exercising any right, power or privilege hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other power, right or privilege. The rights of Agent and Lenders under this Agreement are cumulative and not exclusive of any right or remedies which Lenders would otherwise have.

 

9.4 Waiver by Borrowers of Certain Laws

 

. To the extent permitted by applicable law, each Borrower hereby agrees to waive, and does hereby absolutely and irrevocably waive and relinquish the benefit and advantage of any valuation, stay, appraisement, extension or redemption laws now existing or which may hereafter exist, which, but for this provision, might be applicable to any sale made under the judgment, order or decree of any court, on any claim for interest on the Notes, or any security interest or mortgage contemplated by or granted under or in connection with this Agreement. These waivers have been voluntarily given, with full knowledge of the consequences thereof.

 

9.5 Waiver of Defaults

 

. No Event of Default shall be waived by the Lenders except in a writing signed by an officer of the Agent in accordance with Section 13.11 hereof. No single or partial exercise of any right, power or privilege hereunder, nor any delay in the exercise thereof, shall preclude other or further exercise of their rights by Agent or the Lenders. No waiver of any Event of Default shall extend to any other or further Event of Default. No forbearance on the part of the Agent or the Lenders in enforcing any of their rights shall constitute a waiver of any of their rights. Each Borrower expressly agrees that this Section may not be waived or modified by the Lenders or Agent by course of performance, estoppel or otherwise.

 

9.6 Set Off

 

. Upon the occurrence and during the continuance of any Event of Default, each Lender may at any time and from time to time, without notice to Borrowers but subject to the provisions of Section 10.3 hereof (any requirement for such notice being expressly waived by Borrowers), setoff and apply against any and all of the obligations of Borrowers now or hereafter existing under this Agreement, whether owing to such Lender, any Affiliate of such Lender or any other Lender or the Agent, any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Borrowers and any property of Borrowers from time to time in possession of such Lender, irrespective of whether or not such deposits held or indebtedness 

 

  

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owing by such Lender may be contingent and unmatured and regardless of whether any Collateral then held by Agent or any Lender is adequate to cover the Indebtedness. Promptly following any such setoff, such Lender shall give written notice to Agent and Borrowers of the occurrence thereof. Borrowers hereby grant to the Lenders and the Agent a lien on and security interest in all such deposits, indebtedness and property as collateral security for the payment and performance of all of the obligations of Borrowers under this Agreement. The rights of each Lender under this Section 9.6 are in addition to the other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have.

 

	
10.  

	
PAYMENTS, RECOVERIES AND COLLECTIONS.

 

10.1 Payment Procedure.

 

(a) All payments to be made by Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise provided herein, all payments made by the Borrowers of principal, interest or fees hereunder shall be made without setoff or counterclaim on the date specified for payment under this Agreement and must be received by Agent not later than 1:00 p.m. (California time) on the date such payment is required or intended to be made in Dollars in immediately available funds to Agent at Agent’s office located at 75 E Trimble Road, San Jose, CA 95131, for the ratable benefit of the Revolving Credit Lenders in the case of payments in respect of the Revolving Credit and any Letter of Credit Obligations, for the ratable benefit of the Term Loan Lenders in the case of payments in respect of the Term Loan. Any payment received by the Agent after 1:00 p.m. (California time) shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. Upon receipt of each such payment, the Agent shall make prompt payment to each applicable Lender, or, in respect of Eurodollar-based Advances, such Lender’s Eurodollar Lending Office, in like funds and currencies, of all amounts received by it for the account of such Lender.

 

(b) Unless the Agent shall have been notified in writing by Borrowers at least two (2) Business Days prior to the date on which any payment to be made by Borrowers is due that Borrowers do not intend to remit such payment, the Agent may, in its sole discretion and without obligation to do so, assume that Borrowers have remitted such payment when so due and the Agent may, in reliance upon such assumption, make available to each Revolving Credit Lender or Term Loan Lender, as the case may be, on such payment date an amount equal to such Lender’s share of such assumed payment. If Borrowers have not in fact remitted such payment to the Agent, each Lender shall forthwith on demand repay to the Agent the amount of such assumed payment made available or transferred to such Lender, together with the interest thereon, in respect of each day from and including the date such amount was made available by the Agent to such Lender to the date such amount is repaid to the Agent at a rate per annum equal to the Federal Funds Effective Rate for the first two (2) Business Days that such amount remains unpaid, and thereafter at a rate of interest then applicable to such Revolving Credit Advances.

 

(c) Subject to the definition of “Interest Period” in Article 1 of this Agreement, whenever any payment to be made hereunder shall otherwise be due on a day which is not a Business Day, such 

 

  

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payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest, if any, in connection with such payment.

 

(d) All payments to be made by Borrowers under this Agreement or any of the Notes shall be made without setoff or counterclaim, as aforesaid, and, subject to full compliance by each Lender (and each assignee and participant pursuant to Section 13.9) with Section 13.14, without deduction for or on account of any present or future withholding or other taxes of any nature imposed by any governmental authority or of any political subdivision thereof or any federation or organization of which such governmental authority may at the time of payment be a member (other than any taxes on the overall income, net income, net profits or net receipts or similar taxes (or any franchise taxes imposed in lieu of such taxes) on the Agent or any Lender (or any branch maintained by Agent or a Lender) as a result of a present or former connection between the Agent or such Lender and the governmental authority, political subdivision, federation or organization imposing such taxes), unless Borrowers are compelled by law to make payment subject to such tax. In such event, Borrowers shall:

 

	
(i)  

	
pay to the Agent for Agent’s own account and/or, as the case may be, for the account of the Lenders such additional amounts as may be necessary to ensure that the Agent and/or such Lender or Lenders receive a net amount equal to the full amount which would have been receivable had payment not been made subject to such tax; and

 

	
(ii)  

	
remit such tax to the relevant taxing authorities according to applicable law, and send to the Agent or the applicable Lender or Lenders, as the case may be, such certificates or certified copy receipts as the Agent or such Lender or Lenders shall reasonably require as proof of the payment by Borrowers of any such taxes payable by Borrowers.

 

As used herein, the terms “tax”, “taxes” and “taxation” include all taxes, levies, imposts, duties, fees, deductions and withholdings or similar charges together with interest (and any taxes payable upon the amounts paid or payable pursuant to this Section 10.1) thereon. Borrowers shall be reimbursed by the applicable Lender for any payment made by Borrowers under this Section 10.1 if the applicable Lender is not in compliance with its obligations under Section 13.14 at the time of the Borrowers’ payment.

 

10.2 Application of Proceeds of Collateral

 

. Notwithstanding anything to the contrary in this Agreement, in the case of any Event of Default under Section 9.1(i), immediately following the occurrence thereof, and in the case of any other Event of Default: (a) upon the termination of the Revolving Credit Aggregate Commitment, (b) the acceleration of any Indebtedness arising under this Agreement, (c) at the Agent’s option, or (d) upon the request of the Majority Lenders after the commencement of any remedies hereunder, the Agent shall apply the proceeds of any Collateral, together with any offsets, voluntary payments by any Credit Party or others and any other sums received or collected in respect of the Indebtedness first, to pay all incurred and unpaid fees and expenses of the Agent under the Loan Documents and any protective advances made by Agent with respect to the Collateral under or pursuant to the terms of any Loan Document, next, to pay any fees and expenses owed to the Issuing Lender hereunder, next, to the Indebtedness under the Revolving Credit (including any Reimbursement Obligations) and the 

 

  

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Term Loan, on a pro rata basis, next to any obligations owing by any Credit Party under any Hedging Agreements on a pro rata basis, next, to any other Indebtedness on a pro rata basis, and then, if there is any excess, to the Credit Parties, as the case may be.

 

10.3 Pro-rata Recovery

 

. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of principal of, or interest on, any of the Advances made by it, or the participations in Letter of Credit Obligations held by it in excess of its pro rata share of payments then or thereafter obtained by all Lenders upon principal of and interest on all such Indebtedness, such Lender shall purchase from the other Lenders such participations in the Revolving Credit, the Term Loan, and/or the Letter of Credit Obligation held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably in accordance with the applicable Percentages of the Lenders; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

 

10.4 Treatment of a Defaulting Lender.

 

(a) The obligation of any Lender to make any Advance hereunder shall not be affected by the failure of any other Lender to make any Advance under this Agreement, and no Lender shall have any liability to Borrowers or any of their Subsidiaries, the Agent, any other Lender, or any other Person for another Lender’s failure to make any loan or Advance hereunder.

 

(b) If any Lender shall become a Defaulting Lender, then such Defaulting Lender’s right to participate in the administration of the loans, this Agreement and the other Loan Documents, including without limitation any right to vote in respect of any amendment, consent or waiver of the terms of this Agreement or such other Loan Documents, or to direct or approve any action or inaction by the Agent shall be suspended for the entire period that such Lender remains a Defaulting Lender and the stated commitment amounts and outstanding Advances of such Defaulting Lender shall not be included in determining whether all Lenders or the Majority Lender (or any class thereof), as the case may be, have taken or may take any action hereunder (including, without limitation, any action to approve any consent, waiver or amendment to this Agreement or the other Loan Documents); provided, however, that the foregoing shall not permit (i) an increase in such Defaulting Lender’s stated commitment amounts, (ii) the waiver, forgiveness or reduction of the principal amount of any Indebtedness outstanding to such Defaulting Lender (unless all other Lenders affected thereby are treated similarly), (iii) the extension of the final maturity date(s) of such Defaulting Lenders’ portion of any of the loans or other extensions of credit or other obligations of Borrowers owing to such Defaulting Lender, in each case without such Defaulting Lender’s consent, (iv) any other modification which under Section 13.11 requires the consent of all Lenders or the Lender(s) affected thereby which affects the Defaulting Lender differently than the Non-Defaulting Lenders affected by such modification, other than a change to or waiver of the requirements of Section 10.3 which results in a reduction of the Defaulting Lender’s commitment or its share of the Indebtedness on a non pro-rata basis.

 

(c) To the extent and for so long as a Lender remains a Defaulting Lender and notwithstanding the provisions of Section 10.3 hereof, the Agent shall be entitled, without 

 

  

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limitation, (i) to withhold or setoff and to apply in satisfaction of those obligations for payment (and any related interest) in respect of which the Defaulting Lender shall be delinquent or otherwise in default to Agent or any Lender (or to hold as cash collateral for such delinquent obligations or any future defaults) the amounts otherwise payable to such Defaulting Lender under this Agreement or any other Loan Document, (ii) if the amount of Advances made by such Defaulting Lender is less than its Percentage requires, apply payments of principal made by the Borrowers amongst the Non-Defaulting Lenders on a pro rata basis until all outstanding Advances are held by all Lenders according to their respective Percentages and (iii) to bring an action or other proceeding, in law or equity, against such Defaulting Lender in a court of competent jurisdiction to recover the delinquent amounts, and any related interest. Performance by Borrowers of their respective obligations under this Agreement and the other Loan Documents shall not be excused or otherwise modified as a result of the operation of this Section, except to the extent expressly set forth herein and in any event the Borrowers shall not be required to pay any Revolving Credit Facility Fee under Section 2.9 of this Agreement in respect of such Defaulting Lender’s Unfunded Portion of the Revolving Credit for the period during which such Lender is a Defaulting Lender. Furthermore, the rights and remedies of Borrower, the Agent, the Issuing Lender, and the other Lenders against a Defaulting Lender under this section shall be in addition to any other rights and remedies such parties may have against the Defaulting Lender under this Agreement or any of the other Loan Documents, applicable law or otherwise, and the Borrowers waive no rights or remedies against any Defaulting Lender.

 

(d) If any Lender shall become a Defaulting Lender, then, for so long as such Lender remains a Defaulting Lender, any Fronting Exposure shall be reallocated by the Agent at the request of the Issuing Lender among the Non-Defaulting Lenders in accordance with their respective Percentages of the Revolving Credit, but only to the extent that the sum of the aggregate principal amount of all Revolving Credit Advances made by each Non-Defaulting Lender, plus such Non-Defaulting Lender’s Percentage of the aggregate outstanding principal amount of Letter of Credit Obligations prior to giving effect to such reallocation plus such Non-Defaulting Lender’s Percentage of the Fronting Exposure to be reallocated does not exceed such Non- Defaulting Lender’s Percentage of the Revolving Credit Aggregate Commitment, and only so long as no Default or Event of Default has occurred and is continuing on the date of such reallocation.

 

	
11.  

	
CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.

 

11.1 Reimbursement of Prepayment Costs

 

. If (i) Borrowers make any payment of principal with respect to any Eurodollar-based Advance on any day other than the last day of the Interest Period applicable thereto (whether voluntarily, pursuant to any mandatory provisions hereof, by acceleration, or otherwise); (ii) Borrowers convert or refund (or attempt to convert or refund) any such Advance on any day other than the last day of the Interest Period applicable thereto (except as described in Section 2.5(e)); (iii) Borrowers fail to borrow, refund or convert any Eurodollar-based Advance after notice has been given by Borrowers to Agent in accordance with the terms hereof requesting such Advance; or (iv) or if any Borrower fails to make any payment of principal in respect of a Eurodollar-based Advance when due, the Borrowers shall reimburse Agent for itself and/or on behalf of any Lender, as the case may be, within ten (10) 

 

  

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Business Days of written demand therefor for any resulting loss, cost or expense incurred (excluding the loss of any Applicable Margin) by Agent and Lenders, as the case may be, as a result thereof, including, without limitation, any such loss, cost or expense incurred in obtaining, liquidating, employing or redeploying deposits from third parties, whether or not Agent and Lenders, as the case may be, shall have funded or committed to fund such Advance. The amount payable hereunder by Borrowers to Agent for itself and/or on behalf of any Lender, as the case may be, shall be deemed to equal an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, refunded or converted, for the period from the date of such prepayment or of such failure to borrow, refund or convert, through the last day of the relevant Interest Period, at the applicable rate of interest for said Advance(s) provided under this Agreement, over (b) the amount of interest (as reasonably determined by Agent and Lenders, as the case may be) which would have accrued to Agent and Lenders, as the case may be, on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurocurrency market. Calculation of any amounts payable to any Lender under this paragraph shall be made as though such Lender shall have actually funded or committed to fund the relevant Advance through the purchase of an underlying deposit in an amount equal to the amount of such Advance and having a maturity comparable to the relevant Interest Period; provided, however, that any Lender may fund any Eurodollar-based Advance in any manner it deems fit and the foregoing assumptions shall be utilized only for the purpose of the calculation of amounts payable under this paragraph. Upon the written request of Borrowers, Agent and Lenders shall deliver to Borrowers a certificate setting forth the basis for determining such losses, costs and expenses, which certificate shall be conclusively presumed correct, absent manifest error.

 

11.2 Eurodollar Lending Office

 

. For any Eurodollar Advance, if Agent or a Lender, as applicable, shall designate a Eurodollar Lending Office which maintains books separate from those of the rest of Agent or such Lender, Agent or such Lender, as the case may be, shall have the option of maintaining and carrying the relevant Advance on the books of such Eurodollar Lending Office.

 

11.3 Circumstances Affecting LIBOR Rate Availability

 

. If Agent or the Majority Lenders (after consultation with Agent) shall determine in good faith that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars in the applicable amounts are not being offered to the Agent or such Lenders at the applicable LIBOR Rate, then Agent shall forthwith give notice thereof to Borrowers. Thereafter, until Agent notifies Borrowers that such circumstances no longer exist, (i) the obligation of Lenders to make Advances which bear interest at or by reference to the LIBOR Rate, and the right of Borrowers to convert an Advance to or refund an Advance as an Advance which bears interest at or by reference to the LIBOR Rate shall be suspended, (ii) effective upon the last day of each Eurodollar-Interest Period related to any existing Eurodollar-based Advance, each such Eurodollar-based Advance shall automatically be converted into an Advance which bears interest at or by reference to the Prime Referenced Rate (without regard to the satisfaction of any conditions to conversion contained elsewhere herein), and (iii) effective immediately following such notice, each Advance which bears interest at or by reference to the Daily Adjusting LIBOR Rate shall automatically be converted into an Advance which bears interest at or by reference to the Prime Referenced Rate (without regard to the satisfaction of any conditions to conversion contained elsewhere herein).

 

  

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11.4 Laws Affecting LIBOR Rate Availability

 

. If, after the date of this Agreement, the adoption or introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Eurodollar Lending Offices) with any request or directive (whether or not having the force of law) of any such authority, shall make it unlawful or impossible for any of the Lenders (or any of their respective Eurodollar Lending Offices) to honor its obligations hereunder to make or maintain any Advance which bears interest at or by reference to the LIBOR Rate, such Lender shall forthwith give notice thereof to Borrowers and to Agent. Thereafter, (a) the obligations of the applicable Lenders to make Advances which bear interest at or by reference to the LIBOR Rate and the right of Borrowers to convert an Advance into or refund an Advance as an Advance which bears interest at or by reference to the LIBOR Rate shall be suspended and thereafter only the Prime Referenced Rate shall be available, and (b) if any of the Lenders may not lawfully continue to maintain an Advance which bears interest at or by reference to the LIBOR Rate, the applicable Advance shall immediately be converted to an Advance which bears interest at or by reference to the Prime Referenced Rate. For purposes of this Section, a change in law, rule, regulation, interpretation or administration shall include, without limitation, any change made or which becomes effective on the basis of a law, rule, regulation, interpretation or administration presently in force, the effective date of which change is delayed by the terms of such law, rule, regulation, interpretation or administration.

 

11.5 Increased Cost of Advances Carried at the LIBOR Rate

 

. If, after the date of this Agreement, the adoption or introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Eurodollar Lending Offices) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

 

	
  

	
(a)

	
shall subject any of the Lenders (or any of their respective Eurodollar Lending Offices) to any tax, duty or other charge with respect to any Advance or shall change the basis of taxation of payments to any of the Lenders (or any of their respective Eurodollar Lending Offices) of the principal of or interest on any Advance or any other amounts due under this Agreement in respect thereof (except for changes in the rate of tax on the overall net income of any of the Lenders or any of their respective Eurodollar Lending Offices); or

 

	
  

	
(b)

	
shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any of the Lenders (or any of their respective Eurodollar Lending Offices) or shall impose on any of the Lenders (or any of their respective Eurodollar Lending Offices) or the foreign exchange and interbank markets any other condition affecting any Advance;

 

and the result of any of the foregoing matters is to increase the costs to any of the Lenders of maintaining any part of the Indebtedness hereunder as an Advance which bears interest at or by 

 

  

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reference to the LIBOR Rate to reduce the amount of any sum received or receivable by any of the Lenders under this Agreement in respect of an Advance which bears interest at or by reference to the LIBOR Rate, then such Lender shall promptly notify Agent, and Agent shall promptly notify Borrowers of such fact and demand compensation therefor and, within ten (10) Business Days after such notice, Borrowers agree to pay to such Lender or Lenders such additional amount or amounts as will compensate such Lender or Lenders for such increased cost or reduction, provided that each Lender agrees to take any reasonable action, to the extent such action could be taken without cost or administrative or other burden or restriction to such Lender, to mitigate or eliminate such cost or reduction, within a reasonable time after becoming aware of the foregoing matters. Agent will promptly notify Borrowers of any event of which it has knowledge which will entitle Lenders to compensation pursuant to this Section, or which will cause Borrowers to incur additional liability under Section 11.1 hereof, provided that Agent shall incur no liability whatsoever to the Lenders or Borrowers in the event it fails to do so. A certificate of Agent (or such Lender, if applicable) setting forth the basis for determining such additional amount or amounts necessary to compensate such Lender or Lenders shall accompany such demand and shall be conclusively presumed to be correct absent manifest error.

 

11.6 Capital Adequacy and Other Increased Costs.

 

(a) If, after the Effective Date, the adoption or introduction of, or any change in any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to any Lender or Agent, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Lender or Agent with any guideline, request or directive of any such authority (whether or not having the force of law), including any risk based capital guidelines, affects or would affect the amount of capital required to be maintained by such Lender or Agent (or any corporation controlling such Lender or Agent) and such Lender or Agent, as the case may be, determines that the amount of such capital is increased by or based upon the existence of such Lender’s or Agent’s obligations or Advances hereunder and such increase has the effect of reducing the rate of return on such Lender’s or Agent’s (or such controlling corporation’s) capital as a consequence of such obligations or Advances hereunder to a level below that which such Lender or Agent (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender or Agent to be material (collectively, “Increased Costs”), then Agent or such Lender shall notify Borrowers, and thereafter Borrowers shall pay to such Lender or Agent, as the case may be, within ten (10) Business Days of written demand therefor from such Lender or Agent, additional amounts sufficient to compensate such Lender or Agent (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which such Lender or Agent reasonably determines to be allocable to the existence of such Lender’s or Agent’s obligations or Advances hereunder. A statement setting forth the amount of such compensation, the methodology for the calculation and the calculation thereof which shall also be prepared in good faith and in reasonable detail by such Lender or Agent, as the case may be, shall be submitted by such Lender or by Agent to Borrowers, reasonably promptly after becoming aware of any event described in this Section 11.6(a) and shall be conclusively presumed to be correct, absent manifest error.

 

  

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(b) Notwithstanding the foregoing, however, Borrowers shall not be required to pay any increased costs under Sections 11.5, 11.6 or 3.4(c) for any period ending prior to the date that is 180 days prior to the making of a Lender’s initial request for such additional amounts unless the applicable change in law or other event resulting in such increased costs is effective retroactively to a date more than 180 days prior to the date of such request, in which case a Lender’s request for such additional amounts relating to the period more than 180 days prior to the making of the request must be given not more than 180 days after such Lender becomes aware of the applicable change in law or other event resulting in such increased costs.

 

11.7 Right of Lenders to Fund through Branches and Affiliates

 

. Each Lender may, if it so elects, fulfill its commitment as to any Advance hereunder by designating a branch or Affiliate of such Lender to make such Advance; provided that (a) such Lender shall remain solely responsible for the performances of its obligations hereunder and (b) no such designation shall result in any material increased costs to Borrowers.

 

11.8 Margin Adjustment

 

. Adjustments to the Applicable Margins and the Applicable Fee Percentages, based on Schedule 1.1, shall be implemented on a quarterly basis as follows:

 

(a) Such adjustments shall be given prospective effect only, effective as to all Advances outstanding hereunder, the Applicable Fee Percentage and the Letter of Credit Fee, upon the date of delivery of the financial statements under Sections 7.1(a) and 7.1(b) hereunder and the Covenant Compliance Report under Section 7.2(a) hereof, in each case establishing applicability of the appropriate adjustment and in each case with no retroactivity or claw-back. In the event Borrowers shall fail timely to deliver such financial statements or the Covenant Compliance Report and such failure continues for three (3) Business Days, then (but without affecting the Event of Default resulting therefrom) from the date delivery of such financial statements and report was required until such financial statements and report are delivered, the Applicable Margins and Applicable Fee Percentages shall be at the highest level on the Pricing Matrix attached to this Agreement as Schedule 1.1.

 

(b) From the Effective Date until the required date of delivery (or, if earlier, delivery) of the financial statements under Section 7.1(a) or 7.1(b) hereof, as applicable, and the Covenant Compliance Report under Section 7.2(a) hereof, for the fiscal quarter ending December 31, 2010, the Applicable Margins and Applicable Fee Percentages shall be those set forth under the Level II column of the pricing matrix attached to this Agreement as Schedule 1.1. Thereafter, Applicable Margins and Applicable Fee Percentages shall be based upon the quarterly financial statements and Covenant Compliance Reports, subject to recalculation as provided in Section 11.8(a) above.

 

(c) Notwithstanding the foregoing, however, if, prior to the payment and discharge in full (in cash) of the Indebtedness and the termination of any and all commitments hereunder, as a result of any restatement of or adjustment to the financial statements of a Borrower and any of its Subsidiaries (relating to the current or any prior fiscal period) or for any other reason, Agent determines that the Applicable Margin and/or the Applicable Fee Percentages as calculated by Borrowers as of any applicable date of determination were inaccurate in any respect and a proper calculation thereof would have resulted in different pricing for any fiscal period, then (x) if the proper calculation thereof would have resulted in higher pricing for any such period, Borrowers 

 

  

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shall automatically and retroactively be obligated to pay to Agent, promptly upon demand by Agent or the Majority Lenders, an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period and, if the current fiscal period is affected thereby, the Applicable Margin and/or the Applicable Fee Percentages for the current period shall be adjusted based on such recalculation; and (y) if the proper calculation thereof would have resulted in lower pricing for such period, Agent and Lenders shall have no obligation to recalculate such interest or fees or to repay any interest or fees to the Borrowers.

 

	
12.  

	
AGENT.

 

12.1 Appointment of Agent

 

. Each Lender and the holder of each Note (if issued) irrevocably appoints and authorizes the Agent to act on behalf of such Lender or holder under this Agreement and the other Loan Documents and to exercise such powers hereunder and thereunder as are specifically delegated to Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto, including without limitation the power to execute or authorize the execution of financing or similar statements or notices, and other documents. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for any Credit Party.

 

12.2 Deposit Account with Agent or any Lender

 

. Each Borrower authorizes Agent and each Lender, in Agent’s or such Lender’s sole discretion, upon notice to the Borrowers to charge its general deposit account(s), if any, maintained with the Agent or such Lender for the amount of any principal, interest, or other amounts or costs due under this Agreement when the same become due and payable under the terms of this Agreement or the Notes.

 

12.3 Scope of Agent’s Duties

 

. The Agent shall have no duties or responsibilities except those expressly set forth herein, and shall not, by reason of this Agreement or otherwise, have a fiduciary relationship with any Lender (and no implied covenants or other obligations shall be read into this Agreement against the Agent). None of Agent, its Affiliates nor any of their respective directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it or them under this Agreement or any document executed pursuant hereto, or in connection herewith or therewith with the consent or at the request of the Majority Lenders (or all of the Lenders for those acts requiring consent of all of the Lenders) (except for its or their own willful misconduct or gross negligence), nor be responsible for or have any duties to ascertain, inquire into or verify (a) any recitals or warranties made by the Credit Parties or any Affiliate of the Credit Parties, or any officer thereof contained herein or therein, (b) the effectiveness, enforceability, validity or due execution of this Agreement or any document executed pursuant hereto or any security thereunder, (c) the performance by the Credit Parties of their respective obligations hereunder or thereunder, or (d) the satisfaction of any condition hereunder or thereunder, including without limitation in connection with the making of any Advance or the issuance of any Letter of Credit. Agent and its Affiliates shall be entitled to rely upon any certificate, notice, document or other communication (including any cable, telegraph, telex, facsimile transmission or oral communication) believed by it to be genuine and correct and to have been sent or given by or on behalf of a proper Person. Agent may treat the payee of any Note as the holder thereof. Agent may employ agents and may consult with legal 

 

  

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counsel, independent public accountants and other experts selected by it and shall not be liable to the Lenders (except as to money or property received by them or their authorized agents), for the negligence or misconduct of any such agent selected by it with reasonable care or for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

 

12.4 Successor Agent

 

. Agent may resign as such at any time upon at least thirty (30) days prior notice to Borrowers and each of the Lenders. If Agent at any time shall resign or if the office of Agent shall become vacant for any other reason, Majority Lenders shall, by written instrument, appoint successor agent(s) (“Successor Agent”) satisfactory to such Majority Lenders and, so long as no Default or Event of Default has occurred and is continuing, to Borrowers (which approval shall not be unreasonably withheld or delayed); provided, however that any such successor Agent shall be a bank or a trust company or other financial institution which maintains an office in the United States, or a commercial bank organized under the laws of the United States or any state thereof, or any Affiliate of such bank or trust company or other financial institution which is engaged in the banking business, and shall have a combined capital and surplus of at least $500,000,000. Such Successor Agent shall thereupon become the Agent hereunder, as applicable, and Agent shall deliver or cause to be delivered to any successor agent such documents of transfer and assignment as such Successor Agent may reasonably request. If a Successor Agent is not so appointed or does not accept such appointment before the resigning Agent’s resignation becomes effective, the resigning Agent may appoint a temporary successor to act until such appointment by the Majority Lenders and, if applicable, Borrowers, is made and accepted, or if no such temporary successor is appointed as provided above by the resigning Agent, the Majority Lenders shall thereafter perform all of the duties of the resigning Agent hereunder until such appointment by the Majority Lenders and, if applicable, Borrowers, is made and accepted. Such Successor Agent shall succeed to all of the rights and obligations of the resigning Agent as if originally named. The resigning Agent shall duly assign, transfer and deliver to such Successor Agent all moneys at the time held by the resigning Agent hereunder after deducting therefrom its expenses for which it is entitled to be reimbursed hereunder. Upon such succession of any such Successor Agent, the resigning Agent shall be discharged from its duties and obligations, in its capacity as Agent hereunder, except for its gross negligence or willful misconduct arising prior to its resignation hereunder, and the provisions of this Article 12 shall continue in effect for the benefit of the resigning Agent in respect of any actions taken or omitted to be taken by it while it was acting as Agent.

 

12.5 Credit Decisions

 

. Each Lender acknowledges that it has, independently of Agent and each other Lender and based on the financial statements of Borrowers and such other documents, information and investigations as it has deemed appropriate, made its own credit decision to extend credit hereunder from time to time. Each Lender also acknowledges that it will, independently of Agent and each other Lender and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement, any Loan Document or any other document executed pursuant hereto.

 

12.6 Authority of Agent to Enforce This Agreement

 

. Each Lender, subject to the terms and conditions of this Agreement, grants the Agent full power and authority as attorney-in-fact to 

 

  

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institute and maintain actions, suits or proceedings for the collection and enforcement of any Indebtedness outstanding under this Agreement or any other Loan Document and to file such proofs of debt or other documents as may be necessary to have the claims of the Lenders allowed in any proceeding relative to any Credit Party, or their respective creditors or affecting their respective properties, and to take such other actions which Agent considers to be necessary or desirable for the protection, collection and enforcement of the Notes, this Agreement or the other Loan Documents.

 

12.7 Indemnification of Agent

 

. The Lenders agree (which agreement shall survive the expiration or termination of this Agreement) to indemnify the Agent and its Affiliates (to the extent not reimbursed by Borrowers, but without limiting any obligation of Borrowers to make such reimbursement), ratably according to their respective Weighted Percentages, from and against any and all claims, damages, losses, liabilities, costs or expenses of any kind or nature whatsoever (including, without limitation, reasonable fees and expenses of house and outside counsel) which may be imposed on, incurred by, or asserted against the Agent and its Affiliates in any way relating to or arising out of this Agreement, any of the other Loan Documents or the transactions contemplated hereby or any action taken or omitted by the Agent and its Affiliates under this Agreement or any of the Loan Documents; provided, however, that no Lender shall be liable for any portion of such claims, damages, losses, liabilities, costs or expenses resulting from the Agent’s or its Affiliate’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent and its Affiliates promptly upon demand for its ratable share of any reasonable out-of-pocket expenses (including, without limitation, reasonable fees and expenses of house and outside counsel) incurred by the Agent and its Affiliates in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any of the other Loan Documents, to the extent that the Agent and its Affiliates are not reimbursed for such expenses by Borrowers, but without limiting the obligation of Borrowers to make such reimbursement. Each Lender agrees to reimburse the Agent and its Affiliates promptly upon demand for its ratable share of any amounts owing to the Agent and its Affiliates by the Lenders pursuant to this Section, provided that, if the Agent or its Affiliates are subsequently reimbursed by Borrowers for such amounts, they shall refund to the Lenders on a pro rata basis the amount of any excess reimbursement. If the indemnity furnished to the Agent and its Affiliates under this Section shall become impaired as determined in the Agent’s reasonable judgment or Agent shall elect in its sole discretion to have such indemnity confirmed by the Lenders (as to specific matters or otherwise), Agent shall give notice thereof to each Lender and, until such additional indemnity is provided or such existing indemnity is confirmed, the Agent may cease, or not commence, to take any action. Any amounts paid by the Lenders hereunder to the Agent or its Affiliates shall be deemed to constitute part of the Indebtedness hereunder.

 

12.8 Knowledge of Default

 

. It is expressly understood and agreed that the Agent shall be entitled to assume that no Default or Event of Default has occurred and is continuing, unless the officers of the Agent immediately responsible for matters concerning this Agreement shall have received a written notice from a Lender or a Borrower specifying such Default or Event of Default and stating that such notice is a “notice of default”. Upon receiving such a notice, the Agent shall promptly notify each Lender of such Default or Event of Default and provide each Lender with a copy of such notice and shall endeavor to provide such notice to the Lenders 

 

  

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within three (3) Business Days (but without any liability whatsoever in the event of its failure to do so). The Agent shall also furnish the Lenders, promptly upon receipt, with copies of all other notices or other information required to be provided by Borrowers hereunder.

 

12.9 Agent’s Authorization; Action by Lenders

 

. Except as otherwise expressly provided herein, whenever the Agent is authorized and empowered hereunder on behalf of the Lenders to give any approval or consent, or to make any request, or to take any other action on behalf of the Lenders (including without limitation the exercise of any right or remedy hereunder or under the other Loan Documents), the Agent shall be required to give such approval or consent, or to make such request or to take such other action only when so requested in writing by the Majority Lenders or the Lenders, as applicable hereunder. Action that may be taken by the Majority Lenders, any other specified Percentage of the Lenders or all of the Lenders, as the case may be (as provided for hereunder) may be taken (i) pursuant to a vote of the requisite percentages of the Lenders as required hereunder at a meeting (which may be held by telephone conference call), provided that Agent exercises good faith, diligent efforts to give all of the Lenders reasonable advance notice of the meeting, or (ii) pursuant to the written consent of the requisite percentages of the Lenders as required hereunder, provided that all of the Lenders are given reasonable advance notice of the requests for such consent.

 

12.10 Enforcement Actions by the Agent

 

. Except as otherwise expressly provided under this Agreement or in any of the other Loan Documents and subject to the terms hereof, Agent will take such action, assert such rights and pursue such remedies under this Agreement and the other Loan Documents as the Majority Lenders or all of the Lenders, as the case may be (as provided for hereunder), shall direct; provided, however, that the Agent shall not be required to act or omit to act if, in the reasonable judgment of the Agent, such action or omission may expose the Agent to personal liability for which Agent has not been satisfactorily indemnified hereunder or is contrary to this Agreement, any of the Loan Documents or applicable law. Except as expressly provided above or elsewhere in this Agreement or the other Loan Documents, no Lender (other than the Agent, acting in its capacity as agent) shall be entitled to take any enforcement action of any kind under this Agreement or any of the other Loan Documents.

 

12.11 Collateral Matters.

 

(a) The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Collateral Documents which may be necessary to perfect and maintain a perfected security interest in and Liens upon the Collateral granted pursuant to the Loan Documents.

 

(b) The Lenders irrevocably authorize the Agent, in its reasonable discretion, to the full extent set forth in the post amble to Section 12.10 hereof, (1) to release or terminate any Lien granted to or held by the Agent upon any Collateral (a) upon termination of the Revolving Credit Aggregate Commitment and payment in full of all Indebtedness payable under this Agreement and under any other Loan Document; (b) constituting property (including, without limitation, Equity Interests in any Person) sold or to be sold or disposed of as part of or in connection with any disposition (whether by sale, by merger or by any other form of transaction and including the 

 

  

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property of any Subsidiary that is disposed of as permitted hereby) permitted in accordance with the terms of this Agreement; (c) constituting property in which a Credit Party owned no interest at the time the Lien was granted or at any time thereafter; or (d) if approved, authorized or ratified in writing by the Majority Lenders, or all the Lenders, as the case may be, as provided in Section 13.11; (2) to subordinate the Lien granted to or held by Agent on any Collateral to any other holder of a Lien on such Collateral which is permitted by Section 8.2(b) hereof; and (3) if all of the Equity Interests held by the Credit Parties in any Person are sold or otherwise transferred to any transferee other than a Borrower or a Subsidiary of a Borrower as part of or in connection with any disposition (whether by sale, by merger or by any other form of transaction) permitted in accordance with the terms of this Agreement, to release such Person from all of its obligations under the Loan Documents (including, without limitation, under any Guaranty). Upon request by the Agent at any time, the Lenders will confirm in writing the Agent’s authority to release particular types or items of Collateral pursuant to this Section 12.11(b).

 

12.12 Agents in their Individual Capacities

 

. Comerica Bank and its Affiliates, successors and assigns shall each have the same rights and powers hereunder as any other Lender and may exercise or refrain from exercising the same as though such Lender were not the Agent. Comerica Bank and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, and generally engage in any kind of banking, trust, financial advisory or other business with the Credit Parties as if such Lender were not acting as the Agent hereunder, and may accept fees and other consideration therefor without having to account for the same to the Lenders.

 

12.13 Agent’s Fees

 

. Until the Indebtedness has been repaid and discharged in full and no commitment to extend any credit hereunder is outstanding, Borrowers shall pay to the Agent, as applicable, any agency or other fee(s) set forth (or to be set forth from time to time) in any applicable fee letter on the terms set forth therein. The agency fees referred to in this Section 12.13 shall not be refundable under any circumstances.

 

12.14 Documentation Agent or other Titles

 

. Any Lender identified on the facing page or signature page of this Agreement or in any amendment hereto or as designated with consent of the Agent in any assignment agreement as Lead Arranger, Documentation Agent, Syndications Agent or any similar titles, shall not have any right, power, obligation, liability, responsibility or duty under this Agreement as a result of such title other than those applicable to all Lenders as such. Without limiting the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary relationship with any Lender as a result of such title. Each Lender acknowledges that it has not relied, and will not rely, on the Lender so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

 

12.15 No Reliance on Agent’s Customer Identification Program.

 

(a) Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may relay on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of 

 

  

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the following items relating to or in connection with a Borrower or any of its Subsidiaries, any of their respective Affiliates or agents, the Loan Documents or the transactions hereunder: (i) any identify verification procedures, (ii) any record keeping, (iii) any comparisons with government lists, (iv) any customer notices or (v) any other procedures required under the CIP Regulations or such other laws.

 

(b) Each Lender or assignee or participant of a Lender that is not organized under the laws of the United States or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and certifying to other matters as required by Section 313 of the USA Patriot Act and the applicable regulations: (x) within 10 days after the Effective Date, and (y) at such other times as are required under the USA Patriot Act.

 

	
13.  

	
MISCELLANEOUS.

 

13.1 Accounting Principles

 

. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done, unless otherwise specified herein, in accordance with GAAP.

 

13.2 Consent to Jurisdiction

 

. The Borrowers, the Agent and Lenders hereby irrevocably submit to the non-exclusive jurisdiction of any United States Federal Court or California state court sitting in the County of Santa Clara, California in any action or proceeding arising out of or relating to this Agreement or any of the Loan Documents and the Borrowers, Agent and Lenders hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in any such United States Federal Court or California state court. Each Borrower irrevocably consents to the service of any and all process in any such action or proceeding brought in any court in or of the State of California by the delivery of copies of such process to it at the applicable addresses specified on the signature page hereto or by certified mail directed to such address or such other address as may be designated by it in a notice to the other parties that complies as to delivery with the terms of Section 13.7. Nothing in this Section shall affect the right of the Lenders and the Agent or Borrowers to serve process in any other manner permitted by law or limit the right of the Lenders or the Agent (or any of them) to bring any such action or proceeding against any Credit Party or any of their property in the courts with subject matter jurisdiction of any other jurisdiction. Each Borrower irrevocably waives any objection to the laying of venue of any such suit or proceeding in the above described courts.

 

13.3 Law of California

 

. This Agreement, the Notes and, except where otherwise expressly specified therein to be governed by local law, the other Loan Documents shall be governed by and construed and enforced in accordance with the laws of the State of California (without regard to its conflict of laws provisions). Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law,

 

  

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 but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

13.4 Interest

 

. In the event the obligation of Borrowers to pay interest on the principal balance of the Notes or on any other amounts outstanding hereunder or under the other Loan Documents is or becomes in excess of the maximum interest rate which Borrowers are permitted by law to contract or agree to pay, giving due consideration to the execution date of this Agreement, then, in that event, the rate of interest applicable thereto with respect to such Lender’s applicable Percentages shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not of interest.

 

13.5 WAIVER OF JURY TRIAL

 

. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.

 

(a) In the event that the jury trial waiver contained in this Section 13.5 is not enforceable, the parties elect to proceed as follows:

 

(b) With the exception of the items specified in clause (c), below, any controversy, dispute or claim (each, a “Claim”) between the parties arising out of or relating to this Agreement or any other Loan Document will be resolved by a reference proceeding in California in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to the reference proceeding. Except as otherwise provided in the Agreement, venue for the reference proceeding will be in the state or federal court in the county or district where venue is otherwise appropriate under applicable law (the “Court”).

 

(c) The matters that shall not be subject to a reference are the following: (i) non-judicial foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including, without limitation, set-off), (iii) appointment of a receiver and (iv) temporary, provisional or ancillary remedies (including, without limitation, writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). This Section does not limit the right of any party to exercise or oppose any of the rights and remedies described in clauses (i) and (ii) or to seek or oppose from a court of competent jurisdiction any of the items described in clauses (iii) and (iv). The exercise of, or opposition to, any of those items does not waive the right of any party to a reference pursuant to this Section.

 

  

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(d) The referee shall be a retired judge or justice selected by mutual written agreement of the parties. If the parties do not agree within ten (10) days of a written request to do so by any party, then, upon request of any party, the referee shall be selected by the Presiding Judge of the Court (or his or her representative). A request for appointment of a referee may be heard on an ex parte or expedited basis, and the parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP § 170.6, each party shall have one peremptory challenge to the referee selected by the Presiding Judge of the Court (or his or her representative).

 

(e) The parties agree that time is of the essence in conducting the reference proceedings. Accordingly, the referee shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within fifteen (15) days after the date of selection of the referee, (ii) if practicable, try all issues of law or fact within one hundred twenty (120) days after the date of the conference and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.

 

(f) The referee will have power to expand or limit the amount and duration of discovery. The referee may set or extend discovery deadlines or cutoffs for good cause, including a party’s failure to provide requested discovery for any reason whatsoever. Unless otherwise ordered, no party shall be entitled to “priority” in conducting discovery, depositions may be taken by either party upon seven (7) days written notice, and all other discovery shall be responded to within fifteen (15) days after service. All disputes relating to discovery which cannot be resolved by the parties shall be submitted to the referee whose decision shall be final and binding.

 

(g) Except as expressly set forth in this Section, the referee shall determine the manner in which the reference proceeding is conducted including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the reference proceeding. All proceedings and hearings conducted before the referee, except for trial, shall be conducted without a court reporter, except that when any party so requests, a court reporter will be used at any hearing conducted before the referee, and the referee will be provided a courtesy copy of the transcript. The party making such a request shall have the obligation to arrange for and pay the court reporter. Subject to the referee’s power to award costs to the prevailing party, the parties will equally share the cost of the referee and the court reporter at trial.

 

(h) The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision at the close of the reference proceeding which disposes of all claims of the parties that are the subject of the reference. Pursuant to CCP § 644, such decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court and any such decision will be final, binding and conclusive. The parties reserve the 

 

  

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right to appeal from the final judgment or order or from any appealable decision or order entered by the referee. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

 

(i) If the enabling legislation which provides for appointment of a referee is repealed (and no successor statute is enacted), any dispute between the parties that would otherwise be determined by reference procedure will be resolved and determined by arbitration. The arbitration will be conducted by a retired judge or Justice, in accordance with the California Arbitration Act §1280 through §1294.2 of the CCP as amended from time to time. The limitations with respect to discovery set forth above shall apply to any such arbitration proceeding.

 

(j) THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM WHICH ARISES OUT OF OR IS RELATED TO THE AGREEMENT.

 

13.6 Closing Costs and Other Costs; Indemnification.

 

(a) Borrowers shall pay or reimburse (i) Agent and its Affiliates for payment of, on demand, all reasonable costs and expenses, including, by way of description and not limitation, reasonable in-house and outside attorney fees and advances, appraisal and accounting fees, lien search fees, and required travel costs, incurred by Agent and its Affiliates in connection with the commitment, consummation and closing of the loans contemplated hereby, or in connection with the administration or enforcement of this Agreement or the other Loan Documents (including the obtaining of legal advice regarding the rights and responsibilities of the parties hereto) or any refinancing or restructuring of the loans or Advances provided under this Agreement or the other Loan Documents, or any amendment or modification thereof requested by Borrowers, and (ii) Agent and its Affiliates and each of the Lenders, as the case may be, for all stamp and other taxes and duties payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby, and any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes or duties. Furthermore, all reasonable costs and expenses, including without limitation attorney fees, incurred by Agent and its Affiliates and, after the occurrence and during the continuance of an Event of Default, by the Lenders in revising, preserving, protecting, exercising or enforcing any of its or any of the Lenders’ rights against Borrowers or any other Credit Party, or otherwise incurred by Agent and its Affiliates and the Lenders in connection with any Event of Default or the enforcement of the loans (whether incurred through negotiations, legal proceedings or otherwise), including by way of description and not limitation, such charges in any court or bankruptcy proceedings or arising out of any claim or action by any Person against Agent, its Affiliates, or any Lender which would not have been asserted were it not for Agent’s or such Affiliate’s or Lender’s relationship with 

 

  

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Borrowers hereunder or otherwise, shall also be paid by Borrowers. All of said amounts required to be paid by Borrowers hereunder and not paid forthwith upon demand, as aforesaid, shall bear interest, from the date incurred to the date payment is received by Agent, at the Prime Referenced Rate, plus two percent (2%).

 

(b) Borrowers agree to indemnify and hold Agent and each of the Lenders (and their respective Affiliates) harmless from all loss, cost, damage, liability or expenses, including reasonable house and outside attorneys’ fees and disbursements (but without duplication of such fees and disbursements for the same services), incurred by Agent and each of the Lenders by reason of an Event of Default, or enforcing the obligations of any Credit Party under this Agreement or any of the other Loan Documents, as applicable, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or connected with this Agreement or any of the Loan Documents, excluding, however, any loss, cost, damage, liability or expenses to the extent arising as a result of the gross negligence or willful misconduct of the party seeking to be indemnified under this Section 13.6(b), provided that, the Borrowers shall be obligated to reimburse Agent and the Lenders for only a single financial consultant selected by Agent in consultation with the Lenders.

 

Borrowers agree to defend, indemnify and hold harmless Agent and each Lender (and their respective Affiliates), and their respective employees, agents, officers and directors from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature (including without limitation, reasonable attorneys and consultants fees, investigation and laboratory fees, environmental studies required by Agent or any Lender in connection with the violation of Hazardous Material Laws), court costs and litigation expenses, arising out of or related to (i) the presence, use, disposal, release or threatened release of any Hazardous Materials on, from or affecting any premises owned or occupied by any Credit Party in violation of or the non-compliance with applicable Hazardous Material Laws, (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, (iii) any lawsuit or other proceeding brought or threatened, settlement reached or governmental order or decree relating to such Hazardous Materials, and/or (iv) complying or coming into compliance with all Hazardous Material Laws (including the cost of any remediation or monitoring required in connection therewith) or any other Requirement of Law; provided, however, that the Borrowers shall have no obligations under this Section 13.6(c) with respect to claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses to the extent arising as a result of the gross negligence or willful misconduct of the Agent or such Lender, as the case may be. The obligations of Borrowers under this Section 13.6(c) shall be in addition to any and all other obligations and liabilities Borrowers may have to Agent or any of the Lenders at common law or pursuant to any other agreement.

 

13.7 Notices.

 

(a) Except as expressly provided otherwise in this Agreement (and except as provided in clause (b) below), all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing and shall be given by personal delivery, by mail, by reputable overnight courier or by facsimile and addressed or delivered to it at its address set forth on Schedule 13.7 or at such other address as may be 

 

  

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designated by such party in a notice to the other parties that complies as to delivery with the terms of this Section 13.7 or posted to an E-System set up by or at the direction of Agent (as set forth below). Any notice, if personally delivered or if mailed and properly addressed with postage prepaid and sent by registered or certified mail, shall be deemed given when received or when delivery is refused; any notice, if given to a reputable overnight courier and properly addressed, shall be deemed given two (2) Business Days after the date on which it was sent, unless it is actually received sooner by the named addressee; and any notice, if transmitted by facsimile, shall be deemed given when received. The Agent may, but, except as specifically provided herein, shall not be required to, take any action on the basis of any notice given to it by telephone, but the giver of any such notice shall promptly confirm such notice in writing, or by facsimile, and such notice will not be deemed to have been received until such confirmation is deemed received in accordance with the provisions of this Section set forth above. If such telephonic notice conflicts with any such confirmation, the terms of such telephonic notice shall control. Any notice given by the Agent or any Lender to the Borrower Representative or any Borrower shall be deemed to be a notice to all of the Credit Parties.

 

(b) Notices and other communications provided to the Agent and the Lenders party hereto under this Agreement or any other Loan Document may be delivered or furnished by electronic communication (including email and Internet or intranet websites) pursuant to procedures approved by the Agent. The Agent or the Borrowers may, in their respective discretion, agree to accept notices and other communications to it hereunder by electronic communications (including email and any E-System) pursuant to procedures approved by it. Unless otherwise agreed to in a writing by and among the parties to a particular communication, (i) notices and other communications sent to an email address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, return email, or other written acknowledgment) and (ii) notices and other communications posted to any E-System shall be deemed received upon the deemed receipt by the intended recipient at its email address as described in the foregoing clause (i) of notification that such notice or other communication is available and identifying the website address therefore.

 

13.8 Further Action

 

. Borrowers, from time to time, upon written request of Agent will make, execute, acknowledge and deliver or cause to be made, executed, acknowledged and delivered, all such further and additional instruments, and take all such further action as may reasonably be required to carry out the intent and purpose of this Agreement or the Loan Documents, and to provide for Advances under and payment of the Notes, according to the intent and purpose herein and therein expressed.

 

13.9 Successors and Assigns; Participations; Assignments.

 

(a) This Agreement shall be binding upon and shall inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns.

 

(b) The foregoing shall not authorize any assignment by Borrowers of its rights or duties hereunder, and, except as otherwise provided herein, no such assignment shall be made (or be effective) without the prior written approval of the Lenders.

 

  

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(c) No Lenders may at any time assign or grant participations in such Lender’s rights and obligations hereunder and under the other Loan Documents except (i) by way of assignment to any Eligible Assignee in accordance with clause (d) of this Section, (ii) by way of a participation in accordance with the provisions of clause (e) of this Section or (iii) by way of a pledge or assignment of a security interest subject to the restrictions of clause (f) of this Section (and any other attempted assignment or transfer by any Lender shall be deemed to be null and void).

 

(d) Each assignment by a Lender of all or any portion of its rights and obligations hereunder and under the other Loan Documents, shall be subject to the following terms and conditions:

 

	
(i)  

	
each such assignment shall be made on a pro rata basis, and shall be in a minimum amount of the lesser of (x) Five Million Dollars ($5,000,000) or such lesser amount as the Agent shall agree and (y) the entire remaining amount of assigning Lender’s aggregate interest in the Revolving Credit (and participations in any outstanding Letters of Credit) and the Term Loans; provided, however, that, after giving effect to such assignment, in no event shall the entire remaining amount (if any) of assigning Lender’s aggregate interest in the Revolving Credit (and participations in any outstanding Letters of Credit) and the Term Loans be less than $5,000,000; and

 

	
(ii)  

	
the parties to any assignment shall execute and deliver to Agent an Assignment Agreement substantially (as determined by Agent) in the form attached hereto as Exhibit E (with appropriate insertions acceptable to Agent), together with a processing and recordation fee in the amount, if any, required as set forth in the Assignment Agreement (provided, however, that such Lender need not deliver an Assignment Agreement in connection with assignments to such Lender’s Affiliates or to a Federal Reserve Bank).

 

Until the Assignment Agreement becomes effective in accordance with its terms, and Agent has confirmed that the assignment satisfies the requirements of this Section 13.9, the Borrowers and the Agent shall be entitled to continue to deal solely and directly with the assigning Lender in connection with the interest so assigned. From and after the effective date of each Assignment Agreement that satisfies the requirements of this Section 13.9, the assignee thereunder shall be deemed to be a party to this Agreement, such assignee shall have the rights and obligations of a Lender under this Agreement and the other Loan Documents (including without limitation the right to receive fees payable hereunder in respect of the period following such assignment) and the assigning Lender shall relinquish its rights and be released from its obligations under this Agreement and the other Loan Documents.

 

Upon request, Borrowers shall execute and deliver to the Agent, new Note(s) payable to the order of the assignee in an amount equal to the amount assigned to the assigning Lender pursuant to such Assignment Agreement, and with respect to the portion of the Indebtedness retained by the assigning Lender, to the extent applicable, new Note(s) payable to the order of 

 

  

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the assigning Lender in an amount equal to the amount retained by such Lender hereunder. The Agent, the Lenders and the Borrowers acknowledge and agree that any such new Note(s) shall be given in renewal and replacement of the Notes issued to the assigning lender prior to such assignment and shall not effect or constitute a novation or discharge of the Indebtedness evidenced by such prior Note, and each such new Note may contain a provision confirming such agreement.

 

(e) The Borrowers and the Agent acknowledge that each of the Lenders may at any time and from time to time, subject to the terms and conditions hereof, grant participations in such Lender’s rights and obligations hereunder (on a pro rata basis only) and under the other Loan Documents to any Person (other than a natural Person or to a Borrower or any of such Borrower’s Affiliates or Subsidiaries); provided that any participation permitted hereunder shall comply with all applicable laws and shall be subject to a participation agreement that incorporates the following restrictions:

 

	
(i)  

	
such Lender shall remain the holder of its Notes hereunder (if such Notes are issued), notwithstanding any such participation;

 

	
(ii)  

	
a participant shall not reassign or transfer, or grant any sub-participations in its participation interest hereunder or any part thereof; and

 

	
(iii)  

	
such Lender shall retain the sole right and responsibility to enforce the obligations of the Credit Parties relating to the Notes and the other Loan Documents, including, without limitation, the right to proceed against any Guarantors, or cause the Agent to do so (subject to the terms and conditions hereof), and the right to approve any amendment, modification or waiver of any provision of this Agreement without the consent of the participant (unless such participant is an Affiliate of such Lender), except for those matters covered by Section 13.9(a) through (e) hereof (provided that a participant may exercise approval rights over such matters only on an indirect basis, acting through such Lender and the Credit Parties, Agent and the other Lenders may continue to deal directly with such Lender in connection with such Lender’s rights and duties hereunder). Notwithstanding the foregoing, however, in the case of any participation granted by any Lender hereunder, the participant shall not have any rights under this Agreement or any of the other Loan Documents against the Agent, any other Lender or any Credit Party; provided, however that the participant may have rights against such Lender in respect of such participation as may be set forth in the applicable participation agreement and all amounts payable by the Credit Parties hereunder shall be determined as if such Lender had not sold such participation. Each such participant shall be entitled to the benefits of Article 10 of this Agreement to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (d) of this Section, provided that no participant shall be entitled to receive any greater amount pursuant to such the provisions of Article 10 than the issuing Lender would have been entitled to receive in respect of the amount of the participation transferred 

 

  

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by such issuing Lender to such participant had no such transfer occurred and each such participant shall also be entitled to the benefits of Section 9.6 hereof as though it were a Lender, provided that such participant agrees to be subject to Section 10.3 hereof as though it were a Lender.

 

 

(f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledge or assignee for such Lender as a party hereto.

 

(g) The Agent shall maintain at its principal office a copy of each Assignment Agreement delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders, the Percentages of such Lenders and the principal amount of each type of Advance owing to each such Lender from time to time. The entries in the Register shall be conclusive evidence, absent manifest error, and the Borrowers, the Agent, and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Advances recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender (but only with respect to any entry relating to such Lender’s Percentages and the principal amounts owing to such Lender) upon reasonable notice to the Agent and a copy of such information shall be provided to any such party on their prior written request. The Agent shall give prompt written notice to the Borrowers of the making of any entry in the Register or any change in such entry.

 

(h) Borrowers authorize each Lender to disclose to any prospective assignee or participant which has satisfied the requirements hereunder, any and all financial information in such Lender’s possession concerning the Credit Parties which has been delivered to such Lender pursuant to this Agreement, provided that each such prospective assignee or participant shall execute a confidentiality agreement consistent with the terms of Section 13.12 hereof or shall otherwise agree to be bound by the terms thereof.

 

(i) Nothing in this Agreement, the Notes or the other Loan Documents, expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their successors and assignees and participants permitted hereunder and thereunder any benefit or any legal or equitable right, remedy or other claim under this Agreement, the Notes or the other Loan Documents.

 

13.10 Counterparts

 

. This Agreement may be executed in several counterparts, and each executed copy shall constitute an original instrument, but such counterparts shall together constitute but one and the same instrument.

 

13.11 Amendment and Waiver

 

. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent and the Majority Lenders (or by the Agent at the written request of the Majority Lenders) or, if this Agreement expressly so requires with respect to the subject matter thereof, by all Lenders (and, with respect to any amendments to this Agreement or the other Loan Documents,

 

  

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 by any Credit Party or the Guarantors that are signatories thereto), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Lender or Lenders affected thereby, do any of the following: (a) increase the stated amount of such Lender’s commitment hereunder, (b) reduce the principal of, or interest on, any outstanding Indebtedness or any Fees or other amounts payable hereunder, (c) postpone any date fixed for any payment of principal of, or interest on, any outstanding Indebtedness or any Fees or other amounts payable hereunder, (d) except as expressly permitted hereunder or under the Collateral Documents, release all or substantially all of the Collateral (provided that neither Agent nor any Lender shall be prohibited thereby from proposing or participating in a consensual or nonconsensual debtor-in-possession or similar financing), or release any material guaranty provided by any Person in favor of Agent and the Lenders, provided, however, that Agent shall be entitled, without notice to or any further action or consent of the Lenders, to release any Collateral which any Credit Party is permitted to sell, assign or otherwise transfer in compliance with this Agreement or the other Loan Documents or release any guaranty to the extent expressly permitted in this Agreement or any of the other Loan Documents (whether in connection with the sale, transfer or other disposition of the applicable Guarantor or otherwise), (e) terminate or modify any indemnity provided to the Lenders hereunder or under the other Loan Documents, except as shall be otherwise expressly provided in this Agreement or any other Loan Document, or (f) change the definitions of “Revolving Credit Percentage”, “Term Loan Percentage”, “Weighted Percentage”, “Interest Periods”, “Majority Lenders”, “Majority Revolving Credit Lenders”, “Majority Term Loan Lenders” Sections 10.2 or 10.3 hereof or this Section 13.11; provided, further, that notwithstanding the foregoing: (A) the definitions of “Eligible Accounts”, “Eligible Inventory” may be changed, and the Revolving Credit Maturity Date may be postponed or extended, only with the consent of all of the Revolving Credit Lenders; (B) the Term Loan Maturity Date may be postponed or extended only with the consent of all the Term Loan Lenders; (C) any amendment or waiver of or consent to any variation from the mandatory prepayment provisions in Section 2.10 of the Agreement may be made with the consent of the Majority Revolving Credit Lenders; (D) no amendment, waiver or consent shall, unless in a writing signed by Issuing Lender affect the rights or duties of Issuing Lender under this Agreement or any of the other Loan Documents; (E) no amendment, waiver, or consent shall, unless in a writing signed by the Agent affect the rights or duties of the Agent under this Agreement or any other Loan Document. All references in this Agreement to “Lenders” or “the Lenders” shall refer to all Lenders, unless expressly stated to refer to Majority Lenders (or the like).

 

The Agent shall, upon the written request of the Borrowers, execute and deliver to the Credit Parties such documents as may be necessary to evidence (1) the release of any Lien granted to or held by the Agent upon any Collateral: (a) upon termination of the Revolving Credit Aggregate Commitment and payment in full of all Indebtedness payable under this Agreement and under any other Loan Document; (b) which constitutes property (including, without limitation, Equity Interests in any Person) sold or to be sold or disposed of as part of or in connection with any disposition (whether by sale, by merger or by any other form of transaction and including the property of any Subsidiary that is disposed of as permitted hereby) permitted in accordance with the terms of this Agreement; (c) which constitutes property in which a Credit Party owned no interest at the time the Lien was granted or at any time thereafter; or (d) if approved, authorized or ratified in writing by the Majority Lenders, or all the Lenders, as 

 

  

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the case may be, as provided in this Section 13.11; or (2) the release of any Person from its obligations under the Loan Documents (including without limitation the Guaranty) if all of the Equity Interests of such Person that were held by a Credit Party are sold or otherwise transferred to any transferee other than a Borrower or a Subsidiary of a Borrower as part of or in connection with any disposition (whether by sale, by merger or by any other form of transaction) permitted in accordance with the terms of this Agreement; provided that (i) Agent shall not be required to execute any such release or subordination agreement under clauses (1) or (2) above on terms which, in the Agent’s opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty or such release shall not in any manner discharge, affect or impair the Indebtedness or any Liens upon any Collateral retained by any Credit Party, including (without limitation) the proceeds of the sale or other disposition, all of which shall constitute and remain part of the Collateral.

 

13.12 Confidentiality

 

. Each Lender agrees that it will not disclose without the prior consent of the Borrowers (other than to its employees, its Subsidiaries, another Lender, an Affiliate of a Lender or to its auditors or counsel) any information with respect to the Credit Parties which is furnished pursuant to this Agreement or any of the other Loan Documents; provided that any Lender may disclose any such information (a) as has become generally available to the public or has been lawfully obtained by such Lender from any third party under no duty of confidentiality to any Credit Party, (b) as may be required or appropriate in any report, statement or testimony submitted to, or in respect to any inquiry, by, any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender, including the Board of Governors of the Federal Reserve System of the United States, the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation, ruling or other requirement of law applicable to such Lender, and (e) to any prospective assignee or participant in accordance with Section 13.9(f) hereof.

 

13.13 Substitution or Removal of Lenders.

 

If (a) the obligation of any Lender to make Eurocurrency-based Advances has been suspended pursuant to Section 11.3 or 11.4, (b) any Lender has demanded compensation under Sections 3.4(c), 11.5 or 11.6 or (c) any Lender has become an Impaired Lender or has not approved an amendment, waiver or other modification of this Agreement, if such amendment, waiver or modification has been approved by the Majority Lenders and the consent of such Lender is required (in each case, an “Affected Lender”), then the Borrower shall have the following rights in addition to any other rights or remedies it may have hereunder.

 

(i) Subject to Section 13.9 hereof, the Borrowers may, with the assistance of the Agent, seek a substitute Lender or Lenders (which may be one or more of the Lenders (the “Purchasing Lender” or “Purchasing Lenders”) to purchase the Advances of the 

 

  

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Revolving Credit and/or the Term Loan, as the case may be and assume the Revolving Credit Aggregate Commitment (including without limitation the participations in Letters of Credit) under this Agreement of such Affected Lender, and require the Affected Lender to sell its Advances of the Revolving Credit and/or the Term Loan, as the case may be, and assign its Revolving Credit Aggregate Commitment to such Purchasing Lender or Purchasing Lenders within two (2) Business Days after receiving notice from the Borrower requiring it to do so, at an aggregate price equal to the outstanding principal amount thereof, plus unpaid interest accrued thereon up to but excluding the date of the sale, payable (in immediately available funds) in cash. In connection with any such sale, and as a condition thereof, the Borrower shall pay to the Affected Lender all fees accrued for its account hereunder to but excluding the date of such sale, plus, if demanded by the Affected Lender within ten (10) Business Days after such sale, (i) the amount of any compensation which would be due to the Affected Lender under Section 11.1 if the Borrower had prepaid the outstanding Eurocurrency-based Advances of the Affected Lender on the date of such sale (unless such Affect Lender is an Impaired Lender, in which case no such compensation shall be due) and (y) any additional compensation accrued for its account under Sections 3.4(c), 11.5 and 11.6 to but excluding said date. Upon such sale, the Purchasing Lender or Purchasing Lenders shall assume the Affected Lender’s commitment, and the Affected Lender shall be released from its obligations hereunder to a corresponding extent. The Affected Lender, as assignor, such Purchasing Lender, as assignee, the Borrower and the Agent, shall enter into an Assignment Agreement pursuant to Section 13.8 hereof, whereupon such Purchasing Lender shall be a Lender party to this Agreement, shall be deemed to be an assignee hereunder and shall have all the rights and obligations of a Lender with a Revolving Credit Percentage equal to its ratable share of the then applicable Revolving Credit Aggregate Commitment and the applicable Percentages of the Term Loan of the Affect Lender, provided, however, that if the Affected Lender does not execute such Assignment Agreement within (2) Business Days of receipt thereof, the Agent may execute the Assignment Agreement as the Affected Lender’s attorney-in-fact. Each of the Lenders hereby irrevocably constitutes and appoints the Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of such Lender or in its own name to execute and deliver an Assignment Agreement while such Lender is an Affected Lender hereunder (such power of attorney to be deemed coupled with an interest and irrevocable). In connection with any assignment pursuant to this Section 13.13, the Borrower or the Purchasing Lender shall pay to the Agent the administrative fee for processing such assignment referred to in Section 13.9; and

 

(ii) With respect to any Affected Lender that is an Impaired Lender, the Borrower may, with the prior written consent of the Agent and notwithstanding Section 10.3 of this Agreement or any other provisions requiring pro rata payments to the Lenders, elect to reduce the Revolving Credit Aggregate Commitment by the amount of the Revolving Credit Aggregate Commitment of such Affected Lender and repay all amounts (both any outstanding Term Loan Advances, subject to clause (iii), below if such Affected Lender is a Defaulting Lender, and any Revolving Credit Advances) owing to such Affected Lender, subject to the following:

 

  

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(1) such Affected Lender shall receive an amount in cash equal to the outstanding principal amount owing to such Affected Lender under this Agreement, plus unpaid interest accrued thereon up to but excluding the date of the repayment. In addition, and as a condition thereof, the Borrower shall pay to the Affected Lender all fees accrued for its account hereunder to but excluding the date of such repayment, plus, if demanded by the Affected Lender within ten (10) Business Days after such repayment, (x) the amount of any compensation which would be due to the Affected Lender under Section 11.1 if the Borrower had prepaid the outstanding Eurocurrency-based Advances of the Affected Lender on the date of such repayment and (y) any additional compensation accrued for its account under Sections 3.4(c), 11.5 and 11.6 to but excluding said date;

 

(2) after giving effect to the reduction in the Revolving Credit Aggregate Commitment and the payments required under subclause (A) above, the Borrower shall have availability, on the date of the repayment, to borrow additional Revolving Credit Advances under the Revolving Credit Aggregate Commitment of at least $500,000 (after taking into account the sum on such date of the outstanding principal amount of all Revolving Credit Advances and Letter of Credit Obligations);

 

(3) the stated dollar commitment of any other Lender is not increased thereby; and

 

(iii) if such Affected Lender is a Defaulting Lender and such Defaulting Lender holds no share of the Revolving Credit Aggregate Commitment, or with respect to which the Borrower has elected to reduce the Revolving Credit Aggregate Commitment of such Defaulting Lender by such Defaulting Lender’s Revolving Credit Percentage in accordance with the foregoing provisions of clause (ii) the Borrower may repay all amounts owing to such Lender in connection with the Term Loan, provided that (A) the Majority Lenders have consented to such payment in writing, (B) after giving effect to any reduction of the Revolving Credit Aggregate Commitment or payments on the Revolving Credit under clause (ii) above and payments on the Term Loan under this clause (iii), the Borrower shall have availability, on the date of the repayment, to borrow additional Revolving Credit Advances under the Revolving Credit Aggregate Commitment of at least $500,000 (after taking into account the sum on such date of the outstanding principal amount of all Revolving Credit Advances, and Letter of Credit Obligations) and (C) the stated dollar commitment of any other Lender is not increased thereby.

 

13.14 Withholding Taxes

 

. If any Lender is not a “united states person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code, such Lender shall promptly (but in any event prior to the initial payment of interest hereunder or prior to its accepting any assignment under Section 13.9 hereof, as applicable) deliver to the Agent two executed copies of (i) Internal Revenue Service Form W-8BEN or any successor form specifying the applicable tax treaty between the United States and the jurisdiction of such Lender’s domicile which provides 

 

  

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for the exemption from withholding on interest payments to such Lender, (ii) Internal Revenue Service Form W-8ECI or any successor form evidencing that the income to be received by such Lender hereunder is effectively connected with the conduct of a trade or business in the United States or (iii) other evidence satisfactory to the Agent that such Lender is exempt from United States income tax withholding with respect to such income; provided, however, that such Lender shall not be required to deliver to Agent the aforesaid forms or other evidence with respect to Advances to Borrowers, if such Lender has assigned its entire interest hereunder (including its Revolving Credit Commitment Amount, any outstanding Advances hereunder and participations in Letters of Credit issued hereunder and any Notes issued to it by Borrowers), to an Affiliate which is incorporated under the laws of the United States or a state thereof, and so notifies the Agent. Such Lender shall amend or supplement any such form or evidence as required to insure that it is accurate, complete and non-misleading at all times. Promptly upon notice from the Agent of any determination by the Internal Revenue Service that any payments previously made to such Lender hereunder were subject to United States income tax withholding when made, such Lender shall pay to the Agent the excess of the aggregate amount required to be withheld from such payments over the aggregate amount actually withheld by the Agent. In addition, from time to time upon the reasonable request and the sole expense of Borrowers, each Lender and the Agent shall (to the extent it is able to do so based upon applicable facts and circumstances), complete and provide Borrowers with such forms, certificates or other documents as may be reasonably necessary to allow Borrowers, as applicable, to make any payment under this Agreement or the other Loan Documents without any withholding for or on the account of any tax under Section 10.1(d) hereof (or with such withholding at a reduced rate), provided that the execution and delivery of such forms, certificates or other documents does not adversely affect or otherwise restrict the rights and benefits (including without limitation economic benefits) available to such Lender or the Agent, as the case may be, under this Agreement or any of the other Loan Documents, or under or in connection with any transactions not related to the transactions contemplated hereby.

 

13.15 Taxes and Fees

 

. Should any tax (other than as a result of a Lender’s failure to comply with Section 13.14 or a tax based upon the net income or capitalization of any Lender or the Agent by any jurisdiction where a Lender or the Agent is or has been located), or recording or filing fee become payable in respect of this Agreement or any of the other Loan Documents or any amendment, modification or supplement hereof or thereof, Borrowers agree to pay the same, together with any interest or penalties thereon arising from any Borrower’s actions or omissions, and agrees to hold the Agent and the Lenders harmless with respect thereto provided, however, that Borrowers shall not be responsible for any such interest or penalties which were incurred prior to the date that notice is given to the Credit Parties of such tax or fees. Notwithstanding the foregoing, nothing contained in this Section 13.15 shall affect or reduce the rights of any Lender or the Agent under Section 11.5 hereof.

 

13.16 USA Patriot Act Notice

 

. Pursuant to Section 326 of the USA Patriot Act, the Agent and the Lenders hereby notify the Credit Parties that if they or any of their Subsidiaries open an account, including any loan, deposit account, treasury management account, or other extension of credit with Agent or any Lender, the Agent or the applicable Lender will request the applicable Person’s name, tax identification number, business address and other information necessary to identify such Person (and may request such Person’s organizational documents or 

 

  

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other identifying documents) to the extent necessary for the Agent and the applicable Lender to comply with the USA Patriot Act.

 

13.17 Complete Agreement; Conflicts

 

. This Agreement, the Notes (if issued), any Requests for Revolving Credit Advance and Term Loan Rate Requests, and the Loan Documents contain the entire agreement of the parties hereto, superseding all prior agreements, discussions and understandings relating to the subject matter hereof, and none of the parties shall be bound by anything not expressed in writing. In the event of any conflict between the terms of this Agreement and the other Loan Documents, this Agreement shall govern.

 

13.18 Severability

 

. In case any one or more of the obligations of the Credit Parties under this Agreement, the Notes or any of the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining obligations of the Credit Parties shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality or enforceability of the obligations of the Credit Parties under this Agreement, the Notes or any of the other Loan Documents in any other jurisdiction.

 

13.19 Table of Contents and Headings; Section References

 

. The table of contents and the headings of the various subdivisions hereof are for convenience of reference only and shall in no way modify or affect any of the terms or provisions hereof and references herein to “sections,” “subsections,” “clauses,” “paragraphs,” “subparagraphs,” “exhibits” and “schedules” shall be to sections, subsections, clauses, paragraphs, subparagraphs, exhibits and schedules, respectively, of this Agreement unless otherwise specifically provided herein or unless the context otherwise clearly indicates.

 

13.20 Construction of Certain Provisions

 

. If any provision of this Agreement or any of the Loan Documents refers to any action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, whether or not expressly specified in such provision.

 

13.21 Independence of Covenants

 

. Each covenant hereunder shall be given independent effect (subject to any exceptions stated in such covenant) so that if a particular action or condition is not permitted by any such covenant (taking into account any such stated exception), the fact that it would be permitted by an exception to, or would be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default.

 

13.22 Electronic Transmissions.

 

(a) Each of the Agent, the Credit Parties, the Lenders, and each of their Affiliates is authorized (but not required) to transmit, post or otherwise make or communicate, in its sole discretion, Electronic Transmissions in connection with any Loan Document and the transactions contemplated therein. The Borrowers and each other Credit Party hereby acknowledges and agrees that the use of Electronic Transmissions is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure and abuse and each indicates 

 

  

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it assumes and accepts such risks by hereby authorizing the transmission of Electronic Transmissions.

 

(b) All uses of an E-System shall be governed by and subject to, in addition to Section 13.7 and this Section 13.22, separate terms and conditions posted or referenced in such E-System and related contractual obligations executed by the Agent, the Credit Parties and the Lenders in connection with the use of such E-System.

 

(c) All E-Systems and Electronic Transmissions shall be provided “as is” and “as available”. None of the Agent or any of its Affiliates warrants the accuracy, adequacy or completeness of any E-Systems or Electronic Transmission, and each disclaims all liability for errors or omissions therein. No warranty of any kind is made by the Agent or any of its Affiliates in connection with any E Systems or Electronic Transmission, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects. The Agent, the Credit Parties and the Lenders agree that the Agent has no responsibility for maintaining or providing any equipment, software, services or any testing required in connection with any Electronic Transmission or otherwise required for any E-System.

 

13.23 Advertisements

 

. The Agent and the Lenders may disclose the names of the Credit Parties and the existence of the Indebtedness in general advertisements and trade publications.

 

13.24 Reliance on and Survival of Provisions

 

. All terms, covenants, agreements, representations and warranties of the Credit Parties to any of the Loan Documents made herein or in any of the Loan Documents or in any certificate, report, financial statement or other document furnished by or on behalf of any Credit Party in connection with this Agreement or any of the Loan Documents shall be deemed to have been relied upon by the Lenders, notwithstanding any investigation heretofore or hereafter made by any Lender or on such Lender’s behalf, and those covenants and agreements of the Borrowers set forth in Section 13.6 hereof (together with any other indemnities of any Credit Party contained elsewhere in this Agreement or in any of the other Loan Documents) and of Lenders set forth in Section 12.7 hereof shall survive the repayment in full of the Indebtedness and the termination of any commitment to extend credit.

 

13.25 Joint and Several Liability.

 

(a) Each of the Borrowers acknowledges and agrees that it is the intent of the parties that each such Borrower be primarily liable for the obligations as a joint and several obligor. It is the intention of the parties that with respect to liability of any Borrower hereunder arising solely by reason of its being jointly and severally liable for Advances and other extensions of credit taken by Borrowers, the obligations of such Borrower shall be absolute, unconditional and irrevocable irrespective of:

 

	
(i)  

	
any lack of validity, legality or enforceability of this Agreement or any Note as to any Borrower, as the case may be;

 

	
(ii)  

	
the failure of any Lender or any holder of any Note:

 

  

102

  

	
  

	
(a)

	
to enforce any right or remedy against any Borrower, as the case may be, or any other Person (including any Guarantor) under the provisions of this Agreement, such Note, or otherwise, or

 

	
  

	
(b)

	
to exercise any right or remedy against any guarantor of, or collateral securing, any obligations;

 

	
(iii)  

	
any change in the time, manner or place of payment of, or in any other term of, all or any of the Indebtedness, or any other extension, compromise or renewal of any Indebtedness;

 

	
(iv)  

	
any reduction, limitation, impairment or termination of any Indebtedness with respect to any Borrower, as the case may be, for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each of the Borrowers hereby waives any right to or claim of) any defense (other than the defense of payment in full of the Indebtedness) or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Indebtedness with respect to any Borrower, as the case may be;

 

	
(v)  

	
any addition, exchange, release, surrender or nonperfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any guaranty, held by any Lender or any holder of the Notes securing any of the Indebtedness; or

 

	
(vi)  

	
any other circumstance which might otherwise constitute a defense (other than the defense of payment in full of the Indebtedness) available to, or a legal or equitable discharge of, any Borrower, as the case may be, any surety or any guarantor.

 

(b) Each of the Borrowers agrees that its joint and several liability hereunder shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Indebtedness is rescinded or must be restored by any Lender or any holder of any Note, upon the insolvency, bankruptcy or reorganization of any Borrower, as the case may be, as though such payment had not been made;

 

(c) Each of the Borrowers hereby expressly waives: (i) notice of the Lenders’ acceptance of this Agreement; (ii) notice of the existence or creation or non payment of all or any of the Indebtedness other than notices expressly provided for in this Agreement; (iii) presentment, demand, notice of dishonor, protest, and all other notices whatsoever other than notices expressly provided for in this Agreement; (iv) any claim or defense based on an election of remedies; and (v) all diligence in collection or protection of or realization upon the Indebtedness or any part thereof, any obligation hereunder, or any security for or guaranty of any of the foregoing.

 

  

103

  

(d) No delay on any of the Lenders part in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by any of the Lenders of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. No action of any of the Lenders permitted hereunder shall in any way affect or impair any such Lenders’ rights or any Borrower’s Indebtedness under this Agreement.

 

(e) Each of the Borrowers hereby represents and warrants to each of the Lenders that it now has and will continue to have independent means of obtaining information concerning such Borrower’s affairs, financial condition and business. Lenders shall not have any duty or responsibility to provide any Borrower with any credit or other information concerning such Borrower’s affairs, financial condition or business which may come into the Lenders’ possession.

 

(f) Each of the Borrowers represents and warrants (i) that the business operations of the Borrowers are interrelated and that the business operations of the Borrowers complement one another, and such entities have a common business purpose, and (ii) that, to permit their uninterrupted and continuous operations, such entities now require and will from time to time hereafter require funds and credit accommodations for general business purposes and that (iii) the proceeds of advances under the Revolving Credit, the Term Loan and the other credit facilities extended hereunder will directly or indirectly benefit the Borrowers hereunder, severally and jointly, regardless of which Borrower receives part or all of the proceeds of such Advances.

 

(g) Notwithstanding anything to the contrary contained herein, it is the intention of the Borrowers, Agent and the Lenders that the amount of the respective Borrowers’ obligations hereunder shall be in, but not in excess of, the maximum amount thereof not subject to avoidance or recovery by operation of applicable law governing bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (collectively, “Applicable Insolvency Laws”). To that end, but only in the event and to the extent that the Borrowers’ respective obligations hereunder or any payment made pursuant thereto would, but for the operation of the foregoing proviso, be subject to avoidance or recovery under Applicable Insolvency Laws, the amount of the Borrowers’ respective obligations hereunder shall be limited to the largest amount which, after giving effect thereto, would not, under Applicable Insolvency Laws, render such Borrower’s respective obligations hereunder unenforceable or avoidable or subject to recovery under Applicable Insolvency Laws. To the extent any payment actually made hereunder exceeds the limitation contained in this Section 13.25(g), then the amount of such excess shall, from and after the time of payment by the Borrowers (or any of them), be reimbursed by the Lenders upon demand by such Borrowers. The foregoing proviso is intended solely to preserve the rights of the Agent and the Lenders hereunder against the Borrowers to the maximum extent permitted by Applicable Insolvency Laws and neither any Borrower nor any Guarantor nor any other Person shall have any right or claim under this Section 13.25(g) that would not otherwise be available under Applicable Insolvency Laws.

 

13.26 Amendment and Restatement; Assignment and Assumptions

 

. Except as otherwise set forth herein, this Agreement is intended to and does, effective on the Effective Date, completely amend and restate, without novation, the Prior Credit Agreement.

 

  

104

  

 

[Signatures Follow On Succeeding Page]

 

Detroit_1026630_7

  

105

  

 

WITNESS the due execution hereof as of the day and year first above written.

 

                                                                        

	COMERICA BANK,    

as Administrative Agent

	 	 	 OBAGI MEDICAL PRODUCTS, INC.	 
	By: 	
/s/ JENNIFER S. SETO

	 	By: 	
/s/ PRESTON S. ROMM

	 
	 	
Jennifer S. Seto  

	 	 	
Preston S. Romm

	 
	Its: 	
Vice President

	 	Its: 	
Executive Vice President, Finance,

Operations and Administration &

Chief Financial Officer

	 

         

	
COMERICA BANK,

as a Lender, and as Issuing Lender

	  	  	

OMP, INC.

	  
	By:	/s/ JENNIFER S. SETO	  	
By:

	
/s/ PRESTON S. ROMM

	  
	  	Jennifer S. Seto	  	  	
Preston S. Romm

	  
	Its:	Vice President	  	
Its:

	
Executive Vice President, Finance,

Operations and Administration &

Chief Financial Officer

	  

 

 

 

 

Detroit_1026630_7

  

106

  

EXHIBIT A

 

FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE

 

No.                                     Dated:  _______________

TO:           Comerica Bank (“Agent”)

	
RE:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc.  (each a “Borrower” and collectively,  the “Borrowers”).

 

Pursuant to the terms and conditions of the Credit Agreement, Borrowers hereby request an Advance from Lenders, as described herein:

 

	
(A)  

	
Date of Advance:                                                                           

 

	
(B)  

	
  (check if applicable)

 

This Advance is or includes a whole or partial refunding/conversion of:

 

Advance No(s).                                                                                     

 

	
(C)  

	
Type of Advance (check only one):

 

  Prime Referenced Rate Advance

  Eurodollar-based Advance

	
(D)  

	
Amount of Advance:

 

$_____________________

 

	
(E)  

	
Interest Period (applicable to Eurodollar-based Advances)

 

________ months

 

	
(F)  

	
Disbursement Instructions

 

  Comerica Bank Account No. _________________

  Other:                                                                           

Detroit_1026832_4

  

  

  

Each Borrower certifies to the matters specified in Section 2.3(f) of the Credit Agreement.

 

Capitalized terms used herein, except as defined to the contrary, have the meanings given them in the Credit Agreement.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

Agent Approval:                                                                

 

Detroit_1026832_4

  

  

  

EXHIBIT B

 

FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE

 

$___________________ November 3, 2010

On or before the Revolving Credit Maturity Date, FOR VALUE RECEIVED, OBAGI MEDICAL PRODCUTS, INC. and OMP, INC. (each a “Borrower” and collectively the “Borrowers”) jointly and severally promise to pay to the order of _________________ (“Payee”) at San Jose, California, care of Agent, in lawful money of the United States of America, so much of the sum of ___________________ Dollars ($­­­­­­­­­­­­­_____________), as may from time to time have been advanced by Payee and then be outstanding hereunder pursuant to the Amended and Restated Revolving Credit and Term Loan Agreement made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”), by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”), and Borrowers.  Each of the Revolving Credit Advances made hereunder shall bear interest at the Applicable Interest Rate from time to time applicable thereto under the Credit Agreement or as otherwise determined thereunder, and interest shall be computed, assessed and payable on the unpaid principal amount of each Revolving Credit Advance made by the Payee from the date of such Revolving Credit Advance until paid at the rate and at the times set forth in the Credit Agreement.

 

This Note is a note under which Revolving Credit Advances (including refundings and conversions), repayments and readvances may be made from time to time, but only in accordance with the terms and conditions of the Credit Agreement. This Note evidences borrowings under, is subject to, is secured in accordance with, and may be accelerated or matured under, the terms of the Credit Agreement, to which reference is hereby made. Capitalized terms used herein, except as defined to the contrary, shall have the meanings given them in the Credit Agreement.

 

This Note shall be interpreted and the rights of the parties hereunder shall be determined under the laws of, and enforceable in, the State of California.

 

Each Borrower hereby waives presentment for payment, demand, protest and notice of dishonor and nonpayment of this Note and agrees that no obligation hereunder shall be discharged by reason of any extension, indulgence, release, or forbearance granted by any holder of this Note to any party now or hereafter liable hereon or any present or subsequent owner of any property, real or personal, which is now or hereafter security for this Note.

 

Nothing herein shall limit any right granted Payee by any other instrument or by law.

 

*     *     *

 

[SIGNATURES FOLLOW ON SUCCEEDING PAGE]

 

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This Note amends, restates, supersedes, replaces and reduces that certain Revolving Credit Note dated as of November 21, 2008, made in the principal amount of Twenty Million and 00/110 Dollars ($20,000,000.00) by Borrowers payable to Bank; provided, however, the execution and delivery by Borrowers of this Note shall not, in any manner or circumstance, be deemed to be a novation of or to have terminated, extinguished or discharged any of Borrowers’ indebtedness evidenced by said Note, all of which indebtedness shall continue under and shall hereinafter be evidenced and governed by this Note.

 

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

Detroit_1026832_4

  

  

  

EXHIBIT C

 

FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT

 

TO:           Lenders

	
RE:

	
Issuance of Letter of Credit pursuant to Article 3 of the Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc. (each a “Borrower” and collectively,  the “Borrowers”).

 

	
On

	
, 20__,1 Agent, in accordance with Article 3 of the Credit Agreement, issued its Letter of Credit number

	
, in favor of

	
2 for the account of

	
.3  The face amount of such Letter of Credit is $

	
. The amount of each Lender’s participation in such Letter of Credit is as follows:4

 

____________[Lender]                                                                $                                

____________[Lender]                                                                $                                

____________[Lender]                                                                $                                

____________[Lender]                                                                $                                

This notification is delivered this ____ day of ______________, 201____, pursuant to Section 3.3 of the Credit Agreement. Except as otherwise defined, capitalized terms used herein have the meanings given them in the Credit Agreement.

 

Signed:

COMERICA BANK, as Agent

By:                                                                           

Its:                                                                           

  

	
  

	
1 Date of Issuance

 

  

	
  

	
2 Beneficiary

 

  

	
  

	
3 Name of applicable Borrower

 

  

	
  

	
4 Amounts based on Percentages

 

[This form of Letter of Credit Notice (including footnotes) is subject in all respects to the terms and conditions of the Credit Agreement which shall govern in the event of any inconsistencies or omissions.]

 

Detroit_1026832_4

  

  

  

EXHIBIT D

 

FORM OF TERM LOAN NOTE

 

$_________________                                                                                                            ___________________

 

FOR VALUE RECEIVED, OBAGI MEDICAL PRODCUTS, INC. and OMP, INC. (each a “Borrower” and collectively the “Borrowers”) jointly and severally promise to pay to the order of _______________ (“Payee”) at San Jose, California, care of Agent, so much of the principal sum of Dollars ($________________) as may from time to time during the Term Loan Draw Period have been advanced by the Payee and outstanding at the end of the Term Loan Draw Period, in lawful money of the United States of America, payable in monthly principal installments each in the amount and on the dates set forth in the Credit Agreement (as defined below) until the Term Loan Maturity Date, when the entire unpaid balance of principal and interest thereon shall be due and payable. Interest shall be payable at the rate (including the default rate) and on the dates provided in the Amended and Restated Revolving Credit and Term Loan Agreement made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”), by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”), and Borrowers.  Unless otherwise defined herein or the context otherwise requires, all initially capitalized terms used herein without definition shall have the meanings specified in the Credit Agreement.

 

This Note evidences Term Loan Advances made under, is subject to, may be accelerated and may be prepaid in accordance with, the terms of the Credit Agreement, to which reference is hereby made.

 

This Note shall be interpreted and the rights of the parties hereunder shall be determined under the laws of, and enforceable in, the State of California.

 

Each Borrower hereby waives presentment for payment, demand, protest and notice of dishonor and nonpayment of this Note and agrees that no obligation hereunder shall be discharged by reason of any extension, indulgence, release, or forbearance granted by any holder of this Note to any party now or hereafter liable hereon or any present or subsequent owner of any property, real or personal, which is now or hereafter security for this Note.

 

*     *     *

 

[SIGNATURES FOLLOW ON SUCCEEDING PAGE]

 

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Nothing herein shall limit any right granted Payee by any other instrument or by law.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

 

 

 

Detroit_1026832_4

  

  

  

EXHIBIT E

 

FORM OF ASSIGNMENT AGREEMENT

 

 

Date: _________________

To:           Obagi Medical Products, Inc.

OMP, Inc.

Corporate Headquarters

3760 Kilroy Airport Way

Suite 500

Long Beach, California U.S.A. 90806

and

Comerica Bank (“Agent”)

611 Anton Blvd.

Suite 200

Costa Mesa, CA 92626

	
Re:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc. (each a “Borrower” and collectively,  the “Borrowers”).

 

	
  

	
Ladies and Gentlemen:

 

Reference is made to Section 13.9 of the Credit Agreement. Unless otherwise defined herein or the context otherwise requires, all initially capitalized terms used herein without definition shall have the meanings specified in the Credit Agreement.

 

This Agreement constitutes notice to each of you of the proposed assignment and delegation by  [insert name of assignor] (the “Assignor”) to [insert name of assignee] (the “Assignee”), and, subject to the terms and conditions of the Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, effective on the “Effective Date” (as hereafter defined) that undivided interest in each of Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents in the amounts as set forth on the attached Schedule 1, such that, after giving effect to the foregoing assignment and assumption, and the concurrent assignment by Assignor to Assignee on the date hereof, the Assignee’s interest in the Revolving Credit (and participations in any outstanding Letters of Credit) shall be as set forth in the attached Schedule 2 with respect to the Assignee.

 

The Assignor hereby instructs the Agent to make all payments from and including the Effective Date hereof in respect of the interest assigned hereby, directly to the Assignee. The Assignor and the Assignee agree that all interest and fees accrued up to, but not including, the Effective Date of the assignment and delegation being made hereby are the property of the Assignor, and not the Assignee. The Assignee agrees that, upon receipt of any such interest or fees accrued up to the Effective Date, the Assignee will promptly remit the same to the Assignor.

 

The Assignee hereby confirms that it has received a copy of the Credit Agreement and the exhibits and schedules referred to therein, and all other Loan Documents which it considers necessary, together with copies of the other documents which were required to be delivered under the Credit Agreement as a condition to the making of the loans thereunder.  The Assignee acknowledges and agrees that it: (a) has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had its Percentage been granted and its loans been made directly by such Assignee to the Borrowers without the intervention of the Agent, the Assignor or any other Lender; and (b) has made and will continue to make, independently and without reliance upon the Agent, the Assignor or any other Lender, and based on such documents and information as it has deemed appropriate, its own credit analysis and decisions relating to the Credit Agreement.  The Assignee further acknowledges and agrees that neither the Agent, nor the Assignor has made any representations or warranties about the creditworthiness of the Borrowers or any other party to the Credit Agreement or any other of the Loan Documents, or with respect to the legality, validity, sufficiency or enforceability of the Credit Agreement, or any other of the Loan Documents. This assignment shall be made without recourse to or warranty by the Assignor, except as set forth herein.

 

Assignee represents and warrants that it is a Person to which assignments are permitted pursuant to Section 13.9 of the Credit Agreement.

 

Except as otherwise provided in the Credit Agreement, effective as of the Effective Date:

 

	
  

	
(a)

	
the Assignee: (i) shall be deemed automatically to have become a party to the Credit Agreement and the other Loan Documents, to have assumed all of the Assignor’s obligations thereunder to the extent of the Assignee’s percentage referred to in the second paragraph of this Assignment Agreement, and to have all the rights and obligations of a party to the Credit Agreement and the other Loan Documents, as if it were an original signatory thereto to the extent specified in the second paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement and the other Loan Documents as if it were an original signatory thereto; and

 

	
  

	
(b)

	
the Assignor’s obligations under the Credit Agreement and the other Loan Documents shall be reduced by the percentage referred to in the second paragraph of this Assignment Agreement.

 

As used herein, the term “Effective Date” means the date on which all of the following have occurred or have been completed, as reasonably determined by the Agent:

 

	
(1)  

	
the delivery to the Agent of an original of this Assignment Agreement executed by the Assignor and the Assignee;

 

	
(2)  

	
the payment to the Agent, of all accrued fees, expenses and other items for which reimbursement is then owing under the Credit Agreement;

 

	
(3)  

	
the payment to the Agent of the processing fee referred to in Section 13.9(d)(ii) of the Credit Agreement; and

 

	
(4)  

	
all other restrictions and items noted in Section 13.9 of the Credit Agreement have been completed.

 

The Agent shall notify the Assignor and the Assignee, along with Borrowers, of the Effective Date.

 

The Assignee hereby advises each of you of the following administrative details with respect to the assigned loans:

 

(A)           Address for Notices:

 

Institution Name:

 

Address:

 

Attention:

 

Telephone:

 

Facsimile:

 

(B)           Payment Instructions:

 

(C)           Proposed effective date of assignment.

 

The Assignee has delivered to the Agent (or is delivering to the Agent concurrently herewith) the tax forms referred to in Section 13.14 of the Credit Agreement to the extent required thereunder, and other forms reasonably requested by the Agent. The Assignor has delivered to the Agent (or shall promptly deliver to Agent following the execution hereof), the original of each Note held by the Assignor under the Credit Agreement.

 

The laws of the State of California shall govern the validity, interpretation and enforcement of this Agreement.

 

* * *

 

[SIGNATURES FOLLOW ON SUCCEEDING PAGES]

 

Detroit_1026832_4

  

  

  

Please evidence your consent to and acceptance of the proposed assignment and delegation set forth herein by signing and returning counterparts hereof to the Assignor and the Assignee.

 

[ASSIGNOR]

By:                                                                           

Its:                                                                           

[ASSIGNEE]

By:                                                                           

Its:                                                                           

 

Detroit_1026832_4

  

  

  

ASSIGNMENT AGREEMENT ACCEPTED AND CONSENTED TO

this ______ day of ________________, 201____ BY:

COMERICA BANK, as Agent

By:                                                                

Its:                                                                

OBAGI MEDICAL PRODUCTS, INC.*

By:                                                                           

Preston S. Romm

Its:           Executive Vice President, Finance, Operations and

Administration & Chief Financial Officer

OMP, INC.*

By:                                                                           

Preston S. Romm

Its:           Executive Vice President, Finance, Operations and

Administration & Chief Financial Officer

[*Each Borrower’s consent will be required except as specified in Section 13.9 of the Credit Agreement.]

 

 

[This form of Assignment Agreement (including footnotes) is subject in all respects to the terms and conditions of the Credit Agreement which shall govern in the event of any inconsistencies or omissions.]

 

 

Detroit_1026832_4

  

  

  

EXHIBIT F

 

FORM OF GUARANTY

 

See Attached

 

 

Detroit_1026832_4

  

  

  

EXHIBIT G

 

FORM OF COVENANT COMPLIANCE REPORT

 

TO:           Comerica Bank, as Agent

611 Anton Boulevard

Costa Mesa, CA 92626

Attn: Jennifer S. Seto

	
RE:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc.  (each a “Borrower” and collectively,  the “Borrowers”).

 

This Covenant Compliance Report (“Report”) is furnished pursuant to Section 7.2(a) of the Credit Agreement and sets forth various information as of ________________, 201____ (the “Computation Date”).

 

Reporting Covenants:

	
1.

	
Please indicate compliance status by circling Yes/No/Not Applicable (“N/A”) under the “Complies” column.

	
·REPORTING COVENANTS

	
·REQUIRED

	
·COMPLIES

·

	
· Audited Consolidated F/S (§7.1(a))

	
· Annually, within 90 days

	
·YES

	
·NO

	
·N/A

	
· Unaudited Consolidating F/S, if applicable (§7.1(a))

	
· Annually, within 90 days

	
·YES

	
·NO

	
·N/A

	
· Company Prepared F/S (§7.1(b))

	
· Quarterly, within 45 days

	
·YES

	
·NO

	
·N/A

	
· Compliance Report (§7.2(a))

	
· Quarterly: (i) within 45 days for FQ1, FQ2 and FQ3; and (ii) within 90 days for FQ4

	
·YES

	
·NO

	
·N/A

	
· Annual Projections (§7.2(d))

	
· Annually, within 90 days after FYE

	
·YES

	
·NO

	
·N/A

	
· IP Report (§7.2(f))

	
· Quarterly, within 45 days

	
·YES

	
·NO

	
·N/A

	
· List of IP filings (Security Agreement (§4.1(f)(i))

	
· Monthly, within 7 days

	
·YES

	
·NO

	
·N/A

	
· A/R and A/P Aging (§7.2(e))

	
· Quarterly, within 45 days

	
·YES

	
·NO

	
·N/A

	
· Major Contract Report (§7.2(g))

	
· Quarterly, within 45 days

	
·YES

	
·NO

	
·N/A

Detroit_1026832_4

  

  

  

Financial Covenants:

 

	
2.  

	
Minimum Quick Ratio (§7.9(a)). On the Computation Date, the ratio of (i) the sum of the aggregate Cash of Borrowers plus the aggregate amount of Accounts of Borrowers as of such date, to (ii) current liabilities of Borrowers, which is required to be not less than (a) 1.00 to 1.00 for the fiscal quarters end[ed/ing] September 30, 2010 and December 31, 2010 and (b) 1.25 to 1.00 for the fiscal quarter ending March 30, 2011 and each fiscal quarter thereafter, was __________ to 1.00, as computed in the supporting documents attached hereto as Schedule 1.

 

	
3.  

	
Total Liabilities to Tangible Effective Net Worth (§7.9(b)). On the Computation Date, the ratio of Borrowers’ total liabilities to Tangible Effective Net Worth, which is required to be not more than 2.00 to 1.00, was _____________________ to 1.00, as computed in the supporting documents attached hereto as Schedule 2.

 

	
4.  

	
Minimum EBITDA (§7.9(c)). On the Computation Date, EBITDA for the four fiscal quarter period then ending, which is required to be not less than Twelve Million Dollars ($12,000,000), was $_________________, as computed in the supporting documents attached hereto as Schedule 3.

 

	
5.  

	
Maximum Annual Capital Expenditures (§8.6).  As of the Computation Date, the aggregate Capital Expenditures of Borrowers during the current Fiscal Year, which are required to be not more than $3,000,000 in the aggregate per Fiscal Year, totaled $______________, as computed in the supporting documents attached hereto as Schedule 4.

 

	
6.  

	
Stock Repurchases (§8.5(a)).  On the Computation Date, the aggregate purchase or redemption price of Equity Interests repurchased by Obagi was $________________, which may not exceed $50,300,000 in aggregate. A Default or Event of Default (circle one) was / was not continuing at the time of any such repurchases and a Default or Event of Default (circle one) did / did not result from any such repurchases. Borrowers’ Liquidity at the time of any such repurchases (circle one) was / was not less than $10,000,000.

 

	
7.  

	
Maximum Dividend Distribution (§8.5(b)) On December 31, 201___, the aggregate Cash distributions and dividends paid by Borrowers during such fiscal year then ended was $_____________________, which is required to be not more than 25% of $____________________ (the aggregate Net Income of Borrowers for the fiscal year then ended).

 

	
8.  

	
Joint Venture Investment (§8.7(g)).  On the Computation Date, the aggregate Cash amount of all outstanding joint venture Investments made during the current Fiscal Year was $______________, which Cash amounts may not exceed $2,000,000 in the aggregate during any Fiscal Year. The aggregate Equity Interest given by a Borrower in connection with any joint venture Investment (circle one) did / did not exceed twenty percent (20%) of the aggregate amount of such Borrower’s Equity Interest. A Default or Event of Default (circle one) was / was not continuing at the time a Borrower made any joint venture Investment and a Default or Event of Default (circle one) did / did not result from the making of any such joint venture Investments.  If any joint venture Investment was made to purchase a Target, such Target (circle one) did / did not maintain positive net income for the twelve month period immediately preceding the date of such joint venture Investment and the date of the purchase of such Target.

 

Each Borrower hereby certifies that:

 

A.           To the best of its knowledge, all of the information set forth in this Report (and in any Schedule attached hereto) is true and correct in all material respects.

 

B.           To the best of its knowledge, the representation and warranties of the Credit Parties contained in the Credit Agreement and in the Loan Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and at the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specific date, in which case such representations and warranties were true and correct in all material respects as of the date when made.

 

C.           It has reviewed the Credit Agreement and this Report is based on an examination sufficient to assure that this Report is accurate.

 

D.           To the best of its knowledge, except as stated in Schedule 5 hereto (which shall describe any existing Default or Event of Default and the notice and period of existence thereof and any action taken with respect thereto or contemplated to be taken by such Borrower or any other Credit Party), no Default or Event of Default has occurred and is continuing on the date of this Report.

 

Capitalized terms used in this Report and in the Schedules hereto, unless specifically defined to the contrary, have the meanings given to them in the Credit Agreement.

 

[remainder of page intentionally left blank]

 

 

Detroit_1026832_4

  

  

  

IN WITNESS WHEREOF, Borrowers have caused this Report to be executed and delivered this ____ day of _____________, 201____.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                             

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                             

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

 

 

Detroit_1026832_4

  

  

  

EXHIBIT H

 

FORM OF INTELLECTUAL PROPERTY REPORT

 

To:           Comerica Bank, as Agent

M/C 4770

75 E Trimble Road

San Jose, California 95131

	
Re:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc. (each a “Borrower” and collectively,  the “Borrowers”).

 

This Intellectual Property Report (“Report”) is furnished pursuant to Section 7.2(f) of the Credit Agreement and sets forth various information as of _______________, 201____ (the “Determination Date”).

 

	
1.  

	
As of the Determination Date, and since Borrowers last furnished Agent an Intellectual Property Report, no Borrower has made or filed any applications or registrations in respect of any Intellectual Property Collateral, except as stated in Schedule 1 hereto.

 

	
2.  

	
As of the Determination Date, and since Borrowers last furnished Agent an Intellectual Property Report, there has been no material change in any Borrower’s Intellectual Property Collateral, including but not limited to any subsequent ownership right of a Borrower in or to any Intellectual Property Collateral, except as stated in Schedule 1 hereto.

 

Each Borrower hereby certifies that:

 

A.           To the best of its knowledge, all of the information set forth in this Report (and in any Schedule attached hereto) is true and correct in all material respects.

 

B.           It has reviewed the Credit Agreement and this Report is based on an examination sufficient to assure that this Report is accurate.

 

Capitalized terms used in this Report and in the Schedule hereto, unless specifically defined to the contrary, have the meanings given to them in the Credit Agreement.

 

 

Detroit_1026832_4

  

  

  

IN WITNESS WHEREOF, Borrowers have caused this Report to be executed and delivered this ________ day of ___________________, 201___.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                             

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                             

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

 

Detroit_1026832_4

  

  

  

SCHEDULE 1

Trademarks

 

 

	
· Mark

 

	
· App. No.

 

	
· Reg. No.

 

	
· Filing Date

 

	
· Date Granted

 

	
· Owner

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

Patents

 

 

	
· Title

 

	
· App. No.

 

	
· Reg. No.

 

	
· Filing Date

 

	
· Date Granted

 

	
· Owner

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

Copyrights

 

 

	
· Title

 

	
· Reg. No.

 

	
· Reg. Date

 

	
· Owner

 

	
· 

 

	
· 

 

	
· 

 

	
· 

 

 

Detroit_1026832_4

  

  

  

EXHIBIT I

FORM OF LESSOR’S ACKNOWLEDGMENT

As of __________________, 201____, the undersigned, Lessor, under the terms of a Lease dated, a copy of which is attached hereto (as amended, “Lease”), acknowledges that OMP, INC., Lessee, has or will receive certain credit accommodations from Comerica Bank and the other lenders party to that certain Amended and Restated Revolving Credit and Term Loan Agreement dated November 3, 2010, by and among Comerica Bank, as Agent (“Agent”), the lenders party thereto, Lessee and Obagi Medical Products, Inc. The Lease relates to the real estate commonly known as .

 

Notice — Lessor agrees to notify Agent in writing (at the address specified below or at any other address given by Agent in writing to Lessor) not less than thirty (30) days before commencing any proceedings or otherwise taking any action to terminate the Lease or to enforce its remedies thereunder.

 

Subordination — Lessor agrees that all of Lessee’s machinery, equipment, inventory, fixtures or other property (“Lessee’s Property”) which may be located on the leased premises shall remain the personal property of the Lessee and shall not become a fixture or part of the realty notwithstanding anything that may be implied by law from the mode of attachment, installation or otherwise. Lessor further agrees that any lien or security interest Lessor may claim against any of Lessee’s Property is subordinated to any lien or security interest now or subsequently held by Agent in any of such property.

 

Limited Right of Entry — Lessor acknowledges that, notwithstanding any noncompliance with or default by Lessee under the Lease, the Agent shall have the limited right to enter into and remain in possession of the leased premises for a reasonable period not to exceed ninety (90) consecutive days for the purpose of enforcing its liens and security interests in Lessee’s Property, including the sale and/or detachment and/or removal from the leased premises of such property. Agent shall pay to Lessor, on a weekly basis in advance (pro rata, depending on the number of days Agent is in possession), the current monthly rent accruing under the Lease during the period while Agent is in possession of the leased premises. Agent shall have no responsibility whatsoever for any back rent or other obligations which have accrued under the Lease prior to Agent’s entry into possession under this paragraph.

 

No Assumption — Lessor further agrees that Agent’s rights have been given for security purposes only, and that unless and until Agent agrees expressly and in writing to do so, Agent shall have no obligations whatsoever under the Lease.

 

ADDRESS OF LEASED PREMISES:                                                                                     Lessor:

By:                                                      

Its:                                                      

ACKNOWLEDGMENT OF LESSEE:

OMP, INC.                                                                                     AGENT’S ADDRESS:

Comerica Bank

39200 Six Mile Road

By:                                                                Livonia, Michigan 48152

Preston S. Romm                                                                                     MC 7578

Its:           Executive Vice President, Finance, Operations and                                                                                                Attn:  Manager

Administration & Chief Financial Officer

Detroit_1026832_4

  

  

  

EXHIBIT J

FORM OF REAFFIRMATION OF LOAN DOCUMENTS

This Reaffirmation of Loan Documents is dated as of November 3, 2010 (the “Reaffirmation”) and delivered by the undersigned to Agent (as defined below). Capitalized terms not otherwise defined below shall have the meaning set forth in the Credit Agreement (as defined below).

 

	
1.  

	
Each of the undersigned acknowledges that Obagi Medical Products, Inc. (“Obagi”) and OMP, Inc. (“OMP” and together with Obagi, the “Borrowers” and each individually, a “Borrower”), the financial institutions from time to time signatory thereto (collectively, the “Banks”) and Comerica Bank, as agent for the Banks (in such capacity, the “Agent”), executed that certain Revolving Credit Agreement dated as of November 21, 2008 (as amended, restated or otherwise modified from time to time prior to the date hereof, the “Original Credit Agreement”), and that the Original Credit Agreement has been amended and restated by that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of the date hereof by and among the Borrowers, Agent and Banks (as amended, restated or otherwise modified from time to time, the “Credit Agreement”).

 

	
2.  

	
Each of the undersigned hereby (a) confirms that it has received and reviewed a copy of the Credit Agreement, and (b) reaffirms, ratifies and confirms its obligations, covenants and agreements under each of the Loan Documents to which it is a party, including but not limited to the Loan Documents set forth on Schedule 1 attached hereto (the “Reaffirmed Loan Documents”) and agrees that, after giving effect to the Credit Agreement and the transactions contemplated thereby, such Reaffirmed Loan Documents remain in full force and effect, the undersigned is bound by the terms and conditions of each of the Reaffirmed Loan Documents to which it is a party, and all references in the Reaffirmed Loan Documents to the “Credit Agreement” shall be references to the Credit Agreement as defined herein.

 

	
3.  

	
This Reaffirmation shall be construed in accordance with and governed by the laws of the State of California and may be executed in counterparts as set forth in the Credit Agreement. This Reaffirmation shall be binding upon the undersigned and their respective successors and assigns as set forth in the Credit Agreement.  This Reaffirmation shall be effective as of the date hereof.

 

	
4.  

	
Each of the parties hereto agrees that any copy of this Reaffirmation or any other Loan Document, signed by it and transmitted by facsimile or email, or any other method for delivery shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

 

Detroit_1026832_4

  

  

  

WITNESS, the due execution hereof as of the date and year first above written.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

Detroit_1026832_4

  

  

  

Schedule 1

 

Reaffirmed Loan Documents

 

 

	
1.  

	
Security Agreement dated as of November 21, 2008, among Borrowers and Agent;

 

	
2.  

	
Intellectual Property Security Agreement (Patent) dated as of November 21, 2008, among Borrowers and Agent;

 

	
3.  

	
Intellectual Property Security Agreement (Trademark) dated as of November 21, 2008, among Borrowers and Agent; and

 

	
4.  

	
Intellectual Property Security Agreement (Copyright) dated as of November 21, 2008, among Borrowers and Agent,

 

in each case, as any of the foregoing documents have been amended, restated or otherwise modified from time to time.

 

Detroit_1026832_4

  

  

  

EXHIBIT K

FORM OF REQUEST FOR TERM LOAN ADVANCE

 

No.                                     Dated:  _______________

TO:           Comerica Bank (“Agent”)

	
RE:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc.  (each a “Borrower” and collectively,  the “Borrowers”).

 

Pursuant to the terms and conditions of the Credit Agreement, Borrowers hereby request a Term Loan Advance from Lenders, as described herein:

 

	
(A)  

	
Date of Term Loan Advance:                                                                                                

 

	
(B)  

	
  (check if applicable)

 

This Term Loan Advance is or includes a whole or partial refunding/conversion of:

 

Advance No(s).                                                                                     

 

	
(C)  

	
Type of Term Loan Advance (check only one):

 

  Prime Referenced Rate Advance

  Eurodollar-based Advance

	
(D)  

	
Amount of Term Loan Advance:

 

$_____________________

 

	
(E)  

	
Interest Period (applicable to Eurodollar-based Advances)

 

________ months

 

	
(F)  

	
Disbursement Instructions

 

  Comerica Bank Account No. _________________

  Other:                                                                           

Detroit_1026832_4

  

  

  

Each Borrower certifies to the matters specified in Section 4.4(a)(vi) of the Credit Agreement.

 

Capitalized terms used herein, except as defined to the contrary, have the meanings given them in the Credit Agreement.

 

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

Agent Approval:                                                                

 

Detroit_1026832_4

  

  

  

EXHIBIT L

FORM OF TERM LOAN RATE REQUEST

 

No.___________ Dated: _______________

To:           Comerica Bank, as Agent

	
Re:

	
Amended and Restated Revolving Credit and Term Loan Agreement (“Agreement”) made as of November 3, 2010 (as amended, restated or otherwise modified from time to time, the “Credit Agreement”) by and among the financial institutions from time to time signatory thereto (individually a “Lender,” and any and all such financial institutions collectively the “Lenders”), Comerica Bank, as Administrative Agent for the Lenders (in such capacity, the “Agent”) and Obagi Medical Products, Inc. and OMP, Inc. (each a “Borrower” and collectively,  the “Borrowers”).

 

Pursuant to the Credit Agreement, the Borrowers hereby request that the Lenders refund or convert, as applicable, an Advance under the Term Loan from Lenders as follows:

 

(A)           Date of Refunding or Conversion of Advance:                                                                                                                     

(B)           Type of Activity:

  Refunding

  Conversion

(C)           Type of Advance (check only one):

  Prime Referenced Rate Advance

  Eurodollar-based Advance

(D)           Amount of Advance:

$______________________

 

(E)           Interest Period (applicable to Eurodollar-based Advances)

________ months (insert 1, 2, 3, or 6)

 

(F)           Disbursement Instructions

  Comerica Bank Account No. _________________

  Other:                                                                           

Detroit_1026832_4

  

  

  

Borrowers hereby certify as follows:

 

1.           There is no Default or Event of Default in existence, and none will exist upon the

refunding or conversion of such Advance (both before and immediately after giving effect to such Advance); and

2.           The representations and warranties of the Credit Parties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects and shall be true and correct in all material respects as of the date of this Request (both before and immediately after giving effect to such Request), other than any representation or warranty that expressly speaks only as of a different date.

Capitalized terms used herein, except as defined to the contrary, have the meanings given them in the Credit Agreement.

OBAGI MEDICAL PRODUCTS, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

OMP, INC.

By:                                                                           

Preston S. Romm

	
  

	
Its:

	
Executive Vice President, Finance, Operations and Administration & Chief Financial Officer

 

Detroit_1026832_4ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (“Agreement”) is by and between INX Inc., a Delaware corporation with principal offices at 11757 Katy Freeway, Houston, Texas 77079 (“Company”), and James H. Long, an individual residing at 910 Alkire Lake Drive, Sugar Land, TX  77478 (“Employee”), and is effective November 3, 2010.

 

In consideration of Employee’s continued employment in a new position by Company and any additional compensation or benefits that Company may now or from time to time bestow upon Employee, Employee and Company agree as follows:

 

1. Employment. Company hereby continues to employ Employee subject to the terms hereof, and Employee hereby accepts such employment upon such terms.

 

2. Compensation. Employee shall be compensated by Company during the Term (as hereinafter defined), as set forth in Attachment “A” attached hereto and made a part hereof. Any and all compensation, bonus programs, commission programs and stock incentive programs which are paid or which arise incident to the employment relationship created by this Agreement are discretionary and may be changed from time to time at the sole discretion of Company; provided, however, Employee’s annual Salary, as changed from time to time, shall not be lower than Employee’s Salary in effect at the time the last change is made.

 

3. Duties, Responsibilities.  Employee's employment hereunder shall be in the capacity of Executive Chairman. In such capacity, Employee shall supervise, guide, direct and assist the Company’s Chief Executive Officer, and perform such duties as are prescribed for such office in the Company’s Bylaws and as may from time to time be prescribed by the Company’s Board of Directors. Employee shall perform diligently and to the best of his ability his duties hereunder in accordance with any lawful instructions, rules, regulations or policies made or adopted by the Company’s Board of Directors, including those applicable to the Company’s employees generally. During the Term, Employee shall devote his full time, and best efforts and skills to the business and interests of the Company, do his utmost to further enhance and develop the Company’s best interests and welfare, and endeavor to improve his ability and knowledge of the Company’s business, particularly as it relates to his duties hereunder, in an effort to increase the value of his services for the mutual benefit of the parties hereto. Employee shall truthfully, completely and accurately make, maintain and preserve all records and reports that Company may from time to time request or require.  At all times during the Term, Employee shall project a positive and professional image on behalf of the Company.

 

4. Outside Business Interests. Employee agrees to faithfully devote all of his time, energy, and skill to his employment with Company on a full-time basis for at least forty (40) hours per week. Employee shall not, while employed hereunder, be engaged in any other business activity that interferes with Employee’s ability to execute the duties of his position with the Company effectively, unless consented to in writing by Company. Notwithstanding the foregoing, Employee may engage in passive personal investments and charitable activities, in each case that do not interfere with the business and affairs of Company or interfere with the performance of Employee’s duties to Company.

 

  

  

  

 

Employee represents and warrants to Company that this Agreement, the performance of his obligations under this Agreement or the employment relationship between Company and Employee under this Agreement do not and will not violate or conflict with any non-competition (as pertaining to being employed by a competitor), non-solicitation (as pertaining to customers), non-interference (as pertaining to employees, agents or servants) or confidentiality agreement (as pertaining to trade secrets and other confidential information), or any other obligation to which Employee is subject. Employee also represents and warrants to Company that he will not use the trade secrets or other confidential information of former employers or others in connection with his employment by Company.

 

5. Fiduciary Duties. Employee acknowledges and agrees that during his employment with Company Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of Company.  During his employment with Company, Employee agrees to not act or fail to act in any manner that would injure the business, interests, or reputation of Company or any of its affiliates.  Additionally, during his employment with Company, Employee agrees to immediately disclose to Employee’s immediate superior or the Board of Directors all information and business opportunities pertaining to the business of Company and any of its affiliates learned of by Employee while employed by Company.

 

6. Dishonesty. If at any time Employee becomes aware, or believes, that any other employee, agent or servant of Company, or any third party, is or appears to be (a) removing, concealing, transferring or using any property or funds of Company for the benefit of anyone other than Company or (b) divulging, providing or otherwise disseminating in any manner not authorized by Company any of Company’s Confidential Information (as defined in the Confidentiality, Development and Non-Interference Agreement (“Confidentiality Agreement”) to be executed by Employee concurrently herewith) to any third person not authorized by Company to possess such Confidential Information, Employee shall immediately communicate his knowledge or belief as to such matters to an executive officer of Company or to his immediate superior.

 

7. Restrictive Covenants. Employee agrees that the following covenants are reasonable and necessary to protect Company’s interests, including but not limited to its trade secrets and other confidential information, and therefore agrees to the following covenants which are agreed to be ancillary to the Confidentiality Agreement to be executed by Employee concurrently herewith. Employee agrees as follows:

 

(a)  The Confidentiality Agreement is incorporated herein by reference for all pertinent purposes and such Confidentiality Agreement and all of its terms and provisions shall be deemed a part hereof and shall be enforceable hereunder separate and distinct from its enforceability as a separate agreement, e.g., it shall be enforceable as a separate and distinct agreement as well as being enforceable as a part hereof; and Employee further agrees that he will not, while at any time employed by Company and for a period of eighteen (18) months following the termination of such employment, whether as an individual, or in any capacity, directly or indirectly; (i) in competition with Company solicit or sell or participate in any way concerning a sale of products or services similar to Company’s products or services to any customer or client which Employee at any time solicited or sold for Company; (ii) induce or attempt to induce any distributor, vendor, representative, agent or contractor of Company to terminate or modify its business relationship with Company; (iii) induce or attempt to induce any of (x) Company’s customers or clients or (y) individuals or entities who/which have been customers or clients of Company within the 12 months preceding termination of the Term, to terminate or in any way modify its business relationship with Company; or (iv) solicit, divert or take away, or attempt to solicit, divert or take away, from Company, any individuals or entities who  (x) are Company’s customers or clients or (y) who/which have been customers or clients of Company within the 12 months preceding termination of the Term with Company;

 

  

  

  

 

(b)  In addition to the covenants made in Section 7 (a) above, for a period of twelve (12) months following termination of the Term Employee, in any capacity, directly or indirectly, will not, in competition with Company, solicit or sell or participate in any way concerning a sale of products or services similar to Company’s products or services to any customer or client of Company; and

 

(c)  Enforcement of the above Sections 7 (a) and 7 (b) are the only practical means of enforcing this Section 7 and of enforcing the Confidentiality Agreement.  Employee agrees that enforcement of this Section 7 is necessary to protect Company’s goodwill and other business interests.  This Section 7 shall be deemed ancillary to the Confidentiality Agreement.  Employee agrees that all of the provisions of this Agreement and the Confidentiality Agreement are valid and enforceable as written and according to their respective terms.

 

8. Assignment. This Agreement applies to Company and its subsidiaries, affiliates, successors, assigns and associated companies. Company may assign this Agreement at any time without notice (but Employee cannot). This Agreement is personal to Employee and no individual or entity shall have any interest in same except Employee, personally, on the one hand, and Company and its subsidiaries, affiliates, successors, assigns and associated companies, on the other hand.

 

9. Savings Clause - Non-Waiver. The failure of Company to at any time enforce any provision hereof shall never be construed to be a waiver of such provision or of the right of Company to enforce each and every provision hereof at any time. In the event any Section, paragraph, provision or clause, or any combination of same hereof shall be found or held to be unenforceable at law or in equity, or under any ordinance, statute or regulation, such finding or holding shall not in any way affect the other paragraphs, provisions and clauses which shall remain in full force and effect.

 

10. Governing Law - Venue. This Agreement shall be governed by the internal laws, and not the law of conflicts, of the State of Texas. Venue respecting any litigation arising from this Agreement and/or Employee’s employment with Company shall, at Company’s option, be properly laid only in a court of competent jurisdiction in Harris County, Texas, or such other venue as shall be mutually agreed between Company and Employee. Each party hereto acknowledges and agrees that it has had the opportunity to consult with its own legal counsel in connection with the negotiation of this Agreement and that it has bargaining power equal to that of the other party hereto in connection with the negotiation, execution and delivery of the Agreement. Accordingly, the parties hereto agree that the rule of contract construction that an agreement shall be construed against the drafter shall have no application in the construction or interpretation of this Agreement.

 

11. Termination. Employee’s period of employment by Company (the “Term”) may be terminated at any time by either party, with or without cause.  However, in any case in which the Company terminates the employment relationship without cause, Company shall pay Employee severance equal to 12 months of his then current Salary, with payment to be made in a lump sum (less applicable payroll deductions) within 30 days of termination.  Employee shall be required to execute a full release of claims against Company in order to receive the severance.  For purpose of this section, “Cause” shall mean that Employee has done or been accused of one or more of the following:  (a) been accused of or convicted of a felony or a crime involving moral turpitude; (b) committed an intentional and unauthorized disclosure of Company’s Confidential Information to a third party; (c) committed or been accused by the Company, upon a reasonable basis, of knowingly committing an act of fraud, embezzlement or theft of Company property in excess of $50; or (d) willfully failed to perform his job duties after having been notified in writing of such failure and given 30 days in which to cure such failure (unless the cure cannot be done within 30 days, in which case Employee must make substantial progress towards curing it); and such termination is a “separation from service” as defined in Treasury Regulations section 1.409A-1(h).  Notwithstanding the foregoing, if payment of the severance compensation is subject to section 409A of the Internal Revenue Code (the “Code”), and if Employee is a “specified employee” (within the meaning of section 409A(a)(2)(B) of the Code), such lump sum payment shall be delayed until the first day of the seventh month following Employee’s separation from service.  The covenants and agreements of Employee set forth in Section 7 are of a continuing nature and shall survive the expiration, termination of the Term of this Agreement and Employee’s employment with Company regardless of the reason(s) for such termination or cancellation.

 

  

  

  

 

12. Consideration For This Agreement.  In addition to the continued employment of the Employee by Company, and in addition to the mutual covenants and promises of the parties contained herein, Company shall, within fifteen (15) days after the execution of this Agreement, grant to Employee the shares of unregistered restricted stock as provided for in Attachment “A” hereto as additional and special consideration to support the covenants and agreements of Employee contained herein. Such consideration is paid for both this Agreement and the Confidentiality Agreement.

 

13. Defamation and Privacy. Employee shall refrain, both during and after termination of the Term, from publishing, uttering or otherwise disseminating any oral or written statements about Company or its officers, directors, employees, agents or representatives that are slanderous, libelous, or otherwise defamatory; or that disclose private or confidential information about Company or its business affairs, officers, directors, employees, agents or representatives that Employee knows or should know is injurious to Company; or that constitute an intrusion into the seclusion or private lives or business affairs of Company or its officers, directors, employees, agents or representatives that Employee knows or should know is injurious to Company; or that give rise to unreasonable publicity about the private business affairs of Company or its officers, directors, employees, agents or representatives; or that place Company or any of its officers, directors, employees, agents or representatives in a false light before the public; or that constitute a misappropriation of the name or likeness of Company or its officers directors, employees, agents or representatives. A violation or threatened violation of this prohibition may be enjoined by any court of competent jurisdiction without necessity of posting bond.  The rights afforded Company under the provision of this Section 13 are in addition to any and all rights and remedies otherwise afforded by law or by this Agreement or the Confidentiality Agreement.

 

  

  

  

 

14. Entire Agreement. This Agreement (including all written amendments and/or modifications hereto and all documents ancillary hereto) constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and it is expressly agreed that no representations, promises, warranties or understandings, express or implied, other than set forth herein or referred to herein, shall be binding on either party with respect to the subject matter hereof. The Confidentiality Agreement is ancillary to, and deemed a part of, this Agreement. None of the provisions hereof shall be waived, altered or amended unless in writing signed by the parties.  This Agreement voids and supersedes the Management Employment Agreement dated August 15, 1996 and all other nondisclosure, noncompetition, nonsolicitation and non-interference agreements between Company and Employee (other than the Confidentiality Agreement).

 

15. Indemnification. 

 

Employee (including his heirs, personal representatives, executors and administrators) shall be covered under any directors’ and officers’ liability insurance policy purchased by the Company.  In addition to the insurance coverage provided for in this Section 15,  the Company shall hold harmless and indemnify the Employee (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director, officer, employee, agent or fiduciary of the Company (whether or not he continues to be a director, officer, employee, agent or fiduciary thereof at the time of incurring such expenses or liabilities), or by reason of any action or inaction on the Employee’s part while serving in any such capacity, such expenses and liabilities to include, but not be limited to, losses, damages, judgments, investigation costs, court costs and attorneys’ fees and the cost of reasonable settlements unless such action or inaction constituted willful gross misconduct on the part of Employee.

 

16. Employee’s Certification. Employee HEREBY CERTIFIES THAT:

 

(A) EMPLOYEE RECEIVED A COPY OF THIS AGREEMENT AND THE CONFIDENTIALITY AGREEMENT FOR REVIEW AND STUDY BEFORE HE WAS ASKED TO EXECUTE THEM;

 

(B) EMPLOYEE HAS READ SUCH AGREEMENTS CAREFULLY;

 

(C) EMPLOYEE HAS HAD SUFFICIENT OPPORTUNITY BEFORE HE EXECUTED SUCH AGREEMENTS TO ASK QUESTIONS ABOUT NOT ONLY COMPANY, BUT ALSO THE PROVISIONS OF SUCH AGREEMENTS AND THAT IF HE ASKED SUCH QUESTIONS HE RECEIVED COMPLETE AND SATISFACTORY ANSWERS TO SAME;

 

(D) EMPLOYEE HAS BEEN AFFORDED THE OPPORTUNITY TO DISCUSS AND REVIEW THIS EMPLOYMENT AGREEMENT AND THE CONFIDENTIALITY AGREEMENT WITH AN ATTORNEY OF HIS CHOICE;

 

(E) EMPLOYEE UNDERSTANDS WHAT HIS RIGHTS ARE UNDER SUCH AGREEMENTS AS WELL AS HIS OBLIGATIONS, ESPECIALLY THE ANCILLARY COVENANTS; AND

 

(F) EMPLOYEE HAS READ AND UNDERSTANDS EACH AND EVERY PROVISION OF THIS AGREEMENT AND DOES HEREBY ACCEPT AND AGREE TO THE SAME.

 

  

  

  

 

IN WITNESS WHEREOF, Employee has, on the date set forth below, affixed his hand and Company has caused this Agreement to be executed by a duly authorized officer, on the date set forth below.

 

	 	 	 
Employee:

	 
	 	 	 	 
	
 
Date:  November 3, 2010

	
By: 

	/s/ James H. Long	 
	 	 	 
James H. Long, an individual

	 

 

	 	 	 
Company:

	 
	 	 	 	 
	
 
Date:  November 3, 2010

	
By: 

	/s/ Larry Lawhorn	 
	 	 	 
Larry Lawhorn

	 
	 	 	 
Controller and Chief Accounting Officer

	 

 

  

  

  

 

Attachment “A”

 

To Employment Agreement

 

“Salary” shall be twenty five thousand dollars ($25,000.00) per month during the Term, payable in accordance with Company’s standard pay policies and procedures, which currently provide for a semi-monthly payroll period. Pay shall be prorated for any partial pay period, if any.  In addition, because the Salary level set forth herein was approved by the Compensation Committee of the Company’s Board of Directors “for 2010” to be effective January 1, 2010, the Salary level set forth herein shall be retroactive to, and effective, January 1, 2010, and the Company shall make a one-time payment to Employee representing the difference between (a) the actual salary that has been paid for employment between January 1, 2010, and the effective date of this Agreement and (b) the Salary amount payable pursuant to this Agreement commencing January 1, 2010.

 

In addition to Salary, a quarterly and annual bonus shall be paid, the amount, if any, and terms of which shall be set from time to time in writing by the Compensation Committee of the Board of Directors of the Company.

 

In addition to the above cash compensation, the Company will issue sixty thousand (60,000) shares of unregistered, restricted common stock of the Company, which shares shall vest one fifth (1/5th) immediately upon issuance and the balance of four fifths (4/5ths) vesting ratably (1/4th annually) over a period of four years commencing upon the first anniversary of the date hereof.

 

In addition to the above compensation, as an inducement to enter into this Agreement and the Confidentiality Agreement, the Company will issue twenty thousand (20,000) shares of unregistered, restricted common stock of the Company, which shares shall vest one fifth (1/5th) immediately upon issuance and the balance of four fifths (4/5ths) vesting ratably (1/4th annually) over a period of four years commencing upon the first anniversary of the date hereof.

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