Document:

Confidential
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Exhibit 10.7

 

3-A-4

 

KNOW-HOW AND TRADEMARK

LICENSE AGREEMENT

 

THIS KNOW-HOW AND TRADEMARK LICENSE
AGREEMENT is entered into effective as of this 13th
day of September, 2002 (the “Effective Date”), between OMP, INC.,
a Delaware, U.S.A. corporation having its principal place of business at 310
Golden Shore, Long Beach, California 90802 (“OMP”), and ROHTO PHARMACEUTICAL CO, LTD., a Japanese
company having its principal place of business at 1-8-1, Tatsumi-nishi,
Ikuno-ku, Osaka 544-8666, Japan (“Rohto”).

 

WHEREAS, OMP has
rights in cosmetic products, formulas, processing techniques and other know-how
and trade secrets relating to the manufacture, processing, storage and
distribution of skin care products sold under various OMP trademarks;

 

WHEREAS, OMP is the
owner of the Obagi and Protocols trademarks and certain other trademarks used
in connection with the sale of skin care products; and

 

WHEREAS, OMP
desires to license to Rohto, and Rohto desires to obtain, the rights to use such
know-how and trademarks to manufacture such product for distribution and sale
solely in the Japanese mass market channel, all on the terms and conditions set
forth below.

 

NOW, THEREFORE, in
consideration of mutual promises contained herein, the parties hereto agree as
follows:

 

ARTICLE 1

DEFINITIONS

 

As used in this Agreement, the following terms shall
have the following meanings:

 

1.1                  “Affiliate” means a corporation, partnership, trust or
other entity that directly, or indirectly through one or more intermediates,
controls, is controlled by or is under common control with a party to this
Agreement. For such purposes, “control,” “controlled by” and “under common
control with” shall mean the possession of the power to direct or cause the
direction of the management and policies of an entity, whether through the
ownership of voting stock or partnership interest, by contract or otherwise. In
the case of a corporation, the direct or indirect ownership of more than fifty
percent (50%) of its outstanding voting shares or the ability otherwise to
elect a majority of the board of directors or other managing authority of the
entity shall in any event be deemed to confer control, it being understood that
the direct or indirect ownership of a lesser percentage of such shares shall
not necessarily preclude the existence of control.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

 

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1.2                “Facility” means Rohto’s manufacturing facility located
within Japan, or such other facilities Rohto determines to use at any time with
prior notification to OMP in writing.

 

1.3                “Know-How” means the concept for the Licensed Products,
confidential formulae, active ingredient, delivery systems, and clinical
efficacy and safety test data, processing techniques, product positioning and
other know how, trade-secrets and the improvement of them, Product and
marketing information including any product similar to the Product (including
but not limited to Protocols in Europe) outside of the Territory which is owned
or controlled by OMP while this Agreement is in effect.

 

1.4                “Licensed Products” means those certain premium-priced skin care
products listed on Exhibit A that conform to the Specifications, and such other
products as the parties may hereafter mutually agree in writing.

 

1.5                “Specifications” means those specifications for formulae and
processing techniques for Licensed Products set forth on Exhibit A, as may be
revised and amended from time to time by OMP.

 

1.6                “Territory” means the country of Japan. The parties may
expand the Territory by mutual written agreement.

 

1.7                “OMP Trademarks” means those trademarks and tradenames set
forth on Exhibit B hereto, and such other trademarks developed by OMP and
supplied to Rohto as the parties may hereafter mutually agree in writing. The
parties agree that OMP Trademarks shall include any trademarks or tradenames
including the name “Obagi,” “Protocols” or “Skin Health Restoration,” even if
such trademarks or tradenames are developed collaboratively between the parties
during the term of this Agreement.

 

1.8                “Joint Trademarks” means those trademarks set forth on Exhibit B
hereto, and such other trademarks jointly developed and/or obtained by Rohto
and OMP as a result of collaboration between the two parties, other than those
trademarks and tradenames described in Section 1.7.

 

1.9                “Rohto Trademarks” means those trademarks developed primarily by
Rohto in relation to the marketing and promotion of the Products in the
Territory. The OMP, Joint and Rohto Trademarks are referred to collectively in
this Agreement as the “Trademarks.”

 

1.10         “Net Sales” means the value of Products sold by Rohto
calculated on the price invoiced by Rohto to its purchaser less:

 

(a)             Transportation
charges or allowances if any, included in such amount:

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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(b)                   Trade, quantity
or cash discounts, and broker’s or agent’s commissions if any, allowed or paid;

(c)                    Credits or
allowance, including but not limited to rebate, discount, and refund, if any,
given or made on account of rejection or return of Products previously
delivered: and

(d)                   Any tax, excise
or other governmental charge included in such amount, on the production, sale,
transportation, use or delivery of the Products.

 

1.11           “Channel” means the
sales and distribution channels in which Rohto is currently engaged:
specifically Drug Stores and Variety Stores, including their mail-order and
Internet sales activities. It also may include by mutual agreement,
dispensaries attached to doctor’s offices for the sale of over-the-counter
drugs. To be considered in the Territory, mail order and internet sales must be
made to “ship to” and billing addresses in the Territory.

 

1.12           “Drug Stores” are
defined as stores specifically licensed to sell the over-the-counter drug as a
significant portion of their revenue.

 

1.13           “Variety Stores”
are defined as stores that are not licensed to sell prescription medicines or
over-the-counter drugs but are otherwise similar to drug stores in term of the
type of products they carry and consumer demographics that they target for
appeal. Variety Stores sell many kinds of goods including cosmetics,
accessories and other small household or personal items. Examples of Variety
Stores include Loft and Sony Plaza. Variety stores do not include or encompass
upscale “department” stores such as those operated by Matsuzakaya Co., The
Daimaru, Inc., Isetan Co. or Hankyu Department Stores Inc.

 

ARTICLE 2

LICENSE GRANT AND EFFECTIVE DATE

 

2.1                  License to
Know-How. Subject to the terms and conditions of this Agreement, OMP
hereby grants to Rohto the exclusive, royalty-bearing license to use the Know-How
to manufacture Licensed Products at the Facility and to market, sell and
distribute such Licensed Products in the Channel in the Territory. OMP shall
not itself use, nor grant to any other person the right to use, the Know-How in
the Channel in the Territory to manufacture, marketing, sale and distribution
of Licensed Products or similar products within the Channel of the Territory.
OMP shall not knowingly sell Licensed Products to persons (other than Rohto) in
the Channel in the Territory, nor shall OMP authorize any other licensee of the
Know-How to sell Licensed Products in the Channel in the Territory.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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2.2                  License to
Trademarks. Subject to the terms and conditions of this Agreement, OMP
hereby grants to Rohto the license to use the OMP Trademarks and Joint
Trademarks solely to market, advertise, sell and promote Licensed Products in
the Channel in the Territory. OMP will not license and has not licensed any
other party to apply such Trademarks to Licensed Products or similar product
within the Channel of the Territory during the term of this Agreement, and will
not itself export, or knowingly support a third party exporting, Licensed
Products bearing such Trademarks into the Channel in the Territory. OMP retains
the right to license third parties during the term of this Agreement to use
within the Territory any of OMP Trademarks or Joint Trademarks so long as they
are not marketed or sold within the Channel. OMP assumes no responsibility and
shall have no liability regarding exports by third parties into the Territory
of products, including Licensed Products bearing the OMP Trademarks or Joint
Trademarks.

 

2.3                  No Right of
Sublicense. Rohto may not sublicense or otherwise transfer to any third
party any of Rohto’s rights to use the Know-How or Trademarks, without the
prior written consent of OMP. Such consent shall not be unreasonably withheld.

 

2.4                  Limited
License. This license is limited to Licensed Products which meet or
exceed the Specifications, and Rohto shall not use the Know-How or OMP
Trademarks or Joint Trademarks for any other purpose. No other license, express
or implied, is granted with respect to the Know-How or OMP Trademarks or Joint
Trademarks. OMP reserves all rights not expressly granted hereunder.

 

ARTICLE 3

DISCLOSURE OF KNOW-HOW AND TECHNICAL ASSISTANCE

 

3.1                  Disclosure of
Know-How. Within sixty (60) days after the Effective Date, OMP shall
provide Rohto with any requested materials, including quality assurance
materials, documents and other tangible information, that embody the Know-How.
Rohto agrees not to copy such materials, without the prior written consent of
OMP, except as may be reasonably necessary to exercise its rights under this
Agreement. During the term of this Agreement, OMP shall continue to disclose
such Know-How as may be reasonably necessary for the manufacture of the
Licensed Products.

 

3.2                  Technical
Assistance. If Rohto requests, during the one (1) year period following
the Effective Date, OMP shall provide to Rohto the reasonable services of
appropriate personnel to assist in the transfer of the Know-How to Rohto, to
demonstrate the methods or processes of manufacturing and packaging the
Licensed Products and to assist Rohto in establishing manufacturing processes
for the Licensed Products. Such technical assistance shall be provided at such
times and in such locations as the parties may mutually

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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agree. After such
one (1) year period, OMP may provide to Rohto additional technical assistance
upon such terms as the parties may mutually agree.

 

3.3                  Marketing
Assistance. OMP will provide reasonable assistance in terms of OMP
employee time and attention to assist in the promotion of the Products in
Japan. This assistance will include the cooperation of Dr. Obagi (or his
successor) in his capacity as the Chief Medical Officer of OMP.

 

ARTICLE 4

OWNERSHIP, IMPROVEMENTS AND INFRINGEMENT

 

4.1                  Ownership. Rohto acknowledges that OMP owns all right, title and
interest in and to the Know-How and the OMP Trademarks and Joint Trademarks,
and that Rohto will not acquire any ownership right or interest in the Know-How
or the OMP Trademarks or Joint Trademarks by virtue of the disclosure of
Know-How or license of such Trademarks to Rohto hereunder.

 

4.2                  Improvements
and New Products. If Rohto
discovers or devises any improvement to the Licensed Products, or in any
process or method of manufacturing the Licensed Products, it shall disclose to
OMP within thirty (30) days of filing for any protection by Rohto of its intellectual
property related to such discovery, including but not limited to a patent
application, the nature and means of making use of the improvement (or if Rohto
declines to file for protection for such intellectual property, at least thirty
(30) days prior to implementing use of such intellectual property in the
Licensed Products). Rohto shall not incorporate into the Licensed Products any
improvements except with the prior written consent of OMP. Upon written
approval from Rohto, not to be unreasonably withheld, OMP will also be granted
a license to use Rohto’s improvements with OMP’s products outside of the
Territory. Such grant-back license shall be non-exclusive and with no
sub-license right; provided, however, that OMP shall have the right to sublicense
to its distributors and contract manufacturers. Such license shall be
royalty-free for any minor or incremental improvements to the Licensed
Products, such as upgrades to the quality of ingredient(s), introduction of a
new ingredient that improves the product effectiveness or changes to a process
or method of manufacturing the Licensed Products that result in manufacturing
cost reductions of 20% or less. The parties shall negotiate separate terms in
good faith for royalty on any other significant improvements to the Licensed
Products other than the minor or incremental improvements as described in this
Section.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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4.3                  Third Party
Infringement.

 

(a) Rohto shall notify OMP in writing of any
infringement, misappropriation or imitation of the Trademarks, Know-How or the
Licensed Products by any third party, promptly after any of the foregoing comes
to Rohto’s attention. OMP shall have the right, but not the obligation, to
commence or prosecute any claims or suits in its own name or in the name of
Rohto or join Rohto as a party thereto to address such infringement,
misappropriation or imitation related to any OMP Trademarks or Joint
Trademarks. If OMP brings an action to discontinue such infringement,
misappropriation or imitation, such action shall be solely at OMP’s cost, with
Rohto providing such reasonable cooperation as OMP may request in writing. If
OMP declines to bring an action, Rohto may do so at Rohto’s sole cost. Rohto
shall not institute any suit or take any action on account of any such
infringement, misappropriation or imitation without the prior written consent
of OMP.

 

(b) Rohto shall have the right, but not the
obligation, to commence or prosecute any claims or suits in its own name or in
the name of OMP or join OMP as a party thereto to address such infringement,
misappropriation or imitation related to any Rohto Trademarks. If Rohto brings
an action to discontinue such infringement, misappropriation or imitation, such
action shall be solely at Rohto’s cost, with OMP providing such reasonable
cooperation as Rohto may request in writing. If Rohto declines to bring an
action, OMP may do so at OMP’s sole cost. OMP shall not institute any suit or
take any action on account of any such infringement, misappropriation or
imitation without the prior written consent of Rohto. Rohto shall also notify
OMP of any claims that Rohto’s use of any of the trademarks used with the
Products conflicts with the asserted rights of others.

 

4.4                  Cooperation.
For the purpose of maintaining the value of the Licensed Products in the
Territory, the parties agree to cooperate in good faith for the purpose of
securing and preserving OMP’s rights in and to the Know-How and OMP Trademarks
and Joint Trademarks, and Rohto’s rights in the improvements described in
Section 4.2 and Rohto Trademarks.

 

4.5                  Officer
Activities. OMP shall use commercially reasonable efforts to assure
that to the extent permitted by applicable law, OMP’s directors, officers, and
employees, including Dr. Zein Obagi, will neither promote, market,
distribute, and sell nor solicit any third party to promote, market,
distribute, and sell any products similar to or competing with the Licensed
Products in the Channel in the Territory.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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4.6                  Power and
Authority to Act. OMP represents and warrants that OMP is legal and
beneficial owner of all right and interest in and to (or has sufficient
licenses to) Know-How and OMP Trademarks and Joint Trademarks and has full
power and authority to grant licenses and perform its obligations under this
Agreement.

 

4.7                  Third Party
Intellectual Property. OMP represents and warrants that, to the best of
its knowledge, OMP has no knowledge of any infringement or of any pending or
threatened claim relating in any manner to Know-How and OMP Trademarks; and to
the best of OMP’s knowledge, the Know-How is valid and enforceable and that its
use as contemplated under this Agreement would not infringe any third party’s
intellectual property.

 

4.8                  Trademark
Reputation. OMP agrees to use commercially reasonable efforts to
maintain good-will and good reputation of OMP Trademarks and Joint Trademarks.
Both parties further covenant not to use door-to-door sales, or multi level
distribution channel as their distribution channel in the Territory.

 

ARTICLE 5

PRODUCT QUALITY AND MANUFACTURING PRACTICES

 

5.1                  Quality of
Licensed Products. Rohto acknowledges that, if the Licensed Products
fail to conform to the Specifications, or otherwise are not consistent with OMP’s
image and reputation for overall high quality products, then the substantial
goodwill which OMP has built up and now possesses in connection with the
Know-How and OMP Trademarks and Joint Trademarks will be impaired. Accordingly,
Rohto hereby agrees that:

 

(a) The Licensed Products (including all packaging,
labeling and advertising) shall conform to the Specifications therefor, and be
of high standards and of such quality, style and appearance as shall (in the
judgment of OMP) be reasonably adequate and suited to their exploitation to the
best advantage and to the protection of the Know-How, OMP Trademarks, Joint
Trademarks and goodwill pertaining thereto;

 

(b) The Licensed Products shall be manufactured,
processed, labeled, marketed, sold and distributed in accordance with all
applicable laws, rules and regulations, and shall not be adulterated,
contaminated or misbranded within the meanings of any applicable law or
regulation; and

 

(c) The policies for the marketing, distribution and
sale of the Licensed Products by Rohto shall be of high standards and to the
best advantage of the Know-How and Trademarks and that the same shall in no
manner reflect adversely upon the good name of OMP, or upon any of its
products, the Know-How or the Trademarks.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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Notwithstanding
the foregoing, in no event may OMP require Rohto to manufacture any Licensed
Product to Specifications that do not comply with applicable laws.

 

5.2                  Manufacturing
Practices. Without limiting the generality of any obligations of Rohto
hereunder, Rohto agrees to meet or exceed all its manufacturing practices and
standards (as of the Effective Date) with respect to all manufacturing
activities for the Product. Rohto shall provide OMP with written notice of any
material changes in such manufacturing practices. During the term of this
Agreement, Rohto agrees that OMP or its agent (reasonably acceptable to Rohto)
will be permitted to inspect the Facility annually to assure compliance with
such manufacturing practices; and, OMP shall provide Rohto with a copy of the
results of such inspection. If such inspection discloses deficiencies in the
Facility, OMP may request, and Rohto shall implement, corrective actions, at
Rohto’s expense and on a timetable mutually acceptable to the parties. In addition,
in such event, OMP shall have the right to conduct reasonably frequent
inspections of the Facility. OMP shall have the right to terminate this
Agreement if Rohto fails to implement commercially reasonable corrective
actions. OMP shall also be permitted, at its own expense, to place a
representative at the Facility to monitor Rohto’s performance hereunder for the
initial production of each new Licensed Product.

 

ARTICLE 6 

MARKETING AND SALES

 

6.1                  Submission
for Approval. Rohto shall submit a representative sample of its
proposed advertising and promotional materials (including, without limitation,
packaging, package inserts, labels, tags, advertising copy, advertising
layouts, radio and television presentations, publicity and promotional
materials, catalogues and other sales or trade literature, all of which shall
hereinafter be collectively referred to as the “Materials”) pertaining to the
Licensed Products to OMP for written approval before prior to the launch of
each new Licensed Product. OMP reserves the right to disapprove of any proposed
copy and in such case, shall provide appropriate changes or comments to Rohto.
OMP will notify Rohto of the approval status within ten (10) business days
after receipt of such materials. Failure to notify Rohto of such status within
ten (10) business days following the request for approval shall constitute
approval. Thereafter, Rohto will have no obligation to seek approval for minor
changes including but not limited to introducing a new size/SKU of an existing product
or formula, and adding or deleting a non-active ingredient by 2% or less or changing a non-active
ingredient by 2% or less. Rohto will, however, submit more significant changes
to OMP for its prior written approval. Examples of significant changes include
a new product launch, a line extension (introducing a unique new product not a
new size/SKU of an existing product or formula), a change in logo
dimensions/proportions, a significant change in formulations (adding/deleting
an active ingredient), or a change in product name, or trademark. All Materials
produced by or for Rohto shall comply with mutually-agreed guidelines for
product marketing and positioning, and with the Trademark Usage Guidelines set
forth in Exhibit B.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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6.2                  Export of
Licensed Products. In view of the variance of Specifications from those
specifications used in the United States, or which may be used by OMP in other
countries, Rohto covenants that Rohto will not (1) actively solicit orders for
Licensed Products from any third party in any country where OMP has granted a
third party a license with respect to the Trademarks or the Know-How; (2)
engage in advertising specifically aimed at any such countries or establish any
branch or maintain any distribution depot with respect to the Licensed Products
in any such countries, or (3) put the Licensed Products on the market in any
such countries in response to unsolicited orders. As provided in Section 2.2,
OMP assumes no responsibility and shall have no liability regarding exports by
third parties into the Territory of products, including Licensed Products,
bearing the Trademarks. OMP may from time to time, and on an individual basis,
permit Rohto to export to locations outside the Territory on such conditions as
OMP shall establish in such written permission, which OMP shall have the right
to revoke at any time.

 

6.3                  Marketing
Report. Rohto agrees to share with OMP, to the extent available, and at
least once a year, pertinent written information regarding the market for
Licensed Products in the Territory. This shall include written information
regarding consumer research, technical research and clinical results, pricing,
share of market, out-of-stock, volume, and distribution excluding any trade
secrets of Rohto. Rohto shall act in good faith to keep OMP informed regarding
Rohto’s activities in the market, including without limitation price changes,
demographic target segments, geographic target segments, and distribution
channels.

 

6.4                  Use of Rohto’s
Name. OMP Shall have the right, but not the obligation, to use the name
of Rohto in OMP’s programs, advertising and promotions, without any payment to
Rohto. Any and each use of any trademark or trade name of Rohto must have the
prior written approval of Rohto.

 

ARTICLE 7

TRADEMARKS

 

7.1                  Use of
Trademarks. Rohto shall use OMP Trademarks only in connection with
Licensed Products which are designated in writing by OMP to bear the particular
Trademark, and which are manufactured in accordance with the Specifications.
The Licensed Products shall be manufactured solely for sale under the
Trademarks. The Licensed Products may not be sold without bearing the
appropriate Trademark, unless OMP gives its prior written consent.

 

7.2                  Samples of
Licensed Products. In order to maintain goodwill of the Trademarks,
Rohto shall (i) manufacture the Product in accordance with the product concept
worked together with OMP, (ii) maintain adequate quality control procedures
regarding manufacture of the Product, and (iii) submit to Licensor upon request
for its inspection samples

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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of the Product in sufficient quantity. If OMP considers that Rohto’s
quality control is not sufficient to maintain its goodwill of the OMP
Trademarks or Joint Trademarks, OMP will notify Rohto in writing and Rohto will
make a commercially reasonable effort to improve its quality control procedure.
If such Licensed Products have been sold containing defects that may pose a
threat to health or safety or bring any OMP Trademark or Joint Trademark into
disrepute with the public nonconforming, they shall be recalled by Rohto in
accordance with OMP’s usual policy. If agreement is not reached regarding
disposition of such Licensed Products, they shall be destroyed; provided
that, before such Licensed Products are destroyed, OMP shall examine as
many additional samples of Licensed Products as Rohto may reasonably request to
confirm the existence of the deficiency.

 

7.3                  Trademark
Notices. Whenever an OMP Trademark or Joint Trademark appears in
writing or on any media Rohto shall provide a notice, in form acceptable to
OMP, that such Trademark is registered or pending registration and that such
Trademark is used under license from OMP.

 

7.4                  Prohibitions.
For the term of this Agreement, and thereafter, unless OMP agrees in writing,
Rohto agrees not to use any mark, name or other identifying means:

 

(a) identical with or confusingly similar to any Trademark except as
permitted by this Agreement;

 

(b) in combination or association with any Trademark; or

 

(c) on any container or label bearing any Trademark.

 

7.5                  Acknowledgment
of Value. Rohto recognizes the great value of the goodwill associated
with the OMP Trademarks and Joint Trademarks and acknowledges that such
Trademarks and all rights therein and goodwill pertaining thereto belong
exclusively to OMP, and that such Trademarks have a secondary meaning in the
minds of the public. Rohto acknowledges that all use of the OMP Trademarks and
Joint Trademarks shall inure to the benefit of OMP. Upon expiration or
termination of the right to use such Trademarks pursuant to this Agreement,
except for Rohto’s rights to sell out its inventory pursuant to Section 11.4
below, Rohto shall cease all use of the OMP Trademarks promptly and will not
use any of such Trademarks thereafter. In case that Rohto is not granted a
royalty-free, exclusive, and perpetual license to use the Joint Trademark in
the Channel pursuant to Section 11.5 below, Rohto shall cease use of Joint
Trademarks as well as OMP Trademarks as provided in this Section.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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ARTICLE 8

COMPENSATION

 

8.1                  Royalty Rate. In consideration of the licenses and rights
granted hereunder, Rohto shall
pay to OMP a royalty equal to [***] of Net Sales of Licensed Products sold or
distributed by Rohto and its Affiliates for the three (3) year period following
the Effective Date. Thereafter, such royalty amount shall decrease by [***] per
year for eight (8) consecutive years, until the royalty payable to OMP reaches [***]
of Net Sales of the Licensed Products, at which time the royalty shall no longer decrease. [***]

 

8.2                  Determination of Compensation
and Payment. For each
calendar quarter, Rohto shall calculate the Net Sales for the Licensed Products
(not including net sales of products which Rohto purchased from OMP) in the
Channel in the Territory, and shall calculate the royalties thereon. Such
amount shall be payable to OMP within sixty (60) days following the end of each
calendar quarter. Rohto shall furnish to OMP a written report setting forth the
gross sales of the Licensed Products, the deductions taken on such gross sales
(as set forth in Section 1.10) and Net Sales for the Licensed Products during
the applicable calendar quarter. Such report shall be furnished to OMP whether
or not any Licensed Product was sold during the preceding quarter, and shall be
certified by the Chief Financial Officer of Rohto as being accurate and in
compliance with generally accepted accounting principles as consistently
applied by Rohto. All payments under this Agreement shall be made to OMP in
U.S. dollars, using the conversion rate as of the last business day end of the
payment period.

 

8.3                  Records and Audit Rights. Rohto agrees to keep accurate books and
records covering all transactions relating to the Licensed Products. OMP and
its authorized representatives shall have the right, once per calendar year,
during Rohto’s normal business hours and at Rohto’s usual place of business,
upon ten (10) days prior notice, to examine and copy such books and records and
all other documents and material in the possession or under the control of
Rohto insofar as they relate to the Licensed Products. If any such examination

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

11

 

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Treatment Requested

 

reveals a deficiency in amounts paid or payable
hereunder of more than Five percent (5%) for the period examined, then Rohto
shall bear all reasonable costs incurred by OMP in connection with such
examination. All of Rohto’s books and records with respect to the Licensed
Products shall be kept available for at least two (2) years after the
termination of this Agreement. OMP’s rights under this Section 8.3 shall
survive the termination of this Agreement for two (2) years.

 

8.4                  Taxes. Any royalties or fees under this Agreement do
not include any taxes, and if any withholding tax is imposed on the royalties
or fees, Rohto shall pay to OMP an amount equal to any taxes and levies paid or
payable by Rohto, exclusive, however, of any taxes that are based on the net
income of OMP itself.

 

ARTICLE 9 

INDEMNIFICATION AND INSURANCE

 

9.1                  Indemnification by Rohto. Rohto shall indemnify OMP, its Affiliates and
their respective directors, officers, agents and employees and hold each of
them harmless from and against any loss, liability, deficiency, damage, expense
or cost (including attorneys’ fees and expenses) (collectively, “Losses”)
arising out of any and all claims, demands, suits or causes of action of
whatever kind or nature (collectively, “Claims”) based on (i) the manufacture,
processing, labeling, marketing, advertising, promotion, distribution or sale
of the Licensed Products (including, without limitation, any defects or alleged
defects in the Licensed Products or any failure to comply with any laws, rules
and regulations applicable to the manufacture, processing, labelling,
marketing, advertising, promotion, distribution or sale of any of the Licensed
Products), (ii) the negligence or intentional misconduct of Rohto, its
Affiliates or permitted sublicensees, or their employees or agents, or (iii) a
material breach of this Agreement by Rohto, its Affiliates or permitted
sublicensees, or their employees or agents. OMP shall give Rohto prompt notice
of such Claim and, subject to the next sentence hereof,  Rohto shall have the right to contest,
defend, with OMP’s cooperation, and settle such Claim. OMP alone shall be
entitled to contest, defend and settle a particular Claim if (i) such Claim
seeks equitable relief or (ii) if the subject matter of any Claim relates to
the ongoing business of OMP or OMP’s ongoing ability to manufacture, market,
distribute or sell any Licensed Product in the Territory (or otherwise to
exploit its Know-How), which Claim, if decided against Rohto or OMP, would
adversely affect the ongoing business (including as described in clause (ii) hereof)
or reputation of OMP. Rohto’s obligations under this Section 9.1 shall survive
the termination or expiration of this Agreement.

 

9.2                  Indemnification by OMP. OMP shall indemnify Rohto, its Affiliates and
their respective directors, officers, agents and employees and hold each of
them harmless from and against any Losses arising out of Claims based on (i)
the alleged infringement of a third party’s intellectual property rights by
Rohto’s use of the OMP Trademarks or Joint Trademarks or

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

12

 

Confidential
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Know-How in accordance with the terms of this Agreement, (ii) the
negligence or intentional misconduct of OMP, its Affiliates or permitted
sublicensees, or their employees or agents, or (iii) a material breach of this
Agreement by OMP, its Affiliates or permitted sublicensees, or their employees
or agents. Rohto shall give OMP prompt notice of such Claim and, subject to the
next sentence hereof, OMP shall have the right to contest, defend, with Rohto’s
cooperation, and settle such Claim. Rohto alone shall be entitled to contest,
defend and settle a particular Claim if (i) such Claim seeks equitable relief
or (ii) if the subject matter of any Claim relates to the ongoing business of
Rohto, which Claim, if decided against OMP or Rohto, would adversely affect the
ongoing business (including as described in clause (ii) hereof) or reputation
of Rohto. OMP’s obligations under this Section 9.2 shall survive the
termination or expiration of this Agreement.

 

9.3                  Insurance. Rohto shall maintain, throughout the term of
this Agreement, product liability insurance providing protection in the amount
of at least [***] yen per occurrence for any Claims or Losses arising out of
any defect or alleged defect in any of the Licensed Products. The product liability
insurance policy shall name OMP as an additional insured and Rohto agrees not
to remove OMP or cancel such insurance without thirty (30) days prior written
notice to OMP. As proof of insurance, Rohto shall furnish to OMP a Certificate
of Insurance at least ten (10) days before any Licensed Products are
distributed and/or sold, and thereafter prior to the expiration of any policy.
Compliance with this Section 9.3 shall in no way limit or restrict Rohto’s
indemnification obligations hereunder.

 

ARTICLE 10 

LIMITATION OF LIABILITY

 

10.1           Limitation on Liability. In no event shall OMP’s aggregate liability
hereunder exceed the total amount paid by Rohto to OMP pursuant to this
agreement.

 

10.2           Consequential Damages. In no event shall OMP be liable for any indirect,
incidental or consequential damages, even if OMP shall have been advised in
advance of the likelihood thereof.

 

ARTICLE 11 

TERM AND TERMINATION

 

11.1           Term. Unless terminated earlier as provided in Section 11.2 below, this
Agreement shall continue for a term of ten (10) years from the Effective Date.
Thereafter, this Agreement shall be renewable by OMP for additional one (1)
year periods, with written notice to Rohto at least three (3) months prior to
the expiration of the initial term or any renewal thereof.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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11.2           Termination. This Agreement may be terminated as follows:

 

(a) By either party,
effective immediately upon written notice to the other party, should the other
party file a petition of any type as to its bankruptcy, be declared bankrupt,
become insolvent, make an assignment for the benefit of creditors, go into
liquidation, have a receiver appointed over the whole or any part of its
assets, enters into a compound with its creditors, or have an order made or
resolution passed for it to be wound up (otherwise than in furtherance of a
scheme of amalgamation or reconstruction), or otherwise lose legal control of
its business; or

 

(b) By either party,
effective upon thirty (30) days written notice to the other party in the event
the other party is in material breach of this Agreement and shall have failed
to cure such breach within such thirty (30) day period.

 

(c) By either party,
effective upon twenty (20) days notice to the other party, if a party fails to
pay any sums owing hereunder and does not cure such failure within such twenty
(20) day period;

 

(d) By either party,
effective upon notice fifteen (15) days notice to the other party, if the party
providing such notice determines, in its sole discretion, that an act or
omission of the other party, its employees, officers or agents is likely to
cause or has caused harm or disrepute to, in the case of OMP, the Licensed
Products, the Know- How, the Trademarks, OMP’s trade name or the goodwill
attached thereto, or, in the case of Rohto, the improvements described in
Section 4.2, and the damage or disrepute caused by such act or omission is not
cured within such fifteen (15) day period;

 

(e) As provided in Section 5.2 or 14.12; or

 

(f) By OMP, effective upon fifteen
(15) days notice to Rohto, if, in the reasonable judgment of OMP, any
applicable law or government-enacted regulation or decree renders the
performance by either party of its respective obligations hereunder unduly
onerous or otherwise inexpedient or there is a material adverse change in the
nature of Rohto’s business or to the terms on which Rohto carries on business
such that there is a significant detrimental effect on the volume and/or
profitability of sales of the Licensed Products.

 

11.3           Cessation of Rights. Except as set forth in Section 11.5, upon
expiration or termination of this Agreement, all rights granted to Rohto
hereunder shall cease and Rohto will refrain from further use of the Know-How
and OMP Trademarks and Joint Trademarks in connection with the manufacture,
processing, marketing, sale or distribution of Licensed Products and will not
use the Specifications for any purpose whatsoever. Within thirty (30) days
after such termination, Rohto shall return to OMP all documentation reflecting
or

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

14

 

Confidential
Treatment Requested

 

containing the Know-How, including without
limitation, all plans, specifications, manuals or records and all materials
bearing the Trademarks, including without limitation, all packaging, labels and
advertising materials (whether in written, electronic, graphic or other form).

 

11.4           Sale of Remaining Inventory. Upon termination or expiration of this
Agreement, Rohto may distribute its remaining inventory of the Licensed
Products; provided  that such Licensed Products conform to the
Specifications and are in compliance with all applicable laws and regulations
in the Territory. Upon the earlier of (a) depletion of such inventory, or (b)
ninety (90) days after termination or expiration, Rohto shall comply with the terms
of Section 11.3.

 

11.5           License to Joint Trademarks. Upon termination of this Agreement for any
reason (other than material breach by Rohto), OMP shall not unreasonably
withhold its consent to granting Rohto a royalty-free, exclusive, and perpetual
license to use the Joint Trademarks in the Channel in the Territory. OMP
acknowledges and understands that it is unreasonable to withhold license of
Joint Trademarks to Rohto on the ground that Joint Trademarks are similar or
confusing to any trademark OMP uses in the Territory.

 

11.6           Survival. Expiration or termination of this Agreement
shall not affect Sections 4.1, 4.2, 7.4, 7.5 and 8.3, and Articles 9, 10, 11,
12, 13 and 14, which shall survive such expiration or termination. In addition,
no expiration or termination of this Agreement will relieve any party of any
obligations accruing prior to the date of such expiration or termination.

 

ARTICLE 12 

CONFIDENTIALITY

 

12.1           Confidential Relationship. The parties acknowledge that a confidential
relationship exists between them by virtue of the relationship contemplated by
this Agreement. Each party will use any Confidential Information (as defined
below) of the other party solely for purposes contemplated by this Agreement
and for no other purpose. The receiving party will treat all Confidential
Information disclosed to it as secret and confidential and shall strictly
protect and safeguard the Confidential Information from disclosure to third
parties. The receiving party shall comply with the disclosing party’s instructions
and requirements relating to the preservation of secrecy and confidentiality of
the Confidential Information; provided, however, that the
compliance with such instructions and requirements shall not in any way
diminish the receiving party’s obligations with respect to the Confidential
Information disclosed hereunder. The receiving party will not disclose any such
information to anyone other than its employees, agents, or representatives
having a need to know such information for purposes directly related to its
performance of its obligations under this Agreement and who have executed a
confidentiality agreement in a form that is acceptable to the disclosing party.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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Treatment Requested

 

12.2           Definition of
Confidential Information. As used in this Agreement, the term “Confidential
Information” shall mean any and all information disclosed by either party
relating to this Agreement even before execution of this Agreement, whether in
written, oral, graphic, electronic or other form, including without limitation,
the Know-How, the Specifications, Quality Assurance Manuals, any information to
be acquired by OMP through inspection of facilities of Rohto in accordance with
Section 5.2 herein, and any and all methods, processes, development, engineering,
manufacturing, marketing, business or financial matters relating to either
party, the Licensed Products, the improvements described in Section 4.2, or any
other present or future products, sales, development or business of the
parties.

 

12.3           Exclusions.
Confidential Information shall not include any information which:

 

(a) is or becomes generally available to the public in
the Territory through no default of the receiving party;

 

(b) is subsequently disclosed to the receiving party
by a third party lawfully entitled to such information and who is not itself in
breach of any obligation of confidence in so disclosing it; or

 

(c) prior to its disclosure by the disclosing party
was lawfully in the possession or knowledge of the receiving party.

 

12.4           Copies, Legends.
Neither party may copy any Confidential Information of the other party without
the other party’s prior written consent. The receiving party shall reproduce on
any permitted copies of Confidential Information any and all confidentiality legends
placed on such Confidential Information.

 

ARTICLE 13 

DISPUTE RESOLUTION

 

13.1           Governing Law.
This Agreement shall be governed by, and interpreted and construed in
accordance with, the laws of New York.

 

13.2           Injunctive Relief.
Rohto expressly recognizes that the Know-How possess a special, unique and
extraordinary nature which makes difficult the assessments of monetary damages
which OMP would sustain by an unauthorized use. Rohto expressly recognizes and
agrees that an irreparable injury would be caused to OMP by unauthorized or
improper use or any use in breach of this Agreement, and agrees that
preliminary or permanent injunctive or other equitable relief (including but
not limited to attorneys’ fees and expenses) would be appropriate, in any court
of competent jurisdiction, in the event of a breach of this Agreement by Rohto,
without necessity of OMP proving monetary damages or posting any bond; provided
that such remedy shall not be exclusive of any remedies otherwise
available to OMP.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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Confidential
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13.3           Procedure for
Arbitration. Except as provided in Section 13.2 above, any dispute,
claim or controversy arising out of or in connection with this Agreement which
has not been settled through negotiation within a period of thirty (30) days
after the date on which either party shall first have notified the other party
in writing of the existence of a dispute shall be settled by final and binding
arbitration under the then applicable International Arbitration Rules of the
International Chamber of Commerce (“ICC”). Any such arbitration shall be
conducted by three (3) arbitrators appointed by mutual agreement of the parties
or, failing such agreement, in accordance with such Rules. At least one (1)
arbitrator shall be an experienced cosmetic industry professional, and at least
one (1) arbitrator shall be an experienced business attorney with background in
the licensing and distribution of cosmetic or consumer products. Any such
arbitration shall be conducted in Sidney, Australia in the English language. An
arbitral award may be enforced in any court of competent jurisdiction. Each
party shall bear its own costs and expenses of the arbitration and one-half
(1/2) of the fees and costs of the arbitrators, subject to the power of the arbitrators,
in their sole discretion, to award all such reasonable costs, expenses and fees
to the prevailing party.

 

ARTICLE 14

MISCELLANEOUS

 

14.1           Relationship.
This Agreement does not make either party the employee, agent or legal
representative of the other for any purpose whatsoever. Neither party is
granted any right or authority to assume or to create any obligation or
responsibility, express or implied, not otherwise set forth in this Agreement,
on behalf of or in the name of the other party. In fulfilling its obligations
pursuant to this Agreement, each party shall be acting as an independent
contractor.

 

14.2           Assignment.
Neither party may assign this Agreement to any third party without the other
party’s prior consent in writing; provided, however, that such consent shall
not be required in the event of a merger, acquisition or sale of substantially
all of the assets of a party, provided that the acquiring party assumes such
party’s rights and obligations under this Agreement. Any prohibited assignment
shall be null and void. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted assigns.

 

14.3           Compliance.
Both Parties represent and warrant to operate their business including
performance of this Agreement in compliance with applicable laws and
regulations.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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14.4           Notices. All
notices and requests to be given hereunder shall be in writing and in English
(excluding samples and proposed advertising and promotional materials for OMP’s
approval stated in Article 6.1), and shall be given at the respective addresses
of OMP and Rohto set forth below, unless notification of a change of address is
given in writing.

 

As to OMP:

 

OMP, Inc.

310 Golden Shore, 1st Floor

Long Beach, California 90802

 

	
  Attn:

  	
  Curtis A. Cluff

  	
   

  
	
   

  	
  Chief Financial Officer

  

 

As to Rohto:

 

Rohto Pharmaceutical Co, Ltd.

1-8-1, Tatsumi-nishi, Ikuno-ku,

Osaka 544-8666, Japan

 

	
  Attn:

  	
  Toru Nishihara

  	
   

  
	
   

  	
  Division Manager, Development and Planning

  

 

All notices and
requests addressed as provided above shall be deemed to have been effectively
given (i) ten (10) days after mailing (postage prepaid) by first class or
certified mail, return receipt requested, (ii) two (2) business days after
mailing (postage prepaid) by Federal Express or another reputable,
international overnight delivery service, or (iii) upon receipt, if sent by
facsimile or other means of electronic transmission, if receipt has been
electronically acknowledged thereby.

 

14.5           Entire Agreement.
This Agreement, including the exhibits attached hereto and incorporated herein,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all previous agreements by and between the parties
hereto and all proposals, oral or written, and all negotiations, conversations
or discussions heretofore had between the parties hereto related to this
Agreement. Rohto acknowledges that it has not been induced to enter into this
Agreement by any representations or statements, oral or written, not expressly
contained herein.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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Confidential
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14.6           Amendment, Waiver.
This Agreement may not be modified, amended, rescinded, canceled or waived, in
whole or in part, except by written agreement of the parties. The failure of
either party to insist on compliance with any provision hereof shall not
constitute a waiver or modification of such provision.

 

14.7           Publicity.
No press releases, announcements or other disclosure related to this Agreement
or the transactions contemplated herein will be issued or made without the
written approval of each of OMP and Rohto, except for any public disclosure
which OMP (or any Affiliate of OMP) or Rohto in good faith believes is required
by law (in which case the disclosing party will consult with the other party
prior to making such disclosure).

 

14.8           Severability.
In the event that any of the terms of this Agreement are in conflict with any
rule of law or statutory provision or are otherwise unenforceable as finally
determined by a court of competent jurisdiction, such terms shall be deemed
modified or changed to a provision reflecting the parties’ intent to the extent
possible under the applicable laws and regulations. Such invalidity or
unenforceability shall not invalidate any of the other terms of this Agreement
and this Agreement shall continue in force.

 

14.9           Counterparts;
English Language. This Agreement may be executed in two or more
counterparts in the English language, and each such counterpart shall be deemed
an original hereof. In case of any conflict between the English version and any
translated version of this Agreement, the English version shall govern.

 

14.10    Titles and Headings;
Construction. The Article and Section headings are included for
convenience and reference only and should in no way define, limit, extend or
describe the scope of this Agreement.

 

14.11    Benefit. Except as
otherwise expressly set forth in Section 9.1, nothing in this Agreement or the
agreements referred to herein, expressed or implied, shall confer on any person
other than the parties hereto or thereto, or their respective permitted
successors or assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, the agreements referred to herein, or the
transactions contemplated herein or therein.

 

14.12    Force Majeure.
Neither party shall be in default hereunder by reason of any failure or delay
In the performance of any obligation under this Agreement where such failure or
delay arises out of any cause beyond the reasonable control and without the
fault or negligence of such party and where the party affected has been unable
by the exercise of reasonable efforts to overcome or mitigate the effects of
such act or event. Such causes shall include, without limitation, storms,
floods, other acts of nature, fires, explosions, riots, War or civil
disturbance, strikes or other labor unrest, embargoes and other governmental
actions or regulations that would prohibit either party from ordering or
furnishing Products or from

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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performing any
other aspects of the obligations hereunder, delays In transportation, shortages
of supplies and sales of competitive products by OMP or an Affiliate of OMP in
the same retail outlets as the Product. The party invoking any event
constituting force majeure shall be excused from its inability to perform its
obligations hereunder only to the extent and for the duration of the event of
force majeure so invoked and shall be bound to resume such performance immediately
after the cessation of such event. If the period of delay or failure should
extend for sixty (60) days or more, consecutively or cumulatively, in any one
(1) year period commencing from the date hereof, then, notwithstanding the
terms of Article 11 hereof, the party not invoking such event constituting
force majeure to excuse its delay or failure to perform its obligations
hereunder shall in its discretion have the right to terminate this Agreement
forthwith upon written notice to the other party at any time after expiration
of said sixty (60) day period. Whichever party may -invoke any event
constituting force majeure to excuse its delay or failure to perform shall
promptly notify the other party of its occurrence with all available
information, as well as of the cessation of such event of force majeure.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written.

 

	
  OMP, INC.

  	
  ROHTO PHARMACEUTICAL CO,
  LTD

  
	
   

  	
   

  
	
  By:

  	
  /s/ Austin McNamara

  	
   

  	
  By:

  	
  /s/ Kunio Yamada

  
	
  Title: 

  	
  Chairman & CEO

  	
   

  	
  Title:

  	
  President & CEO

  	 

	
   

  	
  9/13/02

  	
   

  	
  9/13/02

  	 

							

 

Attachments:

 

Exhibit
A – Licensed Products and Specifications

Exhibit
B – Trademarks

Exhibit
C – Trademark Usage Guidelines

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

20

 

Exhibit A

 

Licensed Products
and Specifications

 

*Obagi-C 5%

*Obagi-C10%

*Obagi-K

*Skin Cycler Initialize

*Skin Cycler Settle

*Skin Cycler Unbind

*Skin Cycler Mobilize

*Skin Cycler Work Done

*Skin Cycler Protect

 

*per formulation and
specifications provided separately

 

 

Exhibit B

 

Trademarks

 

OMP Trademarks and
Tradenames include but are not limited to the following:

 

•                            Obagi-C
(Tradename and Package Design)

•                            Obagi-K
(Tradename)

•                            Obagi-K+
(Tradename)

•                            Skin
Health Restoration (Tradename)

 

Joint Trademarks and
Tradenames include but are not limited to the following:

 

•                            Obagi-K
package design (Package Design Only)

•                            Obagi-K+
package design (Package Design Only)

•                            Skin
Cycler (Tradename and Package Design)

•                            Unbind
(Tradename and Package Design)

•                            Mobilize
(Tradename and Package Design)

•                            Work
Done (Tradename and Package Design)

•                            Brightening
Essence (Tradename)

 

Rohto Trademarks and
Tradenames include but are not limited to the following:

 

•                            Wrinkle
Free Application (Tradename)

 

 

 

Exhibit C

 

Trademark Usage
Guidelines

 

 

OMP,
Inc. Graphic Standards

 

 

	
  OMP, Inc.
  Logos

  	
   

  	
  

  

  

  

  
	
   

  	
   

  
	
  Permission must be
  granted before the OMP, Inc. logo can be used or published. Pre-approval
  must be obtained from the OMP, Inc. International Marketing Department.
  Submission should be in written form and should include a sample of the
  marketing piece where the logo will be used.

  	
   

  
	
   

  	
   

  
	
  When referring to
  OMP, Inc. in press copy, the correct name is OMP, Inc. or Obagi
  Medical Products, Inc.

  	
   

  
	
   

  	
   

  
	
  The OMP, Inc.
  corporate logo should appear as the 2-color version shown at right. The 2
  colors of the logo are PMS 2748 blue and PMS 319 light blue.

  	
   

  
	
   

  	
   

  
	
  As an alternative, the
  1-color or black logo may be used. When the logo is to be placed on a
  dark background, the reversed white version should be used.

  	
   

  
	
   

  	
   

  
	
  Area
  of Isolation

  	
   

  
	
   

  	
   

  
	
  It is important to keep
  the logo clear of any distracting elements. The minimum amount of clear space
  around the mark is shown at right on the 2-color logo. (Note: x = the height
  of “INC” in the mark.)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  OMP has specific rights
  with respect to the ownership research, trademarks, patents, development and
  distribution of particular proprietary skin care product lines. OMP holds
  exclusive right, title, and interest in any and all trademarks and trademark
  names, copyrights and patents surrounding the product lines. The use of this
  trademark must comply with any and all applicable laws, rules and
  regulations pertaining to trademarks, copyrights and/or patents.

  	
   

  

 

 

	
  Nu-Derm
  Logos

  	
   

  	
  

  

  

  

  
	
   

  	
   

  
	
  The Obagi Nu-Derm logo
  should be used on all printed materials relating directly to the Nu-Derm
  System. The logo should appear as the 2-color version shown at right. The 2
  colors of the logo are PMS 2748 blue and PMS 319 light blue.

  	
   

  
	
   

  	
   

  
	
  As an alternative, the
  1-color or black logo may be used. When the logo is to be placed on a
  dark background, the reversed white version should be used.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Area
  of Isolation

  	
   

  
	
   

  	
   

  
	
  It is important to keep
  the logo clear of any distracting elements. The minimum amount of clear space
  around the mark is shown at right on the 2-color logo. (Note: x = 1/2 the
  height of “OBAGI” in the mark.)

  	
   

  
	
   

  	
   

  
	
  OMP has specific rights
  with respect to the ownership research, trademarks, patents, development and
  distribution of particular proprietary skin care product lines. OMP holds
  exclusive right, title, and interest in any and all trademarks and trademark
  names, copyrights and patents surrounding the product lines. The use of this
  trademark must comply with any and all applicable laws, rules and
  regulations pertaining to trademarks, copyrights and/or patents.

  

 

 

 

	
  Blue
  Peel Logos

   

  The Obagi Blue Peel
  logo should be used on all printed materials relating directly to the Blue
  Peel product. The logo should appear as the 2-color version shown at right.
  The 2 colors of the logo are PMS 2748 blue and PMS 319 light blue.

   

  As an alternative, the
  1-color or black logo may be used. When the logo is to be placed on a
  dark background, the reversed white version should be used.

   

   

  Area of
  Isolation

   

  It is important to keep
  the logo clear of any distracting elements. The minimum amount of clear space
  around the mark is shown at right on the 2-color logo. (Note: x = 1/2 the
  height of “OBAGI” in the mark.)

   

   

   

   

   

   

   

   

   

  OMP has specific rights
  with respect to the ownership research, trademarks, patents, development and
  distribution of particular proprietary skin care product lines. OMP holds
  exclusive right, title, and interest in any and all trademarks and trademark
  names, copyrights and patents surrounding the product lines. The use of this
  trademark must comply with any and all applicable laws, rules and
  regulations pertaining to trademarks, copyrights and/or patents.

  	
   

  	
  

  

  

  

  

 

 

	
  Obagi-C
  Logos

  	
   

  	
  

  

   

  
	
   

  	
   

  
	
  The Obagi-C logo should
  be used on all printed materials relating directly to Obagi vitamin C
  products. The logo should appear as the 2-color version shown at right. The 2
  colors of the logo are PMS 137 orange and PMS Warm Gray 10. The large C in
  the background gradates from 100% PMS 137 orange at the top to white at the
  bottom.

  	
   

  
	
   

  	
   

  
	
  As an alternative, the
  black logo may be used. The large C in the background gradates from 40%
  black at the top to white at the bottom.

  	
   

  
	
   

  	
   

  
	
  Area
  of Isolation

  	
   

  
	
   

  	
   

  
	
  It is important to keep
  the logo clear of any distracting elements. The minimum amount of clear space
  around the mark is shown at right on the 2-color logo. (Note: x = the height
  of the O in “Obagi.”)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  OMP has specific rights
  with respect to the ownership research, trademarks, patents, development and
  distribution of particular proprietary skin care product lines. OMP holds
  exclusive right, title, and interest in any and all trademarks and trademark
  names, copyrights and patents surrounding the product lines. The use of this
  trademark must comply with any and all applicable laws, rules and
  regulations pertaining to trademarks, copyrights and/or patents.

  	
   

  

 

 

	
  Colors

  	
   

  	
  

  

  

  
	
   

  	
   

  
	
  The OMP, Inc.
  color system is built around the seven colors shown at right.* To keep the
  image consistent, it is important to always use the designated PANTONE
  colors.

  	
   

  
	
   

  	
   

  
	
  As indicated below, the
  primary color palette consists of colors used for Obagi logos. PMS 2748 blue
  and PMS 319 light blue are the colors of the OMP, Inc., Nu-Derm and Blue
  Peel logos. PMS 137 orange and PMS Warm Gray 10 are the colors used for the
  Obagi-C logo. The secondary colors have been chosen to complement the primary
  color palette. They can be used as accent colors on printed materials
  relating to Obagi products.

  	
   

  
	
   

  	
   

  
	
  Pantone (Coated &
  Uncoated)

  	
   

  
	
   

  	
   

  
	
  Primary
  Colors

  	
   

  
	
  PMS 2748

  	
   

  
	
  PMS 319

  	
   

  
	
  PMS 137

  	
   

  
	
  PMS Warm Gray 10

  	
   

  
	
   

  	
   

  
	
  Secondary
  Colors

  	
   

  
	
  PMS 617

  	
   

  
	
  PMS 145

  	
   

  
	
  PMS 5275

  	
   

  
	
   

  	
   

  

 

*                            The
colors shown on this page and throughout this document have not been
evaluated by Pantone, Inc. for accuracy and may not match the PANTONE®
Color Standards. For accurate color standards, refer to the current edition of
the PANTONE Color Formula Guide. PANTONE is a registered trademark of Pantone, Inc.

 

 

	
  Fonts
  - Serif

   

  The consistent use of
  typefaces compatible with the OMP, Inc. brand strengthens and reinforces
  the brand. The typefaces shown are appropriate for use in all communications
  materials for Nu-Derm, Blue Peel and Obagi-C.

   

  Stone Serif is an
  extremely legible serif font with a wide range of weights. It should be used
  for headlines and body copy in Nu-Derm and Blue Peel materials.

   

  Baker Signet is the
  established font for Obagi-C and should be used for all Obagi-C materials.

  	
   

  	
  

  

 

 

	
  Fonts
  - Sans Serif

   

  The consistent
  use of typefaces compatible with the OMP, Inc. brand strengthens and
  reinforces the brand. The typefaces shown are appropriate for use in all
  communications materials for Nu-Derm, Blue Peel and Obagi-C.

   

  Univers is a
  sans serif face with a wide range of weights beyond those shown here. It is a
  good complement to both Stone Serif and Baker Signet. It should be used for
  headlines, subheads, captions and chart information.

   

  If you do not
  own these fonts, they can be purchased from the Adobe Type Library at
  www.adobe.com.

  	
   

  	
  

  

 

 

 

 

AMENDMENT
TO

KNOW-HOW AND TRADEMARK

LICENSE AGREEMENT

 

THIS
AMENDMENT ("Amendment") TO THE
KNOW-HOW AND TRADEMARK LICENSE AGREEMENT dated September 13,
2002 ("License Agreement") is entered into, as of JUNE 1, 2004,
between OMP, INC. ("OMP"), a Delaware
corporation having its principal place of business at 310 Golden Shore, Long
Beach, California 90802, U.S.A., and ROHTO PHARMACEUTICAL CO.,
LTD. ("Rohto"), a Japanese company having its principal
place of business at 1-8-1, Tatsumi-nishi, Ikuno-ku, Osaka 544-8666, Japan.

 

WHEREAS,
in connection with settlement of litigation between OMP and Senetek PLC pending
in California, entitled Senetek PLC v. OMP, Inc., State of California,
Superior Court, County of Los Angeles, no. BC293829, OMP has obtained from
Senetek PLC rights to develop, manufacture, market and sell products containing
the ingredient Kinetin at concentrations of .02% or less in topical skin care
products, including the right to sublicense rights to the same under the Obagi
brand name;

 

WHEREAS,
in obtaining such rights, OMP has obtained full settlement and releases of the
aforementioned lawsuit between Senetek PLC and OMP, as well as an action
between Senetek PLC and Rohto, entitled Senetek PLC v. Rohto Pharmaceutical
Co., Ltd., United States District Court, Northern District of California,
no. 3:2003cv05529, which settlements and releases were to the benefit of
both OMP and Rohto; and

 

WHEREAS,
Rohto wishes to participate in such rights and has agreed to share the cost of
such settlement under the terms and conditions set forth below.

 

NOW,
THEREFORE, in consideration of mutual promises contained
herein, the parties agree as follows:

 

A)            OMP

 

OMP agrees to sublicense
the use of rights, as follows:

 

1)     Sublicense
of Rights—OMP hereby sublicenses to Rohto such rights as it has acquired
from Senetek PLC related to products containing Kinetin in the territory of
Japan as described herein above, consistently with and pursuant to the terms of
the License Agreement.

 

2)     Exclusivity—Such rights are sublicensed
exclusively to Rohto for the territory of Japan and OMP shall not sublicense to
any other person or entity the right such rights in the marketing, sale and
distribution of Licensed Products or similar products within the Channel of the
Territory as defined by the License Agreement.

THE SYMBOL [***] IS USED
TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.

 

1

 

B)            Roto

 

For its part, Rohto
agrees to pay consideration to OMP for use of such rights, as follows:

 

1)     Cash Payment—Rohto agrees to pay
[***] to OMP. Specifically, remittance shall be by wire transfer of [***],
payable to OMP within 15 days of the date of execution of this Amendment;

 

2)     Capped Additional Royalty—Rohto
further agrees to pay an additional [***] royalty (incremental to the
previously agreed [***] royalty) on net sales of Obagi K+ products occurring
after April 1, 2004, payable up to a maximum cap of [***], which shall be
payable on the same terms and in the same manner as bas royalty fees defined by
the License Agreement; and

 

3)     Termination of [***] royalty holdback
and damage offset provision—Section 8.1 of the License Agreement
allows Rohto to hold back [***] of Net Sales of Obagi K products (and also
allows for the offset by Rohto of payment and/or damages related to patent
infringement litigation). That provision (beginning with the third sentence and
through the end of section 8.1) is hereby terminated and rendered null and
void retroactively to the date of execution of the License Agreement. All
amounts previously withheld by Rohto pursuant to said provision shall be
remitted to OMP on or before the date of the next royalty payment due-date occurring
after the date of this agreement.

 

C)            Miscellaneous

 

1)     The parties hereto agree to waive any and
all claims for attorney fees and costs incurred by each in connection with
litigation with Sentek PLC referred to herein above in the recitals.

 

2)     This is the full and complete Amendment of
the License Agreement, and it supersedes all prior oral discussions and
understandings regarding the subject matter of this amendment.

 

3)     This Amendment may be executed in
counterparts.

 

4)     Both parties havfe engaged the advice of
counsel in connection with the preparation of this Amendment.

 

5)     This Amendment is governed by California
law.

 

THE SYMBOL [***] IS USED
TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.

 

2

 

IN
WITNESS WHEREOF, the parties execute this Amendment as of the
date set forth herein above.

 

 

	
  OMP, INC.

  	
  ROHTO PHARMACEUTICALS CO, LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Curtis
  A. Cluff

  	
   

  	
  By:

  	
  Toru
  Nishihara

  	
   

  
	
   

  	
  Curtis A. Cluff

  	
   

  	
   

  	
  Toru Nishihara

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  	
  Title:

  	
  General Manager,
  Business Development

  	
   

  

THE SYMBOL [***] IS USED
TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTION.

 

 

3Exhibit 10.18

 

[Execution Copy]

 

CREDIT
AGREEMENT

 

DATED AS OF
JANUARY 28, 2005

AMONG

 

OMP, INC.,

 

MERRILL
LYNCH CAPITAL,

a Division of Merrill Lynch Business Financial Services Inc.,

as Administrative Agent, as a Lender and

as Sole Bookrunner and Sole Lead Arranger

 

AND

 

THE  ADDITIONAL 
LENDERS 

FROM TIME TO TIME PARTY HERETO

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Certain Defined Terms

  	
  1

  
	
  Section 1.2.

  	
  Accounting Terms and Determinations

  	
  20

  
	
  Section 1.3.

  	
  Other Definitional Provisions

  	
  20

  
	
  Section 1.4.

  	
  Funding and Settlement Currency

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  LOANS AND LETTERS OF CREDIT

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Term Loans

  	
  21

  
	
  Section 2.2.

  	
  Revolving Loans and Swingline Loans

  	
  24

  
	
  Section 2.3.

  	
  Interest, Interest Calculations and Certain Fees

  	
  28

  
	
  Section 2.4.

  	
  Notes

  	
  30

  
	
  Section 2.5.

  	
  Letters of Credit and Letter of Credit Fees

  	
  30

  
	
  Section 2.6.

  	
  General Provisions Regarding Payment; Loan Account

  	
  34

  
	
  Section 2.7.

  	
  Maximum Interest

  	
  34

  
	
  Section 2.8.

  	
  Taxes

  	
  35

  
	
  Section 2.9.

  	
  Capital Adequacy

  	
  36

  
	
  Section 2.10.

  	
  Mitigation Obligations

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Existence and Power

  	
  37

  
	
  Section 3.2.

  	
  Organization and Governmental Authorization; No Contravention

  	
  37

  
	
  Section 3.3.

  	
  Binding Effect

  	
  38

  
	
  Section 3.4.

  	
  Capitalization

  	
  38

  
	
  Section 3.5.

  	
  Financial Information

  	
  38

  
	
  Section 3.6.

  	
  Litigation

  	
  39

  
	
  Section 3.7.

  	
  Ownership of Property

  	
  39

  
	
  Section 3.8.

  	
  No Default

  	
  40

  
	
  Section 3.9.

  	
  Labor Matters

  	
  40

  
	
  Section 3.10.

  	
  Regulated Entities

  	
  40

  
	
  Section 3.11.

  	
  Margin Regulations

  	
  40

  
	
  Section 3.12.

  	
  Compliance With Laws; Anti-Terrorism Laws

  	
  40

  
	
  Section 3.13.

  	
  Taxes

  	
  42

  
	
  Section 3.14.

  	
  Compliance with ERISA

  	
  42

  
	
  Section 3.15.

  	
  Brokers

  	
  43

  
	
  Section 3.16.

  	
  Related Transactions

  	
  43

  
	
  Section 3.17.

  	
  Material Contracts

  	
  43

  
	
  Section 3.18.

  	
  Compliance with Environmental Requirements; No Hazardous Materials

  	
  44

  
	
  Section 3.19.

  	
  Intellectual Property

  	
  45

  
	
  Section 3.20.

  	
  Real Property Interests

  	
  46

  
	
  Section 3.21.

  	
  Solvency

  	
  46

  
	
  Section 3.22.

  	
  Full Disclosure

  	
  46

  

 

- i -

 

	
  Section 3.23.

  	
  Representations and Warranties Incorporated from Other Operative
  Documents

  	
  46

  
	
  Section 3.24.

  	
  Westland Litigation

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  AFFIRMATIVE COVENANTS

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Financial Statements and Other Reports

  	
  47

  
	
  Section 4.2.

  	
  Payment and Performance of Obligations

  	
  50

  
	
  Section 4.3.

  	
  Maintenance of Existence

  	
  51

  
	
  Section 4.4.

  	
  Maintenance of Property; Insurance

  	
  51

  
	
  Section 4.5.

  	
  Compliance with Laws

  	
  52

  
	
  Section 4.6.

  	
  Inspection of Property, Books and Records

  	
  52

  
	
  Section 4.7.

  	
  Use of Proceeds

  	
  53

  
	
  Section 4.8.

  	
  Lenders’ Meetings

  	
  53

  
	
  Section 4.9.

  	
  Required Swap Contracts

  	
  53

  
	
  Section 4.10.

  	
  Hazardous Materials; Remediation

  	
  53

  
	
  Section 4.11.

  	
  Dividends to Holding

  	
  54

  
	
  Section 4.12.

  	
  Further Assurances

  	
  54

  
	
  Section 4.13.

  	
  Compliance With Health Care Laws

  	
  55

  
	
  Section 4.14.

  	
  Notices to Agent

  	
  55

  
	
  Section 4.15.

  	
  Participation Agreements

  	
  57

  
	
  Section 4.16.

  	
  Cure of Violations

  	
  57

  
	
  Section 4.17.

  	
  Corporate Compliance Program

  	
  58

  
	
  Section 4.18.

  	
  Obagi Trade Secrets

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  NEGATIVE COVENANTS

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Debt

  	
  59

  
	
  Section 5.2.

  	
  Liens

  	
  60

  
	
  Section 5.3.

  	
  Contingent Obligations

  	
  61

  
	
  Section 5.4.

  	
  Restricted Distributions

  	
  62

  
	
  Section 5.5.

  	
  Restrictive Agreements

  	
  62

  
	
  Section 5.6.

  	
  Payments and Modifications of Subordinated Debt

  	
  63

  
	
  Section 5.7.

  	
  Consolidations, Mergers and Sales of Assets

  	
  63

  
	
  Section 5.8.

  	
  Purchase of Assets, Investments

  	
  63

  
	
  Section 5.9.

  	
  Transactions with Affiliates

  	
  64

  
	
  Section 5.10.

  	
  Modification of Organizational Documents

  	
  64

  
	
  Section 5.11.

  	
  Modification of Certain Agreements

  	
  65

  
	
  Section 5.12.

  	
  Fiscal Year

  	
  65

  
	
  Section 5.13.

  	
  Conduct of Business

  	
  65

  
	
  Section 5.14.

  	
  Investor Fees

  	
  65

  
	
  Section 5.15.

  	
  Lease Payments

  	
  66

  
	
  Section 5.16.

  	
  Limitation on Sale and Leaseback Transactions

  	
  66

  
	
  Section 5.17.

  	
  Bank Accounts

  	
  66

  
	
  Section 5.18.

  	
  Compliance with Anti-Terrorism Laws

  	
  67

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  FINANCIAL COVENANTS

  	
  67

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Capital Expenditures

  	
  67

  

 

- ii -

 

	
  Section 6.2.

  	
  Minimum EBITDA

  	
  68

  
	
  Section 6.3.

  	
  Fixed Charge Coverage Ratio

  	
  69

  
	
  Section 6.4.

  	
  Interest Coverage Ratio

  	
  70

  
	
  Section 6.5.

  	
  Total Debt to EBITDA Ratio

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CONDITIONS

  	
  71

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Conditions to Closing

  	
  71

  
	
  Section 7.2.

  	
  Conditions to Each Loan, Support Agreement and Lender Letter of
  Credit

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  EVENTS OF DEFAULT

  	
  72

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Events of Default

  	
  72

  
	
  Section 8.2.

  	
  Acceleration and Suspension or Termination of Revolving Loan
  Commitment

  	
  75

  
	
  Section 8.3.

  	
  Cash Collateral

  	
  75

  
	
  Section 8.4.

  	
  Default Rate of Interest and Suspension of LIBOR Rate Options

  	
  75

  
	
  Section 8.5.

  	
  Setoff Rights

  	
  75

  
	
  Section 8.6.

  	
  Application of Proceeds

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EXPENSES AND INDEMNITY

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Expenses

  	
  76

  
	
  Section 9.2.

  	
  Indemnity

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  ADMINISTRATIVE AGENT

  	
  78

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Appointment and Authorization

  	
  78

  
	
  Section 10.2.

  	
  Administrative Agent and Affiliates

  	
  78

  
	
  Section 10.3.

  	
  Action by Administrative Agent

  	
  78

  
	
  Section 10.4.

  	
  Consultation with Experts

  	
  79

  
	
  Section 10.5.

  	
  Liability of Administrative Agent

  	
  79

  
	
  Section 10.6.

  	
  Indemnification

  	
  79

  
	
  Section 10.7.

  	
  Right to Request and Act on Instructions

  	
  79

  
	
  Section 10.8.

  	
  Credit Decision

  	
  80

  
	
  Section 10.9.

  	
  Collateral Matters

  	
  80

  
	
  Section 10.10.

  	
  Agency for Perfection

  	
  81

  
	
  Section 10.11.

  	
  Notice of Default

  	
  81

  
	
  Section 10.12.

  	
  Successor Administrative Agent

  	
  81

  
	
  Section 10.13.

  	
  Disbursements of Revolving Loans; Payment and Sharing of Payment

  	
  82

  
	
  Section 10.14.

  	
  Right to Perform, Preserve and Protect

  	
  85

  
	
  Section 10.15.

  	
  Additional Titled Agents

  	
  85

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  85

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Survival

  	
  85

  
	
  Section 11.2.

  	
  No Waivers

  	
  85

  
	
  Section 11.3.

  	
  Notices

  	
  86

  

 

- iii
-

 

	
  Section 11.4.

  	
  Severability

  	
  86

  
	
  Section 11.5.

  	
  Amendments and Waivers

  	
  86

  
	
  Section 11.6.

  	
  Assignments; Participations; Replacement of Lenders

  	
  87

  
	
  Section 11.7.

  	
  Headings

  	
  90

  
	
  Section 11.8.

  	
  Confidentiality

  	
  90

  
	
  Section 11.9.

  	
  Waiver of Consequential and Other Damages.

  	
  91

  
	
  Section 11.10.

  	
  GOVERNING LAW; SUBMISSION TO JURISDICTION

  	
  91

  
	
  Section 11.11.

  	
  WAIVER OF JURY TRIAL

  	
  92

  
	
  Section 11.12.

  	
  Publication; Advertisement

  	
  92

  
	
  Section 11.13.

  	
  Counterparts; Integration

  	
  93

  
	
  Section 11.14.

  	
  No Strict Construction

  	
  93

  
	
  Section 11.15.

  	
  Time

  	
  93

  

 

- iv -

 

ANNEXES,
EXHIBITS AND SCHEDULES

 

	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex A

  	
  -

  	
  Commitment Annex

  
	
  Annex B

  	
  -

  	
  Closing Checklist

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Assignment Agreement

  
	
  Exhibit B

  	
  -

  	
  Excess Cash Flow Certificate

  
	
  Exhibit C

  	
  -

  	
  Compliance Certificate

  
	
  Exhibit D

  	
  -

  	
  Borrowing Base Certificate

  
	
  Exhibit E

  	
  -

  	
  Notice of Borrowing

  
	
  Exhibit F

  	
  -

  	
  Payment Notification

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 3.1

  	
  -

  	
  Existence, Organizational Identification
  Numbers, Foreign Qualification, Prior Names

  
	
  Schedule 3.4

  	
  -

  	
  Capitalization

  
	
  Schedule 3.5

  	
  -

  	
  Material Adverse Changes after 12/31/2003
  and prior to Closing Date

  
	
  Schedule 3.6

  	
  -

  	
  Litigation

  
	
  Schedule 3.12

  	
  -

  	
  Violations of Health Care Laws

  
	
  Schedule 3.15

  	
  -

  	
  Brokers

  
	
  Schedule 3.17

  	
  -

  	
  Material Contracts

  
	
  Schedule 3.18

  	
  -

  	
  Environmental Compliance

  
	
  Schedule 3.19

  	
  -

  	
  Intellectual Property

  
	
  Schedule 3.20

  	
  -

  	
  Owned Real Estate

  
	
  Schedule 5.1

  	
  -

  	
  Debt

  
	
  Schedule 5.2

  	
  -

  	
  Liens

  
	
  Schedule 5.3

  	
  -

  	
  Contingent Obligations

  
	
  Schedule 5.8

  	
  -

  	
  Investments

  
	
  Schedule 5.9

  	
  -

  	
  Affiliate Transactions

  
	
  Schedule 5.13

  	
  -

  	
  Business Description

  

 

 

CREDIT
AGREEMENT

 

CREDIT AGREEMENT dated as of January 28, 2005
among OMP, INC., a Delaware corporation, as Borrower, the financial
institutions or other entities from time to time parties hereto, each as a
Lender, and MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business
Financial Services Inc., individually as a Lender, as Administrative Agent,
Sole Bookrunner and Sole Lead Arranger.

 

RECITALS:

 

WHEREAS, Borrower is a wholly-owned subsidiary of
Obagi Medical Products, Inc., a Delaware corporation (“Holdings”);
and

 

WHEREAS, Holdings desires to repurchase certain
shares of its preferred stock (the “Repurchase”) and
to make certain distributions to its shareholders (the “Closing Date Distributions”), each
pursuant to, among other things, the terms of that certain Repurchase Agreement
of even date herewith among Holdings and Stongington Capital Appreciation 1994
Fund, L.P. and the Zein & Samar Obagi Family Trust (as amended or
otherwise modified to the date hereof, and including all exhibits and schedules
thereto, the “Repurchase Agreement”); and

 

WHEREAS, Borrower desires that Lenders extend
certain term credit and working capital facilities to Borrower to provide funds
necessary to permit Holdings to pay a portion of the consideration due and
owing in connection with the consummation of the Repurchase and the Closing
Date Distribution in accordance with the provisions of the Repurchase Agreement
and to provide working capital financing for Borrower; and

 

WHEREAS, Borrower desires to secure all of the
Obligations by granting to Administrative Agent, for the benefit of
Administrative Agent and Lenders, a first priority perfected Lien upon all of
its personal and real property, including without limitation all of the
outstanding capital stock or other equity securities, as applicable, of each
Subsidiary; and

 

WHEREAS, Holdings is willing to guaranty all of the
Obligations, and to grant to Administrative Agent, for the benefit of
Administrative Agent and Lenders, a first priority perfected Lien upon all of
its personal and real property, including without limitation all of the
outstanding capital stock or other equity securities of Borrower;

 

NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained, Borrower, Lenders
and Administrative Agent agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.      Certain Defined Terms.

 

The following terms have the following meanings:

 

“Account Debtor” means “account debtor”, as defined in Article 9
of the UCC.

 

1

 

“Accounts” means “accounts” (as defined in Article 9
of the UCC), including any and all rights to payment for the sale or lease of
goods or rendition of services, whether or not they have been earned by
performance.

 

“Additional Titled Agents” has the meaning set forth in Section 10.15.

 

“Adjustment Date” means the first Business Day of each
February, May, August and November of each year, commencing with the
first Business Day of February, 2006.

 

“Administrative Agent” means Merrill Lynch in its capacity as
administrative agent for the Lenders hereunder, as such capacity is established
in, and subject to the provisions of, Article 10, and the successors of
Merrill Lynch in such capacity.

 

“Affected Lender” has the meaning set forth in Section 11.6(c).

 

“Affiliate” means with respect to any Person (i) any
Person that directly or indirectly controls such Person, (ii) any Person
which is controlled by or is under common control with such controlling Person,
(iii) each of such Person’s (other than, with respect to any Lender, any
Lender’s) officers or directors (or Persons functioning in substantially
similar roles) and the spouses, parents, descendants and siblings of such
officers, directors or other Persons. As used in this definition, the term “control” of a Person means the possession,
directly or indirectly, of the power to vote ten percent (10%) or more of any
class of voting securities of such Person or to direct or cause the direction
of the management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.

 

“Agreement” means this Credit Agreement, as the same may
be amended, supplemented, restated or otherwise modified from time to time.

 

“Anti-Terrorism Laws” means any Laws relating to terrorism or money
laundering, including Executive Order No. 13224 (effective September 24,
2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank
Secrecy Act (i.e. The Currency
and Foreign Transactions Reporting Act, 31 USC §§5311-5330 and 12 USC
§§1818(s), 1829(b) and 1951-1959, together with its implementing
regulation, 31 CFR 103.), and the Laws administered by OFAC.

 

“Approved Fund” means any (i) investment company, fund,
trust, securitization vehicle or conduit that is (or will be) primarily engaged
in making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of its business or (ii) any
Person (other than a natural person) which temporarily warehouses loans for any
Lender or any entity described in the preceding clause (i) and that, with
respect to each of the preceding clauses (i) and (ii), is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a
Person (other than a natural person) or an Affiliate of a Person (other than a
natural person) that administers or manages a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer,
assignment or other consensual disposition by any Credit Party of any asset,
but excluding (i) dispositions of Inventory in the Ordinary Course of
Business, and (ii) dispositions of Cash Equivalents.

 

“Assignment Agreement” means an agreement substantially in the form
of Exhibit A hereto.

 

2

 

“Bankruptcy Code” means Title 11 of the United States Code
entitled “Bankruptcy”.

 

“Base Rate” means a variable per annum rate, as of any
date of determination, equal to the greater of (i) the Federal Funds Rate
plus one-half of one percent (0.50%) per annum and (ii) the rate of
interest which is identified and normally published by Bloomberg Professional
Service Page Prime as the “Prime Rate” (or, if more than one rate is
published as the Prime Rate, then the highest of such rates). Any change in
Base Rate will become effective as of the date the rate of interest which is so
identified as the “Prime Rate” is different from that published on the
preceding Business Day. If Bloomberg Professional Service no longer reports the
Prime Rate, or if such Page Prime no longer exists, or Administrative
Agent determines in good faith that the rate so reported no longer accurately
reflects an accurate determination of the prevailing Prime Rate, Administrative
Agent may select a reasonably comparable index or source to use as the basis
for the Base Rate.

 

“Base Rate Loans” means Loans which accrue interest by
reference to the Base Rate, in accordance with the terms of this Agreement.

 

“Base Rate Margin” means (i) as of the Closing Date, 2.25%
per annum, with respect to the Revolving Loans, Swingline Loans, Term Loan A
and other Obligations (other than Term Loan B), and 2.50% per annum with respect
to Term Loan B and (ii) thereafter, as of each Adjustment Date, the
applicable percent per annum set forth in the Pricing Table corresponding to
the Total Debt to EBITDA Ratio as of the last day of the most recently
completed calendar quarter prior to the applicable Adjustment Date; provided, that if an Event of Default has
occurred and is continuing on an Adjustment Date, no reduction in the Base Rate
Margin shall occur on such Adjustment Date.

 

“Blocked Person” means any Person: (i) listed in the annex
to, or is otherwise subject to the provisions of, Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224; (iii) a Person with which
any Lender is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law; (iv) a Person that commits, threatens or
conspires to commit or supports “terrorism” as defined in Executive Order No. 13224
Executive Order No. 13224 (September 23, 2001) Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support
Terrorism (66 Fed. Reg. 49079(2001), any related enabling legislation or any
other similar Executive Orders related thereto; or (v) a Person that is
named a “specially designated national” or “blocked person” on the most current
list published by OFAC or other similar list.

 

“Borrower” means OMP, Inc., a Delaware corporation
doing business under the tradename of Obagi Medical Products, Inc..

 

“Borrower’s Account” means the account specified on the signature pages hereof
below Borrower’s name into which Loans shall, absent other instructions, be
made, or such other account as Borrower may specify by notice to Administrative
Agent.

 

“Borrowing Base” means, as of any date of calculation, (i) the
product of (a) EBITDA multiplied by (b) 3.25, minus (ii) outstanding Total Debt
(other than Revolving Loan Outstandings and Swingline Loan Outstandings). For
purposes of calculating the Borrowing

 

3

 

Base
as of any date of calculation, EBITDA shall be calculated for the twelve (12)
month period ending on the date most recently ended for which financial
statements described in Section 4.l(a) of Holdings and its
Consolidated Subsidiaries were delivered to Administrative Agent; provided, that for any date of calculation
prior to December, 2005, EBITDA shall include EBITDA of Borrower based on its
financial statements, on a consolidated basis.

 

“Borrowing Base Certificate” means a certificate, duly executed by a
Responsible Officer, appropriately completed and substantially in the form of Exhibit D
hereto.

 

“Business Day” means any day except a Saturday, Sunday or
other day on which either the New York Stock Exchange is closed, or on which
commercial banks in Chicago and New York City are authorized by law to close
and, in the case of a Business Day which relates to a LIBOR Loan, a day on
which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” has the meaning provided in the Compliance
Certificate and shall, for purposes of determining compliance with Sections
2.1(c)(i), 5.8 and 6.1 hereof, include (without duplication) amounts expended
by Borrower or its Subsidiaries in connection with Strategic Acquisitions.

 

“Capital Lease” of any Person means any lease of any property
by such Person as lessee which would, in accordance with GAAP, be required to
be accounted for as a capital lease on the balance sheet of such Person.

 

“Cash  Equivalents” means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof with a maturity date of
no more than one (1) year from the date of acquisition, (ii) commercial
paper with a duration of not more than nine (9) months rated at least A-1
by Standard & Poor’s Ratings Service and P-1 by Moody’s Investors
Services, Inc., which is issued by a Person (other than any Credit Party
or an Affiliate of any Credit Party) organized under the laws of any State of
the United States or of the District of Columbia, (iii) time deposits,
certificates of deposit and banker’s acceptances with a duration of not more
than six (6) months issued by any office located in the United States of
any bank or trust company which is organized under the laws of the United
States or any State thereof, or is licensed to conduct a banking business in
the United States, and has capital, surplus and undivided profits of at least
$500,000,000 and which issues (or the parent of which issues) certificates of
deposit or commercial paper with a rating described in clause (ii) above, (iv) repurchase
agreements and reverse repurchase agreements with a duration of not more than
30 days with respect to securities described in clause (i) above entered
into with an office of a bank or trust company meeting the criteria specified
in clause (iii) above, or (v) any money market or mutual fund which
invests only in the foregoing types of investments, has portfolio assets in
excess of $5,000,000,000, complies with the criteria set forth in Securities
and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940
and is rated AAA by Standard & Poor’s Ratings Service and Aaa by Moody’s
Investors Services, Inc.

 

“CERCLA” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980.

 

“Chattel Paper” means “chattel paper”, as defined in Article 9
of the UCC.

 

4

 

“Closing Checklist” means Annex B to this Agreement.

 

“Closing Date” means the date of this Agreement.

 

“Closing Date Distributions” is defined in the second Recital to this
Agreement.

 

“Code” means the Internal Revenue Code of 1986.

 

“Collateral” means all property (including, without
limitation, all contract rights and all rights, title and interests in other
general intangibles), owned by a Credit Party now existing or hereafter
acquired, mortgaged or pledged to, or purported to be subjected to a Lien in
favor of, Administrative Agent, for the benefit of Administrative Agent and
Lenders, pursuant to the Security Documents.

 

“Commitment Annex” means Annex A to this Agreement.

 

“Commitment Expiry Date” means January 28, 2010.

 

“Compliance Certificate” means a certificate, duly executed by a
Responsible Officer, appropriately completed and substantially in the form of Exhibit C
hereto.

 

“Consolidated Subsidiary” means at any date any Subsidiary or other
Person the accounts of which would be consolidated with those of Holdings (or
any other Person, as the context may require hereunder) in its consolidated
financial statements if such statements were prepared as of such date.

 

“Contingent Obligation” means, with respect to any Person, any direct
or indirect liability of such Person: (i) with respect to any debt, lease,
dividend or other obligation of another Person if the purpose or intent of such
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such liability will be protected, in whole or in part,
against loss with respect thereto; (ii) with respect to any un-drawn
letter of credit, or portion thereof, issued for the account of such Person or
as to which such Person is otherwise liable for the reimbursement of any
drawing; (iii) under any Swap Contract; (iv) to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement; or (v) for any obligations of another Person
pursuant to any agreement to purchase, repurchase or otherwise acquire any
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to preserve the solvency,
financial condition or level of income of another Person. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so guaranteed
or otherwise supported or, if not a fixed and determinable amount, the maximum
amount so guaranteed or otherwise supported.

 

“Controlled Group” means all members of a group of corporations
and all members of a group of trades or businesses (whether or not
incorporated) under common control which, together with Borrower, are treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.

 

“Credit Exposure” means any period of time during which the
Revolving Loan Commitment is outstanding or any Loan, Reimbursement Obligation
or other Obligation remains

 

5

 

unpaid
or any Letter of Credit or Support Agreement remains outstanding; provided, that no Credit Exposure shall be
deemed to exist solely due to the existence of contingent indemnification
liability, absent the assertion of a claim with respect thereto.

 

“Credit Party” means any of Holdings, Borrower and any
Subsidiary of Borrower, whether now existing or hereafter acquired or formed;
and “Credit Parties” means all
such Persons, collectively.

 

“Debt” of a Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising and paid on a timely basis and in the Ordinary Course of Business, (iv) all
Capital Leases of such Person, (v) all non-contingent obligations of such
Person to reimburse any bank or other Person in respect of amounts paid under a
letter of credit, banker’s acceptance or similar instrument, (vi) all
equity securities of such Person subject to repurchase or redemption on or
prior to the date which is 181 days following the Termination Date otherwise
than at the sole option of such Person, (vii) all obligations secured by a
Lien on any asset of such Person, whether or not such obligation is otherwise
an obligation of such Person, (viii) “earnouts” and similar payment
obligations of such Person, and (ix) all Debt of others Guaranteed by such
Person. Without duplication of any of the foregoing, Debt of Borrower shall
include any and all Loans and Letter of Credit Liabilities.

 

“Default” means any condition or event which with the
giving of notice or lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Defaulted Lender” means, so long as such failure shall remain
in existence and uncured, any Lender which shall have failed to make any Loan
or other credit accommodation, disbursement or reimbursement required pursuant
to the terms of any Financing Document.

 

“Domestic Subsidiary” means a Subsidiary organized, incorporated or
otherwise formed under the laws of the United States or any State thereof.

 

“Dr. Obagi Payments” means those certain amounts payable to Zein
Obagi, M.D., pursuant to Section 3(b) of that certain Termination,
License and Obligations Agreement dated as of December 17, 2002 by and
among OMP, Inc., Zein Obagi, M.D., and Zein and Samar Obagi Family Trust,
as in existence as of the date hereof.

 

“EBITDA” has the meaning provided in the Compliance
Certificate.

 

“Eligible Assignee” means (i) a Lender, (ii) an
Affiliate of a Lender that is (or will be) primarily engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business, (iii) an
Approved Fund, and (iv) any other Person (other than a natural person)
approved by (a) Administrative Agent, (b) in the case of any
assignment of any portion of the Revolving Loan Commitment, Swingline Lender,
and (c) unless an Event of Default has occurred and is continuing, Borrower
(such approval of Borrower not to be unreasonably withheld or delayed, and
shall be deemed provided unless expressly withheld by Borrower within three (3) Business
Days of request therefor); provided that
notwithstanding the foregoing, (x) “Eligible Assignee” shall not include

 

6

 

Borrower
or any of Borrower’s Affiliates or Subsidiaries and (y) no proposed assignee
intending to assume all or any portion of the Revolving Loan Commitment shall
be an Eligible Assignee unless such proposed assignee either already holds a
portion of the Revolving Loan Commitment, or has been approved as an Eligible
Assignee by Administrative Agent and Swingline Lender.

 

“Eligible Swap Counterparty” means Administrative Agent, any Affiliate of
Administrative Agent, any Lender and/or any Affiliate of any Lender that (i) from
time to time enters into a Swap Contract with Borrower or any Subsidiary and (ii) in
the case of a Lender or an Affiliate of a Lender other than Administrative Agent,
is expressly identified by Administrative Agent, in its sole discretion, as an
Eligible Swap Counterparty. Without limitation of Administrative Agent’s
discretion to identify a Lender or Affiliate of a Lender as an Eligible Swap
Counterparty, no Lender or Affiliate of any Lender shall be designated an
Eligible Swap Counterparty unless such Person maintains reporting systems
acceptable to Administrative Agent with respect to Swap Contract exposure and
agrees to provide regular reporting to Administrative Agent satisfactory to it
with respect to such exposure.

 

“Environmental Laws” means any and all Laws relating to the
environment or the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Materials or
wastes into the environment, including ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Materials or wastes or the clean-up or other
remediation thereof.

 

“ERISA” means the Employee Retirement Income Security
Act of 1974.

 

“ERISA Plan” means any “employee benefit plan”, as such
term is defined in Section 3(3) of ERISA (other than a Multiemployer
Plan), which Borrower maintains, sponsors or contributes to, or, in the case of
an employee benefit plan which is subject to Section 412 of the Code or
Title IV of ERISA, to which Borrower or any member of the Controlled Group may
have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any
time during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.

 

“Event of Default” has the meaning set forth in Section 8.1.

 

“Excess Cash Flow” has the meaning provided in the Excess Cash
Flow Certificate.

 

“Excess Cash Flow Certificate” means a certificate, duly executed by a
Responsible Officer, appropriately completed and substantially in the form of Exhibit B
hereto.

 

“Extraordinary Receipts” means any cash received by or paid to or for
the account of any Credit Party that would be characterized as an “Extraordinary
Item” under GAAP (and not consisting of proceeds described in any of clauses
(ii), (iii) and/or (iv) of Section 2.1(c)), including without
limitation amounts received in respect of foreign, United States, State or
local tax refunds to the extent not included in the calculation of EBITDA,
pension plan reversions, price and other monetary adjustments made pursuant to
any Repurchase Document and/or indemnification payments made pursuant to any
Repurchase Document (other than such

 

7

 

indemnification
payments to the extent that the amounts so received are applied by a Credit
Party for the purpose of satisfying the condition giving rise to the claim for
indemnification or otherwise covering any out-of-pocket expenses incurred by
any Credit Party in obtaining such payments), in each case net of any taxes
imposed on and payable by such Credit Party against such receipts; provided that Extraordinary Receipts shall
exclude any single or related series of amounts received in an aggregate amount
less than $250,000.

 

“Federal Funds Rate” means, for any day, the rate of interest per
annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of
1%) 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 on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided
that (i) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day and (ii) if no such rate is so published on such next
preceding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to Administrative Agent on such day on such transactions as
determined by Administrative Agent.

 

“Financing Documents” means this Agreement (together with any
amendments thereto), any Notes, the Security Documents, any fee letter between
Merrill Lynch and Borrower relating to the transactions contemplated hereby,
any subordination or intercreditor agreement pursuant to which any Debt and/or
any Liens securing such Debt is subordinated to all or any portion of the
Obligations and all other documents, instruments and agreements contemplated herein
or thereby and heretofore executed, executed concurrently herewith or executed
at any time and from time to time hereafter, as any or all of the same may be
amended, supplemented, restated or otherwise modified from time to time.

 

“Fiscal Year” means a fiscal year of Borrower, ending on December 31
of each calendar year.

 

“Fixed Charge Coverage Ratio” has the meaning provided in the Compliance
Certificate.

 

“Foreign Lender” has the meaning set forth in Section 2.8(c).

 

“Foreign Subsidiary” means each of Obagi Skin Health PTE. Ltd.,
Obagi Skin Health Co., Ltd. (Obagi Taiwan), Obagi Skin Health (HK) Limited, and
Obagi China Limited.

 

“GAAP” means generally accepted accounting
principles set forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the United States accounting profession), which are applicable
to the circumstances as of the date of determination.

 

“Governmental Authority” means any nation or government, any state or
other political subdivision thereof, and any agency or branch of government, department
or Person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation or
other Person owned or controlled (through stock or capital

 

8

 

ownership
or otherwise) by any of the foregoing, whether domestic or foreign.
Governmental Authority shall include any agency, branch or other governmental
body charged with the responsibility and/or vested with the authority to
administer and/or enforce any Health Care Laws.

 

“Guarantee” by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Debt or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other obligation
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or deposit in
the Ordinary Course of Business. The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Hazardous Materials” means (i) any “hazardous substance” as
defined in CERCLA, (ii) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act, (iii) asbestos, (iv) polychlorinated
biphenyls, (v) petroleum, its derivatives, by-products and other
hydrocarbons, (vi) mold and (vii) any other pollutant, toxic,
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.

 

“Hazardous Materials Contamination”
means contamination
(whether now existing or hereafter occurring) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of the
relevant property by Hazardous Materials, or any derivatives thereof, or on or
of any other property as a result of Hazardous Materials, or any derivatives
thereof, generated on, emanating from or disposed of in connection with the
relevant property.

 

“Health Care Laws” has the meaning given such term in Section 3.12
hereof.

 

“Holdings” has the meaning set forth in the Recitals to
this Agreement.

 

“Indemnitees” has the meaning set forth in Section 9.2.

 

“Instrument” means “instrument”, as defined in Article 9
of the UCC.

 

“Intellectual Property” means, with respect to any Person, all
patents, trademarks, trade names, trade styles, trade dress, service marks,
logos and other business identifiers, copyrights, technology, know-how and
processes, trade secrets, computer hardware design and specifications and
computer software and all applications and licenses therefor, used in or
necessary for the conduct of business by such Person.

 

“Interest Coverage Ratio” has the meaning provided in the Compliance
Certificate.

 

“Interest Period” means, as to any LIBOR Loan, the period
commencing on the date such Loan is borrowed or continued as, or converted
into, a LIBOR Loan and ending on the

 

9

 

date
one (1), two (2), three (3), six (6) months (or, if all applicable Lenders
consent thereto, nine (9) or twelve (12) months) thereafter, as selected
by Borrower pursuant to Section 2.3(e); provided,
that: (a) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day; (b) any Interest Period
that begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on the last
Business Day of the calendar month at the end of such Interest Period; (c) Borrower
may not select any Interest Period for a Revolving Loan which would extend
beyond the Commitment Expiry Date; and (d) Borrower may not select any
Interest Period for a Term Loan if, after giving effect to such selection, the
aggregate principal amount of such Term Loan having Interest Periods ending
after any date on which an installment of such Term Loan is scheduled to be
repaid would exceed the aggregate principal amount of such Term Loan scheduled
to be outstanding after giving effect to such repayment.

 

“Inventory” means “inventory” (as defined in Article 9
of the UCC).

 

“Investment” means any investment in any Person, whether
by means of acquiring (whether for cash, property, services, securities or
otherwise) or holding securities, capital contributions, loans, time deposits,
advances, Guarantees or otherwise. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect thereto.

 

“Investor” means Stonington Capital Appreciation 1994
Fund LP, a New York limited partnership.

 

“Key Managers” means, collectively, each Responsible
Officer, Borrower’s Executive Vice President of Sales, Borrower’s Vice
President of Marketing, Borrower’s Director of Operations, Borrower’s Vice
President and General Manager (or individuals performing similar duties), any
member of the Board of Directors of any Credit Party, and “Key Manager” refers to any such Person
individually.

 

“Laws” means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, guidances, guidelines,
ordinances, rules, judgments, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, governmental agreements and
governmental restrictions, whether now or hereafter in effect.

 

“LC Issuer” means one or more banks, trust companies or
other Persons in each case expressly identified by Administrative Agent from
time to time, in its sole discretion, as an LC Issuer for purposes of issuing
one or more Letters of Credit hereunder. Without limitation of Administrative
Agent’s discretion to identify any Person as an LC Issuer, no Person shall be
designated as an LC Issuer (i) unless such Person maintains reporting
systems acceptable to Administrative Agent with respect to letter of credit
exposure and agrees to provide regular reporting to Administrative Agent
satisfactory to it with respect to such exposure, and (ii) that is in a
business that directly competes with or is affiliated with another Person that
directly competes with Borrower in the conduct of its business.

 

10

 

“Lender” means each of (i) Merrill Lynch, (ii) each
other Person party hereto in its capacity as a lender, (iii) each other
Eligible Assignee that becomes a party hereto pursuant to Section 11.6, (iv) Administrative
Agent, to the extent of any Revolving Loans made by Administrative Agent which
have not been settled among the Lenders pursuant to Section 10.13, and (v) the
respective successors of all of the foregoing, and “Lenders” means all of the
foregoing. In addition to the foregoing, for the purpose of identifying the
Persons entitled to share in the Collateral and the proceeds thereof under, and
in accordance with the provisions of, this Agreement and the Security
Documents, the term “Lender” shall include Eligible Swap Counterparties.

 

“Lender Letter of Credit” means a Letter of Credit issued by an LC
Issuer that is also, at the time of issuance of such Letter of Credit, a
Lender.

 

“Letter of Credit” means a standby or a documentary letter of
credit issued for the account of Borrower by an LC Issuer which expires by its
terms within one year after the date of issuance and in any event at least
thirty (30) days prior to the Commitment Expiry Date. Notwithstanding the
foregoing, a Letter of Credit may provide for automatic extensions of its
expiry date for one or more successive one (1) year periods provided that
the LC Issuer that issued such Letter of Credit has the right to terminate such
Letter of Credit on each such annual expiration date and no renewal term may
extend the term of the Letter of Credit to a date that is later than the
thirtieth (30th) day prior to the Commitment Expiry Date.

 

“Letter of Credit Liabilities” means, at any time of calculation, the sum
of (i) without duplication, the amount then, available for drawing under
all outstanding Lender Letters of Credit and all Supported Letters of Credit,
in each case without regard to whether any conditions to drawing thereunder can
then be met plus (ii) without
duplication, the aggregate unpaid amount of all reimbursement obligations in
respect of previous drawings made under all such Lender Letters of Credit and
Supported Letters of Credit.

 

“LIBOR” means, with respect to any LIBOR Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) equal to (i) the rate of interest which is identified
and normally published by Bloomberg Professional Service Page BBAM 1 as
the offered rate for loans in United States dollars for the applicable interest
Period under the caption British Bankers Association LIBOR Rates as of 11:00 a.m.
(London time), on the second full Business Day next preceding the first day of
such Interest Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by (ii) the sum of
one minus the daily average during such Interest Period of the aggregate
maximum reserve requirement (expressed as a decimal) then imposed under Regulation
D of the Board of Governors of the Federal Reserve System (or any successor
thereto) for “Eurocurrency Liabilities” (as defined therein). If Bloomberg
Professional Service no longer reports the LIBOR or Administrative Agent
determines in good faith that the rate so reported no longer accurately
reflects the rate available to Administrative Agent in the London Interbank
Market or if such index no longer exists or if Page BBAM 1 no longer
exists or accurately reflects the rate available to Administrative Agent in the
London Interbank Market, Administrative Agent may select a replacement index or
replacement page, as the case may be.

 

“LIBOR Loans” means any Loans, other than Swingline Loans,
which accrue interest by reference to the LIBOR, in accordance with the terms
of this Agreement.

 

11

 

“LIBOR Margin” means (i) as of the Closing Date, 3.75%
per annum, with respect to the Revolving Loans, Term Loan A and other
Obligations (other than the Swingline Loans and Term Loan B), and 4.00% per
annum with respect to Term Loan B and (ii) thereafter, as of each
Adjustment Date, the applicable percent per annum set forth in the Pricing
Table corresponding to the Total Debt to EBITDA Ratio as of the last day of the
most recently completed calendar quarter prior to the applicable Adjustment
Date; provided, that if an Event
of Default has occurred and is continuing on an Adjustment Date, no reduction
in the LIBOR Margin shall occur on such Adjustment Date.

 

“Lien” means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind,
or any other type of preferential arrangement that has the practical effect of
creating a security interest, in respect of such asset. For the purposes of
this Agreement and the other Financing Documents, Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention agreement relating to such
asset.

 

“Litigation” means any action, suit or proceeding before
any court, mediator, arbitrator or Governmental Authority.

 

“Loan Account” has the meaning set forth in Section 2.6(b).

 

“Loans” means Term Loan A, Term Loan B, the Revolving
Loans and the Swingline Loans, or any combination of the foregoing, as the
context may require.

 

“Major Casualty Proceeds” means (i) the aggregate insurance
proceeds received in connection with one or more related events under any
Property Insurance Policy or (ii) any award or other compensation with
respect to any eminent domain, condemnation of property or similar proceedings
(or any transfer or disposition of property in lieu of condemnation), if the
amount of such aggregate insurance proceeds or award or other compensation
exceeds $1,000,000.

 

“Management Agreements” means, collectively, (i) that certain
Management Service Agreement dated as of December 18, 2002 between
Borrower and Stonington Partners, Inc., and (ii) that certain
Management Services Agreement dated as of December 2, 1997 between
Mandarin Management Partners, Inc. (“Mandarin”) and the Borrower, as
amended by that certain First Amendment to Management Services Agreement dated
as of December 22, 2000 between Mandarin and the Borrower and that certain
Assignment and Assumption Agreement dated December 31, 2001 among the
Borrower, Mandarin and Lighthouse Ventures Group, LLC.

 

“Margin Stock” has the meaning assigned thereto in
Regulation U of the Federal Reserve Board.

 

“Material Adverse Effect” means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (i) the
condition

 

12

 

(financial
or otherwise), operations, business, properties or prospects of any of the
Credit Parties, taken as a whole, (ii) the rights and remedies of
Administrative Agent or Lenders under any Financing Document, or the ability of
any Credit Party to perform any of its obligations under any Financing Document
to which it is a party, (iii) the legality, validity or enforceability of
any Financing Document, or (iv) the existence, perfection or priority of
any material security interest granted in any Financing Document or the value
of any material Collateral.

 

“Material Contracts” has the meaning set forth in Section 3.17.

 

“Maximum Lawful Rate” has the meaning set forth in Section 2.7(b).

 

“McNamara Investor Rights Agreement”
means that certain
Investor’s Rights Agreement dated as of April 1, 2002 between Holdings and
Austin T. McNamara, as in effect as of the date hereof.

 

“Merrill Lynch” means Merrill Lynch Capital, a division of
Merrill Lynch Business Financial Services Inc., and its successors.

 

“Multiemployer Plan” means a multiemployer plan, that is intended
to meet the definition set forth in Section 4001(a)(3) of ERISA, to
which Borrower or any member of the Controlled Group may have any liability.

 

“Net Cash Proceeds” means, with respect to any transaction or
event, an amount equal to the cash proceeds, if any, received by any Credit
Party from or in respect of such transaction or event (including proceeds of
any non-cash proceeds of such transaction), less (i) any fees, commissions
and other out-of-pocket expenses paid to a Person that are reasonably incurred
by such Credit Party in connection therewith and (ii) in the case of an
Asset Disposition, the amount of any Debt secured by a Lien on the related
asset and discharged from the proceeds of such Asset Disposition and any taxes
paid, payable or reasonably estimated by the applicable Credit Party to be
payable by such Person in respect of such Asset Disposition (provided, that if the actual amount of
taxes paid is less than the estimated amount, the difference shall immediately
constitute Net Cash Proceeds).

 

“Non-Funding Revolving Lender” means a Revolving Lender that has delivered a
notice to each of Administrative Agent and Swingline Lender stating that such
Revolving Lender shall cease making Revolving Loans due to the non-satisfaction
of one or more conditions set forth in Article 7, and specifying any such
non-satisfied conditions; provided, that
any Revolving Lender delivering any such notice shall be a Non-Funding Revolving
Lender solely over the period commencing on the Business Day following receipt
by Administrative Agent and Swingline Lender of such notice, and terminating on
such date that such Revolving Lender has either revoked the effectiveness of
such notice or acknowledged to each of Administrative Agent and Swingline
Lender the satisfaction of the condition specified in such notice.

 

“Notes” means the Term Notes A, the Term Notes B, the
Revolving Loan Notes and the Swingline Loan Note, or any combination of the
foregoing, as the context may require.

 

“Notice of Borrowing” means a notice of a Responsible Officer,
appropriately completed and substantially in the form of Exhibit E hereto.

 

13

 

“Notice of LC Credit Event” means a notice from a Responsible Officer to Administrative Agent with respect to any
issuance, increase or extension of a Letter of Credit specifying: (i) the
date of issuance or increase of a Letter of Credit; (ii) the identity of
the LC Issuer with respect to such Letter of Credit, (iii) the expiry date
of such Letter of Credit; (iv) the proposed terms of such Letter of
Credit, including the face amount; and (v) the transactions that are to be
supported or financed with such Letter of Credit or increase thereof.

 

“Obagi Investors’ Rights Agreement”
means that certain
Investors’ Rights Agreement dated as of December 17, 2002 by and among
Holdings, Mandarin Partners, LLC and the Zein and Samar Obagi Family Trust, as
in effect as of the date hereof.

 

“Obagi Trade Secrets” is defined in Section 4.18 hereof.

 

“Obligations” means all obligations, liabilities and
indebtedness (monetary (including post-petition interest, whether or not
allowed) or otherwise) of each Credit Party under this Agreement or any other
Financing Document, in each case howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due. In addition to, but without duplication of, the
foregoing, the Obligations shall include, without limitation, all obligations,
liabilities and indebtedness arising from or in connection with (i) all
Support Agreements, (ii) all Lender Letters of Credit and (iii) all
Swap Contracts entered into with any Eligible Swap Counterparty.

 

“OFAC” means the U.S. Department of Treasury Office
of Foreign Assets Control.

 

“Operative Documents” means the Financing Documents and the
Repurchase Documents.

 

“Ordinary Course of Business” means, in respect of any transaction
involving any Credit Party, the ordinary course of such Credit Party’s
business, as conducted by such Credit Party in accordance with past practice.

 

“Organizational Documents” means, with respect to any Person other than
a natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of
designation for preferred stock or other forms of preferred equity) and which
relate to the internal governance of such Person (such as by-laws, a
partnership agreement or an operating, limited liability or members agreement).

 

“Participant” has the meaning set forth in Section 11.6(b).

 

“Payment Account” means the account specified on the signature pages hereof
into which all payments by or on behalf of Borrower to Administrative Agent
under the Financing Documents shall be made, or such other account as
Administrative Agent shall from time to time specify by notice to Borrower.

 

“Payment Notification” means a written notification substantially in
the form of Exhibit F hereto.

 

14

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any Person succeeding to any or all of its functions under
ERISA.

 

“Pension Plan” means any ERISA Plan that is subject to Section 412
of the Code or Title IV of ERISA.

 

“Permits” has the meaning set forth in Section 3.1.

 

“Permitted Contest” means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that compliance with the
obligation that is the subject of such contest is effectively stayed during
such challenge.

 

“Permitted Liens” means Liens permitted pursuant to Section 5.2.

 

“Person” means any natural person, corporation,
limited liability company, professional association, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any Governmental Authority.

 

“Pricing Table” means the following table:

 

	
  Tier

  	
   

  	
  Total Debt to EBITDA

  	
   

  	
  Revolving Loans, Term Loan

  A and all other Obligations

  (other than Swingline Loans

  and Term Loan B)

  	
   

  	
  Term Loan B

  	
   

  	
  Swingline

  Loans

  	
   

  
	
  Level

  	
   

  	
  Ratio

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  
	
  1

  	
   

  	
  Greater than 3.0 to 1.0

  	
   

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  	
  2.75

  	
  %

  	
  4.25

  	
  %

  	
  2.50

  	
  %

  
	
  2

  	
   

  	
  Greater than 2.5 to 1.0, but less than or
  equal to 3.0 to 1.0

  	
   

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  	
  2.25

  	
  %

  
	
  3

  	
   

  	
  Greater than 2.0 to 1.0, but less than or
  equal to 2.5 to 1.0

  	
   

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  	
  2.00

  	
  %

  
	
  4

  	
   

  	
  Less than 2.0 to 1.0

  	
   

  	
  1.75

  	
  %

  	
  3.25

  	
  %

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  	
  1.75

  	
  %

  

 

For purposes of the Pricing Table, if Borrower shall
at any time fail to timely deliver a Compliance Certificate, then effective as
of the tenth (10th) Business Day following the date on which such Compliance Certificate
was due, each applicable Base Rate Margin and each applicable LIBOR Margin
shall be conclusively presumed to equal the highest applicable Base Rate Margin
and the highest applicable LIBOR Margin specified in the Pricing Table until
the date of delivery of such Compliance Certificate.

 

15

 

“Property Insurance Policy” means any insurance policy maintained by any
Credit Party covering losses with respect to tangible real or personal property
or improvements or losses from business interruption.

 

“Pro Rata Share” means (i) with respect to a Lender’s
right to receive payments of principal and interest with respect to Term Loan
A, the Term Loan A Commitment Percentage of such Lender, (ii) with respect
to a Lender’s right to receive payments of principal and interest with respect
to Term Loan B, the Term Loan B Commitment Percentage of such Lender, (iii) with
respect to a Lender’s obligation to make Revolving Loans, such Lender’s right
to receive payments of principal and interest with respect thereto, such Lender’s
right to receive the unused line fee described in Section 2.3(b), and such
Lender’s obligation to share in Letter of Credit Liabilities and to receive the
related Letter of Credit fee described in Section 2.5(b), the Revolving
Loan Commitment Percentage of such Lender, and (iv) for all other purposes
(including without limitation the indemnification obligations arising under Section 10.6)
with respect to any Lender, the percentage obtained by dividing (x) the sum of
the Revolving Loan Commitment Amount of such Lender (or, in the event the
Revolving Loan Commitment shall have been terminated, such Lender’s then
existing Revolving Loan Outstandings), plus such
Lender’s then outstanding principal amount of the Term Loans by (y) the sum of
the Revolving Loan Commitment (or, in the event the Revolving Loan Commitment
shall have been terminated, the then existing Revolving Loan Outstandings) of
all Lenders, plus the then
outstanding principal amount of the Term Loans of all Lenders.

 

“Repurchase” is defined in the second Recital to this
Agreement.

 

“Repurchase Documents” means the Repurchase Agreement and all
agreements, documents and instruments executed and/or delivered pursuant
thereto or in connection therewith.

 

“Reimbursement Obligations” means, at any date, the obligations of
Borrower then outstanding to reimburse (i) Administrative Agent for
payments made by Administrative Agent under a Support Agreement and/or (ii) any
LC Issuer, for payments made by such LC Issuer under a Lender Letter of Credit.

 

“Replacement Lender” has the meaning set forth in Section 11.6(c).

 

“Required Lenders” means, subject to the provisions of Section 10.13(d),
at any time Lenders holding (i) fifty one (51%) or more of the sum of the
Revolving Loan Commitment and the outstanding principal balance of the Term
Loans (taken as a whole) or (ii) if the Revolving Loan Commitment has been
terminated, fifty one percent (51%) or more of the sum of (x) the then
aggregate outstanding principal balance of the Loans plus (y) the then aggregate amount of Letter of Credit
Liabilities.

 

“Required Revolving Lenders” means, subject to the provisions of Section 10.13(d),
at any time Revolving Lenders holding (i) fifty one percent (51%) or more
of the Revolving Loan Commitment or (ii) if the Revolving Loan Commitment
has been terminated, fifty one percent (51%) or more of the sum of (x) the then
aggregate outstanding principal balance of the Revolving Loans plus (y) the
then aggregate amount of Letter of Credit Liabilities.

 

16

 

“Responsible Officer” means any of the Chief Executive Officer,
Chief Financial Officer or Vice President Finance of Borrower.

 

“Restricted Distribution” means as to any Person (i) any dividend
or other distribution (whether in cash, securities or other property) on any
equity interest in such Person (except those payable solely in its equity
interests of the same class) or (ii) any payment on account of (a) the
purchase, redemption, retirement, defeasance, surrender, cancellation,
termination or acquisition of any equity interests in such Person or any claim
respecting the purchase or sale of any equity interest in such Person or (b) any
option, warrant or other right to acquire any equity interests in such Person.

 

“Revolving Lender” means each Lender having a Revolving Loan
Commitment Amount in excess of zero (or, in the event the Revolving Loan
Commitment shall have been terminated at any time, each Lender at such time
having Revolving Loan Outstandings in excess of zero).

 

“Revolving Loan Borrowing” means a borrowing of a Revolving Loan.

 

“Revolving Loan Commitment” means the sum of each Lender’s Revolving Loan
Commitment Amount.

 

“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount
set forth opposite such Lender’s name on the Commitment Annex under the column “Revolving
Loan Commitment Amount”, or, if different, in the most recent Assignment
Agreement to which such Lender is a party.

 

“Revolving Loan Commitment
Percentage” means, as
to any Lender, the percentage set forth as the “Revolving Loan Commitment
Percentage” for such Lender in the most recent Assignment Agreement to which
such Lender is a party and, in the absence of any such Assignment Agreement,
the percentage amount set forth opposite such Lender’s name on the Commitment
Annex under the column “Revolving Loan Commitment Percentage”.

 

“Revolving Loan Limit” means, at any time, the lesser of (i) the
Revolving Loan Commitment minus the
amount of Swingline Loan Outstandings and (ii) the Borrowing Base minus the amount of Swingline Loan
Outstandings.

 

“Revolving Loan Note” has the meaning set forth in Section 2.4.

 

“Revolving Loan Outstandings” means at any time of calculation the sum of
the then existing aggregate outstanding principal amount of Revolving Loans and
the then existing Letter of Credit Liabilities.

 

“Revolving Loans” has the meaning set forth in Section 2.2(a).

 

“Security Documents” means any agreement, document or instrument
executed concurrently herewith or at any time hereafter pursuant to which one
or more Credit Parties or any other Person either (i) Guarantees payment
or performance of all or any portion of the Obligations and/or (ii) provides,
as security for all or any portion of the Obligations, a Lien on any of its
assets in favor of Administrative Agent for its own benefit and the benefit of
the

 

17

 

Lenders,
as any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“Senior Debt” has the meaning provided in the Compliance
Certificate.

 

“Settlement Date” has the meaning set forth in Section 10.13(a).

 

“Settlement Service” has the meaning set forth in Section 11.6(a).

 

“Solvent” means, with respect to any Person, that such
Person (i) owns and will own assets the fair saleable value of which are (a) greater
than the total amount of its liabilities (including Contingent Obligations) and
(b) greater than the amount that will be required to pay the probable
liabilities of its then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales reasonably
available to it; (ii) has capital that is not unreasonably small in
relation to its business as presently conducted or after giving effect to any
contemplated transaction; and (iii) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such debts as they
become due.

 

“Stated Rate” has the meaning set forth in Section 2.7(b).

 

“Strategic Acquisition” means an acquisition by Borrower or a
Subsidiary of a discrete asset or group of associated assets of a Person, other
than in the Ordinary Course of Business, in order to achieve a strategic
benefit or exploit a strategic opportunity consistent with Borrower’s business
plan and/or business and which would not otherwise be classified as a capital
expenditure under GAAP. In no event shall Strategic Acquisition include or be
deemed a consent to an Investment by a Credit Party in or an acquisition by a
Credit Party of a Person or of substantially all of the assets of a Person.

 

“Subsidiary” means, with respect to any Person, (i) any
corporation of which an aggregate of more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, capital
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially by such Person or
one or more Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of more than 50% of such
capital stock whether by proxy, agreement, operation of law or otherwise, and (ii) any
partnership or limited liability company in which such Person and/or one or
more Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner. Unless the context otherwise requires, each reference to a
Subsidiary shall be a reference to a Subsidiary of Borrower. For purposes of
this Agreement, DermaTech Corporation shall not be considered to be a
Subsidiary for the 30 day period following the Closing Date.

 

“Support Agreement” has the meaning set forth in Section 2.5(a).

 

“Supported Letter of Credit” means a Letter of Credit issued by an LC
Issuer in reliance on one or more Support Agreements.

 

18

 

“Swap Contract” means any “swap agreement”, as defined in Section 101
of the Bankruptcy Code, that is intended to provide protection against
fluctuations in interest or currency exchange rates.

 

“Swingline Lender” means Merrill Lynch or any Lender expressly
identified by Merrill Lynch as the Swingline Lender or, if Merrill Lynch shall
at any time resign as Swingline Lender, a Lender other than Merrill Lynch
selected by Administrative Agent in its sole discretion and reasonably
acceptable to Borrower.

 

“Swingline Loan” has the meaning set forth in Section 2.2(e).

 

“Swingline Loan Borrowing” means a borrowing of a Swingline Loan.

 

“Swingline Loan Limit” means, at any time, the smallest of the
following amounts: (i) $3,000,000, (ii) the Revolving Loan Commitment
minus the amount of Revolving
Loan Outstandings and (iii) the Borrowing Base minus the amount of Revolving Loan Outstandings.

 

“Swingline Loan Note” has the meaning set forth in Section 2.4.

 

“Swingline Loan Outstandings” means, at any time of calculation, the then
existing aggregate outstanding principal amount of Swingline Loans.

 

“Taxes” has the meaning set forth in Section 2.8.

 

“Term Loan A” has the meaning set forth in Section 2.1.

 

“Term Loan A Commitment Percentage”
means, as to any
Lender, the percentage set forth as the “Term Loan A Commitment Percentage” for
such Lender in the most recent Assignment Agreement to which such Lender is a
party and, in the absence of any such Assignment Agreement, the percentage
amount set forth opposite such Lender’s name on the Commitment Annex under the
column “Term Loan A Commitment Percentage”.

 

“Term Loan B” has the meaning set forth in Section 2.1.

 

“Term Loan B Commitment Percentage”
means, as to any
Lender, the percentage set forth as the “Term Loan B Commitment Percentage” for
such Lender in the most recent Assignment Agreement to which such Lender is a
party and, in the absence of any such Assignment Agreement, the percentage
amount set forth opposite such Lender’s name on the Commitment Annex under the
column “Term Loan B Commitment Percentage”.

 

“Term Loans” means Term Loan A and Term Loan B,
collectively.

 

“Term Note A” has the meaning set forth in Section 2.4.

 

“Term Note B” has the meaning set forth in Section 2.4.

 

“Termination Date” has the meaning set forth in Section 2.2(c).

 

“Total Debt” has the meaning provided in the Compliance
Certificate.

 

19

 

“Total Debt to EBITDA Ratio” has the meaning provided in the Compliance
Certificate.

 

“UCC” means the Uniform Commercial Code of the
State of New York or of any other state the laws of which are required to be
applied in connection with the perfection of security interests in any
Collateral.

 

“United States” means the United States of America.

 

“USA PATRIOT
Act” means USA Patriot Act, Title III of Pub. L. 107-56, signed into
law October 26, 2001, together with all regulations promulgated pursuant
thereto.

 

“Wholly-Owned Subsidiary” means, with respect to any Person, any
Subsidiary of such Person of which all of the equity securities (other than, in
the case of a corporation, directors’ qualifying shares, to the extent legally
required) are directly or indirectly owned and controlled by such Person or one
or more Wholly-Owned Subsidiaries of such Person.

 

Section 1.2.
     Accounting Terms and Determinations.

 

Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
(including without limitation determinations made pursuant to the exhibits
hereto) shall be made, and all financial statements required to be delivered hereunder
shall be prepared on a consolidated basis in accordance with GAAP applied on a
basis consistent with the most recent audited consolidated financial statements
of Holdings and its Consolidated Subsidiaries delivered to Administrative Agent
and each of the Lenders. If at any time any change in GAAP would affect the
computation of any financial ratio or financial requirement set forth in any
Financing Document, and either Borrower or the Required Lenders shall so
request, the Administrative Agent, the Lenders and Borrower shall negotiate in
good faith to amend such ratio or requirement to preserve the original intent
thereof in light of such change in GAAP (subject to the approval of the
Required Lenders); provided that, until
so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) Borrower shall
provide to the Administrative Agent and the Lenders financial statements and
other documents required under this Agreement which include a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP. All amounts used for purposes of financial
calculations required to be made herein shall be without duplication.

 

Section 1.3.
     Other Definitional Provisions.

 

References in this Agreement to “Articles”, “Sections”,
“Annexes”, “Exhibits” or “Schedules” shall be to Articles, Sections, Annexes,
Exhibits or Schedules of or to this Agreement unless otherwise specifically
provided. Any term defined herein may be used in the singular or plural. “Include”,
“includes” and “including” shall be deemed to be followed by “without
limitation”. Except as otherwise specified or limited herein, references to any
Person include the successors and assigns of such Person. References “from” or “through”
any date mean, unless otherwise specified, “from and including” or “through and
including”, respectively. References to any statute or act shall include all
related current regulations and all amendments and any successor statutes, acts
and regulations. References to any agreement, instrument or document shall
include all schedules, exhibits, annexes and other attachments thereto.

 

20

 

Section 1.4.     Funding and Settlement
Currency.

 

Unless otherwise specified herein, the settlement of
all payments and fundings hereunder between or among the parties hereto shall
be made in lawful money of the United States and in immediately available
funds. Unless specifically directed in writing by Borrower and consented to by
Agent, all Loans shall be funded into Borrower’s Account.

 

ARTICLE II 

LOANS AND LETTERS OF CREDIT

 

Section 2.1.     Term Loans.

 

(a)                         Term Loan Amounts. On the terms and subject to the conditions
set forth herein, the Lenders hereby agree to make the following Loans to
Borrower on the Closing Date:

 

(i)                           a term loan in an original principal amount
equal to $20,000,000 (“Term Loan A”);
and

 

(ii)                       a term loan in an original principal amount
equal to $50,000,000 (“Term Loan B”).

 

Each Lender’s obligation to fund the Term Loans
shall be limited to such Lender’s Term Loan A Commitment Percentage of Term
Loan A, and such Lender’s Term Loan B Commitment Percentage of Term Loan B, and
no Lender shall have any obligation to fund any portion of any Term Loan
required to be funded by any other Lender, but not so funded. Borrower shall
not have any right to re-borrow any portion of the Term Loans which are repaid
or prepaid from time to time.

 

(b)                         Scheduled Repayments. There shall become due and payable, and
Borrower shall repay the Term Loans through, scheduled payments as set forth
below:

 

(i)                           With respect to Term Loan A, scheduled payments on each date set forth
below, each equal to the applicable installment amount set forth below (or, if
less, the outstanding amount thereof):

 

Term Loan A

 

	
  Date

  	
   

  	
  Installment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  April 1, 2005

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  July 1, 2005

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  October 1, 2005

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  January 1, 2006

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  April 1, 2006

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  July 1, 2006

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  October 1, 2006

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  January 1, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  April 1, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  July 1, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  October 1, 2007

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  January 1, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  April 1, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  July 1, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  October 1, 2008

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  January 1, 2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  April 1, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  July 1, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  October 1, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  January 28, 2010

  	
   

  	
  $

  	
  1,250,000

  	
   

  

 

21

 

(ii)                       With respect to Term Loan B, commencing on April 1, 2005 and on the first day of each fiscal
quarter thereafter, through and including January 28, 2010, equal
quarterly installments of $125,000 (or if less, the outstanding amount of the
Term Loan B) and commencing on April 1, 2010 and on the first day of each
fiscal quarter thereafter, equal quarterly installments of $ 11,875,000.

 

Notwithstanding the payment schedules set forth
above, the outstanding principal amount of Term Loan A and Term Loan B shall
become immediately due and payable in full on the Termination Date.

 

(c)                         Mandatory Prepayments. There shall become due and payable and
Borrower shall prepay the Term Loans (and the Revolving Loans and Swingline
Loans, to the extent required by Section 2.l(e)(i)) in the following
amounts and at the following times:

 

(i)                           on the ninety-fifth (95th) day following the last day of
each Fiscal Year, beginning with the Fiscal Year ending December 31, 2005,
an amount equal to (x) seventy five percent (75.0%) of Excess Cash Flow for
such Fiscal Year if Borrower’s Total Debt to EBITDA Ratio as of such Fiscal
Year end is greater than or equal to 2.0 to 1.0 and (y) fifty percent (50%) at
all other times;

 

(ii)                       on the date on which any Credit Party (or Administrative Agent as loss
payee or assignee) receives any Major Casualty Proceeds, an amount equal to one
hundred percent (100%) of such Major Casualty Proceeds; provided, that, so long as no Default or
Event of Default has occurred and is continuing, the recipient (other than
Administrative Agent) of any Major Casualty Proceeds may reinvest such Major
Casualty Proceeds within one hundred eighty (180) days, in replacement assets
comparable to the assets giving rise to such Major Casualty Proceeds; provided, that the aggregate amount which
may be reinvested by Borrower and its Subsidiaries pursuant to the preceding
proviso may not exceed $1,000,000 in any Fiscal Year; provided, further, that if the applicable
Credit Party does not intend to fully reinvest such Major Casualty Proceeds, or
if the time period set forth in this sentence expires without such Credit Party
having reinvested such Major Casualty Proceeds, Borrower shall prepay the Loans
in an amount equal to such Major Casualty Proceeds (to the extent not
reinvested or intended to be reinvested within such time period);

 

22

 

(iii)       upon receipt by any Credit Party of the proceeds from the issuance and
sale of any Debt or equity securities (other than (1) proceeds of Debt
securities expressly permitted pursuant to Section 5.1, (2) proceeds
of the issuance of equity securities by Holdings or Borrower received on or
before the Closing Date, (3) proceeds of the issuance of equity securities
to Borrower or any Wholly-Owned Subsidiary and (4) proceeds received by
any Credit Party upon the exercise of employee stock options not otherwise
prohibited by the terms of this Agreement), an amount equal to one hundred
percent (100%) of the Net Cash Proceeds of such issuance and sale;

 

(iv)          upon receipt by any Credit Party of the proceeds of any Asset
Disposition, an amount equal to one hundred percent (100%) of the Net Cash
Proceeds of such Asset Disposition; provided,
that no prepayment shall be required pursuant to this Section 2.1(c)(iv) unless
and until the aggregate Net Cash Proceeds received during any Fiscal Year from
Asset Dispositions exceeds $250,000 (in which case all Net Cash Proceeds in
excess of such amount shall be used to make prepayments pursuant to this Section 2.1(c)(iv)),
and provided, that, so long as no
Default or Event of Default has occurred and is continuing, the recipient of
such Net Cash Proceeds may reinvest such Net Cash Proceeds within one hundred
eighty (180) days, in replacement fixed assets or in raw materials or packaging
materials to replace raw materials or packaging materials sold by Borrower
outside the Ordinary Course of Business, in each case, of a kind then used or
usable in the business of such Credit Party. If the applicable Credit Party
does not intend to so reinvest such Net Cash Proceeds, or if the time period
set forth in the immediately preceding sentence expires without such Credit
Party having reinvested such Net Cash Proceeds, Borrower shall prepay the Loans
in an amount equal to such Net Cash Proceeds; and

 

(v)              not later than sixty (60) days following the
last day of each fiscal month of Borrower, an amount equal to one hundred
percent (100%) of any Extraordinary Receipts received by any Credit Party
during such month.

 

(d)             Optional Prepayments. Subject to the provisions of Section 2.3(e)(iv),
Borrower may from time to time, with at least two (2) Business Days prior
delivery to Administrative Agent of an appropriately completed Payment
Notification, prepay any Term Loan in whole or in part; provided that any such partial prepayment
shall be in an amount equal to $250,000 or a higher integral multiple of
$25,000.

 

(e)             All Prepayments.

 

(i)               Any prepayment of a LIBOR Loan on a day other
than the last day of an Interest Period therefor shall include interest on the
principal amount being repaid and shall be subject to Section 2.3(e)(iv).
All prepayments of a Loan shall be applied first to that portion of such Loan
comprised of Base Rate Loans and then to that portion of such Loan comprised of
LIBOR Loans, in direct order of Interest Period maturities. Any required
prepayment in respect of either Major Casualty Proceeds or Net Cash Proceeds of
any Asset Disposition shall be applied first against outstanding Revolving
Loans and Swingline Loans, to the extent that, after giving effect to the event
giving rise to such proceeds, and assuming the delivery of a new Borrowing Base
Certificate reflecting such event, a mandatory prepayment of Revolving Loans
and/or Swingline Loans would be required pursuant to either of Section 2.2(c)(ii) or
Section 2.2(e)(i), with the remaining

 

23

 

amount of such proceeds being applied to the Term
Loans as provided herein. All prepayments of Term Loans shall be applied pro
rata between the Term Loans according to the outstanding principal amounts
thereof and, as to each Term Loan, pro rata to the remaining installments
thereof. Following the payment in full of the Term Loans, any remaining amounts
required by Section 2.1(c) to be used to prepay the Term Loans shall
instead be applied first, as a repayment of the outstanding Revolving Loans and
as a concurrent equivalent reduction of the Revolving Loan Commitment, pro rata
among all Lenders having a Revolving Loan Commitment Percentage and second, at
any time the Revolving Loans have been repaid in full, as a repayment of the
outstanding Swingline Loans.

 

(ii)           Borrower shall deliver to Administrative Agent an appropriately
completed Payment Notification at least two (2) Business Days prior to
each mandatory prepayment pursuant to Section 2.1(c) and each
voluntary prepayment pursuant to Section 2.1(d), and Administrative Agent
shall promptly notify each Lender of such notice. Notwithstanding anything to
the contrary contained in this Section 2.1 and so long as Term Loan A is
outstanding, each Lender having a Pro Rata Share of Term Loan B may elect not
to have such Lender’s Pro Rata Share of Term Loan B prepaid in the case of a
prepayment pursuant hereto by notice to Administrative Agent received one (1) Business
Day prior to the date of such prepayment. The amount of any such prepayment
which would have been applied to Term Loan B but for such elections shall be
applied to Term Loan A until paid in full and, thereafter, to Term Loan B, in
accordance with clause (i) of this Section 2.1(e).

 

Section 2.2.     Revolving Loans and Swingline Loans.

 

(a)             Revolving Loans and
Borrowings. On the terms
and subject to the conditions set forth herein, each Lender severally agrees to
make Loans to Borrower from time to time as set forth herein (each a “Revolving Loan”, and collectively, “Revolving Loans”) equal to such Lender’s Revolving Loan Commitment Percentage of
Revolving Loans requested by Borrower hereunder, provided that after giving
effect thereto, the Revolving Loan Outstandings shall not exceed the Revolving
Loan Limit. Within the foregoing limits, Borrower may borrow under this Section 2.2(a)(i),
may prepay or repay Revolving Loans from time to time and may re-borrow
Revolving Loans pursuant to this Section 2.2(a)(i).

 

(b)             Advancing Revolving Loans.

 

(i)               Borrower shall deliver to Administrative
Agent a Notice of Borrowing with respect to each proposed Revolving Loan
Borrowing (other than Revolving Loans made pursuant to clause (iii) below),
such Notice of Borrowing to be delivered no later than noon (Chicago time) (1) on
the day of such proposed borrowing, in the case of Base Rate Loans in an
aggregate principal amount equal to or less than $5,000,000, (2) on the
Business Day prior to such proposed borrowing, in the case of Base Rate Loans
in an aggregate principal amount greater than $5,000,000 and (3) on the
third (3rd) Business Day prior to such proposed borrowing, in the case of all
LIBOR Loans. Once given, except as provided in Section 2.3(e)(ii), a
Notice of Borrowing shall be irrevocable and Borrower shall be bound thereby.

 

24

 

(ii)           Borrower hereby authorizes Lenders and Administrative Agent to make
Revolving Loans (other than LIBOR Loans) based on telephonic notices made by
any Person which Administrative Agent, in good faith, believes to be acting on
behalf of Borrower. Borrower agrees to deliver to Administrative Agent a Notice
of Borrowing in respect of each Revolving Loan requested by telephone no later
than one Business Day following such request. If the Notice of Borrowing
differs in any respect from the action taken by Administrative Agent and
Lenders, the records of Administrative Agent and the Lenders shall govern absent
manifest error. Borrower further hereby authorizes Lenders and Administrative
Agent to make Revolving Loans based on electronic notices made by any Person
which Administrative Agent, in good faith, believes to be acting on behalf of
Borrower, but only after Administrative Agent shall have established procedures
acceptable to Administrative Agent for accepting electronic Notices of
Borrowing, as indicated by Administrative Agent’s written confirmation thereof.

 

(iii)       Borrower and each Revolving Lender hereby authorizes Administrative
Agent to make Revolving Loans (which shall be Base Rate Loans) on behalf of
Revolving Lenders, at any time in its sole discretion and regardless of the
existence of any Default or Event of Default, (x) as provided in Section 2.5(c),
with respect to obligations arising under Support Agreements and/or Lender
Letters of Credit, and (y) to pay principal owing in respect of the Loans
(excluding principal payments in respect of the Loans commencing one Business
Day following receipt by Administrative Agent of a written notice from any
Lender, in accordance with the provisions of Section 10.11, of the
occurrence of an Event of Default) and interest, fees, expenses and other
charges of any Credit Party from time to time arising under this Agreement or
any other Financing Document, so long as, in each case after giving effect to
any such Revolving Loans, the Revolving Loan Outstandings do not exceed the
Revolving Loan Limit; provided, that
(1) Administrative Agent shall have no obligation at any time to make any
Revolving Loan pursuant to the provisions of the preceding sub-clause (y) and (2) Administrative
Agent shall have no right to make Revolving Loans (A) as provided in Section 2.5(c) for
the account of any Revolving Lender that was a Non-Funding Revolving Lender at
the time Administrative Agent executed a Support Agreement, or at the time of
issuance of any Lender Letter of Credit, for which, in either case,
reimbursement obligations have arisen pursuant to Section 2.5(c) and (B) for
the account of any then existing Non-Funding Revolving Lender to pay interest,
fees, expenses and other charges of any Credit Party (other than reimbursement
obligations that have arisen pursuant to Section 2.5(c) in respect of
Support Agreements executed or Lender Letters of Credit issued at the time any
such Non-Funding Revolving Lender was not then a Non-Funding Revolving Lender).

 

(c)             Mandatory Revolving Loan
Repayments and Prepayments.

 

(i)               The Revolving Loan Commitment shall terminate
upon the earlier to occur of (i) the Commitment Expiry Date and (ii) any
date on which Administrative Agent or Required Lenders elect to terminate the
Revolving Loan Commitment pursuant to Section 8.2 (such earlier date being
the “Termination Date”). On such
Termination Date, and there shall become due, and Borrower shall pay on the
Termination Date, the entire outstanding principal amount of each Revolving
Loan and of each Swingline Loan, together with accrued and unpaid interest
thereon to but excluding the Termination Date, and any and all other
Obligations.

 

25

 

(ii)           If at any time the Revolving Loan
Outstandings exceed the Revolving Loan Limit, then, on the next succeeding
Business Day, Borrower shall repay the Revolving Loans and/or Swingline Loans
or cash collateralize Letter of Credit Liabilities in the manner specified in Section 2.5(e) or
cancel outstanding Letters of Credit, or any combination of the foregoing, in
an aggregate amount equal to such excess.

 

(d)             Optional Prepayments. Subject to the provisions of Section 2.3(e)(iv),
Borrower may from time to time prepay the Revolving Loans and/or Swingline
Loans in whole or in part.

 

(e)             Swingline Loans.

 

(i)               Swingline Lender may, from time to time, at
its sole election and without prior notice to or consent by any Lender or
Borrower, convert any request or deemed request by Borrower for a Revolving
Loan that is a Base Rate Loan into a request for an advance made by, and for
the account of, Swingline Lender in accordance with the terms of this Agreement
(each such advance, a “Swingline Loan”); provided,
that the Swingline Loan Outstandings shall at no time exceed the
Swingline Loan Limit. If at any time the Swingline Loan Outstandings exceed the
Swingline Loan Limit, then, on the next succeeding Business Day, Borrower shall
repay Revolving Loans and/or Swingline Loans or cash collateralize Letter of
Credit Liabilities in the manner specified in Section 2.5(e) or
cancel outstanding Letters of Credit, or any combination of the foregoing, in
an aggregate amount equal to such excess. Each Swingline Loan shall be a Base
Rate Loan, and shall be advanced by Swingline Lender in the same manner as
Revolving Loans are advanced hereunder, in accordance with the provisions of Section 2.2(b).
Swingline Lender shall give Administrative Agent prompt notice of each
Swingline Loan advanced by Swingline Lender. In the event that on any Business
Day Swingline Lender desires that all or any portion of the outstanding
Swingline Loans should be reduced, in whole or in part, Swingline Lender shall
notify Administrative Agent to that effect and indicate the portion of the
Swingline Loan to be so reduced. Administrative Agent agrees to transmit to
Revolving Lenders the information contained in each notice received by
Administrative Agent from Swingline Lender regarding the reduction of
outstanding Swingline Loans and shall concurrently notify such Lenders of each
such Lender’s Pro Rata Share of the obligation to make a Revolving Loan to
repay outstanding Swingline Loans (or the applicable portion thereof).

 

(ii)           Each of the Revolving Lenders, other than any Revolving Lender that was
a Non-Funding Revolving Lender at the time the applicable Swingline Loans were
advanced, hereby unconditionally and irrevocably agrees to fund to the Payment
Account, for the benefit of Swingline Lender, not later than noon (Chicago
time) on the Business Day immediately following the Business Day of such Lender’s
receipt of such notice from Administrative Agent (provided that if any Revolving Lender shall receive such
notice at or prior to 10:00 a.m. (Chicago time) on a Business Day, such
funding shall be made by such Lender on such Business Day), such Lender’s Pro
Rata Share of a Revolving Loan (which Revolving Loan shall be a Base Rate Loan
and shall be deemed to be requested by Borrower) in the principal amount of
such portion of the Swingline Loan which is required to be paid to Swingline
Lender under this Section 2.2(e) (regardless of whether the
conditions precedent thereto set forth in Section 7.2 are then satisfied,
including without limitation the existence of any Default or Event of Default

 

26

 

either before or after giving effect to the making
of such Swingline Loan, but subject to the other provisions of this Section 2.2(e)).
The proceeds of any such Revolving Loans shall be immediately paid over to
Administrative Agent for the benefit of Swingline Lender for application
against then outstanding Swingline Loans. For purposes of this clause (ii),
Swingline Lender shall be conclusively entitled to assume that, at the time of
the advance of any Swingline Loan, each Revolving Lender, other than any then
existing Non-Funding Revolving Lender, will fund its Pro Rata Share of the Revolving
Loans provided for in this clause (ii).

 

(iii)       In the event that, at any time any Swingline Loans are outstanding,
either (1) an Event of Default pursuant to either Section 8.1(f) or
8.1(g) has occurred or (2) the Revolving Loan Commitment has been
suspended or terminated in accordance with the provisions of this Agreement,
then in either case, each of the Revolving Lenders (other than Swingline Lender
and any Revolving Lender that was a Non-Funding Revolving Lender at the time
the applicable Swingline Loans were advanced) shall be deemed to have
irrevocably and immediately purchased and received from Swingline Lender,
without recourse or warranty, an undivided interest and participation in the
Swingline Loan in an amount equal to such Lender’s Revolving Loan Commitment
Percentage multiplied by the total amount of the Swingline Loans outstanding.
Any purchase obligation arising pursuant to the immediately preceding sentence
shall be absolute and unconditional and shall not be affected by any circumstances
whatsoever. In the event that on any Business Day Swingline Lender desires to
effect settlement of any such purchase, Swingline Lender shall promptly notify
Administrative Agent to that effect and indicate the payment amounts required
by each Lender to effect such settlement. Administrative Agent agrees to
transmit to Revolving Lenders the information contained in each notice received
by Administrative Agent from Swingline Lender and shall concurrently notify
such Lenders of each such Lender’s Pro Rata Share of the required payment
settlement amount. Each such Lender (other than Non-Funding Revolving Lenders,
as specified above) shall effect such settlement upon receipt of any such
notice by transferring to the Payment Account not later than noon (Chicago
time) on the Business Day immediately following the Business Day of receipt of
such notice (provided that if any
such Lender shall receive such notice at or prior to 10:00 a.m. (Chicago
time) on a Business Day, such funding shall be made by such Lender on such
Business Day), an amount equal to such Lender’s participation in the Swingline
Loan.

 

(iv)          In the event any Revolving Lender (other than Non-Funding Revolving
Lenders, as specified above) fails to make available to Swingline Lender when
due the amount of such Lender’s participation in the Swingline Loans, Swingline
Lender shall be entitled to recover such amount on demand from such Lender
together with interest at the Federal Funds Rate, for the first three (3) days
following the due date, and thereafter at the Base Rate plus the Base Rate
Margin in respect of Swingline Loans. Any Lender’s failure to make any payment
requested under this Section 2.2(e) shall not relieve any other
Lender of its obligations hereunder, but no Lender shall be responsible for the
failure of any other Lender to make available to Swingline Lender such other
Lender’s required payment hereunder. The obligations of the Lenders under this Section 2.2(e) shall
be deemed to be binding upon Administrative Agent, Swingline Lender and Lenders
notwithstanding the occurrence of any Default or Event of Default, or any
insolvency or bankruptcy proceeding pertaining to Borrower or any other Credit
Party.

 

27

 

Section 2.3.     Interest, Interest Calculations and Certain Fees.

 

(a)             Interest. From  and following the Closing
Date, depending upon Borrower’s election from time to time, subject to the
terms hereof, to have portions of the Loans accrue interest determined by
reference to the Base Rate or the LIBOR, the Loans and the other Obligations
shall bear interest at the applicable rates set forth below:

 

(i)               If a Base Rate Loan, or any other Obligation
other than a LIBOR Loan, then at the sum of the Base Rate plus the applicable Base Rate Margin.

 

(ii)           If a LIBOR Loan, then at the sum of the LIBOR plus the applicable LIBOR Margin.

 

(b)             Unused Line Fee. From and following the Closing Date, Borrower shall pay
Administrative Agent, for the benefit of all Lenders committed to make
Revolving Loans, in accordance with their respective Pro Rata Shares, a fee in
an amount equal to (1) (a) the Revolving Loan Commitment less (b) the average daily balance of
the sum of the Revolving Loan Outstandings plus
the Swingline Loan Outstandings during the preceding month, multiplied by (2) one half percent
(0.5%) per annum. Such fee is to be paid monthly in arrears on the first day of
each month.

 

(c)             [Reserved].

 

(d)             Computation of Interest and
Related Fees. All
interest and fees under each Financing Document shall be calculated on the
basis of a 360-day year for the actual number of days elapsed. The date of
funding of a Base Rate Loan and the first day of an Interest Period with
respect to a LIBOR Loan shall be included in the calculation of interest. The
date of payment of a Base Rate Loan and the last day of an Interest Period with
respect to a LIBOR Loan shall be excluded from the calculation of interest. If
a Loan is repaid on the same day that it is made, one (1) day’s interest
shall be charged. Interest on all Base Rate Loans is payable in arrears on the
first day of each month and on the maturity of such Loans, whether by
acceleration or otherwise. Interest on LIBOR Loans shall be payable on the last
day of the applicable Interest Period, unless the Interest Period is greater
than three (3) months, in which case interest will be payable on the last
day of each three (3) month interval. In addition, interest on LIBOR Loans
is due on the maturity of such Loans, whether by acceleration or otherwise.

 

(e)             LIBOR Provisions.

 

(i)               LIBOR Election. All Loans made on the Closing Date shall be
Base Rate Loans and shall remain so until the earlier of ninety (90) days after
the Closing Date or the date Administrative Agent notifies Borrower that it has
completed the primary syndication of the Loans. Thereafter, subject to the
provisions of Section 8.4, Borrower may request that Revolving Loans
permitted to be made hereunder be LIBOR Loans, that outstanding portions of
Revolving Loans permitted to be made hereunder and outstanding portions of each
Term Loan be converted to LIBOR Loans and that all or any portion of a LIBOR
Loan be continued as a LIBOR Loan upon expiration of the applicable Interest
Period. Any such request will be made by submitting a Notice of Borrowing to Administrative
Agent. Once given, and except as provided in clause (ii) below, a Notice
of Borrowing shall be irrevocable and Borrower shall be bound thereby. Upon the

 

28

 

expiration of an Interest Period, in the absence of
a new Notice of Borrowing submitted to Administrative Agent not less than three
(3) Business Days prior to the end of such Interest Period, the LIBOR Loan
then maturing shall be automatically converted to a Base Rate Loan. There may
be no more than eight (8) LIBOR Loans outstanding at any one time. Each
request for a LIBOR Loan, whether by original issuance, conversion or
continuation, shall be in a minimum amount of $100,000 and, if in excess of
such amount, in an integral multiple of $10,000 in excess of such amount. Loans
which are not requested as LIBOR Loans in accordance with this Section 2.3(e)(i) shall
be Base Rate Loans. Administrative Agent shall notify Lenders, by telephonic or
facsimile notice, of each Notice of Borrowing received by Administrative Agent
not less than two (2) Business Days prior to the first day of the Interest
Period of the LIBOR Loan requested thereby.

 

(ii)           Inability to Determine
LIBOR.
In the event, prior to
commencement of any Interest Period relating to a LIBOR Loan, Administrative
Agent shall determine or be notified by Required Lenders that adequate and
reasonable methods do not exist for ascertaining LIBOR, Administrative Agent
shall promptly provide notice of such determination to Borrower and Lenders (which
shall be conclusive and binding on Borrower and Lenders). In such event (1) any
request for a LIBOR Loan or for a conversion to or continuation of a LIBOR Loan
shall be automatically withdrawn and shall be deemed a request for a Base Rate
Loan, (2) each LIBOR Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan and (3) the
obligations of Lenders to make LIBOR Loans shall be suspended until
Administrative Agent or Required Lenders determine that the circumstances
giving rise to such suspension no longer exist, in which event Administrative
Agent shall so notify Borrower and Lenders.

 

(iii)       Illegality. Notwithstanding any other provisions hereof,
if any Law shall make it unlawful for any Lender to make, fund or maintain
LIBOR Loans, such Lender shall promptly give notice of such circumstances to
Administrative Agent, Borrower and the other Lenders. In such an event, (1) the
commitment of such Lender to make LIBOR Loans, continue LIBOR Loans as LEBOR
Loans or convert Base Rate Loans to LIBOR Loans shall be immediately suspended
and (2) such Lender’s outstanding LIBOR Loans shall be converted
automatically to Base Rate Loans on the last day of the Interest Period thereof
or at such earlier time as may be required by law.

 

(iv)          LIBOR Breakage Fee. Upon (i) any default by Borrower in
making any borrowing of, conversion into or continuation of any LIBOR Loan
following Borrower’s delivery to Administrative Agent of any applicable Notice
of Borrowing or (ii) any payment of a LIBOR Loan on any day that is not
the last day of the Interest Period applicable thereto (regardless of the
source of such prepayment and whether voluntary, by acceleration or otherwise),
Borrower shall promptly pay Administrative Agent, for the benefit of all
Lenders that funded or were prepared to fund any such LIBOR Loan, an amount
equal to the amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) in connection with the re-employment
of such funds) that any Lender may sustain as a result of such default or such
payment. For purposes of calculating amounts payable to a Lender under this
paragraph, each Lender shall be deemed to have actually funded its relevant
LIBOR Loan through the purchase of a deposit bearing interest at LIBOR in an
amount equal to the amount of that LIBOR

 

29

 

Loan and having a maturity and repricing
characteristics comparable to the relevant Interest Period; provided, however, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection.

 

(v)              Increased Costs. If, after the Closing Date, the adoption or
taking effect of, or any change in, any Law, or any change in the
interpretation, administration or application of any Law by any Governmental
Authority, central bank or comparable agency charged with the interpretation,
administration or application thereof, or compliance by any Lender with any
request, guideline or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency: (1) shall impose,
modify or deem applicable any reserve (including any reserve imposed by the
Board of Governors of the Federal Reserve System, or any successor thereto, but
excluding any reserve included in the determination of the LIBOR pursuant to
the provisions of this Agreement), special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the
account of, or credit extended or participated in by any Lender; or (2) shall
impose on any Lender any other condition affecting its LIBOR Loans, any of its
Notes (if any) or its obligation to make LIBOR Loans; and the result of
anything described in clauses (1) above and (2) is to increase the
cost to (or to impose a cost on) such Lender of making or maintaining any LIBOR
Loan, or to reduce the amount of any sum received or receivable by such Lender
under this Agreement or under any of its Notes (if any) with respect thereto,
then upon demand by such Lender (which demand shall be accompanied by a
statement setting forth the basis for such demand and a calculation of the amount
thereof in reasonable detail, a copy of which shall be furnished to
Administrative Agent), Borrower shall promptly pay directly to such Lender such
additional amount as will compensate such Lender for such increased cost or
such reduction, so long as such amounts have accrued on or after the day which
is two hundred seventy (270) days prior to the date on which such Lender first
made demand therefor.

 

Section 2.4.     Notes.

 

The portion of Term Loan A made by each Lender shall
be evidenced, if so requested by such Lender, by a promissory note executed by
Borrower (a “Term Note A”), the
portion of Term Loan B made by each Lender shall be evidenced, if so requested
by such Lender, by a promissory note executed by Borrower (a “Term Note B”) and the portion of the Revolving Loans made by each Lender shall
be evidenced, if so requested by such Lender, by a promissory note executed by
Borrower (a “Revolving Loan Note”) in an original principal amount
equal to such Lender’s Pro Rata Share of Term Loan A, Term Loan B and the
Revolving Loan Commitment, respectively. The Swingline Loans made by Swingline
Lender shall be evidenced, if so requested by Swingline Lender, by a promissory
note executed by Borrower (a “Swingline Loan
Note”) in an original
principal amount equal to the amount identified In clause (i) of the
definition of Swingline Loan Limit.

 

Section 2.5.     Letters of Credit and
Letter of Credit Fees.

 

(a)             Letter of Credit. On the terms and subject to the conditions
set forth herein, the Revolving Loan Commitment may be used by Borrower, in
addition to the making of Revolving Loans hereunder, for the issuance, prior to
the Termination Date, by (i)

 

30

 

Administrative
Agent, of letters of credit, guarantees or other agreements or arrangements
(each, a “Support Agreement”) to induce an LC Issuer to issue or
increase the amount of, or extend the expiry date of, one or more Letters of
Credit and (ii) a Lender, identified by Administrative Agent, as an LC
Issuer, of one or more Lender Letters of Credit, so long as, in each case:

 

(i)               Administrative Agent shall have received a
Notice of LC Credit Event at least two (2) Business Days before the
relevant date of issuance, increase or extension; and

 

(ii)           after giving effect to such issuance, increase or extension, (x) the
aggregate Letter of Credit Liabilities under all Letters of Credit do not
exceed $5,000,000 and (y) the Revolving Loan Outstandings do not exceed the
Revolving Loan Limit.

 

Nothing in this Agreement shall be construed to
obligate any Lender to issue, increase the amount of or extend the expiry date
of any letter of credit, which act or acts, if any, shall be subject to
agreements to be entered into from time to time between Borrower and such Lender.
Each Lender that is an LC Issuer hereby agrees to give Administrative Agent
prompt written notice of each issuance of a Lender Letter of Credit by such
Lender and each payment made by such Lender in respect of Lender Letters of
Credit issued by such Lender.

 

(b)             Letter of Credit Fee. Borrower shall pay to Administrative Agent,
for the benefit of the Revolving Lenders, a letter of credit fee with respect
to the Letter of Credit Liabilities for each Letter of Credit, computed for
each day from the date of issuance of such Letter of Credit to the date that is
the last day a drawing is available under such Letter of Credit, at a rate per
annum equal to the LIBOR Margin then applicable to Revolving Loans. Such fee
shall be payable, in arrears on the first day of each calendar month prior to
the Termination Date and on such date. In addition, Borrower agrees to pay
promptly to the LC Issuer any fronting or other fees that it may charge in
connection with any Letter of Credit.

 

(c)             Reimbursement Obligations of Borrower. If
either (x) Administrative Agent shall make a payment to an LC Issuer pursuant
to a Support Agreement, or (y) any Lender shall honor any draw request under,
and make payment in respect of, a Lender Letter of Credit, (i) Borrower
shall promptly reimburse Administrative Agent or such Lender, as applicable,
for the amount of such payment and (ii) Borrower shall be deemed to have
immediately requested that Revolving Lenders make a Revolving Loan, which shall
be a Base Rate Loan, in a principal amount equal to the amount of such payment
(but solely to the extent Borrower shall have failed to directly reimburse
Administrative Agent or, with respect to Lender Letters of Credit, the
applicable LC Issuer, for the amount of such payment). Administrative Agent shall
promptly notify Revolving Lenders of any such deemed request and each Revolving
Lender (other than any such Revolving Lender that was a Non-Funding Revolving
Lender at the time the applicable Supported Letter of Credit or Lender Letter
of Credit was issued) hereby agrees to make available to Administrative Agent
not later than noon (Chicago time) on the Business Day following such
notification from Administrative Agent such Revolving Lender’s Pro Rata Share
of such Revolving Loan. Each Revolving Lender (other than any applicable
Non-Funding Revolving Lender specified above) hereby absolutely and
unconditionally agrees to fund such Revolving Lender’s Pro Rata Share of the
Loan described in the immediately preceding sentence, unaffected by any
circumstance whatsoever, including (without limitation) (i) the occurrence
and continuance of a Default or Event of Default, (ii) the fact that,
whether before or after giving effect to the making of any such Revolving Loan,
the Revolving Loan Outstandings exceed or

 

31

 

will
exceed the Revolving Loan Limit and/or (iii) the non-satisfaction of any
conditions set forth in Section 7.2. Administrative Agent hereby agrees to
apply the gross proceeds of each Revolving Loan deemed made pursuant to this Section 2.5(c) in
satisfaction of Borrower’s reimbursement obligations arising pursuant to this Section 2.5(c).
Borrower shall pay interest, on demand, on all amounts so paid by
Administrative Agent for each day until Borrower reimburses Administrative
Agent therefore at a rate per annum equal to the sum of two percent (2%) plus the interest rate applicable to
Revolving Loans (which are Base Rate Loans) for such day.

 

(d)             Reimbursement and Other Payments by Borrower. The
obligations of Borrower to reimburse Administrative Agent and/or the applicable
LC Issuer pursuant to Section 2.5(c) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement, under all circumstances whatsoever, including the following:

 

(i)               any lack of validity or enforceability of, or
any amendment or any consent to departure from, any Letter of Credit or any
related document;

 

(ii)           the existence of any claim, set-off, defense or other right which
Borrower may have at any time against the beneficiary of any Letter of Credit,
the LC Issuer (including any claim for improper payment), Administrative Agent,
any Lender or any other Person, whether in connection with any Financing
Document or any unrelated transaction, provided
that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;

 

(iii)       any statement or any other 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 whatsoever;

 

(iv)          any affiliation between the LC Issuer and Administrative Agent; or

 

(v)              to the extent permitted under applicable law,
any other circumstance or happening whatsoever, whether or not similar to any
of the foregoing.

 

(e)             Deposit Obligations of Borrower. In the event any Letters of Credit are
outstanding at the time that Borrower prepays or is required to repay the
Obligations or the Revolving Loan Commitment is terminated, Borrower shall (i) deposit
with Administrative Agent for the benefit of all Revolving Lenders cash in an
amount equal to one hundred and three percent (103%) of the aggregate
outstanding Letter of Credit Liability to be available to Administrative Agent,
for its benefit and the benefit of issuers of Lender Letters of Credit, to
reimburse payments of drafts drawn under such Letters of Credit and pay any
fees and expenses related thereto and (ii) prepay the fee payable under Section 2.5(b) with
respect to such Letters of Credit for the full remaining terms of such Letters
of Credit. Upon termination of any such Letter of Credit and provided no Event
of Default then exists, the unearned portion of such prepaid fee attributable
to such Letter of Credit shall be refunded to Borrower, together with the
deposit described in the preceding clause (i) to the extent not previously applied by Administrative Agent
in the manner described herein.

 

32

 

(f)               Participations in Support
Agreements and Lender Letters of Credit.

 

(i)               Concurrently with the issuance of each
Supported Letter of Credit, Administrative Agent shall be deemed to have sold
and transferred to each Revolving Lender (other than any Non-Funding Revolving
Lenders at the time of such issuance), and each such Revolving Lender shall be
deemed irrevocably and immediately to have purchased and received from
Administrative Agent, without recourse or warranty, an undivided interest and participation
in, to the extent of such Lender’s Pro Rata Share of the Revolving Loan
Commitment, Administrative Agent’s Support Agreement liabilities and
obligations in respect of such Letters of Credit and Borrower’s Reimbursement
Obligations with respect thereto. Concurrently with the issuance of each Lender
Letter of Credit, the LC Issuer in respect thereof shall be deemed to have sold
and transferred to each Revolving Lender (other than any Non-Funding Revolving
Lenders at the time of such issuance), and each such Revolving Lender shall be
deemed irrevocably and immediately to have purchased and received from such LC
Issuer, without recourse or warranty, an undivided interest and participation
in, to the extent of such Lender’s Pro Rata Share of the Revolving Loan
Commitment, such Lender Letter of Credit and Borrower’s Reimbursement
Obligations with respect thereto. Any purchase obligation arising pursuant to
the immediately two preceding sentences shall be absolute and unconditional and
shall not be affected by any circumstances whatsoever.

 

(ii)           If either (x) Administrative Agent makes any payment or disbursement
under any Support Agreement and/or (y) an LC Issuer makes any payment or
disbursement under any Lender Letter of Credit, and (A) Borrower has not
reimbursed Administrative Agent or, as applicable, the applicable LC Issuer,
with respect to any Lender Letter of Credit, in full for such payment or
disbursement in accordance with Section 2.5(c), or (B) any
reimbursement received by Administrative Agent or any LC Issuer from Borrower
is or must be returned or rescinded upon or during any bankruptcy or
reorganization of any Credit Party or otherwise, each Revolving Lender (other
than any Revolving Lender that was a Non-Funding Revolving Lender at the time
of the issuance of such Supported Letter of Credit or Lender Letter of Credit)
shall be irrevocably and unconditionally obligated to pay to Administrative
Agent or the applicable LC Issuer, as applicable, its Pro Rata Share of such
payment or disbursement (but no such payment shall diminish the Obligations of
Borrower under Section 2.5(c)). To the extent any such Revolving Lender
shall not have made such amount available to Administrative Agent or the
applicable LC Issuer, as applicable, by noon (Chicago time) on the Business Day
on which such Lender receives notice from Administrative Agent or the
applicable LC Issuer, as applicable, of such payment or disbursement, such
Lender agrees to pay interest on such amount to Administrative Agent or the
applicable LC Issuer, as applicable, forthwith on demand accruing daily at the
Federal Funds Rate, for the first three (3) days following such Lender’s
receipt of such notice, and thereafter at the Base Rate plus the Base Rate
Margin in respect of Revolving Loans. Any Revolving Lender’s failure to make
available to Administrative Agent or the applicable LC Issuer, as applicable,
its Pro Rata Share of any such payment or disbursement shall not relieve any
other Lender of its obligation hereunder to make available such other Revolving
Lender’s Pro Rata Share of such payment, but no Revolving Lender shall be
responsible for the  failure of any other
Lender to make available such other Lender’s Pro Rata Share of any  such payment or disbursement.

 

33

 

Section 2.6.     General Provisions
Regarding Payment; Loan Account.

 

(a)             All
payments to be made by Borrower under any Financing Document, including
payments of principal and interest made hereunder and pursuant to any other Financing
Document, and all fees, expenses, indemnities and reimbursements, shall be made
without set-off or counterclaim, in lawful money of the United States and in
immediately available funds. If any payment hereunder becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. Any
payments received in the Payment Account before 1:00 p.m. (Chicago time)
on any date shall be deemed received by Agent on such date, and any payments
received in the Payment Account after 1:00 p.m. (Chicago time) on any date
shall be deemed received by Agent on the next succeeding Business Day. Any
optional or mandatory prepayment of Term Loans shall be accompanied by timely
delivery to Administrative Agent of an appropriately completed Payment
Notification, as provided in Section 2.1(e). In the absence of receipt by
Administrative Agent of an appropriately completed Payment Notification on or
prior to such prepayment, Borrower and each Lender hereby authorizes and
directs Administrative Agent, notwithstanding any contrary application
provisions contained herein, to apply payments and/or prepayments received from
Borrower against then outstanding Revolving Loans, and second, if no Revolving
Loans are then outstanding, pro rata against all outstanding Term Loans; provided, that (i) if Administrative
Agent receives an appropriately completed Payment Notification within two (2) Business
Days of the making of any such payment or prepayment, Administrative Agent
shall be fully authorized to apply such amounts received in accordance with the
terms of such Payment Notification and to make any corresponding Loan Account
reversals in respect thereof and (ii) if Administrative Agent at any time
determines that payments received by Administrative Agent were in respect of a
mandatory prepayment event, Administrative Agent shall apply such payments in
accordance with the provisions of Section 2.1(e), and shall be fully
authorized to make any corresponding Loan Account reversals in respect thereof.

 

(b)             Administrative
Agent shall maintain a loan account (the “Loan
Account”) on its
books to record Loans and other extensions of credit made by the Lenders
hereunder or under any other Financing Document, and all payments thereon made
by Borrower. All entries in the Loan Account shall be made in accordance with
Administrative Agent’s customary accounting practices as in effect from time to
time. The balance in the Loan Account, as recorded on Administrative Agent’s
most recent printout or other written statement, shall be conclusive and
binding evidence of the amounts due and owing to Administrative Agent by Borrower
absent clear and convincing evidence to the contrary; provided that any failure to so record or
any error in so recording shall not limit or otherwise affect Borrower’s duty
to pay all amounts owing hereunder or under any other Financing Document. Unless
Borrower notifies Administrative Agent of any objection to any such printout or
statement (specifically describing the basis for such objection) within thirty
(30) days after the date of receipt thereof, it shall be deemed final, binding
and conclusive upon Borrower in all respects as to all matters reflected,
therein.

 

Section 2.7.     Maximum Interest.

 

(a)             In
no event shall the interest charged with respect to the Notes (if any) or any
other obligations of Borrower under any Financing Document exceed the maximum
amount permitted under the laws of the State of New York or of any other
applicable jurisdiction.

 

34

 

(b)             Notwithstanding
anything to the contrary herein or elsewhere, if at any time the rate of
interest payable hereunder or under any Note or other Financing Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any
applicable law to be charged (the “Maximum
Lawful Rate”), then for so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable shall be equal
to the Maximum Lawful Rate; provided, that
if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate,
Borrower shall, to the extent permitted by law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received is equal to
the total interest which would have been received had the Stated Rate been (but
for the operation of this provision) the interest rate payable. Thereafter, the
interest rate payable shall be the Stated Rate unless and until the Stated Rate
again would exceed the Maximum Lawful Rate, in which event this provision shall
again apply.

 

(c)             In
no event shall the total interest received by any Lender exceed the amount which
it could lawfully have received had the interest been calculated for the full
term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence,
any Lender has received interest hereunder in excess of the Maximum Lawful
Rate, such excess amount shall be applied to the reduction of the principal
balance of the Loans or to other amounts (other than interest) payable
hereunder, and if no such principal or other amounts are then outstanding, such
excess or part thereof remaining shall be paid to Borrower.

 

(d)             In
computing interest payable with reference to the Maximum Lawful Rate applicable
to any Lender, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such calculation
is made.

 

Section 2.8.     Taxes.

 

(a)             All
payments of principal and interest on the Loans and all other amounts payable
hereunder shall be made free and clear of and without deduction for any present
or future income, excise, stamp, documentary, property or franchise taxes and
other taxes, fees, duties, levies, assessments, withholdings or other charges
of any nature whatsoever (including interest and penalties thereon) imposed by
any taxing authority, excluding taxes imposed on or measured by Administrative
Agent’s or any Lender’s net income by the jurisdiction under which
Administrative Agent or such Lender is organized or conducts business (other
than solely as the result of entering into any of the Financing Documents or
taking any action thereunder) and also excluding any tax that is creditable
against and has the effect of reducing any other tax imposed by the
jurisdiction under which the Administrative Agent or such Lender is organized
or conducts business (all non-excluded items being called “Taxes”). If any withholding or
deduction from any payment to be made by Borrower hereunder is required in
respect of any Taxes pursuant to any applicable Law, then Borrower will: (i) pay
directly to the relevant authority the full amount required to be so withheld
or deducted; (ii) promptly forward to Administrative Agent an official
receipt or other documentation satisfactory to Administrative Agent evidencing
such payment to such authority; and (iii) pay to Administrative Agent for
the account of Administrative Agent and Lenders such additional amount or
amounts as is necessary to ensure that the net amount actually received by
Administrative Agent and each Lender will equal the full amount Administrative
Agent and such Lender would have received had no such withholding or deduction
been required. If any Taxes are directly asserted against Administrative Agent
or any Lender with respect to any payment received by Administrative

 

35

 

Agent
or such Lender hereunder, Administrative Agent or such Lender may pay such
Taxes and Borrower will promptly pay such additional amounts (including any
penalty, interest or expense) as is necessary in order that the net amount
received by such Person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such Person would have received
had such Taxes not been asserted so long as such amounts have accrued on or
after the day which is two hundred seventy (270) days prior to the date on
which Administrative Agent or such Lender first made demand therefor.

 

(b)             If Borrower fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to Administrative Agent,
for the account of Administrative Agent and the respective Lenders, the
required receipts or other required documentary evidence, Borrower shall
indemnify Administrative Agent and Lenders for any incremental Taxes, interest
or penalties that may become payable by Administrative Agent or any Lender as a
result of any such failure.

 

(c)             Each Lender that (i) is organized under
the laws of a jurisdiction other than the United States and (ii)(A) is a
party hereto on the Closing Date or (B) purports to become an assignee of
an interest pursuant to Section 11.6(a) after the Closing Date
(unless such Lender was already a Lender hereunder immediately prior to such
assignment) (each such Lender a “Foreign
Lender”) shall duly
execute and deliver to each of Borrower and Administrative Agent one or more
(as Borrower or Administrative Agent may reasonably request) United States
Internal Revenue Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other
applicable forms, certificates or documents prescribed by the United States
Internal Revenue Service or reasonably requested by Administrative Agent
certifying as to such Lender’s entitlement to a complete exemption from
withholding or deduction of Taxes. Borrower shall not be required to pay
additional amounts to any Lender pursuant to this Section 2.8 with respect
to United States withholding and income Taxes to the extent that the obligation
to pay such additional amounts would not have arisen but for the failure of
such Lender to comply with this paragraph other than as a result of a change in
law.

 

Section 2.9.     Capital Adequacy.

 

If any Lender shall reasonably determine that the
adoption or taking effect of, or any change in, any applicable Law regarding
capital adequacy, in each instance, after the Closing Date, or any change after
the Closing Date in the interpretation, administration or application thereof
by any Governmental Authority, central bank or comparable agency charged with
the interpretation, administration or application thereof, or the compliance by
any Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency adopted
or otherwise taking effect after the Closing Date, has or would have the effect
of reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder or under any
Support Agreement or Lender Letter of Credit to a level below that which such
Lender or such controlling Person could have achieved but for such adoption,
taking effect, change, interpretation, administration, application or
compliance (taking into consideration such Lender’s or such controlling Person’s
policies with respect to capital adequacy) then from time to time, upon demand
by such Lender (which demand shall be accompanied by a statement setting forth
the basis for such demand and a calculation of the amount thereof in reasonable
detail, a copy of which shall be furnished to Administrative Agent), Borrower
shall promptly pay to such Lender such additional amount as

 

36

 

will
compensate such Lender or such controlling Person for such reduction, so long
as such amounts have accrued on or after the day which is two hundred seventy
(270) days prior to the date on which such Lender first made demand therefor.

 

Section 2.10.     Mitigation Obligations.

 

If any Lender requests compensation under either Section 2.3(e)(v) or
Section 2.9, or requires Borrower to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8,
then, upon the written request of Borrower, such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder (subject to
the provisions of Section 11.6) to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment (i) would
eliminate or materially reduce amounts payable pursuant to any such Section, as
the case may be, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender (as determined in its sole discretion). Without limitation of the
provisions of Section 9.1, Borrower hereby agrees to pay all costs and
expenses incurred by any Lender in connection with any such designation or
assignment.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

To induce Administrative Agent and Lenders to enter
into this Agreement and to make the Loans and other credit accommodations
contemplated hereby, Borrower hereby represents and warrants to Administrative
Agent and each Lender that:

 

Section 3.1.     Existence and Power.

 

Each Credit Party is an entity as specified on Schedule 3.1,
is duly organized, validly existing and in good standing under the laws of the
jurisdiction specified on Schedule 3.1, has the same legal name as it
appears in such Credit Party’s Organizational Documents and an organizational
identification number (if any), in each case as specified on Schedule 3.1,
and, except as set forth in Schedule 3.12, has all powers and all
governmental licenses, authorizations, registrations, permits, consents and
approvals required under all applicable Laws and required in order to carry on
its business as now conducted (collectively, “Permits”), except where the failure to have
such Permits could not reasonably be expected to have a Material Adverse
Effect. Each Credit Party is qualified to do business as a foreign entity in
each jurisdiction in which it is required to be so qualified, which
jurisdictions as of the Closing Date are specified on Schedule 3.1, except
where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.1, no Credit
Party (i) has had, over the five (5) year period preceding the
Closing Date, any name other than its current name or (ii) was incorporated
or organized under the laws of any jurisdiction other than its current
jurisdiction of incorporation or organization.

 

Section 3.2.     Organization and
Governmental Authorization; No Contravention.

 

The execution, delivery and performance by each Credit
Party of the Operative Documents to which it is a party are within its powers,
have been duly authorized by all necessary action pursuant to its
Organizational Documents, require no further action by or in

 

37

 

respect
of, or filing with, any Governmental Authority and do not violate, conflict
with or cause a breach or a default under (i) any applicable Law or any of
the Organizational Documents of any Credit Party or (ii) any agreement or
instrument binding upon it, except for such violations, conflicts, breaches or
defaults as could not, with respect to this clause (ii), reasonably be expected
to have a Material Adverse Effect.

 

Section 3.3.     Binding Effect.

 

Each of the Operative Documents to which any Credit
Party is a party constitutes a valid and binding agreement or instrument of
such Credit Party, enforceable against such Credit Party in accordance with its
respective terms, except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency moratorium, reorganization and other laws relating to or affecting
creditors’ rights or remedies generally, including, without limitation,
preference or similar law, rule or regulation, (ii) principles
governing the availability of specific performance, injunctive relief and other
equitable remedies, (iii) applicable laws and court decisions which may
limit or render unenforceable certain terms hereof, but which do not
substantially interfere with the practical realization of the benefits hereof,
except for the economic consequences of any procedural delay which may be
imposed by, relate to, or result from such laws and court decisions, and (iv) general
principles of equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether considered
in a proceeding in equity or at law).

 

Section 3.4.     Capitalization.

 

The authorized equity securities of each of the
Credit Parties as of the Closing Date is as set forth on Schedule 3.4. All
issued and outstanding equity securities of each of the Credit Parties are duly
authorized and validly issued, fully paid, nonassessable, free and clear of all
Liens other than applicable Permitted Liens and those Liens in favor of
Administrative Agent for the benefit of Administrative Agent and Lenders, and
such equity securities were issued in compliance with all applicable Laws. The
identity of the holders of the equity securities of each of the Credit Parties
and the percentage of their fully-diluted ownership of the equity securities of
each of the Credit Parties as of the Closing Date is set forth on Schedule 3.4.
No shares of the capital stock or other equity securities of any Credit Party,
other than those described above, are issued and outstanding as of the Closing
Date. Except as set forth on Schedule 3.4, as of the Closing Date 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 securities of any such entity.

 

Section 3.5.     Financial Information.

 

(a)             The
consolidated balance sheet of Borrower and its Consolidated Subsidiaries as of December 31,
2003 and the related consolidated statements of operations, stockholders’
equity (or comparable calculation, if such Person is not a corporation) and
cash flows for the fiscal year then ended, reported on by
PriceWaterhouseCoopers PwC, copies of which have been delivered to
Administrative Agent, fairly present, in conformity with GAAP, the consolidated
financial position of Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations, changes in stockholders’
equity (or comparable calculation) and cash flows for such period.

 

38

 

(b)             The un-audited consolidated balance sheet of
Borrower and its Consolidated Subsidiaries as of October 31, 2004 and the
related un-audited consolidated statements of operations and cash flows for the
ten months then ended, copies of which have been delivered to Administrative
Agent, fairly present, in conformity with GAAP applied on a basis consistent
with the financial statements referred to in Section 3.5(a), the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for the ten months then ended (subject to normal year-end
adjustments and the absence of footnote disclosures) in all material respects.

 

(c)             The pro forma balance sheet of Holdings and
its Consolidated Subsidiaries as of December 31, 2004, copies of which
have been delivered to Administrative Agent, fairly presents, in all material
respects and in conformity with GAAP applied on a basis consistent with the
financial statements referred to in Section 3.5(a), the consolidated and
consolidating financial position of Holdings and its Consolidated Subsidiaries
as of such date, adjusted to give effect (as if such events had occurred on
such date) to (i) the transactions contemplated by the Operative
Documents, (ii) the making of the initial Loans and the issuance of any
initial Letters of Credit, (iii) the application of the proceeds therefrom
as contemplated by the Operative Documents and (iv) the payment of all
legal, accounting and other fees related thereto to the extent known at the
time of the preparation of such balance sheet. As of the date of such balance
sheet and the date hereof, no Credit Party had or has any material liabilities,
contingent or otherwise, including liabilities for taxes, long-term leases or
forward or long-term commitments, which are not properly reflected on such
balance sheet.

 

(d)             The
information contained in the most recently delivered Borrowing Base Certificate
is true and correct, in all material respects, and the amounts shown therein as
EBITDA has determined as provided in the Financing Documents.

 

(e)             Except as set forth on Schedule 3.5,
since December 31, 2003 there has been no material adverse change in the
business, operations, properties or condition (financial or otherwise) of
Borrower and its Consolidated Subsidiaries, taken as a whole.

 

(f)               Holdings was formed solely to hold the equity
securities of Borrower, and except in connection therewith (and as contemplated
by this Agreement) has no material assets or material liabilities.

 

Section 3.6.
     Litigation.

 

Except as set forth on Schedule 3.6, as of the
Closing Date there is no Litigation pending against, or to Borrower’s knowledge
threatened against or affecting, any Credit Party or, to Borrower’s knowledge,
any party to any Operative Document other than a Credit Party, which if
adversely determined, could reasonably be expected to have a Material Adverse
Effect or which in any manner draws into question the validity of any of the
Operative Documents.

 

Section 3.7.
     Ownership of Property.

 

Except as otherwise expressly stated in Section 3.19
and the Schedules relating thereto with respect to Intellectual Property,
Borrower and each of its Subsidiaries is the lawful owner of, has good and
marketable title to and is in lawful possession of, or has valid leasehold
interests in, all properties and other assets (real or personal, tangible,
intangible or mixed)

 

39

 

purported
or reported to be owned or leased (as the case may be) by such Person, except
as may have been disposed of in the Ordinary Course of Business or otherwise in
compliance with the terms hereof.

 

Section 3.8.     No Default.

 

No Default or Event of Default has occurred and is
continuing. No Credit Party is in breach or default under or with respect to
any contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected, which breach or default could
reasonably be expected to have a Material Adverse Effect.

 

Section 3.9.     Labor
Matters.

 

As of the Closing Date, there are no strikes or
other labor disputes pending or, to Borrower’s knowledge, threatened against
any Credit Party. Hours worked and payments made to the employees of the Credit
Parties have not been in violation of the Fair Labor Standards Act or any other
applicable Law dealing with such matters in any material respect. All payments
due from the Credit Parties, or for which any claim may be made against any of
them, on account of wages and employee and retiree health and welfare insurance
and other benefits have been paid or accrued as a liability on their books, as
the case may be. The consummation of the transactions contemplated by the
Financing Documents and the other Operative Documents will not give rise to a
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which it is a party or by which it is
bound.

 

Section 3.10.     Regulated Entities.

 

No Credit Party is an “investment company” or a
company “controlled” by an “investment company” or a “subsidiary” of an “investment
company,” all within the meaning of the Investment Company Act of 1940. No
Credit Party is a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company”, within the meaning of the Public Utility Holding
Company Act of 1935.

 

Section 3.11.      Margin Regulations.

 

None of the proceeds from the Loans have been or
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any Margin Stock or for any
other purpose which might cause any of the Loans to be considered a “purpose
credit” within the meaning of Regulation T, U or X of the Federal Reserve
Board.

 

Section 3.12.
     Compliance With Laws; Anti-Terrorism Laws.

 

(a)             Each Credit Party is in compliance with the
requirements of all applicable Laws, except to the extent such Credit Party’s
noncompliance could not reasonably be expected to have a Material Adverse
Effect.

 

(b)             None of the Credit Parties, their Affiliates
or any of their respective agents acting or benefiting in any capacity in
connection with the transactions contemplated by this Agreement is (i) in
violation of any Anti-Terrorism Law, (ii) engages in or conspires to
engage

 

40

 

in
any transaction that has the purpose of evading or avoiding or is designed to
evade or avoid, or attempts to violate, any of the prohibitions set forth in
any Anti-Terrorism Law, or (iii) is a Blocked Person. No Credit Party nor,
to the knowledge of any Credit Party, any of its Affiliates or agents acting or
benefiting in any capacity in connection with the transactions contemplated by
this Agreement, (x) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (y) deals in, or otherwise engages in any transaction relating to,
any property or interest in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law.

 

(c)             Without limiting the generality of clause (a) above,

 

(i)               Except as set forth in Schedule 3.12,
neither Borrower nor any of its Subsidiaries, violates any Health Care Laws
applicable to it, except where any such violation would not have a Material
Adverse Effect. For purposes of this Agreement, “Health Care Laws” means, to the extent (and only to the
extent) applicable to a Credit Party or its business, (A) all federal and
state fraud and abuse laws, including, but not limited to the federal
Anti-Kickback Statute (42 U.S.C. §1320a-7(b)), the Stark Law (42 U.S.C. §1395nn
and §1395(q)), the civil False Claims Act (31 U.S.C. §3729 et seq.),
TRICARE (10 U.S.C. Section 1071 et. seq), Sections
1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations
promulgated pursuant to such statutes; (B) the Health Insurance
Portability and Accountability Act of 1996 (Pub. L. No. 104-191) and the
regulations promulgated thereunder, (C) Medicare (Title XVIII of the
Social Security Act) and the regulations promulgated thereunder; (D) Medicaid
(Title XIX of the Social Security Act) and the regulations promulgated
thereunder; (E) any Laws promulgated, administered or enforced by the
Federal Food and Drug Administration, (F) quality, safety and
accreditation standards and requirements of all applicable state laws or
regulatory bodies; (G) licensure Laws; and (H) any and all other
applicable health care related Laws, each of (A) through (H) as may
be amended from time to time.

 

(ii)           Except as set forth in Schedule 3.12,
Borrower and each Domestic Subsidiary has (i) all licenses, consents,
certificates, permits, authorizations, approvals, franchises, registrations,
qualifications and other rights from, and has made all declarations and filings
with, all applicable Governmental Authorities, all self regulatory authorities
and all courts and other tribunals (each, an “Authorization”) necessary to engage in the business
conducted by it except for such Authorizations with respect to which the
failure to obtain would not have a Material Adverse Effect and (ii) no
knowledge that any Governmental Authority is considering limiting, suspending
or revoking any such Authorization. All such Authorizations are valid and in
full force and effect and Borrower and each Subsidiary is in material
compliance with the terms and conditions of all such Authorizations and with
the rules and regulations of the regulatory authorities having
jurisdiction with respect to such Authorizations except where failure to be in
such compliance or for an Authorization to be valid and in full force and
effect would not have a Material Adverse Effect.

 

(iii)       As of the Closing Date, neither Borrower nor any Subsidiary bills or
participates in the Medicare program, the respective Medicaid program in the
state or states in which such entity operates, or any other Third Party Payor
Programs (as defined below). If and to the extent Borrower or any Subsidiary
does bill or participate in such

 

41

 

programs in the future, such Person shall obtain and
maintain the requisite provider number or other Authorization. For purposes of
this Agreement, (i) “Third Party Payor” means
Medicare, Medicaid, TRICARE, Blue Cross and/or Blue Shield, State government
insurers, private insurers and any other person or entity which presently or in
the future maintains Third Party Payor Programs and (ii) “Third Party Payor Programs” means all
third party payor programs in which Borrower or Subsidiary participates
(including, without limitation, Medicare, Medicaid, TRICARE, or any other
federal or state health care programs, as well as Blue Cross and/or Blue
Shield, managed care plans, or any other private insurance programs). Borrower
shall promptly notify Administrative Agent in writing if Borrower or any
Subsidiary hereafter bills or participates in the Medicare program, any
Medicaid program or any other Third Party Payor Program.

 

(iv)          Borrower and each Subsidiary has received and maintains accreditation
in good standing and without limitation or impairment by all applicable
accrediting organizations, to the extent required by law (including any foreign
law or equivalent regulation) except where the failure to maintain such
accreditation could not reasonably be expected to result in a Material Adverse
Effect.

 

(v)              None of Borrower nor any of the Subsidiaries
has been, or has been threatened to be, (i) excluded from U.S. health care
programs pursuant to 42 U.S.C. §1320(a)7 and related regulations, (ii) “suspended”
or “debarred” from selling products to the U.S. government or its agencies
pursuant to the Federal Acquisition Regulation, relating to debarment and
suspension applicable to federal government agencies generally (48 C.F.R.
Subpart 9.4), or other applicable laws or regulations, or (iii) made a
party to any other action by any governmental authority that may prohibit it
from selling products to any governmental or other purchaser pursuant to any
federal, state or local laws or regulations.

 

Section 3.13.     Taxes.

 

All Federal, state and local tax returns, reports
and statements required to be filed by or on behalf of each Credit Party have
been filed with the appropriate Governmental Authorities in all jurisdictions
in which such returns, reports and statements are required to be filed and,
except to the extent subject to a Permitted Contest, all Taxes (including real
property Taxes) and other charges shown to be due and payable in respect
thereof have been timely paid prior to the date on which any fine penalty,
interest, late charge or loss may be added thereto for nonpayment thereof.
Except to the extent subject to a Permitted Contest, all state and local sales
and use Taxes required to be paid by each Credit Party have been paid. All
Federal and state returns have been filed by each Credit Party for all periods
for which returns were due with respect to employee income tax withholding,
social security and unemployment taxes, and, except to the extent subject to a
Permitted Contest, the amounts shown thereon to be due and payable have been
paid in full or adequate provisions therefor have been made.

 

Section 3.14.     Compliance with ERISA.

 

(a)             Each
ERISA Plan (and the related trusts and funding agreements) complies in form and
in operation with, has been administered in material compliance with, and the
terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the
Code in all

 

42

 

material
respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of
the Code is so qualified, and, if required by Law, the United States Internal
Revenue Service has issued a favorable determination letter with respect to
each such ERISA Plan which may be relied on currently. No Credit Party has
incurred liability for any material excise tax under any of Sections 4971
through 5000 of the Code.

 

(b)             During
the thirty-six (36) month period prior to the Closing Date or the making of any
Loan or the issuance of any Letter of Credit, (i) no steps have been taken
to terminate any Pension Plan and (ii) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA, the effect of which could reasonably
be expected to have a Material Adverse Effect. No condition exists or event or
transaction has occurred with respect to any Pension Plan which could result in
the incurrence by any Credit Party of any material liability, fine or penalty.
No Credit Party has incurred liability to the PBGC (other than for current
premiums) with respect to any employee Pension Plan. All contributions (if any)
have been made on a timely basis to any Multiemployer Plan that are required to
be made by any Credit Party or any other member of the Controlled Group under
the terms of the plan or of any collective bargaining agreement or by
applicable Law; no Credit Party nor any member of the Controlled Group has
withdrawn or partially withdrawn from any Multiemployer Plan, incurred any
withdrawal liability with respect to any such plan or received notice of any
claim or demand for withdrawal liability or partial withdrawal liability from
any such plan, and no condition has occurred which, if continued, could result
in a withdrawal or partial withdrawal from any such plan, and no Credit Party
nor any member of the Controlled Group has received any notice that any
Multiemployer Plan is in reorganization, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of any excise
tax, that any such plan is or has been funded at a rate less than that required
under Section 412 of the Code, that any such plan is or may be terminated,
or that any such plan is or may become insolvent.

 

Section 3.15.     Brokers.

 

Except as set forth on Schedule 3.15, and
except for fees payable to Administrative Agent and/or Lenders, no broker,
finder or other intermediary has brought about the obtaining, making or closing
of the transactions contemplated by the Operative Documents, and no Credit
Party has or will have any obligation to any Person in respect of any finder’s
or brokerage fees in connection herewith or therewith.

 

Section 3.16.     Related Transactions.

 

The Repurchase and the Closing Date Distributions
will be consummated promptly following the funding of the Initial Loans on the
Closing Date pursuant to and in material compliance with the provisions of the
Repurchase Documents, true and complete copies of which have been delivered to
Administrative Agent, and in compliance with all applicable Law, including,
without limitation Section 170 of the Delaware General Corporation Law and
Section 500 of the California Corporations Code and, in each case, the
statutes and other regulations associated therewith.

 

43

 

 

Section
3.17.    Material Contracts.

 

Except for the Operative Documents and except for
the other agreements set forth on Schedule 3.17 (collectively with the
Operative Documents, the “Material Contracts”), as
of the Closing Date there are no (i) employment agreements covering the
management of any Credit Party, (ii) collective bargaining agreements or other
labor agreements covering any employees of any Credit Party, (iii) agreements
for managerial, consulting or similar services to which any Credit Party is a
party or by which it is bound, (iv) agreements regarding any Credit Party, its
assets or operations or any investment therein to which any of its
equityholders is a party or by which it is bound, (v) real estate leases,
Intellectual Property licenses or other lease or license agreements to which
any Credit Party is a party, either as lessor or lessee, or as licensor or
licensee, or (vi) customer, distribution, marketing or supply agreements to
which any Credit Party is a party, in each case with respect to the preceding
clauses (i), (iii), (iv), (v) and (vi) requiring payment of more than $100,000
in any year, (vii) partnership or joint venture agreements or (viii) any other
agreements or instruments to which any Credit Party is a party, and the breach,
nonperformance or cancellation of which, or the failure of which to renew,
could reasonably be expected to have a Material Adverse Effect. Schedule 3.17
sets forth, with respect to each real estate lease agreement to which any
Credit Party is a party as of the Closing Date, the address of the subject
property and the annual rental (or, where applicable, a general description of
the method of computing the annual rental). The consummation of the
transactions contemplated by the Financing Documents and the other Operative
Documents will not give rise to a right of termination in favor of any party to
any Material Contract (other than any Credit Party).

 

Section 3.18.    Compliance with
Environmental Requirements; No Hazardous Materials.

 

Except in each case as set forth on Schedule 3.18:

 

(a)             no Hazardous Materials are located on any
properties now or previously owned, leased or operated by any Credit Party or
have been released into the environment, or deposited, discharged, placed or
disposed of at, on, under or near any of such properties in a manner that would
require the taking of any action under any Environmental Law and have given
rise to, or could reasonably be expected to give rise to, remediation costs and
expenses on the part of the Credit Parties in excess of $100,000. No portion of
any such property is being used, or has been used at any previous time, for the
disposal, storage, treatment, processing or other handling of Hazardous
Materials in violation of any Environmental Law nor is any such property
affected by any Hazardous Materials Contamination;

 

(b)             no notice, notification, demand, request for
information, citation, summons, complaint or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending, or to Borrower’s knowledge, threatened by any Governmental
Authority or other Person with respect to any (i) alleged violation by any
Credit Party of any Environmental Law, (ii) alleged failure by any Credit Party
to have any Permits required in connection with the conduct of its business or
to comply with the terms and conditions thereof, (iii) any generation,
treatment, storage, recycling, transportation or disposal of any Hazardous
Materials or (iv) release of Hazardous Materials;

 

(c)             to
the knowledge of Borrower, all oral or written notifications of a release of
Hazardous Materials required to be filed by or on behalf of any Credit Party
under any

 

44

 

applicable
Environmental Law have been filed or are in the process of being timely filed
by or on behalf of the applicable Credit Party;

 

(d)             no
property now owned or leased by any Credit Party and, to the knowledge of
Borrower, no such property previously owned or leased by any Credit Party, to
which any Credit Party has, directly or indirectly, transported or arranged for
the transportation of any Hazardous Materials, is listed or, to Borrower’s
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list
or is the subject of Federal, state or local enforcement actions or, to the
knowledge of Borrower, other investigations which may lead to claims against
any Credit Party for clean-up costs, remedial work, damage to natural resources
or personal injury claims, including, but not limited to, claims under CERCLA;

 

(e)             there
are no underground storage tanks located on any property owned or leased by any
Credit Party that are not properly registered or permitted under applicable
Environmental Laws or that are leaking or disposing of Hazardous Materials; and

 

(f)               there
are no Liens under or pursuant to any applicable Environmental Laws on any real
property or other assets owned or leased by any Credit Party, and no actions by
any Governmental Authority have been taken or, to the knowledge of Borrower,
are in process which could subject any of such properties or assets to such
Liens.

 

For purposes of this Section 3.18, each Credit Party
shall be deemed to include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of such Credit Party.

 

Section 3.19.    Intellectual Property.

 

(a)             Each
Credit Party owns, is licensed to use or otherwise has the right to use, all
Intellectual Property that is material to the condition (financial or other),
business or operations of such Credit Party. All such Intellectual Property
existing as of the Closing Date and registered with any United States or
foreign Governmental Authority is set forth on Schedule 3.19. All Intellectual
Property of each Credit Party of any material value or usefulness in the
conduct of such Person’s business is fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions for
such registrations, filings or issuances, in each case to the extent and in a
manner consistent with prudent commercial standards and practice. To Borrower’s
knowledge and except as set forth on Schedule 3.19, each Credit Party conducts
its business without infringement or claim of infringement of any Intellectual
Property rights of others and there is no infringement or claim of infringement
by others of any Intellectual Property rights of any Credit Party, which
infringement or claim of infringement could reasonably be expected to have a
Material Adverse Effect.

 

(b)             Certain Intellectual Property relating to
Borrower’s Obagi NuDerm System and associated product line is considered by
Borrower to be, and is protected as, a trade secret of Borrower under
applicable Law (including common law trade secret doctrines, any applicable
State’s Uniform Trade Secrets Act and the Economic Espionage Act of 1996;
hereinafter, “Trade Secret Information”) and,
in all material respects, has been (and at all relevant times will be)
maintained in a secure, confidential manner consistent with the requirements of
maintaining and preserving its status as a trade secret of Borrower. Borrower

 

45

 

represents
and warrants that the Trade Secret Information comprising the Obagi Trade
Secrets deposited with Comerica Bank (or such other institution mutually
agreeable to Agent and Borrower) pursuant to (and as defined in) Section 4.18
hereof (when and as so deposited) is a true, correct and complete (in all
material respects) exposition of the Obagi Trade Secrets and, together with
such other information publicly available or contained in Borrower’s books and
records, is sufficient for purposes of enabling a Person to duplicate, utilize
and commercially exploit the Obagi NuDerm System in a manner consistent with
the business of Borrower as historically conducted.

 

Section 3.20.    Real Property Interests.

 

Except for leasehold interests disclosed on Schedule
3.17, and except for the ownership or other interests set forth on Schedule 3.20,
no Credit Party has, as of the Closing Date, any ownership, leasehold or other
interest in real property. Schedule 3.20 sets forth, with respect to each
parcel of real estate owned by any Credit Party as of the Closing Date, the
address and legal description of such parcel.

 

Section 3.21.    Solvency.

 

Borrower and each additional Credit Party is
Solvent.

 

Section 3.22.    Full Disclosure.

 

None of the information (financial or otherwise)
furnished by or, with Borrower’s knowledge and consent, on behalf of any Credit
Party to Administrative Agent in connection with the consummation of the
transactions contemplated by the Operative Documents, contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which such statements were made. All financial projections
delivered to Administrative Agent by or on behalf of any Credit Party have been
prepared on the basis of the assumptions stated therein. Such projections
represent Borrower’s good faith commercially reasonable estimate of Borrower’s
future financial performance and such assumptions are believed by Borrower to
be fair and reasonable in light of current business conditions; provided that Borrower can give no
assurance that such projections will be attained.

 

Section 3.23.    Representations and
Warranties Incorporated from Other Operative Documents.

 

As of the Closing Date, each of the representations
and warranties made in the Operative Documents by each of the parties thereto
is true and correct in all material respects, and such representations and
warranties are hereby incorporated herein by reference with the same effect as
though set forth in their entirety herein, as qualified therein, except to the
extent that such representation or warranty relates to a specific date, in
which case such representation and warranty shall be true as of such earlier
date.

 

Section 3.24.    Westland Litigation

 

Borrower has entered into a certain Settlement and
Mutual Release Agreement dated as of January 21, 2005 (the “Settlement Agreement”) between
it, as a defendant in the lawsuit captioned Westland International
Corporation v. CJ Corp (a/k/a Cheil Jedang

 

46

 

Corporation), et al., Case No. BC318310 filed with the Los Angeles
Superior Court in December of 2004 pursuant to a Second Amended Complaint (the “Complaint”), and Westland
International Corporation, as the plaintiff thereunder (“Plaintiff”). The Settlement Agreement
settles any and all claims between the parties thereto arising in connection
with the facts and circumstances giving rise to the allegations contained in
the Complaint. The settlement amount of $250,000 required to be paid by
Borrower under the Settlement Agreement has been paid by Borrower and received
by the Plaintiff. A Request for Dismissal has been filed by the Plaintiff with
the Los Angeles Superior Court, dismissing the Complaint with prejudice. The
execution, delivery and performance under the Settlement Agreement have been
duly authorized by Borrower and the Settlement Agreement is enforceable in
accordance with its terms and represents a full and final settlement of the
matters referred to therein.

 

ARTICLE IV 

AFFIRMATIVE COVENANTS

 

Borrower agrees that, so long as any Credit Exposure
exists:

 

Section 4.1.    Financial Statements and
Other Reports.

 

Borrower will maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in accordance with GAAP and to
provide the information required to be delivered to Administrative Agent and
the Lenders hereunder, and will deliver to Administrative Agent, and, in the
case of the deliveries required by paragraphs (a) through (f), (m), (n), (p)
and (q), each Lender:

 

(a)             as
soon as practicable and in any event within thirty (30) days after the end of
each month (including the last month of Borrower’s Fiscal Year), provided that
Borrower shall have an additional fifteen (15) days for each month which ends a
fiscal quarter of Borrower), a consolidated and consolidating balance sheet of
Holdings and its Consolidated Subsidiaries as at the end of such month and the
related consolidated and consolidating statements of operations and cash flows
for such month, and, with respect to periods less than the entire Fiscal Year,
for the portion of the Fiscal Year ended at the end of such month setting forth
in each case in comparative form the figures for the corresponding periods of
the previous Fiscal Year and the figures for such month and for such portion of
the Fiscal Year ended at the end of such month set forth in the annual operating
and Capital Expenditure budgets and cash flow forecast delivered pursuant to Section
4.l(m), all in reasonable detail and certified by a Responsible Officer as
fairly presenting, in all material respects, the financial condition and
results of operations of Holdings and its Consolidated Subsidiaries and as
having been prepared in accordance with GAAP applied on a basis consistent with
the audited financial statements of Holdings, subject to changes resulting from
audit and normal year-end adjustments and the absence of footnote disclosures;

 

(b)             as
soon as available and in any event within ninety (90) days after the end of
each Fiscal Year, a consolidated and consolidating balance sheet of Holdings
and its Consolidated Subsidiaries as of the end of such Fiscal Year and the
related consolidated and consolidating statements of operations, stockholders’
equity and cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year and the figures for such
Fiscal Year set forth in the annual operating and Capital Expenditure budgets

 

47

 

and
cash flow forecast delivered pursuant to Section 4.1(m), certified (solely with
respect to such consolidated statements) without qualification (including with
respect to the scope of audit) or exception (including with respect to any
violation or breach of or Default or Event of Default under the Credit
Agreement) by independent public accountants of nationally recognized standing
and acceptable to Administrative Agent;

 

(c)             together
with each delivery of financial statements pursuant to Sections 4.1 (a) and
4.1(b), (i) a Compliance Certificate, and (ii) a management report (1) describing
the operations and financial condition of Borrower and its Consolidated
Subsidiaries for the fiscal period covered by such financial statements and the
portion of the current Fiscal Year then elapsed (or for the Fiscal Year then
ended in the case of year-end financials) and (2) discussing the reasons for
any significant variations as between the fiscal period covered and the portion
of the Fiscal Year then elapsed, as between such periods and the same periods
during the immediately preceding Fiscal Year, and as between such periods and the
same periods included in the projections and forecasts delivered pursuant to Section
4.1(m), all such information to be presented in reasonable detail and to be
certified by a Responsible Officer to the effect that such information fairly
presents, in all material respects, the results of operations and financial
condition of Borrower and its Consolidated Subsidiaries as at the dates and for
the periods indicated;

 

(d)             together with each delivery of financial
statements pursuant to 4.1(b) above, an Excess Cash Flow Certificate;

 

(e)             promptly upon receipt thereof, copies of all
reports submitted to any Credit Party by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of any Credit Party made by such accountants, including the comment
letter submitted by such accountants to management in connection with their
annual audit;

 

(f)               promptly upon their becoming available,
copies of (i) all financial statements, reports, notices and proxy statements sent
by any Credit Party to its security holders (other than by a Subsidiary to
Borrower) relating to the business and operations of Borrower and its
Subsidiaries, (ii) all regular and periodic reports and all registration
statements and prospectuses filed by any Credit Party with any securities
exchange or with the Securities and Exchange Commission or any successor, (iii)
all press releases and other statements made available generally by any Credit
Party concerning material developments in the business of any Credit Party and (iv)
all Swap Contracts entered into by any Credit Party;

 

(g)            promptly upon such information becoming
available, a summary of all purchase price and other monetary adjustments that
are made pursuant to any of the Repurchase Documents;

 

(h)            promptly upon any Key Manager obtaining
knowledge (i) of the existence of any Event of Default or Default, or becoming
aware that the holder of any Debt of any Credit Party in excess of $250,000 has
given any notice or taken any other action with respect to a claimed default
thereunder, (ii) of any change in any Credit Party’s certified accountant or
any resignation, or decision not to stand for re-election, by any member of any
Credit Party’s board of directors (or comparable body), (iii) that any Person
has given any notice to any Credit Party or taken any other action with respect
to a claimed default under any material agreement or

 

48

 

instrument
(other than the Financing Documents) to which any Credit Party is a party or by
which any of its assets is bound, (iv) of the institution of any litigation or
arbitration seeking equitable relief or involving an alleged liability of any
Credit Party equal to or greater than $250,000 or any adverse determination in
any litigation or arbitration involving equitable relief or a potential
liability of any Credit Party equal to or greater than $250,000 or (v) any
loss, damage or destruction of any Collateral having a fair market value in
excess of $250,000, whether or not covered by insurance, a certificate of a
Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default (including any Event of
Default or Default), event or condition, and what action the applicable Credit
Party has taken, is taking or proposes to take with respect thereto;

 

(i)               promptly upon any Key Manager obtaining
knowledge of (i) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, (ii) the failure of
any member of the Controlled Group to make a required contribution on a timely
basis to any ERISA Plan or to any Multiemployer Plan, (iii) the taking of any
action with respect to a Pension Plan which could result in the requirement
that Borrower or any Subsidiary furnish a bond or other security to the PBGC or
such Pension Plan, (iv) the occurrence of a reportable event under Section 4043
of ERISA (for which a reporting requirement is not waived) with respect to any
Pension Plan, (v) the occurrence of any event with respect to any ERISA Plan,
Pension Plan or Multiemployer Plan which could result in the incurrence by any
member of the Controlled Group of any material liability, fine or penalty
(including any claim or demand for withdrawal liability or partial withdrawal
from any Multiemployer Plan), (vi) any material increase in the liability or
contingent liability of Borrower or any Subsidiary with respect to any
post-retirement welfare plan benefit or (vii) the receipt by any Credit Party
of any notice that any Multiemployer Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the imposition
of an excise tax, that any such plan is or has been funded at a rate less than
that required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent, a certificate of
a Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person, and what action the applicable Credit Party has taken, is
taking or proposed to take with respect thereto;

 

(j)               promptly upon any Key Manager obtaining
knowledge of any complaint, order, citation, notice or other written
communication from any Person delivered to any Credit Party with respect to, or
if any Key Manager becomes aware of (i) the existence or alleged existence of a
violation of any applicable Environmental Law, (ii) any release of any
Hazardous Materials into the environment, (iii) the commencement of any cleanup
of any Hazardous Materials, (iv) any pending legislative or threatened proceeding
for the termination, suspension or non-renewal of any Permit required under any
applicable Environmental Law, or (v) any property of any Credit Party that is
or will be subject to a Lien imposed pursuant to any Environmental Law, a
certificate of a Responsible Officer specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person, and what action the applicable Credit
Party has taken, is taking or proposes to take with respect thereto;

 

(k)           at the end of each fiscal quarter of Borrower
a certificate of a Responsible Officer describing any (x) new registration or
application to register by any Credit Party any

 

49

 

Intellectual
Property with any Governmental Authority or (y) any newly acquired interest in
real property (including leasehold interests in real property), in such detail
as Administrative Agent shall reasonably require;

 

(1)            promptly upon receipt or filing thereof,
copies of any reports or notices related to any material taxes and any other
material reports or notices received by any Credit Party from, or filed by any
Credit Party with, any Governmental Authority;

 

(m)         within fifteen (15) days prior to the conclusion
of each Fiscal Year, Borrower’s annual operating plans, operating and Capital
Expenditure budgets, and financial forecasts, including cash flow projections
covering proposed fundings, repayments, additional advances, investments and
other cash receipts and disbursements, each for the following three (3) Fiscal
Years presented on a monthly basis for the next Fiscal Year and annually for
the two (2) subsequent Fiscal Years, all of which shall be in a format
reasonably consistent with projections, budgets and forecasts theretofore
provided to the Lenders, and promptly following the preparation thereof,
updates to any of the foregoing from time to time prepared by management of
Borrower;

 

(n)            as soon as available and in any event within
five (5) Business Days after the end of each month, and from time to time upon
the request of Administrative Agent, a Borrowing Base Certificate as of the
last day of the month most recently ended, together with such reconciliation
reports as may be reasonably requested by Administrative Agent with respect to
the components of such Borrowing Base Certificate;

 

(o)             within two (2) Business Days after any
request therefore, such information in such detail concerning the amount,
composition and manner of calculation of the Borrowing Base as Administrative
Agent or any Lender may reasonably request;

 

(p)             [Reserved];

 

(q)             from time to time, if Administrative Agent or
any Lender determines that obtaining appraisals is necessary in order for
Administrative Agent or such Lender to comply with applicable Laws, appraisal
reports in form and substance and from appraisers satisfactory to
Administrative Agent stating the then current fair market values of all or any
portion of the real estate owned by Borrower or any Subsidiaries. In addition
to the foregoing, from time to time, but in the absence of a Default or Event
of Default not more than once during each calendar year, Administrative Agent may
require Borrower to obtain and deliver to Administrative Agent appraisal
reports in form and substance and from appraisers satisfactory to
Administrative Agent stating the then current market values of all or any
portion of the real estate and personal property owned by Borrower or any
Subsidiaries; and

 

(r)             with reasonable promptness, such other
information and data with respect to any Credit Party as from time to time may be
reasonably requested by Administrative Agent or any Lender.

 

Section 4.2.    Payment and Performance of
Obligations.

 

Borrower (i) will pay and discharge, and cause each
Subsidiary to pay and discharge, at or before maturity, all of their respective
obligations and liabilities, including tax

 

50

 

liabilities,
except for such obligations and/or liabilities (x) that may be the subject of a
Permitted Contest and (y) the non-payment or non-discharge of which could not
reasonably be expected to have a Material Adverse Effect, (ii) will maintain,
and cause each Subsidiary to maintain, in accordance with GAAP, appropriate
reserves for the accrual of all of their respective obligations and liabilities
and (iii) will not breach or permit any Subsidiary to breach, or permit to
exist any default under, the terms of any lease, commitment, contract,
instrument or obligation to which it is a party, or by which its properties or
assets are bound, except for such breaches or defaults which could not
reasonably be expected to have a Material Adverse Effect.

 

Section 4.3.    Maintenance of Existence.

 

Borrower will preserve, renew and keep in full force
and effect, and will cause each Subsidiary to preserve, renew and keep in full
force and effect, their respective existence and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business.

 

Section 4.4.    Maintenance of Property;
Insurance.

 

(a)             Borrower will keep, and will cause each
Subsidiary to keep, all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted.

 

(b)             Borrower will maintain, and will cause each
Subsidiary to maintain, (i) casualty insurance on all real and personal
property on an all risks basis (including the perils of flood and quake),
covering the repair and replacement cost of all such property and coverage for
business interruption and public liability insurance (including
products/completed operations liability coverage) in each case of the kinds and
in amounts as are consistent with the Ordinary Course of Business of Borrower
and reasonably acceptable to Administrative Agent and (ii) such other insurance
coverage in such amounts and with respect to such risks as Administrative Agent
may reasonably request. All such insurance shall be provided by insurers having
an A.M. Best policyholders rating reasonably acceptable to Administrative
Agent. Borrower will not, and will not permit any Subsidiary to, bring or keep
any article on any business location of any Credit Party, or cause or allow any
condition to exist, if the presence of such article or the occurrence of such
condition could reasonably cause the invalidation of any insurance required by
this Section 4.4(b), or would otherwise be prohibited by the terms thereof.

 

(c)             On or prior to the Closing Date, and at all
times thereafter, Borrower will cause Administrative Agent to be named as an
additional insured (with respect to liability policies), assignee and loss
payee (with respect to property and casualty policies) (which shall include, as
applicable, identification as mortgagee), as applicable, on each insurance
policy required to be maintained pursuant to this Section 4.4 pursuant to
endorsements in form and content acceptable to Administrative Agent. Borrower
will deliver to Administrative Agent and the Lenders (i) on the Closing Date, a
certificate from Borrower’s insurance broker dated such date showing the amount
of coverage as of such date, and that such policies will include effective
waivers (whether under the terms of any such policy or otherwise) by the
insurer of all claims for insurance premiums against all loss payees and
additional insureds and all rights of subrogation against all loss payees and
additional insureds, and that if all or any part of such policy is canceled,
terminated or expires, the insurer will forthwith give notice thereof to each
additional insured, assignee and loss payee and that no cancellation, reduction
in amount or

 

51

 

material
change in coverage thereof shall be effective until at least thirty (30) days
after receipt by each additional insured, assignee and loss payee of written
notice thereof, (ii) upon the request of any Lender through Administrative
Agent from time to time full information as to the insurance carried, (iii) within
five (5) days of receipt of notice from any insurer, a copy of any notice of
cancellation, non-renewal or material adverse change in coverage from that
existing on the date of this Agreement and (iv) forthwith, notice of any
cancellation or non-renewal of coverage by Borrower.

 

(d)             [Reserved.]

 

(e)             In the event Borrower fails to provide
Administrative Agent with evidence of the insurance coverage required by this
Agreement, Administrative Agent may purchase insurance at Borrower’s expense to
protect Administrative Agent’s interests in the Collateral. This insurance may,
but need not, protect Borrower’s interests. The coverage purchased by
Administrative Agent may not pay any claim made by Borrower or any claim that
is made against Borrower in connection with the Collateral. Borrower may later
cancel any insurance purchased by Administrative Agent, but only after
providing Administrative Agent with evidence that Borrower has obtained,
insurance as required by this Agreement. If Administrative Agent purchases
insurance for the Collateral, to the fullest extent provided by law Borrower
will be responsible for the costs of that insurance, including interest and
other charges imposed by Administrative Agent in connection with the placement
of the insurance, until the effective date of the cancellation or expiration of
the insurance. The costs of the insurance may be added to the Obligations. The
costs of the insurance may be more than the cost of insurance Borrower is able
to obtain on its own.

 

Section 4.5.    Compliance with Laws.

 

Except as set forth in Schedule 3.12, Borrower will
comply, and cause each Subsidiary to comply, with the requirements of all
applicable Laws, except to the extent that failure to so comply could not
reasonably be expected to have a Material Adverse Effect or result in any Lien
(other than a Permitted Lien) upon a material portion of the assets of any such
Person in favor of any Governmental Authority.

 

Section 4.6.    Inspection of Property,
Books and Records.

 

Borrower will keep, and will cause each Subsidiary
to keep, proper books of record and account in accordance with GAAP in which
full, true and correct entries shall be made of all dealings and transactions
in relation to its business and activities; and at reasonable times and, so
long as no Event of Default exists, upon reasonable prior notice, will permit,
and will cause each Subsidiary to permit, at the sole cost of Borrower or any
applicable Subsidiary, representatives of Administrative Agent and of any
Lender (but at such Lender’s expense unless such visit or inspection is made concurrently
with Administrative Agent) to visit and inspect any of their respective
properties, to examine and make abstracts or copies from any of their
respective books and records, to conduct a collateral audit and analysis of
their respective Inventory and Accounts and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants as often as may reasonably be desired; provided that unless an Event of Default
exists, Borrower shall pay for not more than two such visits or inspections in
any twelve month period and Administrative Agent or any Lender exercising any
rights pursuant to this Section 4.6 shall give Borrower or any applicable

 

52

 

Subsidiary
commercially reasonable prior written notice of such exercise. No notice shall
be required during the existence and continuance of any Event of Default.

 

Section 4.7.    Use of Proceeds.

 

Borrower will use the proceeds of the Term Loans solely
for payment of amounts due under the Repurchase Documents with respect to the
Repurchase and the Closing Date Distributions, transaction fees incurred in
connection with the Operative Documents and the refinancing on the Closing Date
of Debt. The proceeds of Revolving Loans shall be used by Borrower solely for
the purposes set forth in the preceding sentence and for working capital needs
of Borrower.

 

Section 4.8.    Lenders’ Meetings.

 

Upon the written request of Administrative Agent,
but absent the existence of an Event of Default in no event more frequently
than four times in any calendar year, conduct a meeting with Administrative
Agent and the Lenders to discuss the most recently reported financial results
and the financial condition of Borrower and the Subsidiaries, at which shall be
present a Responsible Officer and such other officers of the Credit Parties as may
be reasonably requested to attend by Administrative Agent or any Lender, such
request or requests to be made within a reasonable time prior to the scheduled
date of such meeting. Such meetings shall be held at a time and place
convenient to the Lenders and to Borrower.

 

Section 4.9.    Required Swap Contracts.

 

Not later than sixty (60) days following the Closing
Date, Borrower will, at its sole cost and expense, enter into and thereafter
maintain in full force and effect Swap Contracts providing protection against
fluctuations in interest rates with respect to not less than fifty percent
(50%) of the principal amount of the Term Loans as of the Closing Date, which
Swap Contracts shall provide for not less than a three (3) year term and shall
contain such protections and other terms as are customary and are satisfactory
to Administrative Agent.

 

Section 4.10.    Hazardous Materials;
Remediation.

 

(a)             If
any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of Borrower or any other
Credit Party, Borrower will cause, or direct the applicable Credit Party to
cause, the prompt containment and removal of such Hazardous Materials and the
remediation of such real property or other assets as is necessary to comply
with all Environmental Laws and to preserve the value of such real property or
other assets. Without limiting the generality of the foregoing, Borrower shall,
and shall cause each other Credit Party to, comply with each Environmental Law
requiring the performance at any real property by Borrower or any other Credit
Party of activities in response to the release or threatened release of a
Hazardous Material.

 

(b)             Borrower
will provide Administrative Agent within thirty (30) days after demand therefor
with a bond, letter of credit or similar financial assurance evidencing to the
satisfaction of Administrative Agent that sufficient funds are available to pay
the cost of removing, treating and disposing of any Hazardous Materials or
Hazardous Materials Contamination and discharging any assessment which may be
established on any property as a

 

53

 

result
thereof, such demand to be made, if at all, upon Administrative Agent’s
reasonable business determination that the failure to remove, treat or dispose
of any Hazardous Materials or Hazardous Materials Contamination, or the failure
to discharge any such assessment could reasonably be expected to have a
Material Adverse Effect.

 

Section 4.11.    Dividends to Holding

 

Absent an Event of Default, Borrower shall
distribute funds to Holdings as permitted under Section 5.4 in order to enable
Holdings to pay its franchise taxes, income or other taxes, corporate
maintenance and other liabilities permitted hereunder, as and when the same
become due and payable.

 

Section 4.12.    Further Assurances.

 

(a)             Borrower
will, and will cause each Subsidiary to, at its own cost and expense, cause to
be promptly and duly taken, executed, acknowledged and delivered all such
further acts, documents and assurances as may from time to time be necessary or
as Administrative Agent or the Required Lenders may from time to time
reasonably request in order to carry out the intent and purposes of the
Financing Documents and the transactions contemplated thereby, including all
such actions to establish, create, preserve, protect and perfect a first
priority Lien (subject only to Permitted Liens) in favor of Administrative
Agent for the benefit of the Lenders on the Collateral (including Collateral
acquired after the date hereof), including on any and all assets of each Credit
Party, whether now owned or hereafter acquired.

 

(b)             Without
limiting the generality of the foregoing, in the event that Borrower or any of
its Subsidiaries shall acquire or form any new Subsidiary after the date
hereof, Borrower or the respective Subsidiary will cause such new Subsidiary,
upon such acquisition and concurrently with such formation, (i) to execute a
Guarantee (in form and content acceptable to Administrative Agent) guaranteeing
payment and performance of all of the Obligations and to take such other action
(including, without limitation, authorizing the filing of such UCC financing
statements and delivering certificates in respect of the equity securities of
such Subsidiary) as shall be necessary or appropriate to establish, create,
preserve, protect and perfect a first priority Lien (subject only to Permitted
Liens) in favor of Administrative Agent for the benefit of Administrative Agent
and the Lenders on all assets, both real and personal, in which such new
Subsidiary has or may thereafter acquire any interest, (ii) to execute such other
Security Documents, in form and content acceptable to Administrative Agent, as may
be required or requested by Administrative Agent in connection with the actions
contemplated by the preceding clause (i) and (iii) to deliver such proof of
corporate (or comparable) action, incumbency of officers, opinions of counsel
and other documents as Administrative Agent shall have required or requested.
Until such time that any Subsidiary shall have fully complied with the
provisions of this paragraph, and without limitation of any rights and remedies
available to Administrative Agent and Lenders as a result thereof, the
operating results of such Subsidiary shall be disregarded in the calculation of
EBITDA for any measurement period.

 

(c)             Borrower
will, and will cause each of its Subsidiaries to, take such action from time to
time as shall be necessary to ensure that each of its Subsidiaries is a
Wholly-Owned Subsidiary and that Administrative Agent shall have, for the
benefit of Administrative Agent and Lenders and subject to Permitted Liens, a
first priority Lien on all capital stock or other equity securities of each
Subsidiary (except with respect to the Foreign Subsidiaries, in which case

 

54

 

Administrative
Agent shall have a Lien on 65% of such Subsidiary’s capital stock or other
equity interests which Lien shall be a first priority perfected security
interest under applicable US Law). In the event that any additional capital
stock or other equity securities shall be issued by any Subsidiary, Borrower
shall or shall cause each of its Subsidiaries to, concurrently with such
issuance, deliver to Administrative Agent to the extent required by the
applicable Financing Documents the certificates evidencing such securities,
accompanied by undated powers executed in blank and to take such other action
as Administrative Agent shall request to perfect the security interest created
therein pursuant to such Financing Documents.

 

(d)             Concurrently with the acquisition by Borrower
or any of its Subsidiaries following the Closing Date of any real estate or
real property leasehold interests, Borrower will, within thirty (30) days
following written request by Administrative Agent, deliver or cause to be
delivered to Administrative Agent, with respect to such real estate, (i) a
mortgage or deed of trust, as applicable, in form and substance satisfactory to
Administrative Agent, executed by the title holder thereof, (ii) an ALTA lender’s
title insurance policy issued by a title insurer reasonably satisfactory to
Administrative Agent in form and substance and in amounts reasonably
satisfactory to Administrative Agent insuring Administrative Agent’s first
priority Lien on such real estate, free and clear of all defects and
encumbrances except Permitted Liens; (iii) a current ALTA survey, certified to
Administrative Agent by a licensed surveyor, in form and substance satisfactory
to Administrative Agent, (iv) a certificate, in form and substance acceptable
to Administrative Agent, to Administrative Agent from a national certification
agency acceptable to Administrative Agent, certifying that such real estate is
not located in a special flood hazard area and (v) in the case of real estate
that consists of a leasehold estate, such estoppel letters, consents and
waivers from the landlords and non-disturbance agreements from any holders of
mortgages or deeds of trust on such real estate as may be requested by
Administrative Agent, all of which shall be in form and substance satisfactory
to Administrative Agent.

 

Section 4.13.    Compliance With Health Care
Laws.

 

(a)             Without
limiting or qualifying any other provision of this Agreement, Borrower will
comply, and will cause each Subsidiary to comply, with all applicable Health
Care Laws relating to the operation of such Person’s business, except where
such failure to so comply could not reasonably be expected to have a Material
Adverse Effect. Subject to the provisions of Section 4.16, Borrower will not
make, suffer or permit to occur, or cause or permit any Subsidiary to make,
suffer or permit to occur, any fact, event or circumstance for which notice to
Agent is required under clauses (ii), (iv), (ix) and (x) of Section 4.14(a).

 

(b)             Borrower
will maintain, and will cause each Subsidiary to maintain, all records required
to be maintained by any Governmental Authority or otherwise under the Health
Care Laws, except where such failure to so comply could not reasonably be
expected to have a Material Adverse Effect.

 

Section 4.14.    Notices to Agent.

 

(a)             Borrower
shall notify Administrative Agent within three (3) Business Days following the
occurrence of any of the following facts, events or circumstances, whether
threatened, existing or pending, together with such supporting data and
information as shall be necessary to fully explain to Agent the scope and
nature of the fact, event or circumstance, and

 

55

 

shall
provide to Administrative Agent within two (2) Business Days of Administrative
Agent’s request, such additional information as Administrative Agent shall
request regarding such disclosure:

 

(i)               that Borrower or any Subsidiary is currently,
or has in the past been, or hereafter becomes, subject to any federal, state,
local governmental or private payor civil or criminal investigations, inquiries
or audits involving and/or related to its compliance with Health Care Laws
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect;

 

(ii)           that a Key Manager or Person with a “direct
or indirect ownership interest” (as that phrase is defined in 42 C.F.R.
§420.201) in Borrower or Subsidiary: (A) has had a civil monetary penalty
assessed against him or her pursuant to 42 U.S.C. §1320a-7a or is the subject
of a proceeding seeking to assess such penalty; (B) has been excluded from
participation in a Federal Health Care Program (as that term is defined in 42
U.S.C. §1320a-7b) or is the subject of a proceeding seeking to assess such
penalty; (C) has been convicted (as that term is defined in 42 C.F.R. §1001.2)
of any of those offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C. §§669,
1035, 1347, 1518 or is the subject of a proceeding seeking to assess such
penalty; or (D) has been involved or named in a U.S. Attorney complaint made or
any other action taken pursuant to the False Claims Act under 31 U.S.C.
§§3729-3731 or qui tam action brought pursuant to 31 U.S.C. §3729 et seq.;

 

(iii)       any validation review, program integrity review or reimbursement audits
related to any Borrower or any Subsidiary by any commission, board or agency in
connection with the Medicare or Medicaid programs;

 

(iv)          the voluntary disclosure by Borrower or any
Subsidiary to the Office of the Inspector General of the United States
Department of Health and Human Services, a Medicare fiscal intermediary or any
state’s Medicaid program of a potential overpayment matter involving the
submission of claims to such payor in an amount greater than $250,000;

 

(v)              receipt by Borrower or any Subsidiary of any
notice or communication from the NCQA or other accrediting organization that
such Person is (a) subject to or is required to file a plan of correction with
respect to any accreditation survey, or (b) in danger of losing its
accreditation due to a failure to comply with a plan of correction;

 

(vi)          any material charges of licensing violations
against any Credit Party;

 

(vii)      any health care survey report related to licensure or certification
(including, without limitation, an annual or biannual Medicare or Medicaid
certification survey report) which includes any statement of deficiencies
pertaining to Borrower or any Subsidiary;

 

(viii)         without duplication, any failure of Borrower
or any Subsidiary to comply with the covenants and conditions of Section 4.13;

 

56

 

(ix)         any revocation, suspension, termination,
probation, restriction, limitation, denial, or non-renewal affecting Borrower
or any Subsidiary with respect to any Medicare and/or Medicaid provider
participation or provider agreement, certification, billing number, assignment
(via CMS 855 forms or otherwise), billing agent or electronic funds transfer
instruction which could reasonably be expected to have a Material Adverse
Effect; and/or

 

(x)             any revocation, suspension, termination,
probation, restriction, limitation, denial or non-renewal (other than at the
election of Borrower or any Subsidiary) affecting Borrower or any Subsidiary
with respect to any provider participation or provider agreement with any
third-party payor other than Medicaid or Medicare, including, without
limitation, Blue Cross and/or Blue Shield, and any other private commercial
insurance, healthcare service contractor, provider network, managed care
program and employee assistance program which could reasonably be expected to
have a Material Adverse Effect.

 

Section 4.15.    Participation Agreements. Borrower shall provide to Administrative
Agent upon request, and has provided to Administrative Agent as of the Closing
Date, an accurate, complete and current list of all material participation
agreements with health maintenance organizations, insurance programs, third
party payors and preferred provider organizations with respect to the business
of Borrower and each Subsidiary (collectively, “Participation Agreements”). Borrower will at all times comply, and will cause each
Subsidiary at all times to comply, with all requirements, contracts, conditions
and stipulations applicable to Borrower or any Subsidiary in order to maintain
in good standing and without default or limitation all such Participation
Agreements.

 

Section 4.16.    Cure of Violations. If there shall occur any fact, event or
circumstance for which Borrower is required to give Administrative Agent notice
under Section 4.14 above, or if there shall occur any breach of Section 4.14,
Borrower shall take such action as is necessary to validly challenge or
otherwise appropriately respond to such fact, event or circumstance within any
timeframe required by applicable Health Care Laws, and shall thereafter
diligently pursue the same to a favorable conclusion, all to the effect that
the fact, event or circumstance giving rise to Borrower’s notice obligation
under Section 4.14 or the breach of Section 4.13, shall be dismissed,
rescinded, eliminated and otherwise cease to exist on that date which is the
earlier to occur of (A) sixty (60) days after the date Borrower or any
Subsidiary became aware of such fact, event or circumstance, or (B) the
expiration of any cure period given under applicable Health Care Laws to cure
any such breach. Provided that Borrower is at all times in compliance with the
foregoing covenants and diligently pursue and obtain the cure described above
within the timeframe described above, the existence of any fact, event or circumstance
for which Borrower is required to give Administrative Agent notice under Section
4.14, or the existence of a breach of Section 4.13, shall not, in and of
itself, constitute a breach of Borrower’s obligations hereunder unless and
until the Administrative Agent provides the Borrower with written notice
(provided that Administrative Agent has been made aware of such fact, event or
circumstance in the first instance) that the same shall in Administrative Agent’s
good faith judgment:

 

(a)             have
a material adverse impact on Borrower’s or a Subsidiary’s ability to operate
its business for its current use;

 

57

 

(b)             modify,
limit or annul or result in the transfer, suspension, revocation or imposition
of probationary use of any Authorization which could reasonably be expected to
have a Material Adverse Effect;

 

(c)             if
applicable, materially affect Borrower’s or any Subsidiary’s continued
participation in the Medicaid or Medicare programs or any other of the third-party
payors programs, or any successor programs thereto, at then current rate
certifications or levels;

 

(d)             (i)
materially impair the likelihood that accounts in general will be collected and
paid in the normal course of Borrower’s or any Subsidiary’s business and upon
the same schedule and with the same frequency as such Person’s recent
collections history, or (ii) materially impair the value of any accounts, real
property or other collateral as underwritten by Lenders prior to the Closing
Date;

 

(e)             have
occurred as a result of Borrower’s or any Subsidiary’s gross negligence,
willful misconduct, willful breach of this Agreement or Health Care Laws or
failure to adhere to commercial reasonable standards of operations;

 

(f)               give
rise to any liability of any Credit Party under any Health Care Laws in excess
of $100,000; or

 

(g)            otherwise
have a Material Adverse Effect.

 

Section 4.17.    Corporate Compliance
Program. So long as any
Credit Exposure exists, if Borrower becomes subject to any of the Healthcare
Laws enumerated in clauses (B), (C) or (D) of subsection 3.12(c)(i) and to the
extent that a failure of Borrower to comply with such Laws could reasonably be
expected to result in a Material Adverse Effect, then Borrower shall establish
and maintain on its behalf, and will cause each Subsidiary to maintain on its
behalf, a corporate compliance program reasonably acceptable to Administrative
Agent and Lenders. Borrower will modify any such corporate compliance program
from time to time, as necessary, to ensure continuing compliance with all laws,
ordinances, rules, regulations and requirements to the extent applicable to
Borrower. Borrower will permit Administrative Agent and/or any of its outside
consultants to review such corporate compliance program from time to time.

 

Section 4.18.    Obagi Trade Secrets

 

(a)             Borrower shall, within 30 days after the
Closing Date, cause the know how, techniques, methods, formulae, processing
compilations and other confidential propriety information comprising the Trade
Secret Information associated with the Obagi NuDerm System (collectively, the “Obagi Trade Secrets”) to be memorialized in a readily accessible
and readable tangible medium and deposited into escrow with Comerica Bank at
its offices located at 275 Battery Street, San Francisco, California (or with
such other institution and/or location acceptable to Agent and Borrower)
pursuant to a tri party collateral escrow and access agreement in form and
substance reasonably acceptable to Administrative Agent (the “Escrow Agreement”). No Person will be
permitted access to the information deposited with Comerica Bank (or a
successor thereto) and constituting the Obagi Trade Secrets; provided however, that Borrower shall make
periodic deposits into escrow in accordance with the terms of the Escrow
Agreement for the purposes of updating the Obagi Trade Secrets as required
under paragraph

 

58

 

4.18(b)
below. Borrower shall irrevocably authorize and direct Comerica Bank (or its
successor, as permitted hereunder), pursuant to the terms of the Escrow
Agreement, to immediately deliver the Obagi Trade Secrets to Administrative
Agent upon receipt by Comerica Bank (or such successor) of a written statement
signed by Administrative Agent certifying that an Event of Default has
occurred, that the Obligations have been accelerated and declared by
Administrative Agent to be immediately due and payable and that Administrative
Agent has begun exercising its remedies with respect to such Event of Default(s).
Administrative Agent shall notify Comerica Bank (or its successor) of the
termination of the Escrow Agreement upon repayment or discharge of the
Obligations by providing the notice required under the Escrow Agreement in the form
of Exhibit C attached thereto. Administrative Agent shall not release, share or
otherwise disclose the Obagi Trade Secrets with any Lender for a period of
thirty days following the receipt by Administrative Agent of the Obagi Trade
Secrets as aforesaid. However, nothing herein is intended or should be
interpreted to delay, limit or condition the ability of Administrative Agent to
sell, transfer or otherwise dispose of the Obagi Trade Secrets in the course of
realizing upon such Collateral.

 

(b)             Borrower shall keep and maintain the Obagi
Trade Secret information in a secure manner with the degree of care and
confidentiality consistent with past practices and the terms hereof for as long
as any Obligations remain outstanding, and shall keep such information current
and update the same as necessary to reflect, from time to time, Borrower’s then
current state of knowledge, product standards and manufacturing requirements,
as applicable. Borrower shall effect such updates by periodically depositing
into escrow with Comerica Bank (or its successor) a complete set of such
updated Obagi Trade Secrets, which updated information package shall supercede
and be deemed to replace (without physically removing) the information
comprising the theretofore current Obagi Trade Secrets information package held
in escrow. All representations and warranties of Borrower relating to the Obagi
Trade Secrets shall be deemed to apply only to the most current set of
materials constituting the Obagi Trade Secrets which have been deposited by
Borrower into escrow and shall be deemed automatically remade by Borrower upon
each such deposit. Borrower shall handle the information comprising the Obagi
Trade Secrets and conduct itself with respect to such information at all times
in a manner consistent with and evidencing its intent to keep such information
secret, including limiting access thereto to a limited number of Persons on a
reasonable need to know basis, identifying and marking any relevant records or
written material as being confidential and having employees sign non-disclosure
agreements, as appropriate.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower agrees that, so long as any Credit Exposure
exists:

 

Section 5.1.    Debt.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for:

 

(a)             Debt under the Financing Documents and Letter
of Credit Liabilities;

 

59

 

(b)             Debt outstanding on the date of this
Agreement and set forth on Schedule 5.1;

 

(c)             [Reserved];

 

(d)             Debt incurred or assumed for the purpose of
financing all or any part of the cost of acquiring any fixed asset (including
through Capital Leases), in an aggregate principal amount at any time
outstanding not greater than $500,000;

 

(e)             Debt, if any, arising under Swap Contracts;

 

(f)               intercompany Debt arising from loans made by (i)
Borrower to its domestic Wholly-Owned Subsidiaries to fund working capital requirements
of such Subsidiaries in the Ordinary Course of Business, or (ii) any
Wholly-Owned Subsidiary of Borrower to Borrower; provided, however, that upon the request of Administrative
Agent at any time, any such Debt shall be evidenced by promissory notes having
terms reasonably satisfactory to Administrative Agent, the sole originally
executed counterparts of which shall be pledged and delivered to Administrative
Agent, for the benefit of Administrative Agent and Lenders, as security for the
Obligations; and

 

(g)            unsecured Debt not to exceed $250,000 in the
aggregate at any time outstanding which is subordinated to the Obligations in a
manner satisfactory to Administrative Agent.

 

Section 5.2.    Liens.

 

Borrower will not, and will not permit any Subsidiary
to, directly or indirectly, create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except the following (“Permitted Liens”):

 

(a)             Liens created by the Security Documents;

 

(b)             Liens existing on the date of this Agreement
and set forth on Schedule 5.2;

 

(c)             any Lien on any asset securing Debt permitted
under Section 5.1(d), provided that
such Lien attaches only to the assets financed by such Debt, and such Lien
attaches concurrently with or within ninety (90) days after the acquisition
thereof;

 

(d)             Liens for taxes or other governmental charges
not at the time delinquent or thereafter payable without penalty or the subject
of a Permitted Contest;

 

(e)             Liens arising in the Ordinary Course of
Business (i) in favor of carriers, warehousemen, mechanics and materialmen, and
other similar Liens imposed by law and (ii) in connection with worker’s
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA) or in connection with surety bonds, bids,
performance bonds and similar obligations for sums not overdue or the subject
of a Permitted Contest and not involving any deposits or advances or borrowed
money or the deferred purchase price of property or services and, in each case,
for which it maintains adequate reserves;

 

60

 

(f)               attachments, appeal bonds, judgments and
other similar Liens, for sums not exceeding $250,000 in the aggregate arising
in connection with court proceedings; provided
that the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are the subject of a Permitted Contest;

 

(g)            easements, rights of way, restrictions, minor
defects or irregularities in title and other similar Liens not interfering in
any material respect with the ordinary conduct of the business of Borrower or
any Subsidiary;

 

(h)            deposits or pledges to secure obligations
under worker’s compensations, social security or similar laws, or under unemployment
insurance;

 

(i)               deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money); leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the Ordinary Course of Business; and

 

(j)               Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided that any such Lien attaches to
such fixed asset (and only such asset) concurrently with or within sixty (60)
days after the acquisition thereof.

 

Section 5.3.    Contingent Obligations.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist
any Contingent Obligations, except for:

 

(a)             Contingent Obligations arising in respect of
the Debt under the Financing Documents and Letter of Credit Liabilities;

 

(b)             Contingent Obligations resulting from
endorsements for collection or deposit in the Ordinary Course of Business;

 

(c)             Contingent Obligations arising under Swap
Contracts required by the terms of Section 4.9 and so long as there exists no
Event of Default both immediately before and immediately after giving effect to
any such transaction, Contingent Obligations existing or arising under any
other Swap Contract, provided that
such obligations are (or were) entered into by Borrower or a Subsidiary in the
Ordinary Course of Business for the purpose of directly mitigating risks
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person and not for purposes of speculation;

 

(d)             Contingent Obligations outstanding on the
date of this Agreement and set forth on Schedule 5.3;

 

(e)             Contingent Obligations incurred in the
Ordinary Course of Business with respect to surety and appeal bonds,
performance bonds and other similar obligations not to exceed $100,000 in the
aggregate at any time outstanding;

 

(f)               Contingent Obligations arising under
indemnity agreements with title insurers to cause such title insurers to issue
to Administrative Agent mortgagee title insurance policies; and

 

61

 

(g)            Contingent Obligations arising with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions permitted under Section 5.7.

 

Section 5.4.    Restricted Distributions.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any
sum for any Restricted Distribution; provided
that the foregoing shall not restrict or prohibit any Subsidiary
from making dividends or distributions, directly or indirectly, to Borrower and
shall not restrict or prohibit dividends or distributions, directly or
indirectly, to Holdings at such times and in such amounts as are necessary to
permit:

 

(a)             the purchase of shares of (or options to
purchase shares of) capital stock in Holdings from either Austin McNamara or
Zein Obagi, M.D. (or their respective estates) upon the death, termination of
employment or retirement of such Person, in each case either at the option of
Holdings or as may be required of Holding, pursuant to and in accordance with
the McNamara Investor Rights Agreement and the Obagi Investor’s Rights
Agreement, as applicable, in either case so long as (x) before and after giving
effect to any such dividend or distribution for such purpose, (i) no Event of
Default shall have occurred and be continuing (including, Borrower is able to
demonstrate compliance on a pro forma basis with the covenants set forth in Article
6 recomputed for the most recently ended quarter for which information is
available and is in compliance with all other terms and conditions of this
Agreement), and (ii) if such dividend or distribution is made prior to the
Commitment Expiry Date, the Revolving Loan Limit minus the Revolving Loan Outstandings is equal to or greater
than $2,000,000, and (y) the aggregate of all such purchases or payments
(whether voluntary or mandatory on the part of Holdings) after the date hereof
do not exceed $1,500,000 in any Fiscal Year and do not exceed $5,000,000 in the
aggregate from and after the Closing Date;

 

(b)             payment of taxes by Holdings and, so long as
no Event of Default shall have occurred and be continuing both before and after
giving effect to any such dividend or distribution, payment of administrative
expenses (including without limitation the payment of reasonable director fees)
payable by Holdings in an aggregate amount, with respect to all such
administrative expenses, not to exceed $100,000 in any Fiscal Year; and

 

(c)             Holdings to effect and consummate the
Repurchase and the Closing Date Distributions in accordance with the terms of
the Repurchase Agreement and to pay all costs and expenses incurred in
connection therewith (including, without limitation, the $1,000,000 fee payable
to Investor and set forth on Schedule 3.15).

 

Section 5.5.    Restrictive Agreements.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly (i) enter into or assume any agreement (other
than the Financing Documents) prohibiting the creation or assumption of any
Lien (other than Permitted Liens) upon its properties or assets, whether now
owned or hereafter acquired or (ii) create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary to: (1) pay or make Restricted Distributions
to Borrower or any Subsidiary; (2) pay any Debt owed to Borrower or any
Subsidiary; (3) make loans or advances to Borrower or any Subsidiary; or (4) transfer
any of its property or assets to Borrower or any Subsidiary.

 

62

 

Section 5.6.    Payments and Modifications
of Subordinated Debt.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly (a) declare, pay, make or set aside any
amount for payment in respect of Debt (including Debt permitted under Section 5.1(g)),
except for regularly scheduled payments of interest (but no voluntary
prepayments) in respect of such Subordinated Debt made in full compliance with
any and all subordination provisions applicable to such Subordinated Debt; or (b)
amend or otherwise modify the terms of any Subordinated Debt if the effect of
such amendment or modification is to (i) increase the interest rate or fees on,
or change the manner or timing of payment of, such Debt; (ii) change the dates
upon which payments of principal or interest are due on, or the principal
amount of, such Debt; (iii) change any event of default or add or make more
restrictive any covenant with respect to such Debt; (iv) change the prepayment
provisions of such Debt or any of the defined terms related thereto; (v) change
the subordination provisions thereof (or the subordination terms of any guaranty
thereof); or (vi) change or amend any other term if such change or amendment
would materially increase the obligations of the obligor or confer additional
material rights on the holder of such Debt in a manner adverse to Borrower, any
Subsidiaries, Administrative Agent or Lenders. Borrower shall, prior to
entering into any such amendment or modification, deliver to Administrative
Agent reasonably in advance of the execution thereof, any final or execution form
copy thereof and, if approval of Required Lenders is required by the terms of
this Agreement prior to the taking of any such action, Borrower agrees not to
take, nor permit any of its Subsidiaries to take, any such action with respect
to any such items without obtaining such approval from Required Lenders.

 

Section 5.7.    Consolidations, Mergers and
Sales of Assets.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly (a) consolidate or merge with or into any
other Person other than with not less than twenty (20) Business Days’ prior
written notice to Administrative Agent (or such lesser amount of notice as
Administrative Agent, in its sole discretion, may from time to time permit)
mergers of any Wholly-Owned Subsidiary with and into Borrower (with Borrower as
the surviving entity of such merger) or with and into any other Wholly-Owned
Subsidiary of Borrower or (b) consummate any Asset Dispositions other than
dispositions of assets for cash and fair value that Borrower determines in good
faith is no longer used or useful in the business of Borrower and its
Subsidiaries if all of the following conditions are met: (i) the market value
of assets sold or otherwise disposed of in any single transaction or series of
related transactions does not exceed $100,000 and the aggregate market value of
assets sold or otherwise disposed of in any Fiscal Year of Borrower does not
exceed $250,000; (ii) the Net Cash Proceeds of any such disposition are applied
as required by Section 2.1(c); (iii) after giving effect to any such
disposition and the repayment of Debt with the proceeds thereof, Borrower is in
compliance on a pro forma basis with the covenants set forth in Article 6
recomputed for the most recently ended quarter for which information is
available and is in compliance with all other terms and conditions of this
Agreement; and (iv) no Default or Event of Default then exists or would result
from any such disposition.

 

Section 5.8.    Purchase of Assets,
Investments.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly (w) acquire or enter into any agreement
to acquire any assets other than in the Ordinary Course of Business,
constituting Capital Expenditures to the extent permitted pursuant to Section 6.1
or

 

63

 

constituting
replacement assets purchased with proceeds of Property Insurance Policies,
awards or other compensation with respect to any eminent domain, condemnation
or similar proceeding; (x) create, acquire or enter into any agreement to
create or acquire any Subsidiary, (y) engage or enter into any agreement to
engage in any joint venture or partnership with any other Person or (z) acquire
or own or enter into any agreement to acquire or own any Investment in any
Person other than:

 

(a)             Investments existing on the date of this
Agreement and set forth on Schedule 5.8;

 

(b)             Cash Equivalents;

 

(c)             Investments in the capital stock or other
equity interests of any Wholly-Owned Subsidiaries existing as of the Closing
Date or otherwise formed or organized in compliance with the terms of this
Agreement in an aggregate amount not to exceed $250,000, minus the amount of loans made to domestic
Wholly-Owned Subsidiaries pursuant to Section 5.1(f), so long as (x) Borrower
has pledged to Administrative Agent all of the outstanding capital stock or
other equity interests of any such Subsidiary (or 65% of such stock in the case
of foreign Subsidiaries), (y) any such domestic Subsidiary has Guaranteed the
Obligations and secured such Guarantee by granting in favor of Administrative
Agent, for its benefit and the benefit of the Lenders, a Lien on all or
substantially all of its assets and (z) Borrower has otherwise complied with
the provisions of Section 4.12(b);

 

(d)             bank deposits established in accordance with Section
5.17;

 

(e)             Investments in securities of account debtors
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors;

 

(f)               Investments in the form of Swap Contracts
permitted under Section 5.3(c); and

 

(g)            loans or advances against future compensation
made to officers and employees in an aggregate principal amount not to exceed
$1,000,000 at any time outstanding.

 

Section 5.9.    Transactions with
Affiliates.

 

Except (i) as permitted by Section 5.14, (ii) as
otherwise disclosed on Schedule 5.9, and (iii) for transactions that are
disclosed to Administrative Agent in advance of being entered into and which
contain terms that are no less favorable to Borrower or any Subsidiary, as the
case may be, than those which might be obtained from a third party not an
Affiliate of any Credit Party, Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of Borrower.

 

Section 5.10.    Modification of
Organizational Documents.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, amend or otherwise modify any
Organizational Documents of such Person in any material

 

64

 

respect,
except for such amendments or other modifications required by Law and fully
disclosed to Administrative Agent.

 

Section 5.11.    Modification of Certain
Agreements.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, amend or otherwise modify any Repurchase
Document, the Management Agreements, the Termination, License and Obligations
Agreement pursuant to which the Dr. Obagi Payments are payable, the Amended and
Restated Employment Agreement by and between Borrower and Zein Obagi, M.D.
dated December 17, 2002, the McNamara Investor Rights Agreement or the Obagi
Investors’ Rights Agreement, in any material respect which in any case:

 

(a)             is
contrary to the terms of this Agreement or any other Financing Document;

 

(b)             could
reasonably be expected to be adverse to the rights, interests or privileges of
the Administrative Agent or the Lenders or their ability to enforce the same;

 

(c)             results
in the imposition or expansion in any material respect of any restriction or
burden on Borrower or any Subsidiary; or

 

(d)             reduces
in any material respect any rights or benefits of Borrower or any of its
Subsidiaries (it being understood and agreed that any such determination shall
be in the discretion of the Administrative Agent).

 

Borrower shall, prior to entering into any amendment
or other modification of any of the foregoing documents, deliver to
Administrative Agent reasonably in advance of the execution thereof, any final
or execution form copy of amendments or other modifications to such documents,
and, if approval of Required Lenders is required by the terms of this Section 5.11
prior to the taking of any such action, Borrower agrees not to take, nor permit
any of its Subsidiaries to take, any such action with respect to any such
documents without obtaining such approval from Required Lenders.

 

Section 5.12.    Fiscal Year.

 

Borrower will not, and will not permit any
Subsidiary to, change its Fiscal Year.

 

Section 5.13.    Conduct of Business.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, engage in any line of business other
than those businesses engaged in on the Closing Date and described on Schedule 5.13
and businesses reasonably related thereto.

 

Section 5.14.    Investor Fees.

 

Except as disclosed on Schedule 3.15, Borrower will
not, and will not permit any Subsidiary to, directly or indirectly, pay or
become obligated to pay any management, consulting or similar advisory fees or
other amounts to or for the account of any Affiliate of Borrower or Investor or
any Affiliate of Investor except, so long as no Event of Default is then
continuing or

 

65

 

would
result therefrom, the Dr. Obagi Payments and as required pursuant to the
Management Agreements as they exist on the date hereof.

 

Section 5.15.    Lease Payments.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a
Guarantee or otherwise) any liability for rental payments under a lease with a
lease term of one year or more if, after giving effect thereto, the aggregate
amount of minimum lease payments that Borrower and its Consolidated
Subsidiaries have so incurred or assumed will exceed, on a consolidated basis,
$1,500,000 for any calendar year under all such leases (excluding Capital
Leases).

 

Section 5.16.    Limitation on Sale and
Leaseback Transactions.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, enter into any arrangement with any
Person whereby in a substantially contemporaneous transaction Borrower or any
of its Subsidiaries sells or transfers all or substantially all of its right,
title and interest in an asset and, in connection therewith, acquires or leases
back the right to use such asset.

 

Section 5.17.    Bank Accounts.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, establish any new bank account without
prior written notice to Administrative Agent and unless Administrative Agent,
Borrower or such Subsidiary and the bank at which the account is to be opened
enter into a control agreement regarding such bank account pursuant to which
such bank acknowledges the security interest of Administrative Agent in such
bank account, agrees to comply with instructions originated by Administrative
Agent directing disposition of the funds in the bank account without further
consent from Borrower, and agrees to subordinate and limit any security
interest the bank may have in the bank account on terms satisfactory to
Administrative Agent. Borrower owns and maintains account no. 1891471839 with
Comerica Bank at its Costa Mesa, California office (the “Payroll Account”). The Payroll Account is and at all relevant
times shall be used only for purposes of funding Borrower’s then current
payroll liabilities in amounts necessary to cover payroll checks issued by
Borrower or direct deposit wire transfers for wages, salaries and Bonuses (as
defined below) then due and owing by Borrower and the payroll taxes associated
therewith. All amounts on deposit to such account from time to time shall
represent either wages, salary or Bonuses that are then or will become payable
or owing to employees of Borrower during the then current payroll cycle. At no
time shall Borrower permit the balance in the Payroll Account to exceed an
amount equal to $25,000 (i) more than the amount of Borrower’s aggregate
payroll expense for the then current payroll period (which shall, in no event
exceed $1,500,000, inclusive of Bonuses) or (ii) for longer than four Business
Days (other than with respect to payroll checks issued but not yet presented
for payment). If such balances ever exceed said limits in contravention of the
terms hereof, then Borrower shall, if requested by Administrative Agent,
promptly transfer such excess amounts to Borrower’s general operating account
as to which an acceptable control agreement has been entered into and promptly
enter into and cause Comerica Bank to enter into a control agreement with
respect to the Payroll Account, as described above. The failure of Borrower to
promptly enter into and deliver such control agreement and to effect a transfer
of funds as aforesaid shall constitute an Event of Default hereunder. Nothing
herein is intended or shall be construed (by negative

 

66

 

implication
or otherwise) to waive any requirement that any other existing or hereafter
acquired account of any Borrower any Subsidiary thereof be subject to such
control agreements. For purposes of this Section 5.17, “Bonuses” means bonus or performance based
payments payable by Borrower to its employees based on the established and
written policies of Borrower consistent with Borrower’s historical practice.
Borrower shall (i) provide not less than two months prior written notice to
Administrative Agent indicating the aggregate amount of Bonuses payable, to
whom such Bonuses will be paid, the computation and basis for such Bonuses and
a certification that such Bonuses were determined by Borrower’s Board of
Directors in accordance with Borrower’s policies and historical practice, and (ii)
instruct and authorize the Comerica Bank to send duplicates of all Payroll
Account bank statements to Administrative Agent at the address indicated herein
for notices.

 

Section 5.18.    Compliance with
Anti-Terrorism Laws.

 

Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, knowingly enter into any Operative
Documents or Material Contracts with any Person who is a Blocked Person.
Borrower shall immediately notify Administrative Agent if Borrower has
knowledge that Borrower or any other Credit Party is or becomes a Blocked
Person, or (i) is convicted on, (ii) pleads nolo
contendere to, (iii) is indicted on or (iv) is arraigned and held
over on charges involving money laundering or predicate crimes to money
laundering. Borrower will not, and will not permit any Subsidiary to, directly
or indirectly, (i) conduct any business or engage in any transaction or dealing
with any Blocked Person, including, without limitation, the making or receiving
of any contribution of funds, goods or services to or for the benefit of any
Blocked Person, (ii) deal in, or otherwise engage in any transaction relating
to, any property or interests in property blocked pursuant to Executive Order No.
13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage
in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

ARTICLE VI

FINANCIAL COVENANTS

 

Borrower agrees that, so long as any Credit Exposure
exists:

 

Section 6.1.    Capital Expenditures.

 

Borrower will not permit the aggregate amount of
Capital Expenditures for any period set forth below to exceed the amount set
forth below for such period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  Fiscal Year
  ending December 31, 2005

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  Fiscal Year
  ending December 31, 2006

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
  Fiscal Year
  ending December 31, 2007

  	
   

  	
  $

  	
  2,250,000

  	
   

  
	
  Fiscal Year
  ending December 31, 2008

  	
   

  	
  $

  	
  2,250,000

  	
   

  
	
  Fiscal Year
  ending December 31, 2009

  	
   

  	
  $

  	
  2,250,000

  	
   

  
	
  Fiscal Year
  ending December 31, 2010

  	
   

  	
  $

  	
  2,500,000

  	
   

  

 

67

 

If Borrower does not utilize the entire amount of
Capital Expenditures permitted in any period set forth above, Borrower may carry
forward to the immediately succeeding period only, fifty percent (50%) of such
unutilized amount (with Capital Expenditures made by Borrower in such
succeeding period applied last to such carried forward amount).

 

Section 6.2.    Minimum EBITDA.

 

Borrower will not permit EBITDA for the twelve (12)
month period ending on any date set forth below to be less than the amount set
forth below for such date:

 

	
  Date

  	
   

  	
  Amount

  	
   

  
	
  March 31,
  2005

  	
   

  	
  $

  	
  18,500,000

  	
   

  
	
  June 30,
  2005

  	
   

  	
  $

  	
  18,685,000

  	
   

  
	
  September 30,
  2005

  	
   

  	
  $

  	
  18,872,000

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  19,061,000

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  19,251,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  19,444,000

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  19,638,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  19,835,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  20,033,000

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  20,233,000

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  20,436,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  20,640,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  22,000,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  23,000,000

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  25,000,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  27,000,000

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  September 30,
  2009

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  March 31,
  2010

  	
   

  	
  $

  	
  32,000,000

  	
   

  
	
  June 30,
  2010

  	
   

  	
  $

  	
  32,000,000

  	
   

  
	
  September 30,
  2010

  	
   

  	
  $

  	
  32,000,000

  	
   

  
	
  December 31,
  2010

  	
   

  	
  $

  	
  32,000,000

  	
   

  

 

68

 

Section 6.3.    Fixed Charge Coverage
Ratio.

 

Borrower will not permit the Fixed Charge Coverage
Ratio for the twelve (12) month period ending on any date set forth below to be
less than the ratio set forth below for such date.

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
  March 31,
  2005

  	
   

  	
  1.10

  	
   

  
	
  June 30,
  2005

  	
   

  	
  1.10

  	
   

  
	
  September 30,
  2005

  	
   

  	
  1.10

  	
   

  
	
  December 31,
  2005

  	
   

  	
  1.10

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2006

  	
   

  	
  1.20

  	
   

  
	
  June 30,
  2006

  	
   

  	
  1.20

  	
   

  
	
  September 30,
  2006

  	
   

  	
  1.20

  	
   

  
	
  December 31,
  2006

  	
   

  	
  1.20

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2007

  	
   

  	
  1.25

  	
   

  
	
  June 30,
  2007

  	
   

  	
  1.25

  	
   

  
	
  September 30,
  2007

  	
   

  	
  1.25

  	
   

  
	
  December 31,
  2007

  	
   

  	
  1.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008

  	
   

  	
  1.25

  	
   

  
	
  June 30,
  2008

  	
   

  	
  1.25

  	
   

  
	
  September 30,
  2008

  	
   

  	
  1.25

  	
   

  
	
  December 31,
  2008

  	
   

  	
  1.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2009

  	
   

  	
  1.25

  	
   

  
	
  June 30,
  2009

  	
   

  	
  1.25

  	
   

  
	
  September 30,
  2009

  	
   

  	
  1.25

  	
   

  
	
  December 31,
  2009

  	
   

  	
  1.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2010

  	
   

  	
  1.20

  	
   

  
	
  June 30,
  2010

  	
   

  	
  1.20

  	
   

  
	
  September 30,
  2010

  	
   

  	
  1.20

  	
   

  
	
  December 31,
  2010

  	
   

  	
  1.20

  	
   

  

 

 

69

 

Section 6.4.    Interest Coverage Ratio.

 

Borrower will not permit the Interest Coverage Ratio
for any twelve (12) month period ending on the last day of each fiscal quarter
to be less than 3.00 to 1.00.

 

Section 6.5.    Total Debt to EBITDA Ratio.

 

Borrower will not permit the ratio of (i) Total Debt
on any date set forth below to (ii) EBITDA for the twelve (12) month period
ending on such date (or, if any portion of such period precedes the Closing
Date, for the period commencing on the Closing Date and ending on such date,
expressed on an annualized basis) to exceed the ratio set forth below opposite
such date:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  March 31,
  2005

  	
   

  	
  3.25

  	
   

  
	
  June 30,
  2005

  	
   

  	
  3.25

  	
   

  
	
  September 30,
  2005

  	
   

  	
  3.25

  	
   

  
	
  December 31,
  2005

  	
   

  	
  3.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2006

  	
   

  	
  3.00

  	
   

  
	
  June 30,
  2006

  	
   

  	
  2.75

  	
   

  
	
  September 30,
  2006

  	
   

  	
  2.75

  	
   

  
	
  December 31,
  2006

  	
   

  	
  2.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  2.50

  	
   

  
	
  June 30,
  2007

  	
   

  	
  2.00

  	
   

  
	
  September 30,
  2007

  	
   

  	
  2.00

  	
   

  
	
  December 31,
  2007

  	
   

  	
  1.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008

  	
   

  	
  1.50

  	
   

  
	
  June 30,
  2008

  	
   

  	
  1.50

  	
   

  
	
  September 30,
  2008

  	
   

  	
  1.50

  	
   

  
	
  December 31,
  2008

  	
   

  	
  1.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2009 and each
Fiscal Quarter thereafter

  	
   

  	
  1.00

  	
   

  

 

70

 

ARTICLE VII 

CONDITIONS

 

Section 7.1.    Conditions to Closing.

 

The obligation of each Lender to make the initial
Loans, of Administrative Agent to issue any Support Agreements on the Closing Date
and of any LC Issuer to issue any Lender Letter of Credit on the Closing Date
shall be subject to the receipt by Administrative Agent of each agreement,
document and instrument set forth on the Closing Checklist, each in form and
substance satisfactory to Administrative Agent, and to the satisfaction of the
following conditions precedent, each to the satisfaction of Administrative
Agent and Lenders in their sole discretion:

 

(a)             Administrative Agent shall have received a
copy of the fully executed Settlement Agreement, certified by a Responsible
Officer of Borrower as being a true, correct and complete copy thereof, a copy
of the request to dismiss the Complaint, with prejudice, filed by the Plaintiff
with, and entered by, the Los Angeles County Superior Court together with
evidence of the payment of $250,000 by Borrower to the Plaintiff under the
Complaint in accordance with the terms thereof;

 

(b)             Administrative Agent shall have received
evidence of the consummation of the transactions (other than the Repurchase,
the Closing Date Distribution and the funding of the Loans) contemplated by the
Operative Documents;

 

(c)             the payment of all fees, expenses and other
amounts due and payable under each Financing Document;

 

(d)             except as set forth in Schedule 3.5, the
absence, since December 31, 2003, of any material adverse change in any aspect
of the business, operations, properties or condition (financial or otherwise)
of Borrower or any other Credit Party, or any event or condition which could
reasonably be expected to result in such a material adverse change;

 

(e)             the receipt of pro forma balance sheet of
Holdings and Borrower on a consolidated basis, prepared as of the Closing Date,
which balance sheet shall indicate cash equity of Borrower of not less than $1,000,000
after giving effect to the consummation of the transactions contemplated by the
Operative Documents;

 

(f)               the receipt of a pro forma Compliance
Certificate demonstrating minimum aggregate EBITDA calculated as set forth on Schedule
I to the EBITDA calculation in the Compliance Certificate of not less than
$24,400,000 for the trailing twelve month period ending on December 31, 2004
for Borrower and its Subsidiaries;

 

(g)            the receipt of pro forma financial statements
of Holdings and its Consolidated Subsidiaries which evidence a Total Debt to
EBITDA Ratio, in each case for the twelve (12) month period ending on December 31,
2004, prepared to give effect to the initial

 

71

 

funding
of Loans, issuance of any Letters of Credit on the Closing Date and the
consummation of the transactions contemplated by the Operative Documents, of
not more than 3.0 to 1.0;

 

(h)            the receipt by Administrative Agent of
Borrower’s financial statements for the ten months ended October 31, 2004,
which statements shall be reasonably acceptable to Agent and Lenders; and

 

(i)               receipt by Administrative Agent of such other
documents, instruments and/or agreements as Administrative Agent may reasonably
request.

 

Section 7.2.    Conditions to Each Loan,
Support Agreement and Lender Letter of Credit.

 

The obligation of the Lenders to make a Loan (other
than Revolving Loans made pursuant to Section 2.5(c)), of Administrative Agent
to issue any Support Agreement or of any LC Issuer to issue any Lender Letter
of Credit (including, in each case, on the Closing Date) is subject to the
satisfaction of the following additional conditions:

 

(a)             in the case of a Revolving Loan Borrowing,
receipt by Administrative Agent of a Notice of Borrowing (or telephonic notice
as permitted by Section 2.2(b)(ii)) in accordance with Section 2.2(b) and, in
the case of any Support Agreement or Lender Letter of Credit, receipt by
Administrative Agent of a Notice of LC Credit Event in accordance with Section 2.5(a);

 

(b)             the fact that, immediately after such
borrowing and after application of the proceeds thereof or after such issuance,
the Revolving Loan Outstandings will not exceed the Revolving Loan Limit;

 

(c)             the fact that, immediately before and after
such borrowing or issuance, no Default or Event of Default shall have occurred
and be continuing; and

 

(d)             the fact that the representations and
warranties of each Credit Party contained in the Financing Documents shall be
true, correct and complete on and as of the date of such borrowing or issuance,
except to the extent that any such representation or warranty relates to a
specific date in which case such representation or warranty shall be true and
correct as of such earlier date.

 

Each giving of a Notice of LC Credit Event
hereunder, each giving of a Notice of Borrowing hereunder and each acceptance
by Borrower of the proceeds of any Loan made hereunder shall be deemed to be a
representation and warranty by Borrower on the date of such notice or
acceptance as to the facts specified in Sections 7.2(b), 7.2(c) and 7.2(d).

 

ARTICLE VIII

EVENTS OF DEFAULT

 

Section 8.1.    Events of Default.

 

For purposes of the Financing Documents, the
occurrence of any of the following conditions and/or events, whether voluntary
or involuntary, by operation of law or otherwise, shall constitute an “Event of Default”:

 

72

 

(a)             Borrower shall fail to pay (i) any principal
when due, or (ii) any interest, premium or fee under any Financing Document or
any other amount payable under any Financing Document within two (2) Business
Days of when due;

 

(b)             Borrower shall fail to observe or perform any
covenant contained in Section 4.1, Section 4.4, Section 4.6, Section 4.7, Section
4.9, Section 4.10, Article 5, or Article 6;

 

(c)             any Credit Party defaults in the performance
of or compliance with any material term contained in this Agreement or in any
other Financing Document (other than occurrences described in other provisions
of this Section 8.1 for which a different grace or cure period is specified or
for which no grace or cure period is specified and thereby constitute immediate
Events of Default) and such default is not remedied or waived within thirty
(30) days after the earlier of (1) receipt by Borrower of notice from
Administrative Agent or Required Lenders of such default or (2) actual
knowledge of any Key Manager or any other executive officer of any Credit Party
of such default;

 

(d)             any representation, warranty, certification
or statement made by any Credit Party or any other Person in any Financing
Document or in any certificate, financial statement or other document delivered
pursuant to any Financing Document is incorrect in any respect (or in any
material respect if such representation, warranty, certification or statement
is not by its terms already qualified as to materiality) when made (or deemed
made);

 

(e)             failure of any Credit Party to pay when due
or within any applicable grace period any principal, interest or other amount
on Debt (other than the Loans) or in respect of any Swap Contract, or the
occurrence of any breach, default, condition or event with respect to any Debt
(other than the Loans) or in respect of any Swap Contract, if the effect of
such failure or occurrence is to cause or to permit the holder or holders of
any such Debt, or the counterparty under any such Swap Contract, to cause, Debt
or other liabilities having an individual principal amount in excess of
$250,000 or having an aggregate principal amount in excess of $500,000 to
become or be declared due prior to its stated maturity;

 

(f)               any Credit Party shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;

 

(g)            an involuntary case or other proceeding shall
be commenced against any Credit Party seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of forty-five (45) days; or
an order for relief shall be entered against any Credit Party under the federal
bankruptcy laws as now or hereafter in effect;

 

73

 

(h)            (1) institution of any steps by any Person to
terminate a Pension Plan if as a result of such termination any Credit Party or
any member of the Controlled Group could be required to make a contribution to
such Pension Plan, or could incur a liability or obligation to such Pension
Plan, in excess of $150,000, (2) a contribution failure occurs with respect to
any Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA, or (3) there shall occur any withdrawal or partial withdrawal from a
Multiemployer Plan and the withdrawal liability (without un-accrued interest)
to Multiemployer Plans as a result of such withdrawal (including any
outstanding withdrawal liability that any Credit Party or any member of the
Controlled Group have incurred on the date of such withdrawal) exceeds
$150,000;

 

(i)               one
or more judgments or orders for the payment of money (not paid or fully covered
by insurance maintained in accordance with the requirements of this Agreement
and as to which the relevant insurance company has acknowledged coverage)
aggregating in excess of $500,000 shall be rendered against any or all Credit
Parties and either (a) enforcement proceedings shall have been commenced by any
creditor upon any such judgments or orders or (b) there shall be any period of
twenty (20) consecutive days during which a stay of enforcement of any such
judgments or orders, by reason of a pending appeal, bond or otherwise, shall
not be in effect;

 

(j)               (1) Investor, together with its Affiliates,
shall collectively cease to, directly or indirectly, own and control at least (i)
83.0% of the outstanding equity interests of Holdings owned by Investor on the
Closing Date (after giving effect to the consummation of the transactions
contemplated by the Operative Documents) or (ii) that percentage of the
outstanding voting equity interests of Holdings necessary at all times to elect
a majority of the board of directors (or similar governing body) of Holdings
and to direct the management policies and decisions of Holdings, (2) Holdings
shall cease to directly own and control one hundred percent (100%) of each class
of the outstanding equity interests of Borrower, or (3) Borrower shall cease
to, directly or indirectly, own and control one hundred percent (100%) of each class
of the outstanding equity interests of each Subsidiary;

 

(k)           any Lien created by any of the Security
Documents shall at any time fail to constitute a valid and perfected Lien
(other than with respect to the perfection of Liens on the equity securities of
any Foreign Subsidiary under laws of any jurisdiction outside of the United
States of America) on all of the Collateral purported to be secured thereby,
subject to no prior or equal Lien except Permitted Liens, or any Credit Party
shall so assert;

 

(I)               any
Credit Party shall be prohibited or otherwise materially restrained from
conducting the business theretofore conducted by it by virtue of any casualty,
any labor strike, any determination, ruling, decision, decree or order of any
court or regulatory authority of competent jurisdiction or any other event and
such casualty, labor strike, determination, ruling, decision, decree, order or
other event remains un-stayed and in effect for any period of sixty (60) days
if the resulting loss of income to such Credit Party is fully covered by
business interruption insurance and five (5) days otherwise;

 

(m)         any of the Operative Documents shall for any
reason fail to constitute the valid and binding agreement of any party thereto,
or any such party shall so assert; or

 

(n)            Holdings engages in any type of business
activity other than the ownership of the capital stock or other equity
securities of Borrower, and performance of its obligations

 

74

 

under
Operative Documents to which it is a party, or Holdings takes any action which
would violate any of the provisions of Article 5 hereof (assuming for purposes
hereof that each such provision is expressly binding on Holdings).

 

Section 8.2.    Acceleration and Suspension
or Termination of Revolving Loan Commitment.

 

Upon the occurrence and during the continuance of an
Event of Default, Administrative Agent may, and shall if requested by Required
Lenders; (i) by notice to Borrower suspend or terminate the Revolving Loan
Commitment and the obligations of Administrative Agent and the Lenders with
respect thereto, in whole or in part (and, if in part, such reduction shall be
pro rata among the Lenders having a Revolving Loan Commitment Percentage)
and/or (ii) by notice to the Borrower declare the Obligations to be, and the
Obligations shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by Borrower and Borrower will pay the same; provided that in the case of any of the
Events of Default specified in Section 8.1(f) or 8.1(g) above, without any
notice to Borrower or any other act by Administrative Agent or the Lenders, the
Revolving Loan Commitment and the obligations of Administrative Agent and the
Lenders with respect thereto shall thereupon terminate and all of the
Obligations shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
Borrower and Borrower will pay the same.

 

Section 8.3.    Cash Collateral.

 

If (i) any Event of Default specified in Section 8.1(f)
or 8.1(g) shall occur, (ii) the Obligations shall have otherwise been
accelerated pursuant to Section 8.2 or (iii) the Revolving Loan Commitment and
the obligations of Administrative Agent and the Lenders with respect thereto
shall have been terminated pursuant to Section 8.2, then without any request or
the taking of any other action by Administrative Agent or the Lenders, Borrower
shall immediately comply with the provisions of Section 2.5(e) with respect to
the deposit of cash collateral to secure the existing Letter of Credit
Liability and future payment of related fees.

 

Section 8.4.    Default Rate of Interest
and Suspension of LIBOR Rate Options.

 

At the election of Administrative Agent or Required
Lenders, after the occurrence of an Event of Default and for so long as it
continues, (i) the Loans and other Obligations shall bear interest at rates
that are two percent (2.0%) in excess of the rates otherwise payable under this
Agreement and (ii) the fee described in Section 2.5(b) shall increase by a rate
that is two percent (2.0%) in excess of the rate otherwise payable under such
Section. Furthermore, at the election of Administrative Agent or Required
Lenders during any period in which any Event of Default is continuing (x) as
the Interest Periods for LIBOR Loans then in effect expire, such Loans shall be
converted into Base Rate Loans and (y) the LIBOR election will not be available
to Borrower.

 

Section 8.5.    Setoff Rights.

 

During the continuance of any Event of Default, each
Lender is hereby authorized by Borrower at any time or from time to time, with
reasonably prompt subsequent notice to Borrower (any prior or contemporaneous
notice being hereby expressly waived) to set off and to

 

75

 

appropriate
and to apply any and all (A) balances held by such Lender or any of such Lender’s
Affiliates at any of its offices for the account of Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to Borrower or
its Subsidiaries), and (B) other property at any time held or owing by such
Lender to or for the credit or for the account of Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of
Administrative Agent. Any Lender exercising a right to set off shall purchase
for cash (and the other Lenders shall sell) interests in each of such other
Lender’s Pro Rata Share of the Obligations as would be necessary to cause all
Lenders to share the amount so set off with each other Lender in accordance
with their respective Pro Rata Share of the Obligations. Borrower agrees, to
the fullest extent permitted by law, that any Lender and any of such Lender’s
Affiliates may exercise its right to set off with respect to the Obligations as
provided in this Section 8.5.

 

Section 8.6.    Application of Proceeds.

 

Notwithstanding anything to the contrary contained
in this Agreement, upon the occurrence and during the continuance of an Event
of Default, (a) Borrower irrevocably waives the right to direct the application
of any and all payments at any time or times thereafter received by
Administrative Agent from or on behalf of Borrower or any guarantor of all or
any part of the Obligations, and, as between Borrower on the one hand and
Administrative Agent and Lenders on the other, Administrative Agent (with the
consent of the Required Lenders) shall have the continuing and exclusive right
to apply and to reapply any and all payments received against the Obligations
in such manner as Administrative Agent may deem advisable notwithstanding any
previous application by Administrative Agent and (b) the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs, indemnities, liabilities,
obligations and expenses incurred by or owing to Administrative Agent with
respect to this Agreement, the other Financing Documents or the Collateral; second,
to all fees, costs, indemnities, liabilities, obligations and expenses incurred
by or owing to any Lender with respect to this Agreement, the other Financing
Documents or the Collateral; third, to accrued and unpaid interest on
the Obligations (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts); fourth, to the
principal amount of the Obligations outstanding and to the Obligations owing to
any Eligible Swap Counterparty in respect of any Swap Contracts required by the
terms of this Agreement; fifth to Obligations owing to any Eligible Swap
Counterparty in respect of any Swap Contracts permitted, but not required, by
the terms of this Agreement; and sixth to any other indebtedness or
obligations of Borrower owing to Administrative Agent or any Lender under the
Financing Documents. Any balance remaining shall be delivered to Borrower or to
whoever may be lawfully entitled to receive such balance or as a court of
competent jurisdiction may direct. In carrying out the foregoing, (x) amounts
received shall be applied in the numerical order provided until exhausted prior
to the application to the next succeeding category and (y) each of the Persons
entitled to receive a payment in any particular category shall receive an
amount equal to its pro rata share of amounts available to be applied pursuant
thereto for such category.

 

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ARTICLE IX

 

EXPENSES
AND INDEMNITY

 

Section 9.1.    Expenses.

 

Borrower hereby agrees to promptly pay (i) all costs
and expenses of Administrative Agent (including without limitation the
reasonable fees, costs and expenses of counsel to, and independent appraisers
and consultants retained by Administrative Agent) in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated by the Financing
Documents, in connection with the performance by Administrative Agent of its
rights and remedies under the Financing Documents and in connection with the
continued administration of the Financing Documents including (x) any
amendments, modifications, consents and waivers to and/or under any and all Financing
Documents and (y) any periodic public record searches conducted by or at the
request of Administrative Agent (including, without limitation, title
investigations, UCC searches, fixture filing searches, judgment, pending
litigation and tax lien searches and searches of applicable corporate, limited
liability, partnership and related records concerning the continued existence,
organization and good standing of certain Persons), (ii) without limitation of
the preceding clause (i), all costs and expenses of Administrative Agent in
connection with the creation, perfection and maintenance of Liens pursuant to
the Financing Documents, (iii) without limitation of the preceding clause (i),
all costs and expenses of Administrative Agent in connection with (x) protecting,
storing, insuring, handling, maintaining or selling any Collateral; (y) any
litigation, dispute, suit or proceeding relating to any Financing Document; and
(z) any workout, collection, bankruptcy, insolvency and other enforcement
proceedings under any and all of the Financing Documents, and (iv) all costs
and expenses incurred by Lenders in connection with any litigation, dispute,
suit or proceeding relating to any Financing Document and in connection with
any workout, collection, bankruptcy, insolvency and other enforcement
proceedings under any and all Financing Documents, provided, that to the extent that the costs and expenses
referred to in this clause (iv) consist of fees, costs and expenses of counsel,
Borrower shall be obligated to pay such fees, costs and expenses for counsel to
Administrative Agent and for only one counsel acting for all Lenders (other
than Administrative Agent).

 

Section 9.2.    Indemnity.

 

Borrower hereby agrees to indemnify, pay and hold
harmless Administrative Agent and Lenders and the officers, directors,
employees, trustees, agents, investment advisors, collateral managers,
servicers, and counsel of Administrative Agent and Lenders (collectively called
the “Indemnitees”) from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or nature whatsoever (including the fees and disbursements of counsel for
such Indemnitee) in connection with any investigative, response, remedial,
administrative or judicial matter or proceeding, whether or not such Indemnitee
shall be designated a party thereto and including any such proceeding initiated
by or on behalf of a Credit Party, and the reasonable expenses of investigation
by engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by Administrative Agent or Lenders) asserting any right to payment for
the transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Operative Documents (including
(i)(A) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by Borrower, any Subsidiary or any
other Person of any Hazardous Materials or any Hazardous Materials Contamination,
(B) arising out of or relating to the offsite disposal of any materials
generated or present on any such property or (C) arising out

 

77

 

of
or resulting from the environmental condition of any such property or the
applicability of any governmental requirements relating to Hazardous Materials,
whether or not occasioned wholly or in part by any condition, accident or event
caused by any act or omission of Borrower or any Subsidiary, and (ii) proposed
and actual extensions of credit under this Agreement) and the use or intended
use of the proceeds of the Loans and Letters of Credit, except that Borrower
shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by a final non-appealable judgment of a court of
competent jurisdiction. To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
law to the payment and satisfaction of all such indemnified liabilities
incurred by the Indemnitees or any of them.

 

ARTICLE X

ADMINISTRATIVE AGENT

 

Section 10.1.    Appointment and
Authorization.

 

Each Lender hereby irrevocably appoints and
authorizes Administrative Agent to enter into each of the Financing Documents
to which it is a party (other than this Agreement) on its behalf and to take
such actions as Administrative Agent on its behalf and to exercise such powers
under the Financing Documents as are delegated to Administrative Agent by the
terms thereof, together with all such powers as are reasonably incidental
thereto. Subject to the terms of Section 11.5 and to the terms of the other
Financing Documents, Administrative Agent is authorized and empowered to amend,
modify, or waive any provisions of this Agreement or the other Financing
Documents on behalf of Lenders. The provisions of this Article 10 are solely
for the benefit of Administrative Agent and Lenders and neither Borrower nor
any other Credit Party shall have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and duties under this
Agreement, Administrative Agent shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any other Credit Party.
Administrative Agent may perform any of its duties hereunder, or under the
Financing Documents, by or through its agents or employees.

 

Section 10.2.    Administrative Agent and
Affiliates.

 

Administrative Agent shall have the same rights and
powers under the Financing Documents as any other Lender and may exercise or
refrain from exercising the same as though it were not Administrative Agent,
and Administrative Agent and its Affiliates may lend money to, invest in and
generally engage in any kind of business with each Credit Party or Affiliate of
any Credit Party as if it were not Administrative Agent hereunder.

 

Section 10.3.    Action by Administrative
Agent.

 

The duties of Administrative Agent shall be
mechanical and administrative in nature. Administrative Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Financing Documents is intended to or
shall be construed to impose upon Administrative Agent any obligations in
respect of this Agreement or any of the Financing Documents except as expressly
set forth herein or therein.

 

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Section 10.4.    Consultation with Experts.

 

Administrative Agent may consult with legal counsel,
independent public accountants and other experts selected by it and shall not
be liable 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.

 

Section 10.5.    Liability of Administrative
Agent.

 

Neither Administrative Agent nor any of its
directors, officers, agents or employees shall be liable to any Lender for any
action taken or not taken by it in connection with the Financing Documents,
except that Administrative Agent shall be liable in respect of its duties
hereunder to the extent of its own gross negligence or willful misconduct in
the discharge thereof as determined by a final non-appealable judgment of a
court of competent jurisdiction. Neither Administrative Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements specified in any Financing Document; (iii) the satisfaction of any
condition specified in any Financing Document; (iv) the validity,
effectiveness, sufficiency or genuineness of any Financing Document, any Lien
purported to be created or perfected thereby or any other instrument or writing
furnished in connection therewith; (v) the existence or non-existence of any
Default or Event of Default; or (vi) the financial condition of any Credit
Party. Administrative Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other writing (which may be
a bank wire, telex, facsimile or electronic transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Administrative Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to
recover from other Lenders any payment in excess of the amount to which they
are determined to be entitled (and such other Lenders hereby agree to return to
such Lender any such erroneous payments received by them).

 

Section 10.6.    Indemnification.

 

Each Lender shall, in accordance with its Pro Rata
Share, indemnify Administrative Agent (to the extent not reimbursed by
Borrower) upon demand against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from Administrative Agent’s gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction) that Administrative Agent may suffer or incur in connection with
the Financing Documents or any action taken or omitted by Administrative Agent
hereunder or thereunder. If any indemnity furnished to Administrative Agent for
any purpose shall, in the opinion of Administrative Agent, be insufficient or
become impaired, Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by Required Lenders until such additional indemnity is furnished.

 

79

 

Section 10.7.    Right to Request and Act on
Instructions.

 

Administrative Agent may at any time request
instructions from Lenders with respect to any actions or approvals which by the
terms of this Agreement or of any of the Financing Documents Administrative
Agent is permitted or desires to take or to grant, and if such instructions are
promptly requested, Administrative Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Financing Documents until it shall
have received such instructions from Required Lenders or all or such other
portion of the Lenders as shall be prescribed by this Agreement. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against Administrative Agent as a result of Administrative Agent acting or
refraining from acting under this Agreement or any of the other Financing
Documents in accordance with the instructions of Required Lenders or Required
Revolving Lenders (or all or such other portion of the Lenders as shall be
prescribed by this Agreement) and, notwithstanding the instructions of Required
Lenders or Required Revolving Lenders (or such other applicable portion of the
Lenders), Administrative Agent shall have no obligation to take any action if
it believes, in good faith, that such action would violate applicable Law or
exposes Administrative Agent to any liability for which it has not received
satisfactory indemnification in accordance with the provisions of Section 10.6.

 

Section 10.8.    Credit Decision.

 

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

 

Section 10.9.    Collateral Matters.

 

Lenders irrevocably authorize Administrative Agent,
at its option and in its discretion, to (x) release any Lien granted to or held
by Administrative Agent under any Security Document (i) upon termination of the
Revolving Loan Commitment and payment in full of all Obligations, the
expiration, termination or cash collateralization (to the satisfaction of
Administrative Agent) of all Letters of Credit and, to the extent required by
Administrative Agent in its sole discretion, the expiration, termination or
cash collateralization (to the satisfaction of Administrative Agent) of all
Swap Contracts secured, in whole or in part, by any Collateral; or (ii) constituting
property sold or disposed of as part of or in connection with any disposition
permitted under any Financing Document (it being understood and agreed that
Administrative Agent may conclusively rely without further inquiry on a
certificate of a Responsible Officer as to the sale or other disposition of
property being made in full compliance with the provisions of the Financing
Documents) and (y) release or subordinate any Lien granted to or held by
Administrative Agent under any Security Document constituting property
described in Section 5.2(c) (it being understood and agreed that Administrative
Agent may conclusively rely without further inquiry on a certificate of a
Responsible Officer as to the identification of any property described in Section
5.2(c)). Upon request by Administrative Agent at any time, Lenders will confirm
Administrative Agent’s authority to release and/or subordinate particular types
or items of Collateral pursuant to this Section 10.9.

 

80

 

Section 10.10.    Agency for Perfection.

 

Administrative Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Administrative Agent’s
security interest in assets which, in accordance with the Uniform Commercial
Code in any applicable jurisdiction, can be perfected by possession or control.
Should any Lender (other than Administrative Agent) obtain possession or
control of any such assets, such Lender shall notify Administrative Agent
thereof, and, promptly upon Administrative Agent’s request therefor, shall deliver
such assets to Administrative Agent or in accordance with Administrative Agent’s
instructions or transfer control to Administrative Agent in accordance with
Administrative Agent’s instructions. Each Lender agrees that it will not have
any right individually to enforce or seek to enforce any Security Document or
to realize upon any Collateral for the Loans unless instructed to do so by
Administrative Agent (or consented to by Administrative Agent, as provided in Section
8.5), it being understood and agreed that such rights and remedies may be
exercised only by Administrative Agent.

 

Section 10.11.    Notice of Default.

 

Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default except
with respect to defaults in the payment of principal, interest and fees
required to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”. Administrative
Agent will notify each Lender of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default
as may be requested by Required Lenders, Required Revolving Lenders (or all or
such other portion of the Lenders as shall be prescribed by this Agreement) in
accordance with the terms hereof. Unless and until Administrative Agent has
received any such request, Administrative Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interests
of Lenders.

 

Section 10.12.    Successor Administrative
Agent.

 

Administrative Agent may at any time give notice of
its resignation to the Lenders, Swingline Lender and Borrower. Upon receipt of
any such notice of resignation, Required Lenders shall have the right, in
consultation with Borrower, to appoint a successor Administrative Agent. If no
such successor shall have been so appointed by Required Lenders and shall have
accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders and Swingline Lender (but
without any obligation) appoint a successor Administrative Agent. From and
following the expiration of such thirty (30) day period, Administrative Agent
shall have the exclusive right, upon one (1) Business Days’ notice to Borrower
and the Lenders, to make its resignation effective immediately. From and
following delivery of such notice, (i) the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder and under the other
Financing Documents and (ii) all payments, communications and determinations
provided to be made by, to or through Administrative Agent shall instead be
made by or to each Lender and Swingline Lender directly, until such time as
Required Lenders appoint a successor Administrative Agent as provided for above
in this

 

81

 

paragraph.
Upon the acceptance of a successor’s appointment as Administrative Agent hereunder,
such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring (or retired) Administrative
Agent, and upon such acceptance by such successor Administrative Agent, the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder and under the other Financing Documents (if not already
discharged therefrom as provided above in this paragraph). The fees payable by
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between Borrower and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the
other Financing Documents, the provisions of this Agreement shall continue in
effect for the benefit of such retiring Administrative Agent and its sub-agents
in respect of any actions taken or omitted to be taken by any of them while the
retiring Administrative Agent was acting or was continuing to act as Administrative
Agent.

 

Section 10.13.    Disbursements of Revolving
Loans; Payment and Sharing of Payment.

 

(a)             Revolving Loan Advances,
Payments and Settlements; Interest and Fee Payments.

 

(i)               Administrative Agent shall have the right, on
behalf of Revolving Lenders (other than Non-Funding Revolving Lenders) to
disburse funds to Borrower for all Revolving Loans requested or deemed
requested by Borrower pursuant to the terms of this Agreement. Administrative
Agent shall be conclusively entitled to assume, for purposes of the preceding
sentence, that each Revolving Lender, other than any Non-Funding Revolving
Lenders, will fund its Pro Rata Share of all Revolving Loans requested by
Borrower. Each Revolving Lender (other than any Non-Funding Revolving Lender)
shall reimburse Administrative Agent on demand, in accordance with the
provisions of the immediately following paragraph, for all funds disbursed on
its behalf by Administrative Agent pursuant to the first sentence of this
clause (i), or if Administrative Agent so requests, each Revolving Lender will
remit to Administrative Agent its Pro Rata Share of any Revolving Loan before
Administrative Agent disburses the same to Borrower. If Administrative Agent
elects to require that each Revolving Lender make funds available to
Administrative Agent, prior to a disbursement by Administrative Agent to
Borrower, Administrative Agent shall advise each Revolving Lender by telephone,
facsimile or e-mail of the amount of such Revolving Lender’s Pro Rata Share of
the Revolving Loan requested by Borrower no later than noon (Chicago time) on
the date of funding of such Revolving Loan, and each such Revolving Lender
shall, subject to the provisions of Article 7, pay Administrative Agent on such
date such Revolving Lender’s Pro Rata Share of such requested Revolving Loan,
in same day funds, by wire transfer to the Payment Account, or such other
account as may be identified by Administrative Agent to Revolving Lenders from
time to time. If any Lender fails to pay the amount of its Pro Rata Share
within one (1) Business Day after Administrative Agent’s demand, Administrative
Agent shall promptly notify Borrower, and Borrower shall immediately repay such
amount to Administrative Agent. Any repayment required by Borrower pursuant to
this Section 10.13 shall be accompanied by accrued interest thereon from and
including the date such amount is made available to Borrower to but excluding
the date of payment at the rate of interest then applicable to Revolving Loans
which are Base Rate Loans. Nothing in this Section 10.13 or elsewhere

 

82

 

in this Agreement or the other Financing Documents
shall be deemed to require Administrative Agent to advance funds on behalf of
any Lender or to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights that Administrative Agent or
Borrower may have against any Lender as a result of any default by such Lender
hereunder.

 

(ii)           On a Business Day of each week as selected from time to time by
Administrative Agent, or more frequently (including daily), if Administrative
Agent so elects (each such day being a “Settlement
Date”), Administrative Agent will advise each
Revolving Lender by telephone, facsimile or e-mail of the amount of each such
Revolving Lender’s Pro Rata Share of the Revolving Loan balance as of the close
of business of the Business Day immediately preceding the Settlement Date. In
the event that payments are necessary to adjust the amount of such Revolving
Lender’s actual Pro Rata Share of the Revolving Loan balance to such Lender’s
required Pro Rata Share of the Revolving Loan balance as of any Settlement
Date, the party from which such payment is due shall pay Administrative Agent,
without setoff or discount, to the Payment Account not later than noon (Chicago
time) on the Business Day following the Settlement Date the full amount
necessary to make such adjustment. Any obligation arising pursuant to the
immediately preceding sentence shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever. In the event settlement shall
not have occurred by the date and time specified in the second preceding
sentence, interest shall accrue on the unsettled amount at the Federal Funds
Rate, for the first three (3) days following the scheduled date of settlement,
and thereafter at the Base Rate plus the Base Rate Margin applicable to
Revolving Loans.

 

(iii)       On each Settlement Date, Administrative Agent shall advise each
Revolving Lender by telephone, facsimile or e-mail of the amount of such
Revolving Lender’s Pro Rata Share of principal, interest and fees paid for the
benefit of Revolving Lenders with respect to each applicable Revolving Loan, to
the extent of such Revolving Lender’s credit exposure with respect thereto, and
shall make payment to such Revolving Lender not later than noon (Chicago time)
on the Business Day following the Settlement Date of such amounts in accordance
with wire instructions delivered by such Revolving Lender to Administrative
Agent, as the same may be modified from time to time by written notice to
Administrative Agent; provided, that,
in the case such Revolving Lender is a Defaulted Lender, Administrative Agent
shall be entitled to set off the funding short-fall against that Defaulted
Lender’s respective share of all payments received from Borrower.

 

(iv)          The provisions of this Section 10.13(a) shall
be deemed to be binding upon Administrative Agent and Lenders notwithstanding
the occurrence of any Default or Event of Default, or any insolvency or
bankruptcy proceeding pertaining to Borrower or any other Credit Party.

 

(b)             Term Loan Payments. Payments of principal, interest and fees in
respect of the Term Loans will be settled on the date of receipt if received by
Administrative Agent on the first Business Day of a month or on the Business
Day immediately following the date of receipt if received on any day other than
the first Business Day of a month.

 

83

 

(c)             Return of Payments.

 

(i)               If Administrative Agent pays an amount to a
Lender under this Agreement in the belief or expectation that a related payment
has been or will be received by Administrative Agent from Borrower and such
related payment is not received by Administrative Agent, then Administrative
Agent will be entitled to recover such amount from such Lender on demand
without setoff, counterclaim or deduction of any kind, together with interest
accruing on a daily basis at the Federal Funds Rate.

 

(ii)           If Administrative Agent determines at any time that any amount received
by Administrative Agent under this Agreement must be returned to Borrower or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Financing Document, Administrative Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to
Administrative Agent on demand any portion of such amount that Administrative
Agent has distributed to such Lender, together with interest at such rate, if
any, as Administrative Agent is required to pay to Borrower or such other
Person, without setoff, counterclaim or deduction of any kind.

 

(d)             Defaulted Lenders. The failure of any Defaulted Lender to make
any Revolving Loan or any payment required by it hereunder shall not relieve
any other Lender of its obligations to make such Revolving Loan or payment, but
neither any other Lender nor Administrative Agent shall be responsible for the
failure of any Defaulted Lender to make a Revolving Loan or make any other
payment required hereunder. Notwithstanding anything set forth herein to the
contrary, a Defaulted Lender shall not have any voting or consent rights under
or with respect to any Financing Document or constitute a “Lender” (or be
included in the calculation of “Required Lenders” or “Required Revolving
Lenders” hereunder) for any voting or consent rights under or with respect to
any Financing Document.

 

(e)             Sharing of Payments. If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Sections
2.3(e)(v) or Section 2.9) in excess of its pro rata share of payments entitled
pursuant to the other provisions of this Section 10.13, such Lender shall
purchase from the other Lenders such participations in extensions of credit
made by such other Lenders (without recourse, representation or warranty) as
shall be necessary to cause such purchasing Lender to share the excess payment
or other recovery ratably with each of them; provided,
however, that if all
or any portion of the excess payment or other recovery is thereafter recovered
from such purchasing Lender, the purchase shall be rescinded and each Lender
which has sold a participation to the purchasing Lender shall repay to the
purchasing Lender the purchase price to the ratable extent of such recovery,
without interest. Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this clause (e) may, to the fullest extent
permitted by law, exercise all its rights of payment (including pursuant to Section
8.5) with respect to such participation as fully as if such Lender were the
direct creditor of Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this clause (e) applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this clause (e) to share in the benefits of any recovery on such secured
claim.

 

84

 

Section 10.14.    Right to Perform, Preserve
and Protect.

 

If any Credit Party fails to perform any obligation
hereunder or under any other Financing Document, Administrative Agent itself
may, but shall not be obligated to, cause such obligation to be performed at
Borrower’s expense. Administrative Agent is further authorized by Borrower and
the Lenders to make expenditures from time to time which Administrative Agent,
in its reasonable business judgment, deems necessary or desirable to (i) preserve
or protect the business conducted by Borrower, the Collateral, or any portion
thereof and/or (ii) enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations. Borrower hereby agrees to
reimburse Administrative Agent on demand for any and all costs, liabilities and
obligations incurred by Administrative Agent pursuant to this Section 10.14.
Each Lender hereby agrees to indemnify Administrative Agent upon demand for any
and all costs, liabilities and obligations incurred by Administrative Agent
pursuant to this Section 10.14, subject to the provisions of Section 10.6.

 

Section 10.15.    Additional Titled Agents.

 

Except for rights and powers, if any, expressly
reserved under this Agreement to any bookrunner, arranger or to any titled
agent named on the cover page of this Agreement, other than Administrative
Agent (collectively, the “Additional Titled
Agents”), and except for obligations,
liabilities, duties and responsibilities, if any, expressly assumed under this
Agreement by any Additional Titled Agent, no Additional Titled Agent, in such
capacity, has any rights, powers, liabilities, duties or responsibilities
hereunder or under any of the other Financing Documents. Without limiting the
foregoing, no Additional Titled Agent shall have nor be deemed to have a
fiduciary relationship with any Lender. At any time that any Lender serving as
an Additional Titled Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loans and in the Revolving
Loan Commitment, such Lender shall be deemed to have concurrently resigned as
such Additional Titled Agent.

 

ARTICLE XI 

MISCELLANEOUS

 

Section 11.1.    Survival.

 

All agreements, representations and warranties made
herein and in every other Financing Document shall survive the execution and
delivery of this Agreement and the other Financing Documents and the other
Operative Documents. The provisions of Sections 2.8 and 2.9 and Articles 9, 10
and 11 shall survive the payment of the Obligations and any termination of this
Agreement.

 

Section 11.2.    No Waivers.

 

No failure or delay by Administrative Agent or any
Lender in exercising any right, power or privilege under any Financing Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein and therein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. Any reference in any Financing Document to the “continuing”
nature of any Event of Default shall not be construed as establishing or
otherwise indicating that Borrower or any other Credit Party

 

85

 

has
the independent right to cure any such Event of Default, but is rather
presented merely for convenience should such Event of Default be waived in
accordance with the terms of the applicable Financing Documents.

 

Section 11.3.    Notices.

 

(a)             All notices, requests and other
communications to any party hereunder shall be in writing (including prepaid
overnight courier, facsimile transmission or similar writing) and shall be
given to such party at its address, facsimile number or e-mail address set
forth on the signature pages hereof (or, in the case of any such Lender who
becomes a Lender after the date hereof, in an Assignment Agreement or in a
notice delivered to Borrower and Administrative Agent by the assignee Lender
forthwith upon such assignment) or at such other address, facsimile number or
e-mail address as such party may hereafter specify for the purpose by notice to
Administrative Agent and Borrower; provided,
that notices, requests or other communications shall be permitted by
electronic means only in accordance with the provisions of Section 11.3(b).
Each such notice, request or other communication shall be effective (i)if given
by facsimile, when such notice is transmitted to the facsimile number specified
by this Section and the sender receives a confirmation of transmission from the
sending facsimile machine, or (ii) if given by mail, prepaid overnight courier
or any other means, when received at the applicable address specified by this
Section.

 

(b)             Notices and other communications to the
parties hereto may be delivered or furnished by e-mail pursuant to procedures
approved from time to time by Administrative Agent, provided, that the foregoing shall not apply to notices sent
directly to any Lender if such Lender has notified the Administrative Agent
that it is incapable of receiving notices by electronic communication. The
Administrative Agent or Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided,
that approval of such procedures may be limited to particular
notices or communications.

 

(c)             Unless the Administrative Agent otherwise
prescribes, (i) notices and other communications sent to an e-mail 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, as
available, return e-mail or other written acknowledgment), and (ii) notices or
communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that such
notice or communication is available and identifying the website address
therefor, provided, that if any
such notice or other communication is not sent or posted during normal business
hours, such notice or communication shall be deemed to have been sent at the
opening of business on the next Business Day.

 

Section 11.4.    Severability.

 

In case any provision of or obligation under this
Agreement or any other Financing Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

 

86

 

Section 11.5.    Amendments and Waivers.

 

(a)             No provision of this Agreement or any other
Financing Document may be amended, waived or otherwise modified unless such
amendment, waiver or other modification is in writing and is signed or
otherwise approved by Borrower and the Required Lenders (and, if (x) any
amendment, waiver or other modification would either increase a Lender’s
Revolving Loan Commitment Amount or increase a Lender’s funding obligations in
respect of any Term Loan, by such Lender and (y) the rights or duties of
Administrative Agent, LC Issuer and/or Swingline Lender are affected thereby,
by Administrative Agent, LC Issuer and/or Swingline Lender, as the case may be);
provided that no such amendment,
waiver or other modification shall, unless signed by all the Lenders directly
affected thereby, (i) increase any Lender’s commitment or reduce the principal
of, rate of interest on or any fees with respect to any Loan or Reimbursement
Obligation or forgive any principal, interest or fees with respect to any Loan
or Reimbursement Obligation; (ii) postpone the date fixed for, or waive, any
payment (other than a payment pursuant to Section 2.l(c)) of principal of any
Loan, or of any Reimbursement Obligation or of interest on any Loan or any
Reimbursement Obligation or any fees hereunder or for any termination of any
commitment; (iii) change the definition of the term Required Lenders or the
percentage of Lenders which shall be required for Lenders to take any action
hereunder; (iv) release all or substantially all of the Collateral, authorize
Borrower to sell or otherwise dispose of all or substantially all of the
Collateral or release any guarantor of all or any portion of the Obligations of
its Guarantee obligations with respect thereto, except as otherwise may be
provided in this Agreement or the other Financing Documents (including, without
limitation, in connection with any disposition permitted hereunder); (v) amend,
waive or otherwise modify either of Section 8.6 or this Section 11.5(a) or the
definitions of the terms used in such Sections insofar as the definitions
affect the substance of such Sections; or (vi) consent to the assignment,
delegation or other transfer by any Credit Party of any of its rights and
obligations under any Financing Document or release Borrower of its payment
obligations under any Financing Document, except pursuant to a merger or
consolidation permitted pursuant to this Agreement. It is hereby understood and
agreed that all Lenders shall be deemed directly affected by an amendment,
waiver or other modification of the type described in the preceding clauses
(i), (iii), (iv), (v) and (vi) of the preceding sentence.

 

(b)             Without limitation of the provisions of the
preceding clause (a), no amendment, waiver or other modification to this
Agreement shall, unless signed by Required Revolving Lenders, (i) increase any
of the advance rates set forth in the Borrowing Base Certificate, (ii) make
less restrictive the calculation of the Borrowing Base; (iii) change the
definition of the term Required Revolving Lenders or the percentage of Lenders
which shall be required for Required Revolving Lenders to take any action
hereunder or (iv) amend, waive or otherwise modify this Section 11.5(b) or the
definitions of the terms used in this Section 11.5(b) insofar as the
definitions affect the substance of this Section 11.5(b).

 

Section 11.6.    Assignments;
Participations; Replacement of Lenders.

 

(a)             Assignments.

 

(i)               Any Lender may at any time assign to one or
more Eligible Assignees all or any portion of such Lender’s Loans and interest
in the Revolving Loan Commitment, together with all related obligations of such
Lender hereunder. Except as Administrative Agent may otherwise agree, the
amount of any such assignment (determined as of the date of the applicable
Assignment Agreement or, if a “Trade Date” is specified in such Assignment
Agreement, as of such Trade Date) shall be in a minimum aggregate amount

 

87

 

equal to $1,000,000 or, if less, the assignor’s
entire interests in the Revolving Loan Commitment and outstanding Loans; provided, that in connection with
simultaneous assignments to two or more related Approved Funds, such Approved
Funds shall be treated as one assignee for purposes of determining compliance
with the minimum assignment size referred to above. Borrower and Administrative
Agent shall be entitled to continue to deal solely and directly with such
Lender in connection with the interests so assigned to an Eligible Assignee
until Administrative Agent shall have received and accepted an effective
Assignment Agreement executed, delivered and fully completed by the applicable
parties thereto and a processing fee of $3,500; provided, no processing fee shall be payable in connection
with assignments to Affiliates of a Lender and only one processing fee shall be
payable in connection with simultaneous assignments to two or more related
Approved Funds.

 

(ii)           From and after the date on which the
conditions described above have been met, (i) such Eligible Assignee shall be
deemed automatically to have become a party hereto and, to the extent of the
interests assigned to such Eligible Assignee pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and (ii)
the assigning Lender, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, shall be released
from its rights (other than its indemnification rights) and obligations
hereunder. Upon the request of the Eligible Assignee (and, as applicable, the
assigning Lender) pursuant to an effective Assignment Agreement, Borrower shall
execute and deliver to Administrative Agent for delivery to the Eligible
Assignee (and, as applicable, the assigning Lender) Notes in the aggregate
principal amount of the Eligible Assignee’s percentage interest in the
Revolving Loan Commitment plus the principal amount of the Eligible Assignee’s
Term Loans (and, as applicable, Notes in the principal amount of that portion
of the Revolving Loan Commitment retained by the assigning Lender plus the principal
amount of the Term Loans retained by the assigning Lender). Upon receipt by the
assigning Lender of such Note, the assigning Lender shall return to Borrower
any prior Note held by it.

 

(iii)       Administrative Agent, acting solely for this purpose as an agent of
Borrower, shall maintain at its offices located in Chicago, Illinois a copy of
each Assignment Agreement delivered to it and a register for the recordation of
the names and addresses of each Lender, and the commitments of, and principal
amount of the Loans owing to, such Lender pursuant to the terms hereof. The
entries in such register shall be conclusive, and Borrower, Administrative
Agent and Lenders may treat each Person whose name is recorded therein pursuant
to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. Such register shall be available for
inspection by Borrower and any Lender, at any reasonable time upon reasonable
prior notice to Administrative Agent.

 

(iv)          Notwithstanding the foregoing provisions of
this Section 11.6(a) or any other provision of this Agreement, any Lender may at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank without
being required to execute and deliver an Assignment Agreement; provided that no such pledge or assignment
shall release such Lender from

 

88

 

any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

 

(v)              Notwithstanding the foregoing provisions of
this Section 11.6(a) or any other provision of this Agreement, Administrative
Agent has the right, but not the obligation, to effectuate assignments of Loans
and Revolving Loan Commitments via an electronic settlement system acceptable
to Administrative Agent as designated in writing from time to time to the
Lenders by Administrative Agent (the “Settlement
Service”). At any time when the Administrative
Agent elects, in its sole discretion, to implement such Settlement Service,
each such assignment shall be effected by the assigning Lender and proposed
assignee pursuant to the procedures then in effect under the Settlement
Service, which procedures shall be consistent with the other provisions of this
Section 11.6(a). Each assigning Lender and proposed Eligible Assignee shall
comply with the requirements of the Settlement Service in connection with
effecting any assignment of Loans and Revolving Loan Commitments pursuant to
the Settlement Service. Administrative Agent’s approval of such Eligible
Assignee shall be deemed to have been granted with respect to any transfer
effected through the Settlement Service. Assignments and assumptions of the
Loans and Revolving Loan Commitments shall be effected by the provisions
otherwise set forth herein until Administrative Agent notifies Lenders of the
Settlement Service as set forth herein.

 

(b)             Participations.

 

Any Lender may at any time, without the consent of,
or notice to, Borrower or Administrative Agent, sell to one or more Persons
participating interests in its Loans, commitments or other interests hereunder
(any such Person, a “Participant”). In
the event of a sale by a Lender of a participating interest to a Participant, (a)
such Lender’s obligations hereunder shall remain unchanged for all purposes, (b)
Borrower and Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations
hereunder and (c) all amounts payable by Borrower shall be determined as if
such Lender had not sold such participation and shall be paid directly to such
Lender. No Participant shall have any direct or indirect voting rights
hereunder except with respect to any event described in Section 11.5 expressly
requiring the unanimous vote of all Lenders or, as applicable, all affected
Lenders. Each Lender agrees to incorporate the requirements of the preceding
sentence into each participation agreement which such Lender enters into with
any Participant. Borrower agrees that if amounts outstanding under this
Agreement are due and payable (as a result of acceleration or otherwise), each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement and with respect
to any Letter of Credit to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement; provided that such
right of set-off shall be subject to the obligation of each Participant to
share with Lenders, and Lenders agree to share with each Participant, as
provided in Section 8.5. Borrower further agrees that each Participant shall be
entitled to the benefits of Sections 2.3(e)(v), 2.8 and 2.9 to the same extent
as if such Participant were a Lender; provided,
that (i) no Participant shall be entitled to receive any greater
payment under Section 2.3(e)(v) or 2.9 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless such sale is made with Borrower’s prior written consent and
(ii) no Participant that is organized under the laws of a jurisdiction other
than the United States shall be entitled to the benefits of Section 2.8 unless

 

89

 

such
Participant shall have complied with the provisions of Section 2.8(c) (assuming,
for such purposes only, that such Participant is a Lender).

 

(c)             Replacement of Lenders.

 

Within thirty (30) days after: (i) receipt by
Administrative Agent of notice and demand from any Lender for payment of
additional costs as provided in Sections 2.3(e)(v) or Section 2.9, which demand
shall not have been revoked, (ii) Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.8, or (iii) any Lender is a Defaulted Lender, and
the circumstances causing such status shall not have been cured or waived (each
relevant Lender in the foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower and Administrative Agent
may, at its option, notify such Affected Lender and, in the case of Borrower
election, the Administrative Agent, of such Person’s intention to obtain, at
Borrower’s expense, a replacement Lender (“Replacement
Lender”) for such
Lender, which Replacement Lender shall be an Eligible Assignee. In the event
Borrower or Administrative Agent, as applicable, obtains a Replacement Lender
within ninety (90) days following notice of its intention to do so, the
Affected Lender shall sell, at par, and assign all of its Loans and funding
commitments hereunder to such Replacement Lender in accordance with the
procedures set forth in Section 11.6(a); provided,
that (i) Borrower shall have reimbursed such Lender for its
increased costs and additional payments for which it is entitled to
reimbursement under this Agreement through the date of such sale and assignment
and (ii) Borrower shall pay to Administrative Agent the $3,500 processing fee
in respect of such assignment. In the event that a replaced Lender does not
execute an Assignment Agreement pursuant to Section 11.6(a) within five (5) Business
Days after receipt by such replaced Lender of notice of replacement pursuant to
this Section 11.6(c) and presentation to such replaced Lender of an Assignment
Agreement evidencing an assignment pursuant to this Section 11.6(c), such
replaced Lender shall be deemed to have consented to the terms of such
Assignment Agreement, and any such Assignment Agreement executed by
Administrative Agent, the replacement Lender and, to the extent required
pursuant to Section 11.6(a), Borrower, shall be effective for purposes of this Section
11.6(c) and Section 11.6(a). Upon any such assignment and payment, such
replaced Lender shall no longer constitute a “Lender” for purposes hereof;
provided, any rights of such replaced Lender to indemnification hereunder shall
survive as to such replaced Lender.

 

(d)             Credit Party Assignments.

 

No Credit Party may assign, delegate or otherwise
transfer any of its rights or other obligations hereunder or under any other
Financing Document without the prior written consent of Administrative Agent
and each Lender.

 

Section 11.7.    Headings.

 

Headings and captions used in the Financing
Documents (including the Exhibits, Schedules and Annexes hereto and thereto)
are included for convenience of reference only and shall not be given any
substantive effect.

 

90

 

Section 11.8.    Confidentiality.

 

Administrative Agent and each Lender shall hold all
non-public information regarding the Credit Parties and their respective
businesses identified as such by Borrower and obtained by Administrative Agent
or any Lender pursuant to the requirements hereof in accordance with such
Person’s customary procedures for handling information of such nature, except
that disclosure of such information may be made (i) to their respective agents,
employees, Subsidiaries, Affiliates, attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any interest
in the Loans, and to prospective contractual counterparties (or the
professional advisors thereto) in Swap Contracts permitted hereby, provided that any such Persons shall have
agreed to be bound by the provisions of this Section 11.8, (iii) as required by
Law, subpoena, judicial order or similar order and in connection with any
litigation, (iv) as may be required in connection with the examination, audit
or similar investigation of such Person and (v) to a Person that is a trustee,
investment advisor, collateral manager, servicer, noteholder or secured party
in a Securitization (as hereinafter defined) in connection with the
administration, servicing and reporting on the assets serving as collateral for
such Securitization. For the purposes of this Section, “Securitization” shall
mean a public or private offering by a Lender or any of its Affiliates or their
respective successors and assigns, of securities which represent an interest
in, or which are collateralized, in whole or in party, by the Loans.
Confidential information shall include only such information identified as such
at the time provided to Administrative Agent and shall not include information
that either: (i) is in the public domain, or becomes part of the public domain
after disclosure to such Person through no fault of such Person, or (ii) is
disclosed to such Person by a Person other than a Credit Party, provided Administrative Agent does not
have actual knowledge that such Person is prohibited from disclosing such
information. The obligations of Administrative Agent and Lenders under this Section
11.8 shall supersede and replace the obligations of Administrative Agent and
Lenders under any confidentiality agreement in respect of this financing
executed and delivered by Administrative Agent or any Lender prior to the date
hereof.

 

Section 11.9.    Waiver of Consequential and
Other Damages.

 

To the fullest extent permitted by applicable law,
Borrower shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of this Agreement, any other Financing Document or any
agreement or instrument contemplated hereby or thereby, the transactions
contemplated hereby or thereby, any Loan or Letter of Credit or the use of the
proceeds thereof. No Indemnitee shall be liable for any damages arising from
the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Financing
Documents or the transactions contemplated hereby or thereby.

 

Section 11.10.    GOVERNING LAW; SUBMISSION
TO JURISDICTION.

 

THIS AGREEMENT, EACH NOTE AND EACH
OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING
THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
BORROWER

 

91

 

HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON
BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED
TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE
SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

Section 11.11.    WAIVER OF JURY TRIAL.

 

EACH OF BORROWER, ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY. EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE
OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER
IN THEIR RELATED FUTURE DEALINGS. EACH OF BORROWER, ADMINISTRATIVE AGENT AND
EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

Section 11.12.    Publication; Advertisement.

 

(a)             Publication. No Credit Party will directly or indirectly
publish, disclose or otherwise use in any public disclosure, advertising
material, promotional material, press release or interview, any reference to
the name, logo or any trademark of Merrill Lynch or any of its Affiliates or
any reference to this Agreement or the financing evidenced hereby, in any case
except (i) as required by Law, subpoena or judicial or similar order, in which
case the applicable Credit Party shall give Administrative Agent prior written
notice of such publication or other disclosure or (ii) with Merrill Lynch’s
prior written consent.

 

(b)             Advertisement. Each Lender and each Credit Party hereby
authorizes Merrill Lynch to publish the name of such Lender and Credit Party,
the existence of the financing arrangements referenced under this Agreement,
the primary purpose and/or structure of those arrangements, the amount of
credit extended under each facility, the title and role of each party to this
Agreement, and the total amount of the financing evidenced hereby in any

 

92

 

“tombstone”,
comparable advertisement or press release which Merrill Lynch elects to submit
for publication. In addition, each Lender and each Credit Party agrees that
Merrill Lynch may provide lending industry trade organizations with information
necessary and customary for inclusion in league table measurements after the
Closing Date. With respect to any of the foregoing, Merrill Lynch shall provide
Borrower with an opportunity to review and confer with Merrill Lynch regarding
the contents of any such tombstone, advertisement or information, as
applicable, prior to its submission for publication and, following such review
period, Merrill Lynch may, from time to time, publish such information in any
media form desired by Merrill Lynch, until such time that Borrower shall have
requested Merrill Lynch cease any such further publication.

 

Section 11.13.    Counterparts; Integration.

 

This Agreement and the other Financing Documents may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. Signatures by facsimile shall bind the parties hereto. This
Agreement and the other Financing Documents constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.

 

Section 11.14.    No Strict Construction.

 

The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.

 

Section 11.15.    Time.

 

Time is of the essence in Borrower’s and each other
Credit Party’s performance under this Agreement and all other Financing Documents.

 

Balance of Page Intentionally Left
Blank

 

Signature Page Follows

 

93

 

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

 

 

	
   

  	
  OMP, INC.,
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Curtis
  Cluff

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Curtis Cluff

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:310
  Golden Shore

  Long Beach, California 90802

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile number:

  
	
   

  	
   

  	
  E-mail Address:

  
	
   

  	
   

  	
  Taxpayer Identification
  Number:

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Dorsey &
  Whitney, LLP

  250 Park Avenue

  New York, New York 10177

  Attn: V. Carl Walker

  Facsimile Number: (212) 953-7201

  
	
   

  	
   

  
	
   

  	
  Borrower’s
  Account Designation:

  
	
   

  	
   

  
	
   

  	
   

  	
  Bank:

  
	
   

  	
   

  	
  ABA No.: 

  
	
   

  	
   

  	
  Account No.:

  
	
   

  	
   

  	
  Account Name:

  
	
   

  	
   

  	
  Reference:

  

 

 

	
   

  	
  MERRILL
  LYNCH CAPITAL, a division of

  Merrill Lynch Business Financial Services Inc.,

  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Marc A.
  Preiser

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marc A. Preiser

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:222 N.
  LaSalle Street, 16th Floor 

  Chicago, Illinois 60601 

  Attn: Account Manager for Obagi

  transaction

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile number:  (312)
            -
            

  
	
   

  	
   

  	
  E-Mail Address:

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Merrill Lynch Capital 

  
	
   

  	
  222 N. LaSalle Street,
  16th Floor

  
	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Attn: Group Senior
  Transaction Attorney, Corporate

  
	
   

  	
  Finance, for Obagi
  transaction

  
	
   

  	
  Facsimile Number: (312)
  499-3126

  
	
   

  	
   

  
	
   

  	
  And with an additional
  copy to:

  
	
   

  	
   

  
	
   

  	
  Katten Muchin Zavis
  Rosenman

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:525 W.
  Monroe Street

  Chicago, IL 60661

  Attn: René Ghadimi

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile
  number: (312) 577-8797

  
	
   

  	
   

  	
  E-Mail
  Address: rene.ghadimi@kmzr.com

  

 

 

Lenders:

 

 

	
  NEWSTAR
  CP FUNDING LLC

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION

  
	
  By: NewStar Financial, Inc.

  Its designated Manager

  	
   

  
	
    By:

  	
  /s/ Robert F. Milordi

  	
   

  	
  By:

  	
  /s/ Kenneth M. Gacevich

  
	
  Name:

  	
  Robert F. Milordi

  	
   

  	
  Name:

  	
  Kenneth M. Gacevich

  
	
  Title:

  	
  Director-Portfolio Mgmt

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
  Address:  500
  Boylston St.

  Suite 1600

  Boston, MA, 02116

  	
   

  	
  Address:One
  Wachovia Center

  Mail Code NC0610

  Charlotte, NC 28288

  
	
   

  	
   

  
	
  Facsimile number:

  	
  Facsimile number:
  (704)715-0067

  
	
  E-Mail Address:

  	
  E-Mail Address:
  kenneth.gacerich@wachovia.com

  
	
   

  	
   

  
	
  MCG
  CAPITAL CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James Garmey

  	
   

  	
   

  
	
  Name:

  	
  James Garmey

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  
	
  Address:  1100
  Wilson Boulevard

  Suite 3000

  Arlington, VA 22209

  	
   

  
	
   

  	
   

  
	
  Facsimile number:
  (703)247-7505 

  	
   

  
	
  E-Mail Address:
  jgarmey@mcgcapital.com

  	
   

  
								

 

 

Annex A

 

Commitment
Annex

 

	
  Lender

  	
   

  	
  Revolving

  Loan

  Commitment

  Amount

  	
   

  	
  Revolving

  Loan

  Commitment

  Percentage

  	
   

  	
  Term Loan A

  Commitment

  Amount

  	
   

  	
  Term Loan A

  Commitment

  Percentage

  	
   

  	
  Term Loan B

  Commitment

  Amount

  	
   

  	
  Term Loan B

  Commitment

  Percentage

  	
   

  
	
  Merrill
  Lynch Capital

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  100.000

  	
  %

  	
  $

  	
  14,375,000

  	
   

  	
  71.875

  	
  %

  	
  $

  	
  26,750,000

  	
   

  	
  53.500

  	
  %

  
	
  Wachovia
  Bank National Association

  	
   

  	
  $

  	
  - 0 -

  	
   

  	
  0.000

  	
  %

  	
  $

  	
  - 0 -

  	
   

  	
  0.000

  	
  %

  	
  $

  	
  9,750,000

  	
   

  	
  19.500

  	
  %

  
	
  NewStar
  CP Funding LLC

  	
   

  	
  $

  	
  - 0 -

  	
   

  	
  0.000

  	
  %

  	
  $

  	
  1,500,000

  	
   

  	
  7.500

  	
  %

  	
  $

  	
  9,250,000

  	
   

  	
  18.500

  	
  %

  
	
  MCG
  Capital Corporation

  	
   

  	
  $

  	
  - 0 -

  	
   

  	
  0.000

  	
  %

  	
  $

  	
  4,125,000

  	
   

  	
  20.625

  	
  %

  	
  $

  	
  4,250,000

  	
   

  	
  8.500

  	
  %

  
	
  TOTALS

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  20,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  50,000,000

  	
   

  	
  100

  	
  %

  

 

 

Annex B

 

Closing
Checklist

 

 

MERRILL LYNCH CAPITAL

 

CLOSING CHECKLIST

 

OMP, INC.

 

$80,000,000
Revolving and Term Loan Facility

 

CLOSING DATE: January 28,
2005

 

PARTIES
TO THE TRANSACTION

 

	
  ADMINISTRATIVE 

  AGENT AND LENDER:

  	
  Merrill Lynch Capital

  10877 Wilshire Boulevard

  Suite 2020 

  Los Angeles, California 90024

  Tel: (310) 209-4881

  
	
   

  	
   

  
	
   

  	
  Clare
  Bailhe (clare_bailhe@ml.com)

  
	
   

  	
  Tel:
     (310) 209-4895

  
	
   

  	
  Fax:
    (310) 209-4888

  
	
   

  	
   

  
	
   

  	
  Marc
  Preiser (marc_preiser@ml.com)

  
	
   

  	
  Tel:
     (310) 209-4885

  
	
   

  	
  Fax:
    (310) 209-4888

  
	
   

  	
   

  
	
   

  	
  Sanjeev
  Narayan (sanjeev_narayan@ml.com)

  
	
   

  	
  Tel:
     (310) 209-4878

  
	
   

  	
  Fax:
    (310) 209-4888

  
	
   

  	
   

  
	
   

  	
  Tommy
  Ryan (tommy_ryan@ml.com)

  
	
   

  	
  Tel:
     (310) 209-4875

  
	
   

  	
  Fax:
    (310) 209-4888

  

 

 

	
  ADMINISTRATIVE 

  AGENT’S COUNSEL:

  	
  Katten Muchin Zavis
  Rosenman

  525 W. Monroe Street, Suite 1600 

  Chicago, Illinois, 60661 

  Tel: (312) 902-5200

  Fax: (312) 902-1021

  
	
   

  	
   

  
	
   

  	
  Rene
  Ghadimi, Esq. (rene.ghadimi@kmzr.com)

  
	
   

  	
  Tel:
     (312) 902-5583

  
	
   

  	
  Fax:
    (312) 577-8797

  
	
   

  	
   

  
	
   

  	
  David
  Valeck, Esq. (david.valeck@kmzr.com)

  
	
   

  	
  Tel:
     (312) 902-5225

  
	
   

  	
  Fax:
    (312) 577-4552

  
	
   

  	
   

  
	
  BORROWER:

  	
  OMP, Inc.

  
	
   

  	
  310 Golden Shore

  
	
   

  	
  Long Beach, California
  90802

  
	
   

  	
  Tel:    (562) 628-1007

  
	
   

  	
  Fax:   (562)
  628-1008

  
	
   

  	
   

  
	
   

  	
  Austin
  McNamara (austinm@obagi.com)

  
	
   

  	
  Tel:
     (562) 491-6010

  
	
   

  	
  Fax:
    (562) 624-2329

  
	
   

  	
   

  
	
   

  	
  David
  Goldstein (davidg@obagi.com)

  
	
   

  	
  Tel: 
    (562) 491-6018

  
	
   

  	
  Fax:  
  (562) 628-1008

  
	
   

  	
   

  
	
   

  	
  Curtis
  Cluff (curtisc@obagi.com)

  
	
   

  	
  Tel:
     (562) 491-6011

  
	
   

  	
  Fax:
    (562) 624-2329

  
	
   

  	
   

  
	
   

  	
  Stephen
  Garcia (StephenG@obagi.com)

  
	
   

  	
  Tel:
     (562) 491-6046

  
	
   

  	
  Fax:
    (562) 624-2329

  
	
   

  	
   

  
	
   

  	
  Linda
  Hay (lindah@obagi.com)

  
	
   

  	
  Tel:
     (562) 491-6014

  
	
   

  	
  Fax:
    (562) 624-2329

  

 

2

 

	
  COUNSEL TO

  BORROWER, HOLDINGS

  AND EACH SUBSIDIARY

  OF BORROWER:

  	
  Dorsey &
  Whitney LLP

  250 Park Avenue 

  New York, New York 10177

  
	
   

  	
   

  
	
   

  	
  Wes
  Fredericks, Esq. (fredericks.wesley@dorsey.com)

  
	
   

  	
  Tel: 
    (212) 415-9263

  
	
   

  	
  Fax:
    (212) 953-7201

  
	
   

  	
   

  
	
   

  	
  Kevin
  Collins, Esq. (collins.kevin@dorsey.com)

  
	
   

  	
  Tel:
     (212) 415-9319

  
	
   

  	
  Fax:
    (212) 953-7201

  
	
   

  	
   

  
	
   

  	
  Carl
  Walker, Esq. (walker.carl@dorsey.com)

  
	
   

  	
  Tel:
     (212) 415-9351

  
	
   

  	
  Fax:
    (212) 953-7201

  
	
   

  	
   

  
	
   

  	
  Richard
  J. Frecker, Esq. (frecker.richard@dorsey.com)

  
	
   

  	
  Tel:  
   (212) 735-0775

  
	
   

  	
  Fax:
    (212) 953-7201

  
	
   

  	
   

  
	
   

  	
  Katherine
  Choi, Esq. (choi.katherine@dorsey.com)

  
	
   

  	
  Tel:
     (212) 735-0777

  
	
   

  	
  Fax:
    (212) 953-7201

  

 

3

 

	
  EQUITY SPONSOR:

  	
  Stonington Capital
  Appreciation 1994 Fund LP

  
	
   

  	
  c/o Stonington Partners, Inc.

  
	
   

  	
  767 Fifth Avenue, 48th
  Floor

  
	
   

  	
  New York, New York
  10153

  
	
   

  	
  Tel: (714) 662-5600

  
	
   

  	
  Fax: (714) 241-0792

  
	
   

  	
   

  
	
   

  	
  Trey
  (Albert J.) Fitzgibbons (afitzgibbons@stonington.com)

  
	
   

  	
  Tel:
     (212) 339-8550

  
	
   

  	
  Fax:
    (212) 339-8585

  
	
   

  	
   

  
	
   

  	
  Brad
  Hoecker (bhoecker@stonington.com)

  
	
   

  	
  Tel:
     (212) 339-8534

  
	
   

  	
  Fax:
    (212) 339-8585

  
	
   

  	
   

  
	
   

  	
  John
  A. Bartholdson (jbartholdson@stonington.com)

  
	
   

  	
  Tel:
    (212) 339-8542

  
	
   

  	
  Fax:
    (212) 339-8585

  
	
   

  	
   

  
	
   

  	
  James
  Noone (jnoone@stonington.com)

  
	
   

  	
  Tel:
     (212) 339-8500

  
	
   

  	
  Fax:   
  (212) 339-8585

  
	
   

  	
   

  
	
  COUNSEL TO EQUITY

  	
  Wachtell Lipton Rosen &
  Katz

  
	
  SPONSOR:

  	
  51 West 52nd Street

  
	
   

  	
  New York, New York
  10019

  
	
   

  	
   

  
	
   

  	
  David
  Shapiro, Esq. (deshapiro@wlrk.com)

  
	
   

  	
  Tel:
    (212) 403-1314

  

 

A.                      Pre-Closing
Documents

 

1.                           Letter
agreement authorizing the pre-funding filing of Uniform Commercial Code
financing statements executed by OMP, Inc., a Delaware corporation (“Borrower”),
and Obagi Medical Products, Inc., a Delaware corporation (“Holdings”)

 

B.                        Loan
Documents 

 

1.                           Credit
Agreement

 

4

 

	
  Annexes

  	
   

  
	
   

  	
   

  
	
  Annex
  A

  	
  Commitment Annex

  
	
  Annex
  B

  	
  Closing Checklist

  
	
   

  	
   

  
	
  Exhibits

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form of Assignment
  Agreement 

  
	
  Exhibit B

  	
  Form of Excess
  Cash Flow Certificate 

  
	
  Exhibit C

  	
  Form of Compliance
  Certificate 

  
	
  Exhibit D

  	
  Form of Borrowing
  Base Certificate 

  
	
  Exhibit E

  	
  Form of Notice of
  Borrowing 

  
	
  Exhibit F

  	
  Form of Payment
  Notification

  
	
   

  	
   

  
	
  Schedules

  	
   

  
	
   

  	
   

  
	
  Schedule 3.1

  	
  Existence,
  Organizational Identification Numbers, Foreign Qualification, Prior Names

  
	
  Schedule 3.4

  	
  Capitalization 

  
	
  Schedule 3.6

  	
  Litigation 

  
	
  Schedule 3.15

  	
  Brokers

  
	
  Schedule 3.17

  	
  Material Contracts

  
	
  Schedule 3.18

  	
  Environmental
  Compliance

  
	
  Schedule 3.19

  	
  Intellectual Property

  
	
  Schedule 3.20

  	
  Owned Real Estate

  
	
  Schedule 5.1

  	
  Debt

  
	
  Schedule 5.2

  	
  Liens

  
	
  Schedule 5.3

  	
  Contingent Obligations 

  
	
  Schedule 5.8

  	
  Investments 

  
	
  Schedule 5.9

  	
  Affiliate Transactions 

  
	
  Schedule 5.13

  	
  Business Description

  
			

 

2.                         Revolving
Notes in the aggregate principal amount of $10,000,000 issued to the following
lenders in the following amounts:

 

a.                      Merrill
Lynch Capital, $10,000,000

 

3.                         Term
Notes A in the aggregate principal amount of $20,000,000 issued to the
following lenders in the following amounts:

 

a.                      Merrill
Lynch Capital, $14,375,000

b.                     MCG Capital,
$4,125,000

c.                      NewStar CP
Funding LLC, $1,500,000

 

4.                         Term
Notes B in the aggregate principal amount of $50,000,000 issued to the
following lenders in the following amounts*:

 

5

 

a.                           Merrill
Lynch Capital, $26,750,000

b.                          MCG
Capital, $4,250,000

c.                           NewStar
CP Funding LLC, $9,250,000

 

* Wachovia Bank, National
Association, $9,750,000 (Noteless)

 

5.                         Guaranty
by Holdings

 

6.                         Initial
Borrowing Base Certificate

 

7.                         Initial
Notice of Borrowing and Letter of Direction

 

Schedule 1             Wire transfer
instructions/Memorandum of funds flow

 

8.                         Initial
Compliance Certificate

 

9.                         Officer’s
Closing Certificate

 

10.                   Subordination
Agreements

 

a.                          Letter
Agreement re: subordination of fees payable to Stonington Partners, Inc. (“Sponsor”)
pursuant to that certain Management Services Agreement dated as of December 18,
2002 (“Management Services Agreement”)

 

b.                         Letter
Agreement re: subordination of fees payable to Lighthouse Partners, LLC
pursuant to that certain Management Services Agreement dated as of December 2,
1997, as amended and assigned (“Lighthouse Management Agreement”)

 

c.                          Letter
Agreement re: subordination of dividends payable to the Zein and Samar Obagi
Family Trust (the “Trust”) payable pursuant to the Organizational Documents of
Holdings and payable to that certain Investors’ Rights Agreement dated as of December 17,
2002 (as amended, restated, supplemented or otherwise modified from time to
time, the “Investors’ Rights Agreement”)

 

d.                         Letter
Agreement re: subordination of fees payable to (i) Dr. Obagi pursuant
to that certain Amended and Restated Employment Agreement dated as of December 17,
2002 (“Employment Agreement”) and (ii) Dr. Obagi and the Trust
pursuant to that certain Termination, License and Obligations Agreement dated
as of December 17, 2002 (the “Termination Agreement”)

 

6

 

e.                          Letter
Agreement re: subordination of certain redemption rights and payments payable
to Austin McNamara (“McNamara”) pursuant to the that certain Investor’s Rights
Agreement dated as of April 1, 2002 (“Investor’s Rights Agreement”)
between Borrower and McNamara

 

11.                   Fee Letter

 

C.                        Security
Documents

 

12.                   Security
Agreement by and between Borrower and Administrative Agent

 

Schedule 3.1               Organizational Information

Schedule 3.3               Collateral Locations

Schedule 3.5               Federal Registration Collateral

Schedule 3.9               Commercial Tort Claims and Other
Collateral Disclosures

Schedule 3.10         Deposit and Securities Accounts

Schedule 4.4               Bailees

 

13.                   Security
Agreement by and between Holdings and Administrative Agent

 

Schedule 3.1               Organizational Information

Schedule 3.3               Collateral Locations

Schedule 3.5               Federal Registration Collateral

Schedule 3.9               Commercial Tort Claims and Other
Collateral Disclosures

Schedule 3.10         Deposit and Securities Accounts

Schedule 4.4               Bailees

 

14.                   Patent Security
Agreement executed by Borrower and recorded with the United States Patent and
Trademark Office on            
at book             
and page           .
(Filing information to be completed once receipt of filing received from the
USPTO)

 

Schedule of Patents and Patent Licenses

 

15.                   Trademark
Security Agreement executed by Borrower and recorded with the United States
Patent and Trademark Office on          
at book          and page     .
(Filing information to be completed once receipt of filing received from the
USPTO)

 

Schedule of Trademarks and Trademark Licenses

 

16.                   Deposit Account
Control Agreement by and among Comerica Bank, Borrower and Administrative Agent

 

7

 

17.                   Securities
Account Control Agreement by and among American Express, Borrower and
Administrative Agent (to the extent neccesary)

 

18.                   Tri-party
collateral escrow and access agreement among Comerica Bank, Borrower and
Administrative Agent (re: access to trade secrets)

 

a.                           Completed
Deposited Materials Form executed by Borrower and Comerica Bank

 

b.                          Executed
Certificates of Authority for each of Borrower and Administrative Agent

 

19.                   UCC Financing
Statements (Listed on Exhibit A)

 

20.                   Pledge
Agreement by Holdings

 

Acknowledgment of Issuer
executed by Borrower

 

Exhibit A                                                         Identification
of Pledged Securities

 

Irrevocable proxy coupled
with interest, issued by Holdings with respect to Borrower

 

Stock certificate number
53, representing 1 share and one hundred percent (100%) of the issued and
outstanding capital stock of Borrower, with appropriate assignment separate
from certificate executed in blank

 

21.                   Pledge
Agreement by Borrower

 

Acknowledgment of Issuer
executed by each of Obagi Skin Health PTE. LTD.; Obagi Skin Health Co., Ltd.
(Obagi Taiwan); Obagi Skin Health (HK) Limited and Obagi China Limited

 

Exhibit A                                                         Identification
of Pledged Securities

 

Irrevocable proxies
coupled with interest, issued by Borrower with respect to each of Obagi Skin
Health PTE. LTD.; Obagi Skin Health Co., Ltd. (Obagi Taiwan); Obagi Skin Health
(HK) Limited and Obagi China Limited

 

Stock certificate number    ,
representing    shares of the issued and outstanding capital stock
of Obagi China Limited, with appropriate assignment separate from certificate
executed in blank (information to be completed once stock certificates are
re-issued by the Chinese authorities)

 

8

 

22.                   Landlord Waiver
and Consent with respect to the following leased real properties:

 

a.                          310
Golden Shore, Long Beach, California (Headquarters)

b.                         2205 E.
Carson Street, Units B-l and B-2, Carson, California (Warehouse)

1.                           Master
Landlord (Cypress-Southbay, LLC)

2.                           Sub
Landlord (Marlog Cargo USA, Inc.)

 

23.                   Collateral
Assignment of Leases executed by Borrower

 

24.                   Bailee
Waivers/Lien Acknowledgments (to the extent neccesary)

 

D.                       Due
Diligence

 

25.                   Pre-Closing
Lien Search Reports – Summary Enclosed

 

26.                   Evidence that
blanket lien in favor of Imperial Bank has been terminated

 

27.                   Pre-Closing
Intellectual Property Reports – On File With Administrative Agent

 

28.                   Post-Closing
Lien Search Reports

 

29.                   Information
with respect to maintenance, protection and access to trade secrets and other
proprietary information

 

30.                   Westland
Litigation due diligence

 

E.                         Organizational
Due Diligence

 

31.                   Certificate of
Secretary of Holdings, with incumbency

 

Exhibit A                      Articles of
Incorporation, file-stamped by the Secretary of State of Delaware

Exhibit B                        By-laws

Exhibit C                        Resolutions

Exhibit D                       Good
Standing Certificate – Delaware

 

32.                   Certificate of
Secretary of Borrower, with incumbency

 

Exhibit A                      Articles of
Incorporation, file-stamped by the Secretary of State of Delaware

 

9

 

Exhibit B                        By-Laws

Exhibit C                        Resolutions

Exhibit D                       Good
Standing Certificates – California, Delaware

 

F.                         Certified
Copies of Other Documents

 

33.                   Purchase
Agreement among Holdings and Preferred A Shareholders

 

34.                   Management
Service Agreement

 

35.                   Lighthouse
Management Agreement

 

36.                   Termination
Agreement

 

37.                   Investor’s
Rights Agreement (including the Assignment and Assumption Agreement)

 

38.                   Investors’
Rights Agreement (including all amendments thereto and the Assignment and
Assumption Agreement)

 

39.                   Employment
Agreement

 

G.                        Opinions

 

40.                   Asset Valuation
and Solvency Opinion issued by Houlihan & Lokey

 

a.                         Executed
Consent Letter

 

41.                   Opinion of law
issued by Dorsey & Whitney, LLP, in its capacity as counsel to Holdings,
Borrower and each Subsidiary of Borrower with respect to the Credit Agreement
and each of the other Financing Documents

 

42.                   Opinion of law
issued by Richards Layton & Finger

 

H.                       Miscellaneous
Items

 

43.                   Post-Closing
Letter Agreement

 

44.                   Certificates of
Insurance with respect to liability and casualty policies for Borrower and
Holdings, naming Administrative Agent as additional insureds/loss payee

 

45.                   Financial
Statements of Borrower

 

10

 

EXHIBIT A to
Closing Checklist

 

UNIFORM COMMERCIAL
CODE FINANCING STATEMENTS

 

	
  Debtor

  	
   

  	
  Jurisdiction

  	
   

  	
  File Number

  	
   

  	
  File Date

  	
   

  	
  Filing Type

  	
   

  
	
  OMP, Inc.

  	
   

  	
  Delaware

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Blanket

  	
   

  
	
  Obagi
  Medical Products, Inc.

  	
   

  	
  Delaware

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Blanket

  	
   

  

 

 

IN
WITNESS WHEREOF, the undersigned has executed this Term Note
A as of the date first written above.

 

 

	
   

  	
   

  	
  OMP, INC.,
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Curtis Cluff

  
	
   

  	
   

  	
  Name:

  	
  Curtis Cluff

  
	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 

TERM NOTE A

 

 

	
  $4,125,000

  	
  New
  York, New York

  
	
   

  	
  January 28,
  2005

  

 

FOR
VALUE RECEIVED, the undersigned (the “Borrower”) hereby unconditionally promise
to pay to the order of MCG Capital
Corporation (the “Lender”) at
the office of Administrative Agent (as such term is defined below) at 222 North
LaSalle Street, Chicago, Illinois 60601, or at such other place as
Administrative Agent may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of FOUR MILLION ONE HUNDRED
TWENTY FIVE THOUSAND AND 00/100 DOLLARS ($4,125,000). This Term Note A (this “Note”) is issued in
accordance with the provisions of that certain Credit Agreement of even date
herewith (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”) among
the Borrower, various financial institutions as are, or may from time to
time become, parties thereto as lenders (including without limitation the
Lender) and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as administrative agent (in such capacity, the “Administrative Agent”) and is entitled to the benefits and
security of the Credit Agreement and the other Financing Documents, and
reference hereby is made to the Credit Agreement for a statement of the terms
and conditions under which the portion of Term Loan A evidenced hereby was made
and is required to be repaid. All capitalized terms used herein (which are not
otherwise specifically defined herein) shall be used in this Note as defined in
the Credit Agreement.

 

The outstanding principal
balance of the portion of Term Loan A evidenced by this Note shall be due and
payable as provided for in the Credit Agreement.

 

Borrower promises to pay
interest from the date hereof until payment in full hereof on the unpaid principal
balance of the portion of Term Loan A evidenced hereby at the per annum rate or
rates set forth in the Credit Agreement. Interest on the unpaid principal
balance of the portion of Term Loan A evidenced hereby shall be payable on the
dates and in the manner set forth in the Credit Agreement. Interest as
aforesaid shall be charged for the actual number of days elapsed over a year
consisting of three hundred sixty (360) days on the actual daily outstanding
balance hereof; provided that (a) LIBOR Loans shall include the date on
which the applicable Interest Period began, but shall exclude the last day of
the applicable Interest Period and (b) Base Rate Loans shall include the
date of funding of any such Loan, but shall exclude the date of payment of any
such Loan.

 

Upon and after the
occurrence of an Event of Default, and as provided in the Credit Agreement, the
portion of Term Loan A evidenced by this Note may be declared, and
immediately shall become, due and payable without demand, notice or legal process
of any kind; provided, that upon
the occurrence of an Event of Default pursuant to the provisions of Section 8.1(f) or
Section 8.l(g) of the Credit Agreement, the portion of Term Loan A
evidenced by this Note shall automatically be due and payable, without demand,
notice or acceleration of any kind whatsoever.

 

 

8.1(f) or Section 8.l(g) of
the Credit Agreement, the portion of Term Loan A evidenced by this Note shall
automatically be due and payable, without demand, notice or acceleration of any
kind whatsoever.

 

Payments received in
respect of Term Loan A shall be applied as provided in the Credit Agreement.

 

Presentment, demand,
protest and notice of presentment, demand, nonpayment and protest are each
hereby waived by each Borrower.

 

THIS
NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES. Whenever possible each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any provision of or obligation under this Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. Whenever in this Note reference is made to
Administrative Agent, Lender or the Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective successors and
permitted assigns. The provisions of this Note shall be binding upon each
Borrower and its successors and permitted assigns, and shall inure to the
benefit of Lender and its successors and permitted assigns.

 

This Note is issued in
substitution for and replacement of that certain Term Note A dated as of January 28,
2004 (the “Original Note”) issued by Borrower to the Lender in
the principal amount of $14,375,000. This Note is made in substitution of the
Original Note and not in satisfaction of the Original Note. This Note shall not
be deemed to constitute a novation.

 

In addition to and
without limitation of any of the foregoing, this Note shall be deemed to be a
Financing Document and shall otherwise be subject to all of general terms and
conditions contained in Article 11 of the Credit Agreement, mutatis mutandi.

 

[Remainder of page intentionally
left blank; signature page follows.]

 

 

 

AMENDED
AND SUBSTITUTE TERM NOTE A

 

	
  $9,375,000

  	
  New
  York, New York

  
	
   

  	
  February 2,
  2005

  

 

Originally Issued: January 28,
2005

 

FOR
VALUE RECEIVED, the undersigned (the “Borrower”) hereby
unconditionally promise to pay to the order of Merrill Lynch Capital, a division of Merrill Lynch Business Financial
Services Inc. (the “Lender”) at the office of Administrative
Agent (as such term is defined below) at 222 North LaSalle Street, Chicago,
Illinois 60601, or at such other place as Administrative Agent may from
time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of NINE MILLION THREE HUNDRED SEVENTY FIVE THOUSAND AND
00/100 DOLLARS ($9,375,000). This Amended and Substitute Term Note A
(this “Note”) is issued in accordance with the
provisions of that certain Credit Agreement dated as of January 28, 2005
(as amended, restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”) among the Borrower, various financial
institutions as are, or may from time to time become, parties thereto as
lenders (including without limitation the Lender) and Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services Inc., as administrative
agent (in such capacity, the “Administrative
Agent”) and is
entitled to the benefits and security of the Credit Agreement and the other
Financing Documents, and reference hereby is made to the Credit Agreement for a
statement of the terms and conditions under which the portion of Term Loan A
evidenced hereby was made and is required to be repaid. All capitalized terms
used herein (which are not otherwise specifically defined herein) shall be used
in this Note as defined in the Credit Agreement.

 

The outstanding principal
balance of the portion of Term Loan A evidenced by this Note shall be due and
payable as provided for in the Credit Agreement.

 

Borrower promises to pay
interest from the date hereof until payment in full hereof on the unpaid
principal balance of the portion of Term Loan A evidenced hereby at the per
annum rate or rates set forth in the Credit Agreement. Interest on the unpaid
principal balance of the portion of Term Loan A evidenced hereby shall be
payable on the dates and in the manner set forth in the Credit Agreement.
Interest as aforesaid shall be charged for the actual number of days elapsed
over a year consisting of three hundred sixty (360) days on the actual daily
outstanding balance hereof; provided that (a) LIBOR Loans shall include
the date on which the applicable Interest Period began, but shall exclude the
last day of the applicable Interest Period and (b) Base Rate Loans shall
include the date of funding of any such Loan, but shall exclude the date of
payment of any such Loan.

 

Upon and after the occurrence
of an Event of Default, and as provided in the Credit Agreement, the portion of
Term Loan A evidenced by this Note may be declared, and immediately shall
become, due and payable without demand, notice or legal process of any kind; provided, that upon the occurrence of an
Event of Default pursuant to the provisions of Section

 

 

Payments
received in respect of Term Loan A shall be applied as provided in the Credit
Agreement.

 

Presentment,
demand, protest and notice of presentment, demand, nonpayment and protest are
each hereby waived by each Borrower.

 

THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES. Whenever possible each provision
of this Note shall be interpreted in such manner as to be effective and valid
under applicable law, but in case any provision of or obligation under this
Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby. Whenever in this Note
reference is made to Administrative Agent, Lender or the Borrower, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and permitted assigns. The provisions of this Note shall
be binding upon each Borrower and its successors and permitted assigns, and
shall inure to the benefit of Lender and its successors and permitted assigns.

 

In
addition to and without limitation of any of the foregoing, this Note shall be
deemed to be a Financing Document and shall otherwise be subject to all of
general terms and conditions contained in Article 11 of the Credit
Agreement, mutatis mutandi.

 

[Remainder of page intentionally
left blank; signature page follows.]

 

2

 

IN
WITNESS WHEREOF, the undersigned has executed this Term Note
A as of the date first written above.

 

 

	
   

  	
  OMP, INC.,
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis Cluff

  
	
   

  	
  Name:

  	
  Curtis Cluff

  
	
   

  	
  Title:

  	
  CFO

  

 

 

TERM
NOTE A

 

	
  $1,500,000

  	
  New York, New York

  
	
   

  	
  January 28,
  2005

  

 

FOR
VALUE RECEIVED, the undersigned (the “Borrower”) hereby unconditionally promise to pay to the order of NewStar CP Funding LLC (the “Lender”) at the office of Administrative Agent (as such term is defined
below) at 222 North LaSalle Street, Chicago, Illinois 60601, or at such other
place as Administrative Agent may from time to time designate in writing,
in lawful money of the United States of America and in immediately available
funds, the principal sum of ONE MILLION FIVE
HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000). This Term Note A
(this “Note”) is issued in accordance with the
provisions of that certain Credit Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among the Borrower, various financial institutions as are, or may from
time to time become, parties thereto as lenders (including without limitation
the Lender) and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as administrative agent (in such capacity, the “Administrative Agent”) and is entitled to the benefits and
security of the Credit Agreement and the other Financing Documents, and
reference hereby is made to the Credit Agreement for a statement of the terms
and conditions under which the portion of Term Loan A evidenced hereby was made
and is required to be repaid. All capitalized terms used herein (which are not
otherwise specifically defined herein) shall be used in this Note as defined in
the Credit Agreement.

 

The outstanding principal
balance of the portion of Term Loan A evidenced by this Note shall be due and
payable as provided for in the Credit Agreement.

 

Borrower promises to pay
interest from the date hereof until payment in full hereof on the unpaid
principal balance of the portion of Term Loan A evidenced hereby at the per
annum rate or rates set forth in the Credit Agreement. Interest on the unpaid
principal balance of the portion of Term Loan A evidenced hereby shall be
payable on the dates and in the manner set forth in the Credit Agreement.
Interest as aforesaid shall be charged for the actual number of days elapsed
over a year consisting of three hundred sixty (360) days on the actual daily
outstanding balance hereof; provided that (a) LIBOR Loans shall include
the date on which the applicable Interest Period began, but shall exclude the
last day of the applicable Interest Period and (b) Base Rate Loans shall
include the date of funding of any such Loan, but shall exclude the date of
payment of any such Loan.

 

Upon and after the
occurrence of an Event of Default, and as provided in the Credit Agreement, the
portion of Term Loan A evidenced by this Note may be declared, and
immediately shall become, due and payable without demand, notice or legal
process of any kind; provided, that
upon the occurrence of an Event of Default pursuant to the provisions of Section 8.1(f) or
Section 8.1(g) of the Credit Agreement, the portion of Term Loan A
evidenced by this Note shall automatically be due and payable, without demand,
notice or acceleration of any kind whatsoever.

 

 

Payments received in
respect of Term Loan A shall be applied as provided in the Credit Agreement.

 

Presentment, demand,
protest and notice of presentment, demand, nonpayment and protest are each
hereby waived by each Borrower.

 

THIS
NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES. Whenever possible each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any provision of or obligation under this Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. Whenever in this Note reference is made to
Administrative Agent, Lender or the Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective successors and
permitted assigns. The provisions of this Note shall be binding upon each
Borrower and its successors and permitted assigns, and shall inure to the
benefit of Lender and its successors and permitted assigns.

 

In addition to and
without limitation of any of the foregoing, this Note shall be deemed to be a
Financing Document and shall otherwise be subject to all of general terms and
conditions contained in Article 11 of the Credit Agreement, mutatis mutandi.

 

[Remainder of page intentionally
left blank; signature page follows.]

 

2

 

IN WITNESS WHEREOF, the undersigned has
executed this Term Note A as of the date first written above.

 

 

	
   

  	
  OMP, INC.,
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis Cluff

  
	
   

  	
  Name:

  	
  Curtis Cluff

  
	
   

  	
  Title:

  	
  CFO

  

 

 

TERM
NOTE A

 

	
  $2,000,000

  	
   

  	
  New
  York, New York

  
	
   

  	
   

  	
  February 2,
  2005

  

 

FOR
VALUE RECEIVED, the undersigned (the “Borrower”) hereby unconditionally promise
to pay to the order of CLT, L.P.
(the “Lender”) at the office of
Administrative Agent (as such term is defined below) at 222 North LaSalle
Street, Chicago, Illinois 60601, or at such other place as Administrative Agent
may from time to time designate in writing, in lawful money of the United
States of America and in immediately available funds, the principal sum of TWO MILLION AND 00/100 DOLLARS ($2,000,000). This
Term Note A (this “Note”) is
issued in accordance with the provisions of that certain Credit Agreement dated
as of January 28, 2005 (as amended, restated, supplemented or otherwise
modified from time to time, the “Credit
Agreement”) among the Borrower, various financial institutions as
are, or may from time to time become, parties thereto as lenders
(including without limitation the Lender) and Merrill Lynch Capital, a division
of Merrill Lynch Business Financial Services Inc., as administrative agent (in
such capacity, the “Administrative Agent”)
and is entitled to the benefits and security of the Credit Agreement and the
other Financing Documents, and reference hereby is made to the Credit Agreement
for a statement of the terms and conditions under which the portion of Term
Loan A evidenced hereby was made and is required to be repaid. All capitalized
terms used herein (which are not otherwise specifically defined herein) shall
be used in this Note as defined in the Credit Agreement.

 

The outstanding principal
balance of the portion of Term Loan A evidenced by this Note shall be due and
payable as provided for in the Credit Agreement.

 

Borrower promises to pay
interest from the date hereof until payment in full hereof on the unpaid
principal balance of the portion of Term Loan A evidenced hereby at the per
annum rate or rates set forth in the Credit Agreement. Interest on the unpaid
principal balance of the portion of Term Loan A evidenced hereby shall be
payable on the dates and in the manner set forth in the Credit Agreement.
Interest as aforesaid shall be charged for the actual number of days elapsed
over a year consisting of three hundred sixty (360) days on the actual daily
outstanding balance hereof; provided that (a) LIBOR Loans shall include
the date on which the applicable Interest Period began, but shall exclude the
last day of the applicable Interest Period and (b) Base Rate Loans shall
include the date of funding of any such Loan, but shall exclude the date of
payment of any such Loan.

 

Upon and after the
occurrence of an Event of Default, and as provided in the Credit Agreement, the
portion of Term Loan A evidenced by this Note may be declared, and
immediately shall become, due and payable without demand, notice or legal
process of any kind; provided, that
upon the occurrence of an Event of Default pursuant to the provisions of Section 8.1(f) or
Section 8.1(g) of the Credit Agreement, the portion of Term Loan A
evidenced by this Note shall automatically be due and payable, without demand,
notice or acceleration of any kind whatsoever.

 

 

Payments received in
respect of Term Loan A shall be applied as provided in the Credit Agreement.

 

Presentment, demand,
protest and notice of presentment, demand, nonpayment and protest are each
hereby waived by each Borrower.

 

THIS
NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),  WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES. Whenever possible each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any provision of or obligation under this Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. Whenever in this Note reference is made to
Administrative Agent, Lender or the Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective successors and
permitted assigns. The provisions of this Note shall be binding upon each
Borrower and its successors and permitted assigns, and shall inure to the
benefit of Lender and its successors and permitted assigns.

 

In addition to and
without limitation of any of the foregoing, this Note shall be deemed to be a
Financing Document and shall otherwise be subject to all of general terms and
conditions contained in Article 11 of the Credit Agreement, mutatis mutandi.

 

[Remainder of page intentionally
left blank; signature page follows.]

 

2

 

IN WITNESS WHEREOF, the
undersigned has executed this Term Note A as of the date first written above.

 

 

	
   

  	
   

  	
  OMP, INC.,
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Curtis Cluff

  
	
   

  	
   

  	
  Name:

  	
  Curtis Cluff

  
	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 

	
   Exhibit A to Credit Agreement
  (Assignment Agreement)

  

 

This Assignment Agreement
(this “Assignment Agreement”) is entered into as of                    ,
20     by and between the Assignor named on the signature page hereto
(“Assignor”) and the Assignee
named on the signature page hereto (“Assignee”):
Reference is made to the Credit Agreement dated as of January 28, 2005 (as
amended or otherwise modified from time to time, the “Credit Agreement”) among OMP, Inc. (“Borrower”), the financial institutions party thereto from time to time,
as Lenders, and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as Administrative Agent. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to them in the
Credit Agreement.

 

Assignor and Assignee
hereby agree as follows:

 

Assignor hereby sells and
assigns to Assignee, and Assignee hereby purchases and assumes from Assignor
the interests set forth on the schedule attached hereto (the “Schedule”), in and to Assignor’s rights and obligations under the Credit
Agreement as of the effective date set forth on the Schedule (the “Effective Date”). Such purchase and sale is
made without recourse, representation or warranty except as expressly set forth
herein. On the Effective Date, Assignee shall pay to Assignor an amount equal
to the aggregate amounts assigned pursuant to the Schedule (exclusive of
unfunded portions of the Revolving Loan Commitment) and Assignor shall pay to
Assignee a closing fee, if applicable, in respect of the transactions
contemplated hereby in the amount specified on the Schedule.

 

Assignor (i) represents
that as of the Effective Date, that it is the legal and beneficial owner of the
interests assigned hereunder free and clear of any adverse claim, (ii) makes
no other representation or warranty and assumes no responsibility with respect
to any statement, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Financing
Documents or any other instrument or document furnished pursuant thereto; and (iii) makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of any other Credit Party or any other Person or the performance
or observance by any Credit Party of its Obligations under the Credit Agreement
or any other Financing Documents or any other instrument or document furnished
pursuant thereto.

 

Assignee (i) confirms
that it has received a copy of the Credit Agreement and the other Financing
Documents, together with copies of the most recent financial statements
delivered pursuant thereto and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment Agreement; (ii) agrees that it will, independently and
without reliance upon Administrative Agent, Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) appoints and authorizes Administrative
Agent to take such action as Administrative Agent on its behalf and to exercise
such powers under the Credit Agreement and the other Financing Documents as are
delegated to Administrative Agent by the terms thereof,

 

Exhibit A - Page 1

 

together with such powers
as are reasonably incidental thereto; (iv) agrees that it will perform in
accordance with their terms all obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; (v) represents
that on the date of this Assignment Agreement it is not presently aware of any
facts that would cause it to make a claim under the Credit Agreement; (vi) represents
and warrants that Assignee is not a Foreign Lender or, if it is a Foreign
Lender, (A) that it has delivered to Administrative Agent the
documentation required to be delivered to Administrative Agent by Section 13
below and (B) that if it is claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of “portfolio interest”, (w) it is not a “bank” within the
meaning of Section 881(c)(3)(A) of the Code, (x) it is not a
10-percent shareholder of any Credit Party within the meaning of Section 881(c)(3)(B) or
Section 871(h)(3)(B) of the Code, (y) it is not a controlled foreign
corporation related to any Credit Party within the meaning of Section 881(c)(3)(C) of
the Code and (z) it is not a conduit entity participating in a conduit
financing, arrangement (as defined in Section 1.881-3 of the Code Treasury
Regulations); (vii) represents and warrants that Assignee is (or, upon
receipt of the required consents hereto by Administrative Agent, Swingline
Lender and Borrower will become) an Eligible Assignee and (viii) represents
and warrants that it has experience and expertise in the making or the
purchasing of loans such as the Loans, and that it has acquired the interests
described herein for its own account and without any present intention of
selling all or any portion of such interests.

 

Each of Assignor and
Assignee represents and warrants to the other party hereto that it has full
power and authority to enter into this Assignment Agreement and to perform its
obligations hereunder in accordance with the provisions hereof, that this
Assignment Agreement has been duly authorized, executed and delivered by such
party and that this Assignment Agreement constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of equity.

 

Upon the effectiveness of
this Assignment Agreement pursuant to Section 13 below, (i) Administrative
Agent shall register Assignee as a Lender, pursuant to the terms of the Credit
Agreement, (ii) Assignee shall be a party to the Credit Agreement and, to
the extent provided in this Assignment Agreement, have the rights and
obligations of a Lender thereunder, (iii) Assignor shall, to the extent provided in this
Assignment Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and (iv) Administrative Agent shall
thereafter make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to
Assignee. Assignor and Assignee shall make all appropriate adjustments in
payments for periods prior to the Effective Date by Administrative Agent or
with respect to the making of this assignment directly between themselves.

 

Each of Assignor and Assignee
hereby agrees from time to time, upon request of the other such party hereto,
to take such additional actions and to execute and deliver such additional
documents and instruments as such other party may reasonably request to
effect the transactions contemplated by, and to carry out the intent of, this
Assignment Agreement.

 

Neither this Assignment
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except by an instrument in writing signed by the party (including,
if applicable, any party required to evidence its consent to or acceptance of
this Assignment

 

Exhibit A - Page 2

 

Agreement) against whom
enforcement of such change, waiver, discharge or termination is sought.

 

For the purposes hereof
and for purposes of the Credit Agreement, the notice address of Assignee shall
be as set forth on the Schedule. Any notice or other communication herein
required or permitted to be given shall be in writing and delivered in
accordance with the notice provisions of the Credit Agreement.

 

In case any provision in
or obligation under this Assignment Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

 

THIS ASSIGNMENT AGREEMENT
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

 

This Assignment Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto
and their respective successors and assigns.

 

This Assignment Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures hereto were upon the same
agreement.

 

This Assignment Agreement
shall become effective as of the Effective Date upon the satisfaction of each
of the following conditions: (i) the execution of a counterpart hereof
by each of Assignor and Assignee, (ii) the execution of a counterpart hereof
by each of Administrative Agent and Borrower as evidence of its consent hereto
to the extent required pursuant to Section 11.6(a) of the Credit
Agreement, (iii) the receipt by Administrative Agent of the administrative
fee, if any, referred to in Section 11.6(a) of the Credit Agreement, (iv) in
the event Assignee is a Foreign Lender, the receipt by Administrative Agent of
United States Internal Revenue Service Forms W-8ECI, W-8BEN or W-8IMY (as
applicable), and such other forms, certificates or documents, including those
prescribed by the United States Internal Revenue Service, properly completed
and executed by Assignee, certifying as to Assignee’s entitlement to exemption
from withholding or deduction of Taxes, and (v) the receipt by
Administrative Agent of originals or telecopies of the counterparts described
above.

 

Exhibit A - Page 3

 

The parties hereto have
caused this Assignment Agreement to be executed and delivered as of the date
first written above.

 

	
   

  	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  	
   

  	
   

  
	
  

  

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
  

  

  	
   

  	
  ASSIGNEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  

  

  	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Consented to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Merrill Lynch Capital,
  a division of Merrill Lynch

  Business Financial Services Inc., as Administrative

  Agent and Swingline Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OMP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

Exhibit A - Page 4

 

Schedule to
Assignment Agreement

 

	
  Assignor:

  	
   

  
	
  Assignee:

  	
   

  
	
  Effective
  Date:

  	
   

  

 

Credit Agreement dated as
of January 28, 2005 among OMP Inc. as Borrower, the financial institutions
party thereto from time to time, as Lenders, and Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services Inc., as Administrative
Agent

 

Interests Assigned:

 

	
  Commitment/Loan

  	
   

  	
  Revolving Loan

  Commitment

  	
   

  	
  Term Loan A

  	
   

  	
  Term Loan B

  	
   

  
	
  Assignor
  Amounts

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
  Amounts
  Assigned

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Assignor
  Amounts (post-assignment)

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

	
   

  	
  Closing

  	
   

  	
  $

  
	
  Fee:

  	
   

  	
   

  	
   

  

 

	
   

  	
  Assignee Information:

  	
   

  	
   

  

 

	
   

  	
    Address for
  Notices:

  	
   

  	
  Address for Payments:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Bank:

  	
   

  
	
  Attention:

  	
   

  	
  ABA#:

  	
   

  
	
  Telephone:

  	
   

  	
  Account
  #:

  	
   

  
	
  Facsimile:

  	
   

  	
  Reference:

  	
   

  
					

 

Exhibit A - Page 5

 

	
     Exhibit B
  to Credit Agreement (Excess Cash Flow Certificate)

  

 

OMP, INC.

 

Date:
               ,
    

 

This certificate is given
by                     ,
a Responsible Officer of OMP, Inc. (“Borrower”),
pursuant to Section 4.1(c) of that certain Credit Agreement dated as
of January 28, 2005 among Borrower, the Lenders from time to time party
thereto and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as Administrative Agent for Lenders (as such agreement
may have been amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”).
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.

 

The undersigned
Responsible Officer hereby certifies to Administrative Agent and Lenders that:

 

(a)                     set forth
below is a schedule of Excess Cash Flow for the year ended                   ,
           and the
calculation of the required prepayment of $             ;
and

 

(b)                    the schedule set
forth below is based on the audited financial statements which have been
delivered to Administrative Agent in accordance with Section 4.1 (b) of
the Credit Agreement.

 

IN WITNESS WHEREOF, the
undersigned officer has executed and delivered this certificate this day of                                   ,
            .

 

 

	
   

  	
  By: 

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  	
  of Borrower

  

 

Exhibit C - Page 1

 

	
  Excess Cash Flow is
  defined as follows:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Cash Flow Provided
  by Operating Activities (in accordance with GAAP and as reflected in Borrower’s
  financial statements for the applicable period)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital
  Expenditures (as computed under Section 6.1 of the Compliance Certificate)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Regularly
  scheduled principal payments or voluntary prepayments of principal with
  respect to Debt to the extent actually paid (including the portion of
  scheduled payments under Capital Leases allocable to principal but excluding
  repayments of Revolving Loans and other Debt subject to re-borrowing to the
  extent not accompanied by a concurrent and permanent reduction of the
  Revolving Loan Commitment (or equivalent loan commitment), and excluding the
  amortization of debt discount or premium)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Changes in the
  current portion of Debt, to the extent of any reduction in the amount of such
  Debt liability

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Restricted
  Distributions made in cash by Borrower and permitted under Section 5.4
  of the Credit Agreement

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Excess Cash Flow

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Required prepayment
  percentage

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Required prepayment
  amount

  	
   

  	
  $

  	
   

  	
   

  

 

Exhibit C - Page 2

 

	
   Exhibit C to Credit Agreement (Compliance
  Certificate)

  

 

COMPLIANCE
CERTIFICATE

OMP, INC.

 

Date:
          ,        

 

This certificate is given
by                   ,
a Responsible Officer of OMP, Inc. (“Borrower”),
pursuant to Section 4.1(c) of that certain Credit
Agreement dated as of January 28, 2005 among Borrower, the Lenders from
time to time party thereto and Merrill Lynch Capital, a division of Merrill
Lynch Business Financial Services Inc., as Administrative Agent for Lenders (as
such agreement may have been amended, restated, supplemented or otherwise
modified from time to time, the “Credit
Agreement”). Capitalized terms used herein without definition shall
have the meanings set forth in the Credit Agreement.

 

The undersigned
Responsible Officer hereby certifies to Administrative Agent and Lenders that:

 

(a)                      the
financial statements delivered with this certificate in accordance with Section 4.1(a) and/or
4.1(b) of the Credit Agreement fairly present in all material respects the
results of operations and financial condition of Holdings and its Subsidiaries
as of the dates and the accounting period covered by such financial statements;

 

(b)                     I have
reviewed the terms of the Credit Agreement and have made, or caused to be made
under my supervision, a review in reasonable detail of the transactions and
conditions of Borrower and the Subsidiaries during the accounting period
covered by such financial statements;

 

(c)                      such review
has not disclosed the existence during or at the end of such accounting period,
and I have no knowledge of the existence as of the date hereof, of any
condition or event that constitutes a Default or an Event of Default, except as
set forth in Schedule 1 hereto, which includes a description of the nature
and period of existence of such Default or an Event of Default and what action
Borrower has taken, is undertaking and proposes to take with respect thereto;

 

Exhibit C - Page 3

 

(d)                     Borrower is
in compliance with the covenants contained in Article 6 of the Credit
Agreement, as demonstrated by the calculation of such covenants below, except
as set forth below; and

 

(e)                      the Total
Debt to EBITDA Ratio for the period covered by this certificate,  as demonstrated by the calculations required
by Section 6.5 attached
hereto, is           to
1.0. As a result of the foregoing, Tier Level          of
the Pricing Table, duplicated below, is the applicable Tier Level for purposes
of determining the Base Rate Margin and the LIBOR Margin.

 

Pricing
Table

 

	
  Tier

  	
   

  	
  Total Debt to EBITDA

  	
   

  	
  Revolving Loans, Term Loan

  A and all other Obligations

  (other than Swingline Loans and

  Term Loan B)

  	
   

  	
  Term Loan B

  	
   

  	
  Swingline

  Loans

  	
   

  
	
  Level

  	
   

  	
  Ratio

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  
	
  1

  	
   

  	
  Greater than 3.0 to 1.0

  	
   

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  	
  2.75

  	
  %

  	
  4.25

  	
  %

  	
  2.50

  	
  %

  
	
  2

  	
   

  	
  Greater than 2.5 to
  1.0, but less than or equal to 3.0 to 1.0

  	
   

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  	
  2.25

  	
  %

  
	
  3

  	
   

  	
  Greater than 2.0 to
  1.0, but less than or equal to 2.5 to 1.0

  	
   

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  	
  2.00

  	
  %

  
	
  4

  	
   

  	
  Less than 2.0 to 1.0

  	
   

  	
  1.75

  	
  %

  	
  3.25

  	
  %

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  	
  1.75

  	
  %

  

 

IN WITNESS WHEREOF, the
undersigned officer has executed and delivered this certificate this      
day of           ,     .

 

 

	
   

  	
   

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title

  	
   

  	
  of Borrower

  

 

Exhibit C - Page 4

 

CAPITAL
EXPENDITURES

(Section 6.1)

 

	
  Capital Expenditures
  for the applicable measurement period (the “Defined
  Period”) are defined as follows:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amount capitalized
  during the Defined Period by Borrower and its Consolidated Subsidiaries as
  capital expenditures for property, plant, and equipment or similar fixed
  asset accounts, including any such expenditures by way of acquisition of a
  Person or by way of assumption of Debt or other obligations, to the extent
  reflected as plant, property and equipment

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Plus:                                 deposits
  made in the Defined Period in connection with property, plant, and equipment;
  less deposits of a prior period included above

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:                               Net
  Cash Proceeds of Asset Dispositions received during the Defined Period which (i) Borrower
  or a Subsidiary is permitted to reinvest pursuant to the terms of the Credit
  Agreement and (ii) are included in capital expenditures above

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Proceeds
  of Property Insurance Policies received during the Defined Period which (i) Borrower
  or a Subsidiary is permitted to reinvest pursuant to the terms of the Credit
  Agreement and (ii) are included in capital expenditures above

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Expenditures

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:                               Portion
  of Capital Expenditures financed during the Defined Period under Capital
  Leases or other Debt (Debt, for this purpose, does not include drawings under
  the Revolving Loan Commitment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unfinanced Capital
  Expenditures (used in calculation of Operating Cash Flow (defined in Section 6.3
  of the Compliance Certificate))

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Expenditures
  (from above)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permitted Capital
  Expenditures (including carry forward of
  $           from
  prior fiscal year)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  

 

Exhibit C - Page 5

 

EBITDA

(Section 6.2)

 

	
  EBITDA for the
  applicable measurement period (the “Defined Period”)
  is defined as follows:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net income (or loss)
  for the Defined Period of Holdings and its Consolidated Subsidiaries, but
  excluding: (a) the income (or loss) of any Person (other than
  Subsidiaries of Holdings) in which Holdings or any of its Subsidiaries has an
  ownership interest unless received by Holdings or its Subsidiary in a cash
  distribution; and (b) except for any Credit Party as of the Closing
  Date, the income (or loss) of any Person accrued prior to the date it became
  a Subsidiary of Holdings or is merged into or consolidated with Holdings

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:               Any
  provision for (or less any benefit from) income and franchise taxes deducted
  in the determination of net income for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Interest
  expense, net of interest income, deducted in the determination of net income
  for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amortization and
  depreciation deducted in the determination of net income for the

  	
   

  	
   

  	
   

  
	
  Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Losses
  (or less gains) from Asset Dispositions included in the determination of net
  income for the Defined Period (excluding sales, expenses or losses related to
  current assets)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Other
  non-cash expenses (or less gains or income) deducted in the determination of
  net income for the Defined Period and for which no cash outlay (or cash
  receipt) is foreseeable prior to the Commitment Expiry Date or, if later, the
  final scheduled installment in respect of the Term Loans

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Expenses
  and fees deducted in the determination of net income and incurred during the
  Defined Period to consummate the transactions contemplated by the Operative
  Documents, but solely to the extent disclosed to Administrative Agent prior
  to the Closing Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Extraordinary
  losses (or less gains) included in the determination of net income during the
  Defined Period, net of related tax effects

  	
   

  	
   

  	
   

  

 

Exhibit C - Page 6

 

	
  Less:                Expenditures
  made after the Closing Date, but during the Defined Period, in connection with
  the consummation of the transactions contemplated by the Operative Documents,
  but not reflected in the pro forma balance sheet referenced in Section 3.5(c) and
  not deducted in the determination of net income

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EBITDA for the Defined
  Period

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Required EBITDA for the
  Defined Period

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  

 

Exhibit C - Page 7

 

FIXED
CHARGE COVERAGE RATIO

(Section 6.3)

 

	
  Fixed Charge Coverage
  Ratio for the applicable measurement period (the “Defined Period”) is defined as follows:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed Charges:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Interest expense
  ($           ), net of
  interest income
  ($           ),
  interest paid in kind ($           )
  and amortization of capitalized fees and expenses incurred to consummate the
  transactions contemplated by the Operative Documents and included in interest
  expense
  ($           ),
  included in the determination of net income of Borrower and its Consolidated
  Subsidiaries for the Defined Period (“Total
  Interest Expense”)(1)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus:   Any provision for (or less any benefit
  from) income or franchise taxes included in the determination of net income
  for the Defined Period *

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Scheduled
  payments of principal for the Defined Period with respect to all Debt
  (including the portion of scheduled payments under Capital Leases allocable
  to principal but excluding mandatory prepayments required by Section 2.1(c) 
  and excluding scheduled repayments of Revolving Loans and other Debt subject
  to reborrowing to the extent not accompanied by a concurrent and permanent
  reduction of the Revolving Loan Commitment (or equivalent loan commitment))

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Increases
  (or less the decreases) during the Defined Period in deferred tax assets*

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Decreases
  (or less the increases) during the Defined Period in deferred tax liabilities
  *

  	
   

  	
   

  

 

(1)                         Total
Interest Expense for each of the Fiscal Quarters in the Defined Period
occurring before the first anniversary of the Closing Date shall be annualized
and computed as the actual Total Interest Expense for such period times the multiplier for such period, as
follows:

 

	
  Fiscal Quarter ended March 31,
  2005

  	
   

  	
  Actual multiplied by 4

  
	
  Two Fiscal Quarters
  ended June 30, 2005

  	
   

  	
  Actual multiplied by 2

  
	
  Three Fiscal Quarters
  ended September 30, 2005

  	
   

  	
  Actual multiplied by
  1.33

  

 

*                            If the
sum of these three items is less than zero, each entry should be reflected,
instead, as zero.

 

Exhibit C - Page 8

 

	
  Restricted
  Distributions made by Borrower in cash during the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed Charges(1)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Operating Cash Flow:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EBITDA for the Defined
  Period (calculated in the manner required by Section 6.2 of the
  Compliance Certificate)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Less:   Unfinanced Capital Expenditures for the
  Defined Period (calculated in the manner required by Section 6.1 of the
  Compliance Certificate)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  To the extent not
  already reflected in the calculation of EBITDA, other capitalized costs,
  defined as the gross amount paid in cash and capitalized during the Defined
  Period, as long term assets, other than amounts capitalized during the
  Defined Period as capital expenditures for property, plant and equipment or
  similar fixed asset accounts

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Operating Cash Flow

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Fixed Charge Coverage
  Ratio (Ratio of Operating Cash Flow to Fixed Charges) for the Defined 

  Period

  	
   

  	
       
  to 1.0

  
	
   

  	
   

  	
   

  
	
  Minimum Fixed Charge
  Coverage for the Defined Period

  	
   

  	
       
  to 1.0

  
	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  

 

Exhibit C - Page 9

 

INTEREST
COVERAGE RATIO

(Section 6.4)

 

	
  Total Interest Expense
  (calculated in the manner required by Section 6.3 of the Compliance
  Certificate) for the applicable measurement period (the “Defined Period”)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  EBITDA for the Defined
  Period (calculated in the manner required by Section 6.3 of the
  Compliance Certificate)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Interest Coverage Ratio
  (Ratio of EBITDA to Interest Expenses) for the Defined Period

  	
   

  	
        
  to 1.0

  
	
   

  	
   

  	
   

  
	
  Minimum Required
  Interest Coverage Ratio for the Defined Period

  	
   

  	
        
  to 1.0

  
	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  

 

Exhibit C - Page 10

 

TOTAL
DEBT TO EBITDA RATIO

(Section 6.5)

 

	
  Total
  Debt:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Average daily principal
  balance of the Revolving Loans for the one month period ending on the last
  day of the applicable measurement period (the “Defined Period”)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus:  Outstanding principal
  balance of the Term Loans as of the last day of the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Letter
  of Credit Liabilities as of the last day of the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Outstanding
  principal balance of all other Debt of Holdings and its Consolidated
  Subsidiaries as of the last day of the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Debt

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  EBITDA for the Defined
  Period (calculated in the manner required by Section 6.2 of the
  Compliance Certificate)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Total Debt to EBITDA
  Ratio (ratio of Total Debt to EBITDA for the Defined Period)

  	
   

  	
        to
  1.0

  
	
   

  	
   

  	
   

  
	
  Maximum
  Permitted Total Debt to EBITDA Ratio for the Defined Period 

  	
   

  	
        to
  1.0

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  

 

Exhibit C - Page 11

 

Schedule 1
to 

Compliance Certificate

 

[Borrower
to list any existing Defaults or Events of Default, specifying the nature and
period of existence of each, and the actions Borrower has taken, is undertaking
and proposes to take in respect thereof. If no Defaults and no Events of
Default are then in existence, such schedule should read “None”.]

 

Exhibit C - Page 12

 

	
   Exhibit D to Credit Agreement
  (Borrowing Base Certificate)

  

 

Merrill
Lynch Capital

 

Borrowing
Base Report Summary

 

	
  Date:

  	
   

  	
   

  	
   

  	
  Report
  #:                  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Period Covered:
                 
  to
                 

  
	
   

  	
   

  	
  Customer #

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Availability

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EBITDA
  as shown on Borrower’s most recent Compliance Certificate

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Multiplied
  by 3.25

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  less

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total Debt (as shown on
  Borrower’s most recent Compliance Certificate)

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total Availability

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facility
  Limit

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Revolving Loan
  Commitment

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Borrowing Base
  Availability

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Loans
  Outstanding

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Current Loan Balance

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Less: Available
  Collections

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Add: Borrowings

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Ending Loan Balance
  this Report

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Final
  Availability

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Excess/(Short)
  Borrowing Base

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
											

 

Pursuant to, and in
accordance with, the terms and provisions of the loan documents (“Documents”),
between Merrill Lynch Capital, a division of Merrill Lynch Business Financial
Services Inc., as Administrative Agent (“Secured Party”), certain financial
institutions, as lenders, and OMP, Inc. (“Borrower”), Borrower is
executing and delivering to Secured Party this Borrowing Base Report
accompanied by supporting data (collectively referred to as (“Report”).
Borrower warrants and represents to Secured Party that this Report is true,
correct, and based on information contained in Borrower’s own financial
records. Borrower, by the execution of this Report, hereby ratifies, confirms
and affirms all of the terms, conditions and provisions of the Documents, and
further certifies that the Borrower is in compliance with the documents as of
                                                       .
This document does not supersede any provisions of the Credit Agreement.

 

	
   

  	
   

  	
   

  	
  (Borrower)

  
	
   

  	
   

  	
   

  	
  (Title)

  

 

Exhibit D - Page 1

 

	
   Exhibit E to Credit Agreement (Notice
  of Borrowing)

  

 

OMP, INC.

 

Date:
              ,
     

 

This certificate is given
by                                    ,
a Responsible Officer of OMP, Inc. (“Borrower”),
pursuant to Section [2.2(b)/2.3(e)]
of that certain Credit Agreement dated as of January 28, 2005 among
Borrower, the Lenders from time to time party thereto and Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as Administrative
Agent for Lenders (as such agreement may have been amended, restated,
supplemented or otherwise modified from time to time the “Credit Agreement”). Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.

 

The undersigned
Responsible Officer hereby gives notice to Administrative Agent of Borrower’s
request to: [complete as appropriate]

 

(a)                     on [date]
borrow $[                   ]
of Revolving Loans, which Revolving Loans shall be [Base Rate Loans/LIBOR Loans having an Interest Period of              month(s)];

 

(b)                    on [date] convert $[                   ]
of the aggregate outstanding principal amount of the [                   ]
Loan, bearing interest at the [                   ]
Rate, into a(n) [                   ]
Loan [and, in the case of a LIBOR Loan,
having an Interest Period of [                   ] month(s)];

 

(c)                     on [date] continue $[                   ]
of the aggregate outstanding principal amount of the [                   ]
Loan, bearing interest at the LIBOR, as a LIBOR Loan having an Interest Period
of [                   ]
month(s).

 

The undersigned officer
hereby certifies that, both before and after giving effect to the request above
(i) each of the conditions precedent set forth in Section 7.2(b), 7.2(c) and
7.2(d) have been satisfied, (ii) all of the representations and
warranties contained in the Credit Agreement and the other Financing Documents
are true, correct and complete as of the date hereof, except to the extent such
representation or warranty relates to a specific date, in which case such
representation or warranty is true, correct and complete as of such earlier
date, and (iii) no Default or Event of Default has occurred and is
continuing on the date hereof.

 

Exhibit E - Page 1

 

IN WITNESS WHEREOF, the
undersigned officer has executed and delivered this certificate this
      day of
                   ,
      .

 

 

	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  	
  of Borrower

  

 

Exhibit E - Page 2

 

	
   Exhibit F to Credit Agreement (Payment
  Notification)

  

 

OMP, INC.

 

Date:              ,
       

 

Reference is hereby made
to the Credit Agreement dated January 28, 2005 among the undersigned,
Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services
Inc., as Administrative Agent and the financial institutions party thereto.
Capitalized terms used here have the meanings ascribed thereto in the Credit
Agreement.

 

Please be advised that
funds in the amount of
$                          
will be wire transferred to Administrative Agent on
                       ,
200  . Such funds shall constitute [an optional]
[a mandatory] prepayment of the Term
Loans, with such prepayments to be applied in the manner specified in Section 2.1(e)(i).
[Such mandatory prepayment is being made
pursuant to Section 2.1(c) [(i), (ii), (iii) or (iv)] of the
Credit Agreement.]

 

Fax
to MLC Operations 312-499-3336 no later than noon Chicago time

 

Note:
Funds must be received no later than noon Chicago time for same day application

 

	
  Wire
  Instructions:

  	
   

  	
   

  
	
  Bank
  Name:

  	
   

  	
  LaSalle Bank National
  Association 

  135 S. LaSalle Street 

  Chicago, IL 60603

  
	
   

  	
   

  	
   

  
	
  ABA#
  

  	
   

  	
  0710-0050-5

  
	
  Account
  Name:

  	
   

  	
  MLBFS Corporate Finance

  
	
  Account
  #:

  	
   

  	
  5800393182

  
	
  Reference:

  	
   

  	
  (Client Name)

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Merrill Lynch Capital 

  222 N. LaSalle Street, 16th Floor 

  Chicago, IL 60601

  

 

Exhibit F - Page 1

 

IN WITNESS WHEREOF, the
undersigned officer has executed and delivered this certificate this
                    
day of                     ,
        .

 

 

	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  	
  of Borrower

  

 

Exhibit F - Page 2

 

 

FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER

 

THIS FIRST AMENDMENT TO CREDIT
AGREEMENT AND WAIVER (this “Amendment”), dated as of June       ,
2005, is by and among OMP, INC., a
Delaware corporation (the “Borrower”),
the Lenders (as such term is defined in the Credit Agreement referred to
below), and MERRILL LYNCH CAPITAL,
a division of Merrill Lynch Business Financial Services Inc., as administrative
agent for the Lenders (in such capacity, the “Administrative
Agent”) and each of the other Persons who are signatories hereto
(Borrower and each such other Person is individually referred to herein as a “Credit Party” and collectively as the “Credit Parties”).

 

R E C I T A L S:

 

WHEREAS, the
Borrower, Lenders and Administrative Agent are parties to that certain Credit
Agreement dated as of January 28, 2005 (as the same has been and may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”), pursuant to which
the Lenders made certain loans and other financial accommodations to the
Borrower;

 

WHEREAS, the Events
of Default specified on Schedule I hereto (the “Specified Defaults”) have occurred and are continuing and
Borrower has requested that Administrative Agent and Lenders waive such
Specified Defaults; and

 

WHEREAS, the
parties to the Credit Agreement desire to amend the Credit Agreement on the
terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in
consideration of the mutual agreements, provisions and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties agree as follows:

 

1.             Defined
Terms.  Capitalized terms used but
not defined herein shall have the respective meanings ascribed to such terms in
the Credit Agreement.

 

2.             Waiver.  Effective as of the First Amendment Closing
Date, upon satisfaction of the conditions precedent set forth in Section 4
hereof, Administrative Agent and the Lenders waive the Specified Defaults.

 

3.             Amendments.  Subject to the terms and conditions herein
contained, the Credit Agreement hereby is amended as follows:

 

(a)           Section 1.1 of the
Credit Agreement hereby is amended by deleting the definition of “McNamara
Investor Rights Agreement” and substituting the following therefor:

 

“McNamara Investor Rights Agreement”
means that certain Investor’s Rights Agreement dated as of April 1, 2002
among Holdings, Austin T. McNamara and the McNamara Trusts, as in effect as of
the First Amendment Effective Date.

 

 

(b)           Section 1.1 of the
Credit Agreement hereby is amended by adding the following definitions thereto
in the correct alphabetical order:

 

“First Amendment Effective Date”
means June     , 2005.

 

“McNamara Trusts”
means, collectively, (i) the McNamara Family Irrevocable Trust Under
Agreement Dated December 17, 2004 and (ii) the McNamara Irrevocable
Trust.

 

(c)           Section 5.4(a) of
the Credit Agreement hereby is deleted in its entirety and the following
language hereby is substituted therefor:

 

“(a)  the purchase of shares of (or options to
purchase shares of) capital stock in Holdings from any of (i) Austin T.
McNamara (or his estate) or the McNamara Trusts or (ii) Zein Obagi, M.D.
(or his estate), in each case (x) upon the death, termination of employment or
retirement of Austin T. McNamara or Zein Obagi, M.D., respectively, (y) either
at the option of Holdings or as may be required of Holdings, pursuant to and in
accordance with the McNamara Investor Rights Agreement and the Obagi Investor’s
Rights Agreement, as applicable, and (z) so long as (A) before and after
giving effect to any such dividend or distribution for such purpose, (i) no
Event of Default shall have occurred and be continuing (including, Borrower is
able to demonstrate compliance on a pro forma basis with the covenants set
forth in Article 6 recomputed for the most recently ended quarter for
which information is available and is in compliance with all other terms and
conditions of this Agreement), and (ii) if such dividend or distribution
is made prior to the Commitment Expiry Date, the Revolving Loan Limit minus the
Revolving Loan Outstandings is equal to or greater than $2,000,000, and (B) the
aggregate of all such purchases or payments (whether voluntary or mandatory on
the part of Holdings) after the date hereof does not exceed $1,500,000 in any
Fiscal Year and does not exceed $5,000,000 from and after the Closing Date;”

 

(d)           Section 5.4(c) of
the Credit Agreement hereby is deleted in its entirety and the following
language hereby is substituted therefor:

 

“(c)         Holdings to effect and
consummate the Repurchase and the Closing Date Distributions in accordance with
the terms of the Repurchase Agreement and to pay all costs and expenses
incurred in connection therewith (including, without limitation, the $1,000,000
fee payable to Investor and set forth on Schedule 3.15).”

 

4.             Conditions.  The effectiveness of this Amendment is
subject to the following conditions precedent:

 

(a)           the execution and
delivery of this Amendment by each Credit Party, Administrative Agent and
Required Lenders;

 

 

(b)           Borrower shall have
delivered to Administrative Agent a fully executed and effective control
agreement with Comerica Bank granting Administrative Agent control over all
deposit accounts maintained therewith; and

 

(c)           the truth and accuracy
of the representations and warranties contained in Section 5 hereof in all
material respects.

 

5.             Representations
and Warranties.  Each Credit Party
hereby represents and warrants to Administrative Agent and each Lender as
follows:

 

(a)           the representations and
warranties of each Credit Party contained in the Financing Documents are true
and correct as of the date hereof in all material respects (except to the
extent any such representation or warranty is qualified by materiality,
Material Adverse Effect or words of similar import, in which case such
representation or warranty shall be true and correct in all respects), except
to the extent that any such representation or warranty relates to a specific
date, in which case such representation and warranty shall be true and correct
as of such earlier date;

 

(b)           the execution, delivery
and performance by each Credit Party, as applicable, of this Amendment are
within its powers, have been duly authorized by all necessary action pursuant
to its Organizational Documents, require no further action by or in respect of,
or filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of applicable
law or regulation or of the Organizational Documents of any Credit Party or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon it;

 

(c)           this Amendment
constitutes the valid and binding obligation of the Credit Parties, enforceable
against such Credit Parties in accordance with its terms, except as the
enforceability hereof may be limited by applicable bankruptcy, insolvency, or
similar laws relating to the enforcement of creditor’s rights generally and by
general equitable principles; and

 

(d)           after giving effect to
the waiver with respect to the Specified Defaults, no Default or Event of
Default exists.

 

6.             No
Waiver.  Nothing contained herein
shall be deemed to constitute a waiver of compliance with any term or condition
contained in the Credit Agreement or any of the other Financing Documents or
constitute a course of conduct or dealing among the parties thereto.  Except as expressly stated herein,
Administrative Agent and each Lender reserve all rights, privileges and
remedies under the Financing Documents. 
Except as amended hereby, the Credit Agreement and other Financing
Documents remain unmodified and in full force and effect.  All references in the Financing Documents to
the Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.

 

7.             Severability.  In case any provision of or obligation under
this Amendment shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

 

8.             Headings.  Headings and captions used in this Amendment
(including Schedule I attached hereto) are included for convenience of
reference only and shall not be given any substantive effect.

 

9.             GOVERNING LAW;
SUBMISSION TO JURISDICTION.  THIS AMENDMENT AND ALL
MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN
CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY
AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE OTHER FINANCING
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. 
BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE
MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AMENDMENT AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

10.          WAIVER OF JURY TRIAL.  EACH OF EACH CREDIT PARTY, ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.  EACH OF EACH CREDIT
PARTY, ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AMENDMENT, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH OF EACH CREDIT PARTY, ADMINISTRATIVE
AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY
OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

11.           Waiver.  Borrower
and each other Credit Party, on behalf of each such Credit Party and their
respective executors, successors and assigns, hereby waives, releases and
discharges Administrative Agent and the Lenders and all of the affiliates,
directors, officers, employees, attorneys and agents of Administrative Agent
and the Lenders, from any and all claims, demands, actions or causes of action
arising out of or in any way relating to the Financing Documents occurring on
or before the date hereof and any documents, agreements, 

 

 

dealings or other matters connected with the Financing Documents,
including, without limitation, all known and unknown matters, claims or
transactions occurring on or before the date hereof.

 

12.           Counterparts;
Integration.  This Amendment may be executed and
delivered via facsimile or electronic means with the same force and effect as
if an original were executed and may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
hereto were upon the same instrument. 
This Amendment constitutes the entire agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersede any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof.

 

13.           Reaffirmation.
Each of the Credit Parties as debtor, grantor, guarantor, assignor, as
applicable, or in any other similar capacity in which such Credit Party grants
liens or security interests in its property or otherwise acts as accommodation
party or guarantor, as the case may be, hereby (i) ratifies and reaffirms
all of its payment and performance obligations, contingent or otherwise, under
each of the Financing Documents to which it is a party and (ii) to the
extent such Credit Party granted liens on or security interests in any of its
property pursuant to any such Financing Document as security for or otherwise
guaranteed the Borrower’s Obligations under or with respect to the Financing
Documents, ratifies and reaffirms such guarantee and grant of security
interests and liens and confirms and agrees that such security interests and
liens hereafter secure all of the Obligations as amended hereby.  Each of the Credit Parties hereby consents to
this Amendment and acknowledges that each of the Financing Documents remains in
full force and effect and is hereby ratified and reaffirmed.  The execution of this Amendment shall not
operate as a waiver of any right, power or remedy of the Administrative Agent
or Lenders, constitute a waiver of any provision of any of the Financing
Documents or serve to effect a novation of the Obligations.

 

[ Remainder of Page Intentionally
Left Blank; Signature Page Follows ]

 

 

IN WITNESS WHEREOF, the parties have executed this
Amendment as of the date set forth above.

 

	
   

  	
  CREDIT
  PARTIES:

  
	
   

  	
   

  
	
   

  	
  OMP, INC., a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis A Cluff

  	
   

  
	
   

  	
  Name:

  	
  Curtis A Cluff

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OBAGI MEDICAL PRODUCTS, INC.,
  a

  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis A Cluff

  	
   

  
	
   

  	
  Name:

  	
  Curtis A Cluff

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADMINISTRATIVE AGENT AND LENDERS:

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH CAPITAL,
  a division of

  Merrill Lynch Business Financial Services Inc.,

  as Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Luis Viera

  	
   

  
	
   

  	
  Name:

  	
  Luis Viera

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FRIEDBERGMILSTEIN PRIVATE

  
	
   

  	
  CAPITAL FUND I,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  FriedbergMilstein, LLC,

  
	
   

  	
   

  	
  its Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Eric A. Green

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Eric A. Green

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MCG CAPITAL CORPORATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
											

 

 

	
   

  	
  RACE POINT CLO, LIMITED,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Sankaty Advisors, LLC,

  	
   

  
	
   

  	
   

  	
  as Collateral Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RACE POINT II CLO, LIMITED,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AVERY POINT CLO, LIMITED,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASTLE HILL II-INGOTS, LTD.
  , as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Sankaty Advisors, LLC as Collateral

  	
   

  
	
   

  	
  Manager for Loan Funding XI LLC,

  	
   

  
	
   

  	
  as Term Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
   

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
   

  	
  SENIOR VICE PRESIDENT

  	
   

  
												

 

 

	
   

  	
  CASTLE HILL III CLO, LTD.
  , as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  TIMOTHY BARNS

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LONG LANE MASTER TRUST IV,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Meredith J. Koslick

  	
   

  
	
   

  	
  Name:

  	
  Meredith J. Koslick

  	
   

  
	
   

  	
  Title:

  	
  Authorized Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROSPECT FUNDING I, LLC,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARBOUR TOWN FUNDING LLC,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Meredith J. Koslick

  	
   

  
	
   

  	
  Name:

  	
  Meredith J. Koslick

  	
   

  
	
   

  	
  Title:

  	
  Assistant Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAPS CLO FUND I, LLC,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James A. Fisher

  	
   

  
	
   

  	
  Name:

  	
  James A. Fisher

  	
   

  
	
   

  	
  Title:

  	
  SMD

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NEWSTAR CP FUNDING LLC,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  NewStar Financial, Inc., its designated

  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
											

 

 

	
   

  	
  HUDSON STRAITS CLO 2004, LTD.
  , as a

  Lender

  
	
   

  	
   

  
	
   

  	
  By: Royal Bank of Canada, as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Melissa Marano

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Melissa Marano

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FOXE BASIN CLO 2003, LTD.
  , as a Lender

  
	
   

  	
   

  
	
   

  	
  By: Royal Bank of Canada, as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Melissa Marano

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Melissa Marano

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLT, L.P. , as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By: Royal Bank of Canada, as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Melissa Marano

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Melissa Marano

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth Gacevich

  	
   

  
	
   

  	
  Name:

  	
  Kenneth Gacevich

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
										

 

 

Schedule I

 

Pursuant to that certain letter agreement dated as of January 28,
2005 permitting certain conditions precedent to the effectiveness of the Credit
Agreement to be satisfied after the Closing Date, the Borrower agreed to
deliver to Administrative Agent, in form and substance satisfactory to
Administrative Agent, the items described on Exhibit A thereto (the “Delivery Requirements”) on or before the
dates specified with respect to such items (the “Delivery Deadlines”). 
Although as of the First Amendment Closing Date, all Delivery
Requirements have been satisfied, none of the Delivery Requirements were
satisfied on or before the Delivery Dates, therefore Events of Default exist
prior to the First Amendment Effective Date.

 

 

SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT

 

THIS SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”), dated as of
September     , 2006, is by and among OMP, INC., a Delaware corporation (the “Borrower”), the Lenders (as such term is
defined in the Credit Agreement referred to below), and MERRILL LYNCH CAPITAL, a division of
Merrill Lynch Business Financial Services Inc., as administrative agent for the
Lenders (in such capacity, the “Administrative
Agent”) and each of the other Persons who are signatories hereto
(Borrower and each such other Person is individually referred to herein as a “Credit Party” and collectively as the “Credit Parties”).

 

R E C I T A L S:

 

WHEREAS, the Borrower, Lenders and Administrative
Agent are parties to that certain Credit Agreement dated as of January 28,
2005 (as the same has been and may hereafter be amended, restated, supplemented
or otherwise modified from time to time, the “Credit
Agreement”), pursuant to which the Lenders made certain loans and
other financial accommodations to the Borrower;

 

WHEREAS, the Events of Default specified on Schedule 1
hereto (the “Specified Defaults”)
have occurred and are continuing and Borrower has requested that Administrative
Agent and Lenders waive such Specified Defaults; and

 

WHEREAS, the parties to the Credit Agreement desire
to amend the Credit Agreement and waive the Specified Defaults on the terms and
subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the
mutual agreements, provisions and covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which hereby
are acknowledged, the parties agree as follows:

 

1.             Defined Terms.  Capitalized terms used but not defined herein
shall have the respective meanings ascribed to such terms in the Credit
Agreement.

 

2.             Waiver.    Effective as of the date hereof, upon
satisfaction of the conditions precedent set forth in Section 5 hereof,
Administrative Agent and the Lenders hereby waive the Specified Defaults.

 

3.             Amendments.  Subject to the terms and conditions herein
contained, the Credit Agreement hereby is amended as follows:

 

(a)           Section 1.1 of
the Credit Agreement hereby is amended by amending and restating the
definitions of “Base Rate Margin” and “LIBOR Margin” in their entirety to read
as follows:

 

“Base Rate Margin” means (i) as of the
Closing Date, 2.25% per annum,
with respect to the Revolving Loans, Swingline Loans, Term Loan A and other
Obligations (other than Term Loan B), and 2.50% per annum with respect to

 

 

Term
Loan B and (ii) thereafter, as of each Adjustment Date, the applicable
percent per annum set forth in the Pricing Table corresponding to the Total
Debt to EBITDA Ratio as of the last day of the most recently completed calendar
quarter prior to the applicable Adjustment Date; provided,
that if an Event of Default has occurred and is continuing on an Adjustment
Date, no reduction in the Base Rate Margin shall occur on such Adjustment
Date.  Notwithstanding anything set forth
herein to the contrary, the Base Rate Margin during the period commencing on
August 1, 2006 through and including the first Business Day of February,
2007 shall be deemed to be 2.50% per annum, with respect to the Revolving
Loans, Swingline Loans, Term Loan A and other Obligations (other than Term Loan
B), and 2.75% per annum with respect to Term Loan B.

 

“LIBOR Margin” means (i) as of the
Closing Date, 3.75% per annum,
with respect to the Revolving Loans, Term Loan A and other Obligations (other
than the Swingline Loans and Term Loan B), and 4.00% per annum with respect to
Term Loan B and (ii) thereafter, as of each Adjustment Date, the
applicable percent per annum set forth in the Pricing Table corresponding to
the Total Debt to EBITDA Ratio as of the last day of the most recently
completed calendar quarter prior to the applicable Adjustment Date; provided, that if an Event of Default has occurred and is
continuing on an Adjustment Date, no reduction in the LIBOR Margin shall occur
on such Adjustment Date.  Notwithstanding
anything set forth herein to the contrary, the LIBOR Margin during the period
commencing on August 1, 2006 through and including the first Business Day
of February, 2007 shall be deemed to be 4.00% per annum, with respect to the
Revolving Loans, Term Loan A and other Obligations (other than the Swingline
Loans and Term Loan B), and 4.25% per annum with respect to Term Loan B.

 

(b)           Section 6.2 of
the Compliance Certificate is amended by adding the following add-back to the
calculation of “EBITDA” immediately prior to the words “EBITDA for the Defined
Period” on Page 7 of said Exhibit C:

 

“Expenses,
costs and fees deducted in the determination of net income and incurred during
the Defined Period (and in any event, on or prior to December 31, 2006) to
consummate the initial public offering of the Borrower in an aggregate amount
not to exceed $3,000,000; provided that
such expenses, costs and fees shall be deemed to be $0 for all Compliance
Certificates delivered on or after December 31, 2007; provided,
further, that it is understood and
acknowledged that this add-back shall not be included in the calculation of
EBITDA for the purposes of determining the applicable Base Rate Margin or LIBOR
Margin”

 

2

 

(c)           Section 6.5 of
the Compliance Certificate is amended by adding the following subtraction from
the calculation of “Total Debt” immediately prior to the word “Total Debt” on
Page 11 of said Exhibit C:

 

“Less:            Cash on hand in excess of
$1,000,000 as reflected on the balance sheet delivered to Administrative Agent
pursuant to Section 4.1(a) of the Credit Agreement as at the end of
the Defined Period; provided, that
it is understood and acknowledged that this subtraction shall not be included
in the calculation of Total Debt for the purposes of determining the applicable
Base Rate Margin or LIBOR Margin”

 

4.             Delivery of Financial Statements.  Borrower shall deliver to the Administrative
Agent and each Lender, with respect to its Fiscal Year ended December 31, 2005,
the items required by Section 4.1(b) of the Credit Agreement on or
prior to September 29, 2006.  The
failure of the Borrower to satisfy this Section 4 on or prior to
September 29, 2006 shall constitute an immediate Event of Default under
the Credit Agreement.

 

5.             Conditions.  The effectiveness of this Amendment is
subject to the following conditions precedent:

 

(a)           the execution and
delivery of this Amendment by each Credit Party, Administrative Agent and
Required Lenders;

 

(b)           receipt by
Administrative Agent for the account of each Lender party hereto a
non-refundable amendment fee in an aggregate amount equal to one-eighth of one
percent (0.125%) of the sum of the Revolving Loan Commitment and the aggregate
outstanding principal amount of the Term Loan A and the Term Loan B, which fee
shall be fully earned and due and payable in cash on the date hereof; and

 

(c)           the truth and
accuracy of the representations and warranties contained in Section 6
hereof in all material respects.

 

6.             Representations and Warranties.  Each Credit Party hereby represents and
warrants to Administrative Agent and each Lender as follows:

 

(a)           the representations
and warranties of each Credit Party contained in the Financing Documents are
true and correct as of the date hereof in all material respects (except to the
extent any such representation or warranty is qualified by materiality,
Material Adverse Effect or words of similar import, in which case such
representation or warranty shall be true and correct in all respects), except
to the extent that any such representation or warranty relates to a specific
date, in which case such representation and warranty shall be true and correct
as of such earlier date;

 

3

 

(b)           the execution, delivery
and performance by each Credit Party, as applicable, of this Amendment are
within its powers, have been duly authorized by all necessary action pursuant
to its Organizational Documents, require no further action by or in respect of,
or filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of applicable
law or regulation or of the Organizational Documents of any Credit Party or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon it;

 

(c)           this Amendment
constitutes the valid and binding obligation of the Credit Parties, enforceable
against such Credit Parties in accordance with its terms, except as the
enforceability hereof may be limited by applicable bankruptcy, insolvency, or
similar laws relating to the enforcement of creditor’s rights generally and by
general equitable principles; and

 

(d)           after giving effect
to the waiver with respect to the Specified Defaults, no Default or Event of
Default exists.

 

7.             No Waiver.  Nothing contained  herein shall be deemed to constitute a waiver
of compliance with any term or condition contained in the Credit Agreement or
any of the other Financing Documents or constitute a course of conduct or dealing
among the parties thereto.  Except as
expressly stated herein, Administrative Agent and each Lender reserve all
rights, privileges and remedies under the Financing Documents.  Except as amended hereby, the Credit
Agreement and other Financing Documents remain unmodified and in full force and
effect.  All references in the Financing
Documents to the Credit Agreement shall be deemed to be references to the
Credit Agreement as amended hereby.

 

8.             Severability.  In case any provision of or obligation under
this Amendment shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

9.             Headings.  Headings and captions used in this Amendment
(including Schedule 1 attached hereto) are included for convenience of
reference only and shall not be given any substantive effect.

 

10.          GOVERNING
LAW; SUBMISSION TO JURISDICTION. 
THIS AMENDMENT AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING
THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.  BORROWER HEREBY CONSENTS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF
NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE
OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND

 

4

 

CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. 
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER
AT THE ADDRESS SET FORTH IN THIS AMENDMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

11.          WAIVER
OF JURY TRIAL.  EACH OF EACH CREDIT
PARTY, ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AMENDMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 
EACH OF EACH CREDIT PARTY, ADMINISTRATIVE AGENT AND EACH LENDER
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AMENDMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS.  EACH OF EACH CREDIT
PARTY, ADMINISTRATIVE AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH
HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

12.           Waiver.  Borrower
and each other Credit Party, on behalf of each such Credit Party and their
respective executors, successors and assigns, hereby waives, releases and
discharges Administrative Agent and the Lenders and all of the affiliates,
directors, officers, employees, attorneys and agents of Administrative Agent
and the Lenders, from any and all claims, demands, actions or causes of action
arising out of or in any way relating to the Financing Documents occurring on
or before the date hereof and any documents, agreements, dealings or other
matters connected with the Financing Documents, including, without limitation,
all known and unknown matters, claims or transactions occurring on or before
the date hereof.

 

13.           Counterparts; Integration.  This
Amendment may be executed and delivered via facsimile or electronic means with
the same force and effect as if an original were executed and may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures hereto were upon the same instrument.  This Amendment constitutes the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.

 

14.           Reaffirmation. Each of the
Credit Parties as debtor, grantor, guarantor, assignor, as applicable, or in
any other similar capacity in which such Credit Party grants liens or security
interests in its property or otherwise acts as accommodation party or
guarantor, as the case may be, hereby (i) ratifies and reaffirms all of
its payment and performance obligations, contingent or otherwise, under each of
the Financing Documents to which it is a party and (ii) to the extent

 

5

 

such
Credit Party granted liens on or security interests in any of its property
pursuant to any such Financing Document as security for or otherwise guaranteed
the Borrower’s Obligations under or with respect to the Financing Documents,
ratifies and reaffirms such guarantee and grant of security interests and liens
and confirms and agrees that such security interests and liens hereafter secure
all of the Obligations as amended hereby. 
Each of the Credit Parties hereby consents to this Amendment and
acknowledges that each of the Financing Documents remains in full force and
effect and is hereby ratified and reaffirmed. 
The execution of this Amendment shall not operate as a waiver of any
right, power or remedy of the Administrative Agent or Lenders, constitute a
waiver of any provision of any of the Financing Documents or serve to effect a
novation of the Obligations.

 

[ Remainder of Page Intentionally Left Blank;
Signature Page Follows ]

 

6

 

IN WITNESS WHEREOF, the
parties have executed this Amendment as of the date set forth above.

 

	
   

  	
  CREDIT PARTIES:

  
	
   

  	
   

  
	
   

  	
  OMP, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stephen A. Garcia

  	
   

  
	
   

  	
  Name:

  	
  Stephen
  A. Garcia

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OBAGI MEDICAL PRODUCTS, INC., a

  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Curtis A Cluff

  	
   

  
	
   

  	
  Name:

  	
  Curtis
  A Cluff

  	
   

  
	
   

  	
  Title:

  	
  Executive
  V.P.

  	
   

  
					

 

Second Amendment and Waiver to Credit
Agreement

 

 

ADMINISTRATIVE AGENT AND LENDERS:

 

MERRILL LYNCH CAPITAL, a division of

Merrill Lynch Business Financial Services Inc., 

as Administrative Agent and as a Lender

 

	
   

  	
  By:

  	
  /s/ Luis Viera

  	
   

  
	
   

  	
  Name:

  	
  Luis Viera

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  FRIEDBERGMILSTEIN PRIVATE

  
	
   

  	
  CAPITAL FUND I, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FriedbergMilstein,
  LLC,

  
	
   

  	
   

  	
  its
  Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  James A. Feeley III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Feeley III

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Partner

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  MCG CAPITAL CORPORATION, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Thomas P. McLoughlin

  	
   

  
	
   

  	
  Name:

  	
  Thomas
  P. McLoughlin

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  RACE POINT CLO, LIMITED, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RACE POINT II CLO, LIMITED, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AVERY POINT CLO, LIMITED, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASTLE HILL II-INGOTS, LTD. , as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
										

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  CASTLE HILL III CLO, LTD. , as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROSPECT FUNDING I, LLC, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARBOUR TOWN FUNDING LLC, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  MURCHISON TAYLOR

  	
   

  
	
   

  	
  Name:

  	
  MURCHISON
  TAYLOR

  	
   

  
	
   

  	
  Title:

  	
  VICE
  PRESIDENT

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CASTLE HILL I — INGOTS, Ltd., as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LOAN FUNDING XI LLC, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty
  Advisors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Timothy Barns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  Barns

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  MAPS CLO FUND I, LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Its Collateral Manager, Callidus Capital

  
	
   

  	
   

  	
  Management, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mavis Taintor

  	
   

  
	
   

  	
  Name:

  	
  Mavis
  Taintor

  	
   

  
	
   

  	
  Title:

  	
  Senior
  Managing Director

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  NEWSTAR CP FUNDING LLC, as a Lender

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  NewStar Financial, Inc., its designated

  	
   

  
	
   

  	
   

  	
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

Second Amendment and Waiver to Credit
Agreement

 

 

	
   

  	
  HUDSON STRAITS CLO 2004, LTD.

  
	
   

  	
  By
  GSO Capital Partners LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee M. Shaiman

  	
   

  
	
   

  	
  Name:
  

  	
  Lee
  M. Shaiman

  	
   

  
	
   

  	
  Title:
  

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FOXE BASIN CLO 2003, LTD.

  
	
   

  	
  By:
  GSO Capital Partners LP as Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee M. Shaiman

  	
   

  
	
   

  	
  Name:

  	
  Lee
  M. Shaiman

  	
   

  
	
   

  	
  Title:

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLT, L.P. , as a Lender

  
	
   

  	
   

  
	
   

  	
  By:
  Royal Bank of Canada, as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Gale
  Force I CLO, Ltd.

  
	
   

  	
  By:
  GSO Capital Partners LP as Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lee M. Shaiman

  	
   

  
	
   

  	
  Name:

  	
  Lee
  M. Shaiman

  	
   

  
	
   

  	
  Title:

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  280
  FUNDING I

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  GEORGE FAN

  	
   

  
	
   

  	
  Name:

  	
  GEORGE
  FAN

  	
   

  
	
   

  	
  Title:

  	
  AUTHORIZED
  SIGNATORY

  	
   

  
						

 

Second Amendment and Waiver to Credit Agreement

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dominic Barakat

  	
   

  
	
   

  	
  Name:

  	
  Dominic
  Barakat

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLTS
  2005-2 LTD., as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Structured
  Asset Investors, LLC,

  
	
   

  	
   

  	
  as
  Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dominic Barakat

  	
   

  
	
   

  	
  Name:

  	
  Dominic
  Barakat

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  
					

 

Second Amendment and Waiver to Credit
Agreement

 

 

SCHEDULE 1

 

Specified Defaults

 

1.             Events of Default have occurred and
are continuing pursuant to Section 8.1(b) of the Credit Agreement due
to (i) the Fixed Charge Coverage Ratio for the 12-month period ending on
June 30, 2006 being less than the minimum permitted amount set forth in
Section 6.3 of the Credit Agreement, (ii) the Total Debt to EBITDA
Ratio for the 12 month period ending on June 30, 2006 exceeding the
maximum permitted amount set forth in Section 6.5 of the Credit Agreement
and (iii) the EBITDA for the 12 month period ending on June 30, 2006
being less than the minimum permitted amounts set forth in Sections 6.2 of the
Credit Agreement.

 

2.             An Event of Default has occurred
and is continuing pursuant to Section 8.1(b) of the Credit Agreement
as a result of Borrower’s failure to timely deliver its consolidated and
consolidating financial statements pursuant to and in accordance with the terms
of Section 4.1(b) of the Credit Agreement for its Fiscal Year ended
December 31, 2005.

 

Second Amendment and Waiver to Credit
Agreement

 

THIRD AMENDMENT TO CREDIT AGREEMENT

THIS THIRD
AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of November 13, 2006,
is by and among OMP, INC., a
Delaware corporation (the “Borrower”),
the Lenders (as such term is defined in the Credit Agreement referred to
below), and MERRILL LYNCH CAPITAL,
a division of Merrill Lynch Business Financial Services Inc., as administrative
agent for the Lenders (in such capacity, the “Administrative
Agent”) and each of the other Persons who are signatories hereto (Borrower
and each such other Person is individually referred to herein as a “Credit Party” and collectively as the “Credit Parties”).

R E C I T A L S:

WHEREAS, the Borrower,
Lenders and Administrative Agent are parties to that certain Credit Agreement
dated as of January 28, 2005 (as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the
Lenders made certain loans and other financial accommodations to the Borrower;
and

WHEREAS, the parties
to the Credit Agreement desire to amend the Credit Agreement on the terms and
subject to the conditions set forth herein.

NOW,
THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the parties agree as follows:

                1. Defined Terms.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed to such terms in the Credit Agreement.

 

                2. Amendments. Subject to
the terms and conditions herein contained, the Credit Agreement hereby is
amended as follows:

 

(a) Section 1.1 of the
Credit Agreement is hereby amended by adding the following definitions in the
proper alphabetical order:

“IPO”
means the initial public offering (including any over-allotment option) of the
equity securities of Holdings to be consummated on or prior to March 31, 2007.

“McNamara
Debt” means Debt of Holdings owing to Austin T. McNamara (or his
estate) or the McNamara Trusts (and their respective successors and assigns) in
a maximum principal amount of $28,201,250 (exclusive of capitalized interest,
fees and costs) incurred pursuant to and in accordance with the terms of the
McNamara Notes.

“McNamara
Note(s)” means that certain promissory note(s) by Holdings in favor
of Austin T. McNamara (or his estate) or the McNamara Trusts in the original
maximum aggregate principal amount of $28,201,250, which notes were issued as

 

 

consideration for the
purchase of shares of capital stock in Holdings from Austin T. McNamara and/or
the McNamara Trusts pursuant to and in accordance with the McNamara Investor
Rights Agreement and shall conform exactly to the form and substance of Exhibit
B to the Third Amendment.

“McNamara Payment Condition” means the release and discharge by
Austin T. McNamara, on terms and conditions satisfactory to the Administrative
Agent and Required Lenders, of all damages, losses, claims, demands,
liabilities, obligations, actions or causes of action whatsoever which Austin
T. McNamara may have or claim to have against any Credit Party and its
affiliates, subsidiaries, successors, assigns, directors, officers, employees,
agents, consultants and attorneys, whether known or unknown and of every nature
and extent whatsoever.

“Third Amendment” means that certain Third Amendment to Credit
Agreement, dated as of November 13, 2006, by and among the Borrower, the other
Credit Parties, the Lenders and the Administrative Agent.

(b) Sections 2.1(c)(i),
(c)(ii) and (c)(iii) of the Credit Agreement are hereby amended and restated in
their entirety to read as follows:

“(i) on the ninety-fifth (95th) day following the last day
of each Fiscal Year, beginning with the Fiscal Year ending December 31, 2005,
an amount equal to (x) seventy five percent (75.0%) (or, after the consummation
of the IPO, fifty percent (50.0%)) of Excess Cash Flow for such Fiscal Year if
Borrower’s Total Debt to EBITDA Ratio as of such Fiscal Year end is greater
than or equal to 2.0 to 1.0 and (y) fifty percent (50%) (or, after the
consummation of the IPO, twenty-five percent (25.0%)) at all other times;

(ii) on the date on
which any Credit Party (or Administrative Agent as loss payee or assignee)
receives any Major Casualty Proceeds, an amount equal to one hundred percent
(100%) of such Major Casualty Proceeds; provided,
that, so long as no Default or Event of Default has occurred and is continuing,
the recipient (other than Administrative Agent) of any Major Casualty Proceeds
may reinvest such Major Casualty Proceeds within one hundred eighty (180) days,
in replacement assets comparable to the assets giving rise to such Major
Casualty Proceeds; provided, that
the aggregate amount which may be reinvested by Borrower and its Subsidiaries
pursuant to the preceding proviso may not exceed $1,000,000 (or, after the
consummation of the IPO, $1,500,000) in any Fiscal Year; provided, further,
that if the applicable Credit Party does not intend to fully reinvest such
Major Casualty Proceeds, or if the time period set forth in this sentence
expires without such Credit Party having reinvested such Major Casualty
Proceeds, Borrower shall prepay the Loans in an amount equal to such Major
Casualty Proceeds (to the extent not reinvested or intended to be reinvested
within such time period);

(iii) upon receipt by any Credit Party of the proceeds from the issuance and
sale of any Debt or equity securities (other than (1) proceeds of Debt
securities

 

2

 

expressly permitted pursuant
to Section 5.1, (2) proceeds of the issuance of equity securities by Holdings
or Borrower received on or before the Closing Date, (3) proceeds of the
issuance of equity securities to Borrower or any Wholly-Owned Subsidiary, (4)
proceeds received by any Credit Party upon the exercise of employee stock
options not otherwise prohibited by the terms of this Agreement and (5) the Net
Cash Proceeds of the IPO in excess of the greater of $35,000,000 and an amount
equal to fifty percent (50%) of such Net Cash Proceeds), an amount equal to one
hundred percent (100%) of the Net Cash Proceeds of such issuance and sale;”

                (c) Section 4.1 of the Credit
Agreement is hereby amended by adding the following paragraph at the end
thereof:

 

“It is agreed and
acknowledged that the requirement set forth in Sections 4.1(b) may be
satisfied, at Borrower’s option, by the Borrower’s filing of forms 10-K with
the Securities and Exchange Commission or any of its successors so long as such
forms are timely filed pursuant to and in accordance with the rules and
regulations promulgated from time to time by the Securities and Exchange
Commission or any of its successor and are otherwise available generally to the
Administrative Agent and the Lenders.”

 

                (d) Section 5.1(c) of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:

 

                “(c) the
McNamara Debt;”

 

                (e) Section 5.1(d) of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:

 

“(d) Debt incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
any fixed asset (including through Capital Leases), in an aggregate principal
amount at any time outstanding not greater than $500,000 (or, after the
consummation of the IPO, $1,000,000);”

                (f) Section 5.4(a) of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:

 

                “(a)
[Reserved];”

 

                (g) Section 5.4 of the Credit
Agreement is hereby further amended by replacing the phrase “; and” at the end
of clause (b) thereof with “;”, replacing the “.” at the end of clause (c)
thereof with “;” and adding new clauses (d), (e) and (f) to read as follows:

 

“ (d) a one-time prepayment
of the McNamara Notes on the date of the McNamara Notes in an amount not to
exceed $1,500,000 so long as (i) before and after giving effect to any such
dividend or distribution for such purpose, (A) no Event of Default shall have
occurred and be continuing, (B) Borrower is able to 

 

3

 

demonstrate compliance on a
pro forma basis with the covenants set forth in Article 6 recomputed for the
most recently ended quarter for which information is available and is in
compliance with all other terms and conditions of this Agreement, and (C) if
such dividend or distribution is made prior to the Commitment Expiry Date, the
Revolving Loan Limit minus the Revolving Loan Outstandings is equal to or
greater than $5,000,000;

(e) after the consummation
of the IPO, a one-time prepayment of the McNamara Notes in an amount not to
exceed the lesser of $13,500,000 and an amount equal to twenty percent (20%) of
the Net Cash Proceeds of the IPO so long as before and after giving effect to
any such dividend or distribution for such purpose, (i) no Event of Default
shall have occurred and be continuing, (ii) Borrower is able to demonstrate
compliance on a pro forma basis with the covenants set forth in Article 6
recomputed for the most recently ended quarter for which information is
available and is in compliance with all other terms and conditions of this
Agreement), (iii) the McNamara Payment Condition has been satisfied and (iv) if
such dividend or distribution is made prior to the Commitment Expiry Date, the
Revolving Loan Limit minus the Revolving Loan Outstandings is equal to or
greater than $5,000,000 as recomputed on a pro forma basis; and

 

(f) payments of the
scheduled installments of principal and the related accrued interest of the
McNamara Notes so long as (i) before and after giving effect to any such
dividend or distribution for such purpose, (A) no Event of Default shall have
occurred and be continuing, (B) Borrower is able to demonstrate compliance on a
pro forma basis with the covenants set forth in Article 6 recomputed for the
most recently ended quarter for which information is available and is in
compliance with all other terms and conditions of this Agreement, and (C) if
such dividend or distribution is made prior to the Commitment Expiry Date, the
Revolving Loan Limit minus the Revolving Loan Outstandings is equal to or
greater than $2,000,000 as recomputed on a pro forma basis, and (ii) the
aggregate of all such payments (whether voluntary or mandatory on the part of
Holdings) after the date hereof, do not exceed $1,500,000 in any Fiscal Year
and do not exceed $5,000,000 in the aggregate from and after the Closing Date.”

 

(h) Section 5.6 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

“Section 5.6 Payments and
Modifications of Subordinated Debt.

Borrower will not, and will
not permit any Subsidiary to, directly or indirectly (a) declare, pay, make or
set aside any amount for payment in respect of the McNamara Debt and Debt
permitted under Section 5.1(g) (the “Subordinated
Debt”), except for regularly scheduled payments of principal and
interest (but no voluntary prepayments except in accordance with Section
5.4(d)(i) and 5.4(e)) in respect of such Subordinated Debt made in full
compliance with any and all subordination provisions applicable to such Subordinated
Debt; or (b) amend or

 

4

 

otherwise modify the terms
of any Subordinated Debt if the effect of such amendment or modification is to
(i) increase the interest rate or fees on, or change the manner or timing of
payment of, such Debt; (ii) change the dates upon which payments of principal
or interest are due on, or the principal amount of, such Debt; (iii) change any
event of default or add or make more restrictive any covenant with respect to
such Debt; (iv) change the prepayment provisions of such Debt or any of the
defined terms related thereto; (v) change the subordination provisions thereof
(or the subordination terms of any guaranty thereof); or (vi) change or amend
any other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder
of such Debt in a manner adverse to Borrower, any Subsidiaries, Administrative
Agent or Lenders, as determined by the Administrative Agent and Lenders in
their reasonable discretion.  Borrower
shall, prior to entering into any such amendment or modification, deliver to
Administrative Agent reasonably in advance of the execution thereof, any final
or execution form copy thereof and, if approval of Required Lenders is required
by the terms of this Agreement prior to the taking of any such action, Borrower
agrees not to take, nor permit any of its Subsidiaries to take, any such action
with respect to any such items without obtaining such approval from Required
Lenders.”

(i) Section 5.10 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

“Section 5.10 Modification
of Organizational Documents.

Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, amend or otherwise modify
any Organizational Documents of such Person in any material respect, except for
(a) such amendments or other modifications required by Law and fully disclosed
to Administrative Agent and (b) a one-time amendment and restatement to the
Organizational Documents of Borrower substantially in the form of Exhibit A
to the Third Amendment.”

(j) Section 5.15 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

“Section 5.15 Lease
Payments.

Borrower
will not, and will not permit any Subsidiary to, directly or indirectly, incur
or assume (whether pursuant to a Guarantee or otherwise) any liability for
rental payments under a lease with a lease term of one year or more if, after
giving effect thereto, the aggregate amount of minimum lease payments that
Borrower and its Consolidated Subsidiaries have so incurred or assumed will
exceed, on a consolidated basis, $1,500,000 (or, after the consummation of the
IPO, $2,000,000) for any calendar year under all such leases (excluding Capital
Leases).”

 

 

5

 

                (k) Section 5.17 of the Credit
Agreement is hereby amended by deleting the word “$25,000” in the seventeenth
(17th) line thereof and inserting the word “$75,000” in its place thereof.

 

                (l) Section 6.1 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:

 

“Section 6.1. Capital
Expenditures.

Borrower will not permit the
aggregate amount of Capital Expenditures for any period set forth below to
exceed the amount set forth below for such period:

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  Fiscal Year ending
  December 31, 2005

  	
   

  	
  $3,000,000

  	
   

  
	
  Fiscal Year ending
  December 31, 2006

  	
   

  	
  $2,000,000
  (or, after the consummation of the IPO, $2,250,000)

  	
   

  
	
  Fiscal Year ending
  December 31, 2007

  	
   

  	
  $2,250,000
  (or, after the consummation of the IPO, $3,500,000)

  	
   

  
	
  Fiscal Year ending
  December 31, 2008

  	
   

  	
  $2,250,000
  (or, after the consummation of the IPO, $4,000,000)

  	
   

  
	
  Fiscal Year ending
  December 31, 2009

  	
   

  	
  $2,250,000
  (or, after the consummation of the IPO, $4,500,000)

  	
   

  
	
  Fiscal Year ending
  December 31, 2010

  	
   

  	
  $2,500,000
  (or, after the consummation of the IPO, $5,000,000)

  	
   

  

 

If Borrower does not utilize
the entire amount of Capital Expenditures permitted in any period set forth
above, Borrower may carry forward to the immediately succeeding period only,
fifty percent (50%) of such unutilized amount (with Capital Expenditures made
by Borrower in such succeeding period applied last to such carried forward
amount).”

(m) Sections 8.1(e) and (j)
of the Credit Agreement are hereby amended and restated in their entirety to
read as follows:

“(e)
(1) failure of any Credit Party to pay when due or within any applicable grace
period any principal, interest or other amount on Debt (other than (i) the
McNamara Debt if such failure is caused by any payment blockage by the
Administrative Agent pursuant to the subordination provisions of the McNamara
Notes or the Credit Parties’ failure to meet the conditions specified in
Section 5.4 of the Credit Agreement and (ii) the Loans) or in respect of any
Swap Contract, or the occurrence of any breach, default, condition or event
with respect to any Debt (other than (i) the McNamara Debt if such breach,
default, condition or event is caused by any payment blockage by the
Administrative Agent pursuant to the subordination provisions of the McNamara
Notes or the Credit Parties’ failure to

 

 

6

 

meet
the conditions specified in Section 5.4 of the Credit Agreement and (ii) the
Loans) or in respect of any Swap Contract, if the effect of such failure or
occurrence is to cause or to permit the holder or holders of any such Debt, or
the counterparty under any such Swap Contract, to cause, Debt or other liabilities
having an individual principal amount in excess of $250,000 or having an
aggregate principal amount in excess of $500,000 to become or be declared due
prior to its stated maturity; (2) failure of any Credit Party to pay when due
or within any applicable grace period any principal, interest or other amount
on Debt (other than the Loans), or the occurrence of any breach, default,
condition or event with respect to any Debt (other than the Loans) having an
individual principal amount in excess of $250,000 or having an aggregate
principal amount in excess of $500,000 upon the ultimate maturity of such Debt;
or (3) the occurrence of any breach or default under any terms or provisions of
any McNamara Note (other than a breach or default described in the preceding
clauses (1) and (2)) or under any agreement subordinating the Subordinated Debt
to all or any portion of the Obligations or the occurrence of any event
requiring the prepayment of any Subordinated Debt;”

 

“(j)
(1) Investor, together with its Affiliates, shall collectively cease to,
directly or indirectly, own and control at least (i) twenty percent (20%) of
the aggregate outstanding equity interests of Holdings on a fully diluted basis
or (ii) that percentage of the outstanding voting equity interests of Holdings
necessary at all times to elect a majority of the board of directors (or
similar governing body) of Holdings and to direct the management policies and
decisions of Holdings, (2) Holdings shall cease to directly own and control one
hundred percent (100%) of each class of the outstanding equity interests of
Borrower, or (3) Borrower shall cease to, directly or indirectly, own and
control one hundred percent (100%) of each class of the outstanding equity
interests of each Subsidiary;”

 

(n) Section 6.5 of the
Compliance Certificate is hereby amended by amending and restating the
subtraction of cash on hand in its entirety to read as follows:

“Less:            Cash on hand in excess of $3,000,000 as 

reflected on the balance sheet delivered to 

Administrative Agent pursuant to Section 

4.1(a) of the Credit Agreement as at the end of 

the Defined Period; provided,
that it is 

understood and acknowledged that this 

subtraction shall not be included in the 

calculation of Total Debt for the purposes of 

determining the applicable Base Rate Margin

or LIBOR Margin                                                                                                            ”

(o) Section 6.5 of the
Compliance Certificate is further amended by adding the following subtraction
from the calculation of “Total Debt” immediately prior to the word “Total Debt”
on Page 11 of said Exhibit C: 

 

7

 

                “Less: the McNamara Debt                                                                                                             ”

 

                3. Financial Covenants.
The requirement of Borrower to comply with the financial performance covenant
set forth in Section 6.5 (“Total Debt to
EBITDA Ratio”) of the Credit Agreement for the twelve month
measurement period ended on September 30, 2006 is hereby suspended. Such
covenant compliance requirement shall be automatically reinstated with full force
and effect for all periods commencing with the twelve month period ending
December 31, 2006 and thereafter, in accordance with the terms of the Credit
Agreement.  Notwithstanding the foregoing
waiver, Borrower shall compute and report the results of its Total Debt to
EBITDA Ratio in its Compliance Certificate for the measurement period ended
September 30, 2006 in accordance with the terms of the Credit Agreement.

 

                4. Fee. Borrower shall
pay the Administrative Agent for the account of each Lender party hereto a
non-refundable fee in the aggregate amount equal to $177,812.50 representing
one quarter of one percent (0.25%) of the sum of the Revolving Loan Commitment
and the aggregate outstanding principal amount of the Term Loan A and the Term
Loan B if the IPO is not consummated by January 31, 2007.

 

                5. Conditions. The
effectiveness of this Amendment is subject to the following conditions
precedent:

 

(a) the execution and delivery of this Amendment by
each Credit Party, Administrative Agent and Required Lenders;

 

(b) receipt by Administrative Agent for the account of
each Lender party hereto a non-refundable amendment fee in the aggregate amount
equal to $177,812.50 representing one quarter of one percent (0.25%) of the sum
of the Revolving Loan Commitment and the aggregate outstanding principal amount
of the Term Loan A and the Term Loan B, which fee shall be fully earned and due
and payable in cash on the date hereof;

 

(c) receipt by Administrative Agent of the execution
copy of each McNamara Note;

 

(d) the truth and accuracy of the representations and
warranties contained in Section 6 hereof in all material respects; and

 

(e) the delivery to Administrative Agent of such other
documents (including, without limitation, any legal opinions) and other items
as Administrative Agent shall reasonably require, all in form and substance
reasonably satisfactory to Administrative Agent.

 

                6. Representations and
Warranties. Each Credit Party hereby represents and warrants to
Administrative Agent and each Lender as follows:

 

(a) the representations and warranties of each Credit
Party contained in the Financing Documents are true and correct as of the date
hereof in all material respects (except to the extent any such representation
or warranty is qualified by materiality,

 

 

8

 

 

Material Adverse Effect or words of similar import, in which
case such representation or warranty shall be true and correct in all
respects), except to the extent that any such representation or warranty
relates to a specific date, in which case such representation and warranty
shall be true and correct as of such earlier date;

 

(b) the execution, delivery and performance by each
Credit Party, as applicable, of this Amendment are within its powers, have been
duly authorized by all necessary action pursuant to its Organizational
Documents, require no further action by or in respect of, or filing with, any
governmental body, agency or official and do not violate, conflict with or
cause a breach or a default under any provision of applicable law or regulation
or of the Organizational Documents of any Credit Party or of any agreement,
judgment, injunction, order, decree or other instrument binding upon it;

 

(c) this Amendment constitutes the valid and binding
obligation of the Credit Parties, enforceable against such Credit Parties in
accordance with its terms, except as the enforceability hereof may be limited
by applicable bankruptcy, insolvency, or similar laws relating to the
enforcement of creditor’s rights generally and by general equitable principles;
and

 

(d) no Default or Event of Default exists.

 

                7. No Waiver. Nothing
contained  herein shall be deemed to
constitute a waiver of compliance with any term or condition contained in the
Credit Agreement or any of the other Financing Documents or constitute a course
of conduct or dealing among the parties thereto. Except as expressly stated
herein, Administrative Agent and each Lender reserve all rights, privileges and
remedies under the Financing Documents. 
Except as amended hereby, the Credit Agreement and other Financing
Documents remain unmodified and in full force and effect.  All references in the Financing Documents to
the Credit Agreement shall be deemed to be references to the Credit Agreement
as amended hereby.

 

                8. Severability. In case
any provision of or obligation under this Amendment shall be invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired
thereby.

 

                9. Headings. Headings and
captions used in this Amendment (including Schedule 1 attached hereto) are
included for convenience of reference only and shall not be given any
substantive effect.

 

                10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AMENDMENT AND
ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING
IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK

 

 

9

 

 

AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE
OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. 
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AMENDMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN
(10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

                11. WAIVER OF JURY TRIAL. EACH OF EACH CREDIT PARTY,
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AMENDMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF EACH CREDIT PARTY,
ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AMENDMENT, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH OF EACH CREDIT PARTY, ADMINISTRATIVE
AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY
OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

                12. Waiver. Borrower and
each other Credit Party, on behalf of each such Credit Party and their
respective executors, successors and assigns, hereby waives, releases and
discharges Administrative Agent and the Lenders and all of the affiliates,
directors, officers, employees, attorneys and agents of Administrative Agent
and the Lenders, from any and all claims, demands, actions or causes of action
arising out of or in any way relating to the Financing Documents occurring on
or before the date hereof and any documents, agreements, dealings or other
matters connected with the Financing Documents, including, without limitation,
all known and unknown matters, claims or transactions occurring on or before
the date hereof.

 

                13. Counterparts; Integration.
This Amendment may be executed and delivered via facsimile or electronic means
with the same force and effect as if an original were executed and may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures hereto were upon the same instrument.  This Amendment constitutes the entire
agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.

 

 

10

 

 

                14. Reaffirmation. Each
of the Credit Parties as debtor, grantor, guarantor, assignor, as applicable,
or in any other similar capacity in which such Credit Party grants liens or
security interests in its property or otherwise acts as accommodation party or
guarantor, as the case may be, hereby (i) ratifies and reaffirms all of its
payment and performance obligations, contingent or otherwise, under each of the
Financing Documents to which it is a party and (ii) to the extent such Credit
Party granted liens on or security interests in any of its property pursuant to
any such Financing Document as security for or otherwise guaranteed the
Borrower’s Obligations under or with respect to the Financing Documents,
ratifies and reaffirms such guarantee and grant of security interests and liens
and confirms and agrees that such security interests and liens hereafter secure
all of the Obligations as amended hereby. 
Each of the Credit Parties hereby consents to this Amendment and
acknowledges that each of the Financing Documents remains in full force and
effect and is hereby ratified and reaffirmed. 
The execution of this Amendment shall not operate as a waiver of any
right, power or remedy of the Administrative Agent or Lenders, constitute a
waiver of any provision of any of the Financing Documents or serve to effect a
novation of the Obligations.

 

[ Remainder of Page Intentionally Left Blank;
Signature Page Follows ]

 

 

11

 

 

                IN WITNESS
WHEREOF, the parties have executed this Amendment as of the date set forth
above.

 

 

	
   

  	
  CREDIT PARTIES

  
	
   

  	
   

  	
   

  
	
   

  	
  OMP, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen A. Garcia

  
	
   

  	
  Name:

  	
  Stephen A. Garcia

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  OBAGI MEDICAL PRODUCTS, INC., a

  
	
   

  	
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis A. Cluff

  
	
   

  	
  Name:

  	
  Curtis A. Cluff

  
	
   

  	
  Title:

  	
  Exectuive Vice President

  

 

 

 

	
   

  	
  ADMINISTRATIVE AGENT AND LENDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  MERRlLL LYNCH CAPITAL, a division of

  Merrill Lynch Business Financial Services Inc.,

  As Administrative Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
  Name:

  	
  [ILLEGIBLE]

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

 

	
   

  	
  FRIEDBERGMILSTEIN PRIVATE

  CAPITAL FUND I, as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  FriedbergMilstein, LLC,

  
	
   

  	
   

  	
  its Investment Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James A. Feeley III

  
	
   

  	
   

  	
  Name:

  	
  JAMES A. FEELEY III

  
	
   

  	
   

  	
  Title:

  	
  PARTNER

  

 

 

 

 

	
   

  	
  NEWSTAR CP FUNDING LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Newstar Financial, Inc., its designated

  
	
   

  	
   

  	
     Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert E. Hornstein

  
	
   

  	
   

  	
  Name:

  	
  Robert E. Hornstein

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
  Portfolio Management

  

 

 

 

 

	
   

  	
  CASTLE HILL III CLO, LTD., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  By: Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT FUNDING I, LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HARBOR TOWN FUNDING LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. MURCHISON TAYLOR

  
	
   

  	
  Name:

  	
  L. MURCHISON TAYLOR

  
	
   

  	
  Title:

  	
  VICE PRESIDENT

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CASTLE HILL I—INGOTS, Ltd., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LOAN FUNDING XI LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

 

	
   

  	
  CASTLE HILL III CLO, LTD., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT IWNDING I, LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HARBOR TOWN FUNDING LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CASTLE HILL I—INGOTS, Ltd., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LOAN FUNDING XI LLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  

 

 

 

	
   

  	
  RACE POINT CLO, LIMITED, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RACE POINT II CLO, LIMITED, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AVERY POINT CLO, LIMITED, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CASTLE HILL II—INGOTS, LTD., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Sankaty Advisors, LLC,

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jamie Kellogg III

  
	
   

  	
   

  	
  Name:

  	
  JAMIE KELLOGG III

  
	
   

  	
   

  	
  Title:

  	
  MANAGING DIRECTOR

  

 

 

 

	
   

  	
  MAPS CLO FUND I, LLC., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Its Collateral Manager, Callidus Capital

  
	
   

  	
   

  	
  Management, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mavis Taintor

  
	
   

  	
   

  	
  Name:

  	
  Mavis Taintor

  
	
   

  	
   

  	
  Title:

  	
  Senior Managing Director

  

 

 

 

	
   

  	
  CoLTS 2005-2, LTD., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Structured Asset Investors, LLC

  
	
   

  	
   

  	
  as Collateral Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dominic Barakat

  
	
   

  	
  Name:

  	
  Dominic Barakat

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

 

EXHIBIT A

 

Amended and Restated Borrower Organization Documents

 

(Attached)

 

 

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

OBAGI MEDICAL PRODUCTS, INC.

The undersigned, Steven R.
Carlson, hereby certifies that:

                1. He is the duly elected and
acting Chief Executive Officer of Obagi Medical Products, Inc., a Delaware
corporation.

 

                2. The Certificate of
Incorporation of this corporation was originally filed with the Secretary of
State of Delaware on December 20, 2004 under the name of Obagi Medical
Products, Inc.

 

                3. The Certificate of Incorporation
of this corporation shall be amended and restated to read in full as follows:

 

“ARTICLE
I

The
name of this corporation is Obagi Medical Products, Inc. (the “Corporation”).

ARTICLE
II

The address of the
Corporation’s registered office in the State of Delaware is The Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle.  The name of its registered agent
at such address is The Corporation Trust Company.

ARTICLE
III

The
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law (“DGCL”).

ARTICLE
IV

The Corporation is
authorized to issue two classes of stock to be designated, respectively, “Common
Stock” and “Preferred Stock.” The total number of shares which the Corporation
is authorized to issue is one hundred and ten million (110,000,000) shares,
each with a par value of $0.001 per share. One hundred million (100,000,000)
shares shall be Common Stock and ten million (10,000,000) shares shall be
Preferred Stock.

The Board of Directors is
authorized, subject to any limitations prescribed by law, to provide for the
issuance of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the state of Delaware (a “Certificate of Designation”),
to establish from time to time the number of shares to be included in each such
series,  and fix the designation, powers,
preferences and rights of each such series, and any qualifications, limitations
or restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders

 

 

 

of a majority of the Common Stock, without a vote of
the holders of the Preferred Stock, or of any series thereof, unless a vote of
such holders is required pursuant to the terms of any Certificate of
Designation.

ARTICLE
V

Subject to the rights of the
holders of any series of Preferred Stock to elect additional directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by
a majority of the Whole Board.  For purposes
of this Amended and Restated Certificate of Incorporation (the “Amended
Certificate”), the term “Whole Board” shall mean the total number of authorized
directors whether or not there exist any vacancies in previously authorized
directorships.

ARTICLE
VI

Any vacancies on the Board
of Directors resulting from death, resignation, removal, or other causes, other
than a vacancy with respect to a director who must be elected by the holders of
any class or series of stock (either in general or under specified
circumstances), shall be filled by either (i) the affirmative vote of the
holders of a majority of the voting power of the then-outstanding shares of
voting stock of the Corporation entitled to vote generally in the election of
directors (the “Voting Stock”) voting together as a single class; or (ii) by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors. Subject to the rights
of any class or series of stock then outstanding, newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such newly created directorship
shall be filled by the stockholders, be filled only by the affirmative vote of
the directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director.

No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.

ARTICLE
VII

Each
outstanding share of Common Stock shall entitle the holder thereof to one vote
on each matter properly submitted to the stockholders of the Corporation for
their vote.

The directors of the
Corporation need not be elected by written ballot unless the Bylaws so provide.

ARTICLE
VIII

If
at any time this Corporation shall have a class of stock registered pursuant to
the provisions of the Securities Exchange Act of 1934, as amended, for so long
as such class is so registered, any action required or permitted to be taken by
the stockholders of the Corporation and in which the holders of such class are
entitled to vote must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing of such
stockholders.

 

 

2

 

ARTICLE
IX

The Board of Directors of
the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of
the Corporation. The stockholders shall also have the power to adopt, amend or
repeal the Bylaws of the Corporation; provided, however, that in
addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Amended Certificate, the affirmative
vote of the holders of at least 66 2/3% of the Voting Stock, voting as a single
class, shall be required to adopt, amend or repeal any provision of the Bylaws
of the Corporation.

The Corporation reserves the
right to amend or repeal any provision contained in this Amended Certificate,
in the manner now or hereafter prescribed by the DGCL, and all rights conferred
upon stockholders herein are granted subject to this reservation, provided,
however, that notwithstanding and in addition to any other provision of
this Amended Certificate or any provision of law that might otherwise permit a
lesser vote or no vote, the affirmative vote of the holders of at least 66 2/3%
of the Voting Stock, voting as a single class, shall be required to adopt,
amend or repeal any provision if the effect of such adoption, amendment or
repeal would be to amend or repeal this Article IX.

ARTICLE
X

Advance notice of a
stockholder nomination for the election of directors or of business to be
brought by the stockholders before any meeting of the stockholders of the
Corporation shall be given in the manner provided in the Bylaws, or else such
nomination cannot be made or such business cannot be brought before the
meeting.

ARTICLE
XI

The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. In addition to the powers and authority expressly conferred upon the
Board of Directors by statute or by this Amended Certificate or the Bylaws of
the Corporation, the Board of Directors is hereby empowered to exercise all
such powers and do all such acts and things as may be exercised or done by the
Corporation.

ARTICLE
XII

 To the fullest
extent permitted by the  DGCL, as the
DGCL may be amended from time to time, a director of the Corporation shall not
be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.  If the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the DGCL, as so amended.

 

 

3

 

 Any repeal or modification of the foregoing
provisions of this Article XII shall not adversely affect any right or
protection of a director of the Corporation with respect to any acts or
omissions of such director first occurring before such repeal or modification.

ARTICLE
XIII

To the fullest extent
permitted by applicable law, the Corporation is also authorized to provide
indemnification of (and advancement of expenses to) directors and officers (and
any other persons to which Delaware law permits the Corporation to provide
indemnification) through Bylaw provisions, agreements with such directors and
officers or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the DGCL, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach
of duty to a corporation, its stockholders, and others.

Any repeal or modification of any of the foregoing provisions
of this Article XIII shall not adversely affect any right or protection of a
director, officer or other person existing at the time of such repeal or
modification.”

* * *

 

 

4

 

The foregoing Amended and
Restated Certificate of Incorporation has been duly adopted by this Corporation’s
Board of Directors and stockholders in accordance with the applicable
provisions of Sections 228, 242 and 245 of the Delaware General Corporation
Law.

Executed on the
         day of                       ,
2006.

	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Steven R.
  Carlson,

  Chief Executive Officer

  

 

 

5

 

AMENDED AND RESTATED BYLAWS

OF 

OBAGI MEDICAL PRODUCTS, INC.

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
   

  	
  CORPORATE
  OFFICES

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
     1.1
  

  	
   

  	
  Registered
  Office

  	
  1

  
	
     1.2
  

  	
   

  	
  Other
  Offices

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II 

  	
   

  	
  MEETINGS
  OF STOCKHOLDERS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
     2.1
  

  	
   

  	
  Annual
  Meetings

  	
  1

  
	
     2.2
  

  	
   

  	
  Special
  Meetings

  	
  3

  
	
     2.3
  

  	
   

  	
  Notice
  of Stockholders’ Meetings

  	
  4

  
	
     2.4
  

  	
   

  	
  Quorum

  	
  5

  
	
     2.5
  

  	
   

  	
  Organization;
  Conduct of Business

  	
  5

  
	
     2.6
  

  	
   

  	
  Proxies
  and Voting

  	
  5

  
	
     2.7
  

  	
   

  	
  Waiver
  of Notice

  	
  6

  
	
     2.8
  

  	
   

  	
  Record
  Date for Stockholder Notice

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  	
   DIRECTORS

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
     3.1
  

  	
   

  	
  Number
  of Directors

  	
  7

  
	
     3.2
  

  	
   

  	
  Election
  and Term of Office of Directors

  	
  7

  
	
     3.3
  

  	
   

  	
  Director
  Resignations, Newly Created Directors and Vacancies

  	
  7

  
	
     3.4
  

  	
   

  	
  Participation
  in Meetings by Conference Telephone

  	
  8

  
	
     3.5
  

  	
   

  	
  Regular
  Meetings

  	
  8

  
	
     3.6
  

  	
   

  	
  Special
  Meetings

  	
  8

  
	
     3.7
  

  	
   

  	
  Quorum

  	
  9

  
	
     3.8
  

  	
   

  	
  Waiver
  of Notice

  	
  9

  
	
     3.9
  

  	
   

  	
  Conduct
  of Business; Board Action by Written Consent Without a Meeting

  	
  9

  
	
     3.10
  

  	
   

  	
  Compensation
  of Directors

  	
  9

  
	
     3.11
  

  	
   

  	
  Approval
  of Loans to Officers

  	
  10

  
	
     3.12
  

  	
   

  	
  Removal
  of Directors

  	
  10

  
	
     3.13
  

  	
   

  	
  Chairman
  of the Board of Directors

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV 

  	
   

  	
  COMMITTEES

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
     4.1
  

  	
   

  	
  Committees
  of Directors

  	
  10

  
	
     4.2
  

  	
   

  	
  Committee
  Minutes

  	
  11

  
	
     4.3
  

  	
   

  	
  Conduct
  of Business

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  V 

  	
   

  	
  OFFICERS

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
     5.1
  

  	
   

  	
  Officers

  	
  11

  
	
     5.2
  

  	
   

  	
  Appointment
  of Officers

  	
  11

  
	
     5.3
  

  	
   

  	
  Subordinate
  Officers

  	
  11

  
	
     5.4
  

  	
   

  	
  Removal
  and Resignation of Officers

  	
  12

  
	
     5.5
  

  	
   

  	
  Vacancies
  in Offices

  	
  12

  
	
     5.6
  

  	
   

  	
  Chief
  Executive Officer

  	
  12

  
	
     5.7

  	
   

  	
  President

  	
  12

  

 

 

i

 

 

	
     5.8 

  	
   

  	
  Vice Presidents

  	
  12

  
	
     5.9
  

  	
   

  	
  Secretary

  	
  13

  
	
     5.10
  

  	
   

  	
  Chief
  Financial Officer

  	
  13

  
	
     5.11
  

  	
   

  	
  Action
  with Respect to Securities of Other Corporations

  	
  13

  
	
     5.12
  

  	
   

  	
  Delegation
  of Authority

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  	
  INDEMNIFICATION
  OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
     6.1
  

  	
   

  	
  Indemnification
  of Directors and Officers

  	
  14

  
	
     6.2
  

  	
   

  	
  Indemnification
  of Others

  	
  14

  
	
     6.3
  

  	
   

  	
  Payment
  of Expenses in Advance

  	
  15

  
	
     6.4
  

  	
   

  	
  Indemnity
  Not Exclusive

  	
  15

  
	
     6.5
  

  	
   

  	
  Insurance

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  	
  RECORDS
  AND REPORTS

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
     7.1

  	
   

  	
  Maintenance
  and Inspection of Records

  	
  16

  
	
     7.2

  	
   

  	
  Inspection
  by Directors

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII 

  	
   

  	
  GENERAL
  MATTERS

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
     8.1

  	
   

  	
  Checks

  	
  16

  
	
     8.2
  

  	
   

  	
  Execution
  of Corporate Contracts and Instruments

  	
  17

  
	
     8.3
  

  	
   

  	
  Stock
  Certificates

  	
  17

  
	
     8.4

  	
   

  	
  Special
  Designation on Certificates

  	
  17

  
	
     8.5
  

  	
   

  	
  Lost
  Certificates

  	
  18

  
	
     8.6
  

  	
   

  	
  Construction;
  Definitions

  	
  18

  
	
     8.7
  

  	
   

  	
  Fiscal
  Year

  	
  18

  
	
     8.8
  

  	
   

  	
  Seal

  	
  18

  
	
     8.9
  

  	
   

  	
  Transfer
  of Stock

  	
  18

  
	
     8.10
  

  	
   

  	
  Registered
  Stockholders

  	
  18

  
	
     8.11
  

  	
   

  	
  Facsimile
  Signatures

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  AMENDMENTS

  	
  19

  

 

 

 

ii

 

AMENDED AND RESTATED

 

BYLAWS

 

OF

 

OBAGI MEDICAL PRODUCTS, INC.

 

ARTICLE I

 

CORPORATE OFFICES

1.1 Registered Office. The registered
office of the Corporation shall be in the City of Wilmington, County of New
Castle, State of Delaware.  The name of
the registered agent of the Corporation at such location is The Corporation
Trust Company.

1.2 Other Offices.

The Board of Directors may at any time establish other offices at any
place or places where the Corporation is qualified to do business.

 

ARTICLE II

MEETINGS OF STOCKHOLDERS

 

2.1 Annual Meetings.

                (a) The annual meeting of
stockholders shall be held each year at such date, time and place as may be
designated by resolution of the Board of Directors. The Board of Directors may,
in its sole discretion, determine that the meeting may be held solely by means
of remote communication, as permitted by Section 211 of the Delaware General
Corporation Law (“DGCL”). At the meeting, directors shall be elected and any
other proper business may be transacted.

 

                (b) Nominations of persons for
election to the Board of Directors and the proposal of business to be
transacted by the stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation’s notice with respect to such meeting, (ii) by
or at the direction of the Board of Directors or (iii) by any stockholder of
the Corporation who was a stockholder of record at the time of giving of the
notice provided for in this Section 2.1, who is entitled to vote for the
election of directors or such other business at the meeting and who has
complied with the notice procedures set forth in this Section 2.1.

 

                (c) For nominations or other
business to be properly brought before an annual meeting by a stockholder
pursuant to clause (iii) of paragraph (b) of this Section 2.1:

 

(i) the stockholder must
have given timely notice thereof in writing to the secretary of the
Corporation, as provided in this Section 2.1;

 

 

 

 

(ii) such business must be a
proper matter for stockholder action under the DGCL;

 

(iii) if the stockholder, or
the beneficial owner on whose behalf any such proposal or nomination is made,
has provided the Corporation with a Solicitation Notice (as defined below),
such stockholder or beneficial owner must, in the case of a proposal, have
delivered a proxy statement and form of proxy to holders of at least the
percentage of the Corporation’s voting shares required under applicable law to
carry any such proposal, or, in the case of a nomination or nominations, have
delivered a proxy statement and form of proxy to holders of a percentage of the
Corporation’s voting shares reasonably believed by such stockholder or
beneficial holder to be sufficient to elect the nominee or nominees proposed to
be nominated by such stockholder, and must, in either case, have included in
such materials the Solicitation Notice; and

 

(iv) if no Solicitation
Notice relating thereto has been timely provided pursuant to this section, the
stockholder or beneficial owner proposing such business or nomination must not
have solicited a number of proxies sufficient to have required the delivery of
such a Solicitation Notice under this section.

 

                (d) To be timely, a stockholder’s
notice shall be delivered to the Secretary at the principal executive offices
of the Corporation not less than 90 or more than 120 days before the first
anniversary (the “Anniversary”) of the date on which the Corporation first
mailed its proxy materials for the preceding year’s annual meeting of
stockholders; provided, however, that if the date of the annual meeting is
advanced more than 30 days before or delayed by more than 30 days after the
anniversary of the preceding year’s annual meeting, notice by the stockholder
to be timely must be so delivered not later than the close of business on the
later of the 90th day before such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made.
Such stockholder’s notice shall set forth:

 

(i) as to each person whom
the stockholder proposes to nominate for election or reelection as a director
all information relating to such person as would be required to be disclosed in
solicitations of proxies for the election of such nominees as directors
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and such person’s written consent to serve as a
director if elected;

 

(ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of such business, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and

 

(iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (A) the name and address of such stockholder, as
they appear on the Corporation’s books, and of such beneficial owner, (B) the
class and number of shares of the Corporation that

 

2

 

are owned beneficially and of record by such
stockholder and such beneficial owner, and (C) whether either such stockholder
or beneficial owner intends to deliver a proxy statement and form of proxy to
holders of, in the case of a proposal, at least the percentage of the
Corporation’s voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, a sufficient number of holders
of the Corporation’s voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a “Solicitation Notice”).

                (e) Notwithstanding anything in
this Section 2.1 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 55 days
before the Anniversary, a stockholder’s notice required by this Bylaw shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary
at the principal executive offices of the Corporation not later than the close
of business on the 10th day following the day on which such public announcement
is first made by the Corporation.

 

                (f) Only persons nominated in
accordance with the procedures set forth in this Section 2.1 shall be eligible
to serve as directors and only such business shall be conducted at an annual
meeting of stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this section. The chairman of the
meeting shall have the power and the duty to determine whether a nomination or
any business proposed to be brought before the meeting has been made in
accordance with the procedures set forth in these Bylaws and, if any proposed
nomination or business is not in compliance with these Bylaws, to declare that
such defectively proposed business or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.

 

                (g) For purposes of these
Bylaws, “public announcement” shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press or a comparable national news
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.

 

                (h) Nothing in this Section 2.1
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the
Exchange Act.

 

                2.2 Special Meetings.

 

                (a) Special meetings of the stockholders,
other than those required by statute, may be called at any time by the Board of
Directors acting pursuant to a resolution adopted by a majority of the Whole
Board. For purposes of these Bylaws, the term “Whole Board” shall mean the
total number of authorized directors whether or not there exist any vacancies
in previously authorized directorships. The Board of Directors may postpone or
reschedule any previously scheduled special meeting.

 

 

3

 

                (b) Only such business shall be
conducted at a special meeting of the stockholders as shall have been brought
before the meeting pursuant to the Corporation’s notice of the meeting.

 

                (c) Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation’s
notice of meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of record at the time of giving of notice provided for in
this paragraph, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this Section 2.2. Nominations by
stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder’s notice has been
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the later of the 90th day
before such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.

 

                (d) Nothing in this Section 2.2
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the
Exchange Act.

 

                2.3 Notice of Stockholders’ Meetings. 

 

                (a) Notice of the place, if any,
date and time of all meetings of stockholders, and the means of remote
communication, if any, by which stockholders and proxyholders may be deemed to
be present and person and vote at such meeting, 
shall be given not less than 10 nor more than 60 days before the date of
the meeting to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or required by law or the Certificate of
Incorporation. Written notice of any meeting of stockholders, if mailed, is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Without limiting the manner by which notice otherwise may be given effectively
to stockholders, any notice to stockholders may be given by electronic mail or
other electronic transmission, in the manner provided in Section 232 of the
DGCL.  An affidavit of the secretary or
an assistant secretary or of the transfer agent of the Corporation that the
notice has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.

 

                (b) When a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place, if any, thereof, and the means of remote communications, if
any, by which stockholders and proxyholders may be deemed to be present in
person and vote at such adjourned meeting are announced at the meeting at which
the adjournment is taken; provided, however, that if the date of any adjourned
meeting is more than 30 days after the date for which the meeting was
originally noticed, or if a new record date is fixed for the adjourned meeting,
notice of the place, if any, date, and time of the adjourned meeting and the
means of remote communications, if any, by which stockholders and proxyholders
may be deemed to be present in person and vote at such adjourned meeting, shall
be given in conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.

 

 

4

 

2.4 Quorum.

At any meeting of the stockholders, the holders of a majority of the
shares of stock entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum for all purposes, except as otherwise provided by the
DGCL or by the Certificate of Incorporation. Where a separate vote by a class
or classes or series is required, a majority of the shares of such class or
classes or series present in person or by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter.

 

If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, if any, date or time.

 

2.5 Organization; Conduct of Business.

                (a) The chairman of the board of
directors of the Corporation or his or her designee or in his or her absence,
the chief executive officer of the Corporation, or, in his or her absence, the
president of the Corporation, shall call to order any meeting of the
stockholders and act as chairman of the meeting.  In the absence of the secretary of the
Corporation, the secretary of the meeting shall be such person as the chairman
of the meeting appoints.

 

                (b) The chairman of any meeting
of stockholders shall determine the order of business and the procedure at the
meeting, including the manner of voting and the conduct of business. The
chairman shall have the power to adjourn the meeting to another place, if any,
date and time.  The date and time of
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting.

 

                2.6 Proxies and Voting.

 

                (a) At any meeting of the
stockholders, every stockholder entitled to vote may vote in person or by proxy
authorized by an instrument in writing or by a transmission permitted by law
filed in accordance with the procedure established for the meeting.  Any copy, facsimile communication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.

 

                (b) The Corporation may, and to
the extent required by law, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof.  The Corporation may designate
one or more alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
chairman of the meeting may, and to the extent required by law, shall, appoint
one or more inspectors to act at the meeting. 
Each inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability.  Every vote taken by ballots shall be counted
by a duly appointed inspector or inspectors.

 

 

5

 

                (c) All elections of directors
shall be determined by a plurality of the votes cast, and except as otherwise
required by law, all other matters shall be determined by a majority of the
votes cast affirmatively or negatively.

 

2.7 Waiver of Notice.

Whenever notice is required to be given under any provision of the DGCL
or of the Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person entitled to notice, or waiver by electronic mail
or other electronic transmission by such person, whether before or after the
time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.  Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice, or any waiver
of notice by electronic transmission, unless so required by the Certificate of
Incorporation or these Bylaws.

 

2.8 Record Date for Stockholder Notice.

In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date on which the resolution fixing the date is adopted and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than 60 days before any other action.

 

If the Board of Directors does not so fix a record date:

 

                (a) The record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held.

 

                (b) The record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.

 

                A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting, if such adjournment is for 30 days or
less; provided, however, that the Board of Directors may fix a new record date
for the adjourned meeting.

 

 

6

 

ARTICLE III

DIRECTORS 

3.1 Number of Directors.

The number of directors constituting the Whole Board shall be seven.

 

Subject to the rights of the holders of any series of preferred stock
to elect directors under specified circumstances, this number may be changed
from time to time by a resolution adopted by a majority of the Whole
Board.  No decrease in the number of
authorized directors shall shorten the term of any incumbent director.

 

3.2 Election and Term of Office of Directors.

Except as provided in Section 3.3 of these Bylaws, and unless otherwise
provided in the Certificate of Incorporation, directors shall be elected at
each annual meeting of stockholders to hold office until the next annual
meeting.  Each director, including a
director elected to fill a vacancy, shall hold office until his or her
successor is elected or until his or her earlier resignation or removal.

 

3.3 Director Resignations, Newly Created Directors and
Vacancies.

                (a) Any director may resign at
any time upon written notice to the attention of the secretary of the
Corporation or, if there is no secretary in office, then to the attention of
any other corporate officer or to the Board of Directors as a whole.  When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.

 

                (b) Subject to the rights of the
holders of any series of preferred stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, removal from office or other cause shall, unless otherwise required
by law or by resolution of the Board of Directors, be filled only by a majority
vote of the directors then in office, though less than a quorum, and directors
so chosen shall serve for a term expiring at the next annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires or until such director’s successor shall have been duly
elected.

 

                (c) Whenever the holders of any
class or classes of stock or series thereof are entitled to elect one or more
directors by the provisions of the Certificate of Incorporation, vacancies and
newly created directorships of such class or classes or series may be filled by
a majority of the directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected.

 

 

7

 

 

                (d) If at any time, by reason of
death or resignation or other cause, the Corporation should have no directors
in office, then any officer or any stockholder or an executor, administrator,
trustee or guardian of a stockholder, or other fiduciary entrusted with like
responsibility for the person or estate of a stockholder, may call a special
meeting of stockholders in accordance with the provisions of the Certificate of
Incorporation or these Bylaws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section 211 of the DGCL.

 

                (e) If, at the time of filling
any vacancy or any newly created directorship, the directors then in office
constitute less than a majority of the Whole Board (as constituted immediately
before any such increase), then the Court of Chancery may, upon application of
any stockholder or stockholders holding at least 10% of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office as aforesaid, which election shall be governed by the provisions of
Section 211 of the DGCL as far as applicable.

 

3.4 Participation in Meetings by Conference Telephone.

Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.

 

3.5 Regular Meetings.

Regular meetings of the Board of Directors may be held at such place,
date and time as shall from time to time be determined by the Board of
Directors.  A notice of each regular
meeting shall not be required.

 

3.6 Special Meetings.

Special meetings of the Board of Directors may be called by the
Chairman of the Board, the chief executive officer or by a majority of the
Whole Board, and shall be held at such place, date and time as he, she or they
shall fix.

 

Notice of the place, date and time of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail, charges prepaid, or by facsimile or electronic mail, addressed to each
director at that director’s address as it is shown on the records of the
Corporation. If the notice is mailed, it shall be deposited in the United
States mail at least four days before the time of the holding of the meeting.  If the notice is delivered personally, or by
facsimile, electronic mail or telephone, it shall be delivered at least 24
hours before the time of the holding of the meeting.  The notice need not specify the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.  Any and all business may be
transacted at a special meeting, unless otherwise indicated in the notice
thereof.

 

 

8

 

3.7 Quorum.

At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall fail to attend any meeting, then a majority of the directors
present may adjourn the meeting to another place, date or time, without further
notice or waiver thereof.

 

A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.

 

3.8 Waiver of Notice.

Whenever notice of a Board of Directors meeting is required to be given
under any provision of the DGCL or of the Certificate of Incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice, or
waiver by electronic mail or other electronic transmission by such person,
whether before or after the time stated therein, shall be deemed equivalent to
notice.  Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors, or members of a
committee of directors, need be specified in any written waiver of notice or
any waiver by electronic transmission unless so required by the Certificate of
Incorporation or these Bylaws.

 

3.9
Conduct of Business; Board Action by
Written Consent Without a Meeting.

At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board of Directors may from time to time
determine, and all matters shall be determined by the vote of a majority of the
directors present, except as otherwise provided in these Bylaws or by law.

 

Any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board of Directors or committee, as the case may be,
consent thereto in writing or by electronic transmission, and the writing or
writings or electronic transmission or transmissions are filed with the minutes
of proceedings of the Board of Directors or committee. Such filings shall be in
paper form if the minutes are maintained in paper form and shall be in
electronic form if the minutes are maintained in electronic form.

 

3.10 Compensation of Directors.

The Board of Directors shall have the authority to fix the compensation
of the directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a fixed
sum for attendance at each meeting of the Board of Directors, or paid a stated
salary or paid other compensation as director. 
No such compensation

 

 

9

 

shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.  Members of special or standing
committees may be allowed compensation for attending committee meetings.

3.11 Approval of Loans to Officers.

Subject to applicable law, including Section 13(k) of the Exchange Act,
the Corporation may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the Corporation or of its subsidiary,
including any officer or employee who is a director of the Corporation or of
its subsidiary, whenever, in the judgment of the directors, such loan, guaranty
or assistance may reasonably be expected to benefit the Corporation.  The loan, guaranty or other assistance may be
with or without interest and may be unsecured, or secured in such manner as the
Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation. Nothing in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.

 

3.12 Removal of Directors.

Unless otherwise restricted by statute, the Certificate of
Incorporation or these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.

 

3.13 Chairman of the Board of Directors.

The Corporation may have, at the discretion of the Board of Directors,
a Chairman of the Board of Directors who shall not be considered by virtue of
holding such position an officer of the Corporation.

 

ARTICLE IV

COMMITTEES 

4.1 Committees of Directors.

The Board of Directors may from time to time designate committees of
the Board of Directors, with such lawfully delegable powers and duties as it
thereby confers, to serve at the pleasure of the Board of Directors and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent members at any
meeting of the committee.  In the absence
of any member of any committee and any alternate member in his or her place, the
member or members of the committee present at the meeting, whether or not he or
she or they constitute a quorum, may by unanimous vote appoint another member
of the Board of Directors to act at the meeting in the place of the absent
member. Any Board committee may create one or more subcommittees, each
subcommittee to consist of one or more members of such committee, and delegate
to the subcommittee any or all of the powers of the committee.

 

 

10

 

4.2 Committee Minutes.

Each committee shall keep regular minutes of its meetings and maintain
them in the Corporation’s official minute book.

 

4.3 Conduct of Business.

Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-half of the members shall constitute
a quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing or by electronic transmission, and the
writing or writings or electronic transmission or transmissions are filed with
the minutes of the proceedings of such committee. Such filing shall be in paper
form if the minutes are maintained in paper form and shall be in electronic
form if the minutes are maintained in electronic form.

 

The Board of Directors may adopt rules for the governance of any
committee not inconsistent with these Bylaws.

 

ARTICLE V

OFFICERS 

5.1 Officers.

The officers of the Corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The Corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, a treasurer and one or more assistant
treasurers, and any such other officers as may be appointed in accordance with
these Bylaws. Any number of offices may be held by the same person.

 

5.2 Appointment of Officers.

The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors.

 

5.3 Subordinate Officers.

The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the Corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors or such other officer may from time
to time determine.  The Board of
Directors may empower the chief executive officer or the president to define
the authority and duties of such subordinate officers.

 

 

11

 

5.4 Removal and Resignation of Officers.

Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.

 

Any officer may resign at any time by giving written notice to the
secretary of the Corporation. Any resignation shall take effect at the date of
the receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. 
Any resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.

 

5.5 Vacancies in Offices.

Any vacancy occurring in any office of the Corporation shall be filled
in the manner prescribed in these Bylaws for regular appointments to that
office.

 

5.6 Chief Executive Officer.

Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the Corporation, if such an officer is appointed, shall, subject to
the control of the Board of Directors, have general supervision, direction, and
control of the business and the officers of the Corporation.  He or she shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the Board of Directors, shall have the general powers
and duties of management usually vested in the office of chief executive
officer of a Corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.

 

5.7 President.

Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if there is one, or the chief
executive officer, if such an officer is appointed, the president shall be the
principal executive officer of the company and shall, subject to the control of
the Board of Directors, have general supervision, direction, and control of the
business and other officers of the Corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a Corporation and such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.

 

5.8 Vice Presidents.

In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president

 

 

12

 

 

and when so acting shall
have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively (in
order of priority)  by the Board of
Directors, the chief executive officer, or the president.

5.9 Secretary.

The secretary shall keep or cause to be kept, at the principal
executive office of the Corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders.  The minutes shall show the time and place of
each meeting, the names of those present at directors’ meetings or committee
meetings, the number of shares present or represented at stockholders’
meetings, and the proceedings thereof.

 

The secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation’s
transfer agent or registrar, as determined by resolution of the Board of Directors,
a share register, or a duplicate share register, showing the names of all
stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.

 

The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law
or by these Bylaws.  He or she shall keep
the seal of the Corporation, if one be adopted, in safe custody and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or by these Bylaws.

 

5.10 Chief Financial Officer.

The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares.

 

The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the Corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.

 

5.11 Action with Respect to Securities of Other
Corporations.

Unless otherwise directed by the Board of Directors, the chief
executive officer, the president or any officer of the Corporation authorized
by the chief executive officer or the president is authorized to vote and
otherwise act on behalf of the Corporation, in person or by

 

 

13

 

proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation in which the
Corporation may hold securities and otherwise to exercise any and all rights
and powers which the Corporation may possess by reason of its ownership of
securities in such other corporation.

5.12 Delegation of Authority.

Notwithstanding any other provision in these Bylaws, the Board of
Directors may from time to time delegate the powers or duties of any officer to
any other officers or agents.

 

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER
AGENTS 

6.1 Indemnification of Directors and Officers.

Each person who was or is made a party to or is threatened to be made a
party to, witness or other participant in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a “Proceeding”), by
reason of the fact that he or she is or was a director or officer of the
Corporation (an “Indemnitee”), whether the basis of the Proceeding is alleged
action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the DGCL, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law permitted the Corporation
to provide before such amendment), against all expense, liability and loss
(including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by Indemnitee
in connection therewith; provided, however, the Corporation shall not indemnify
any such Indemnitee in connection with a Proceeding (or part thereof) (i)
initiated by such Indemnitee against the Corporation or any director or officer
of the Corporation unless the Corporation has joined in or consented to the
initiation of such Proceeding or (ii) made on account of Indemnitee’s conduct
which constitutes a breach of Indemnitee’s duty of loyalty to the Corporation
or its stockholders, or is an act or omission not in good faith which involves
intentional misconduct or a knowing violation of the law.  For purposes of this Section 6.1, a “director”
or “officer” of the Corporation includes any person who (i) is or was a
director or officer of the Corporation , (ii) is or was serving at the request
of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) was a director
or officer of a corporation that was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation..

 

6.2 Indemnification of Others.

The Corporation shall have the power, to the maximum extent and in the
manner permitted by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide

 

 

14

 

broader indemnification
rights than such law permitted the Corporation to provide before such
amendment), to indemnify each of its employees and agents against all expense,
liability and loss (including attorneys’ fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such employees and agents in connection therewith; provided,
however, provided, however, the Corporation shall not indemnify any such
employee or agent in connection with a Proceeding (or part thereof) (i)
initiated by such employee or agent against the Corporation or any director or
officer of the Corporation unless the Corporation has joined in or consented to
the initiation of such Proceeding or (ii) made on account of such employee’s or
agent’s conduct which constitutes a breach of such employee’s or agent’s duty
of loyalty to the Corporation or its stockholders, or is an act or omission not
in good faith which involves intentional misconduct or a knowing violation of
the law.  For purposes of this Section
6.2, an “employee” or “agent” of the Corporation includes any person other than
a director or officer (i) who is or was an employee or agent of the
Corporation, (ii) who is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was an employee or agent of a corporation which
was a predecessor corporation of the Corporation or of another enterprise at
the request of such predecessor corporation.(1)

6.3 Payment of Expenses in Advance.

Expenses incurred in defending any Proceeding for which indemnification
is required pursuant to Section 6.1 shall be, or for which indemnification is
permitted pursuant to Section 6.2 following authorization thereof by the Board
of Directors may be, paid by the Corporation in advance of the final
disposition of such Proceeding upon receipt of an undertaking, by or on behalf
of the indemnified party to repay such amount if it shall ultimately be
determined, by final judicial decision from which there is no further right to
appeal, that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.(2)

 

6.4 Indemnity Not Exclusive.

The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may been
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office.

 

6.5 Insurance.

The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as
such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the provisions of the DGCL.

 

 

(1)
DGCL  § 145(a), (b).

(2)
DGCL  § 145 (e).

 

 

15

 

 

ARTICLE VII

RECORDS AND REPORTS 

7.1 Maintenance and Inspection of Records.

The Corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books and other records.

 

Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
Corporation’s stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person’s interest as a stockholder.  In every instance where an attorney or other
agent is the person who seeks the right to inspection, the demand under oath
shall be accompanied by a power of attorney or such other writing that
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in Delaware or at its principal place of business.(3)

 

A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in each such stockholder’s name, shall be open to the examination of
any such stockholder for a period of at least ten days before the meeting in the
manner provided by law.  The stock list
shall also be open to the examination of any stockholder during the whole time
of the meeting as provided by law.  This
list shall presumptively determine the identity of the stockholders entitled to
vote at the meeting and the number of shares held by each of them.(4)

 

7.2 Inspection by Directors.

Any director shall have the right to examine the Corporation’s stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director.

ARTICLE VIII

GENERAL MATTERS 

8.1
Checks.

(3)
DGCL  § 220(b).

(4)
DGCL  § 218.

 

 

16

 

 

From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the Corporation, and only the persons so
authorized shall sign or endorse those instruments.

 

8.2 Execution of Corporate Contracts and Instruments.

The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.

 

8.3 Stock Certificates.

The shares of the Corporation shall be represented by certificates.
Every stockholder shall be entitled to have a certificate signed by, or in the
name of the Corporation by the chairman or vice-chairman of the Board of
Directors, or the president or vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation. Any or all of the signatures on the certificate may be a
facsimile.  In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate has ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.

 

No stock certificates will be issued in bearer form.(5)

 

8.4 Special Designation on Certificates.

If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the DGCL, in lieu of the
foregoing requirements there may be set forth on the face or back of the
certificate that the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.(6)

 

 

(5)
DGCL  § 158.

(6)
DGCL  § 157, 202.

 

 

17

 

 

8.5 Lost Certificates.

Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and canceled at the same time.  The Corporation may issue a new certificate
of stock in the place of any certificate previously issued by it, alleged to
have been lost, stolen, mutilated or destroyed, and the Corporation may require
the owner of the lost, stolen, mutilated or destroyed certificate, or the owner’s
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft, mutilation or destruction of any such certificate or the issuance of
such new certificate.(7)

 

8.6 Construction; Definitions.

Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the DGCL shall govern the construction of
these Bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular, and the
term “person” includes both a corporation and a natural person.

 

8.7 Fiscal Year.

The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.

 

8.8 Seal.

The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.

 

8.9 Transfers of Stock.

Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation.

 

8.10 Registered Stockholders.

The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of another
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.

 

8.11 Facsimile Signatures.

(7) DGCL  § 167.

 

 

18

 

In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.

 

ARTICLE IX

AMENDMENTS 

The Bylaws of the Corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that no bylaw may be
adopted, amended or repealed by the stockholders except by the vote or written
consent of at least 66 2/3% of the voting power of the Corporation. The
Corporation may, in its Certificate of Incorporation, confer the power to
adopt, amend or repeal Bylaws upon the Board of Directors.  The fact that such power has been so
conferred upon the Board of Directors shall not divest the stockholders of the
power, nor limit their power, to adopt, amend or repeal Bylaws as set forth in
this Article IX.(8)

 

 

(8) DGCL  § 109(a).

 

 

19

 

CERTIFICATE OF ADOPTION OF

AMENDED AND RESTATED BYLAWS

OF

OBAGI MEDICAL PRODUCTS, INC.

The undersigned hereby certifies that the undersigned is the duly
elected, qualified, and acting Secretary of Obagi Medical Products, Inc. (the “Corporation”),
and that the foregoing Amended and Restated Bylaws were adopted as the Bylaws
of the Corporation on                                     ,
by the Board of Directors of the Corporation.

Executed this           
day of                                   ,
       .

                      
                          ,
Secretary

 

 

 

 

EXHIBIT B

McNamara Notes

(Attached)

 

 

 

 

THE RIGHTS AND OBLIGATIONS
EVIDENCED BY THIS NOTE ARE SUBORDINATED AND SUBJECT TO THE RIGHTS OF THE SENIOR
CREDITORS IDENTIFIED HEREIN, PURSUANT TO THE TERMS AND CONDITIONS CONTAINED
HEREIN.

SUBORDINATED PROMISSORY NOTE

	
  $6,266,900

  	
   

  	
  Long Beach, CA

  November 17, 2006

  

 

FOR VALUE RECEIVED, the
undersigned, Obagi Medical Products, Inc. a Delaware corporation (the “Company”),
promises to pay to the order of McNamara Family Irrevocable Trust Under
Agreement Dated December 17, 2004 (the “Holder”), the principal sum of Six
Million Two Hundred Sixty Six Thousand Nine Hundred dollars ($6,266,900) in
immediately available funds in lawful money of the United States of America,
together with interest from and after the date hereof on the unpaid principal
balance of this Note.

Capitalized terms not
defined elsewhere in this Note shall have the meanings assigned to them in Exhibit
A.

1. Accrual
of Interest.  The unpaid
principal balance of this Note shall bear interest  at a per annum rate equal to the sum of (i)
the Prime Rate in effect from time to time plus 250 basis points (2.50%) (the “Adjustable
Rate”). This Note shall not be construed to require payment of any interest in
excess of the maximum amount permitted by applicable law.

2. Principal
and Interest Payments.

                (a) Payment Schedule.
This Note shall be due and payable in equal quarterly installments of principal
and interest accrued on the unpaid principal amount of this Note from time to
time at the Adjustable Rate, until payment in full of this Note, in an amount
sufficient to amortize the principal of this Note in full in 20 consecutive
quarterly installments, each installment to be due and payable (i) on the last
Business Day of each calendar quarter commencing on March 31, 2007 and
continuing through December 31, 2011 or (ii) immediately upon acceleration,
voluntary prepayment or as otherwise provided for in this Note.  On December 31, 2011 all principal, interest
and other sums accrued under this Note and unpaid shall be due and payable in
full, subject to Sections 3 and 4 hereof. The due dates of any payments not
made in whole or in part hereunder in compliance with  the provisions of Sections 3 and 4 hereof
shall be extended to the next Business Day upon which such payments are
permitted to be made pursuant to said Sections 3 and 4.

 

                (b) Prepayment. This Note
may be prepaid at any time, in whole or in part, without premium or penalty,
but with accrued and unpaid interest on the amount prepaid through the date of
prepayment.

 

 

 

                (c) Method of Payment.
Payments of principal and interest shall be made to the Holder at such address
as it may specify from time to time in a written notice to the Company in the
manner provided in Section 7.  If any
payment is due on a day that is not a Business Day, such payment shall be due
on the next succeeding Business Day.

 

                3. Restriction
and Limitation of Payments.

 

                (a) Restriction of Payments.
Notwithstanding Section 2(a) hereof, no payment or distribution of any kind,
whether direct or indirect and whether in cash, securities or other property,
shall be made on account of any principal and interest on this Note and all
other amounts owing with respect hereto, including, without limitation amounts
received pursuant to claims for damages, rights of rescission or other rights
under or in respect of this Note (the “Note Debt”) or in respect of any
purchase, redemption, retirement or other acquisition of any Note Debt, by or
for the account of the Company or any of its Subsidiaries, unless (i) no
Merrill Lynch Event of Default has occurred and is continuing (including if,
after giving effect to such distribution, the Company is unable to demonstrate
compliance with the covenants set forth in Article 6 of the Merrill Lynch
Credit Agreement (or, as the case may be, the financial covenants set forth in
any replacement Merrill Lynch Credit Agreement) recomputed for the most
recently ended quarter for which information is available) and the Company and
Subsidiaries are in compliance with all other terms and conditions of the
Merrill Lynch Credit Agreement, (ii) if such payment or distribution is made
prior to the Merrill Lynch Commitment Expiry Date, the Merrill Lynch Revolving Loan
Limit minus the Merrill Lynch Revolving Loan Outstanding is equal to or greater
than $2,000,000, (iii) the aggregate of all such payments hereunder or under
any similar arrangements described in Section 5.4 of the Merrill Lynch Credit
Agreement (whether voluntary or mandatory on the part of the Company) after
January 28, 2005 do not exceed $1,500,000 in any Fiscal Year and do not exceed
$5,000,000 in the aggregate from and after January 28, 2005, and (iv) such
payment or distribution is not then prohibited by the terms of any replacement
Merrill Lynch Credit Agreement.

 

                (b) Limitation of Payments.
In an event of an insolvency of the Company and/or upon and during the
continuance of a Senior Default by the Company, the Company will not make any
payment or distribution of any kind, whether direct or indirect and whether in
cash, securities or other property, made on account of any Note Debt or in
respect of any purchase, redemption, retirement or other acquisition of any
Note Debt by or for the account of the Company or any of its Subsidiaries.

 

                (c) Withholding Rights.
The Company shall be entitled to deduct, withhold and offset from any payment
to or amount due to the Holder pursuant to this Note such amounts, if any, as
(i) the Company or OMP, Inc. is or was required by any provision of federal,
state or local tax law to deduct and withhold from the Holder or Austin
McNamara in connection with (A) any payments due to the Holder hereunder, or
(B) the redemption of the shares of capital stock of the Company held by the
Holder in consideration of the issuance of this Note and the shares of capital
stock of the Company held by [Name of other McNamara Trust] in consideration of
the issuance of the note issued to [Name of other McNamara Trust] or for any
other consideration, or (ii) any tax authority asserts against the Company or
OMP, Inc. (including without limitation taxes, interest, penalties, additions
to tax and the Company’s or OMP, Inc.’s associated costs, attorney’s fees and
other fees) under any provision of federal, state or local tax law in
connection with the exercise by the Holder,

 

 

2

 

Austin
McNamara or [Name of other McNamara Trust] of options to purchase any or all of
the shares of capital stock of the Company that were held by the Holder or
[Name of other McNamara Trust] and were redeemed in consideration of the
issuance of this Note or the note issued to [Name of other McNamara Trust] or
for any other consideration.  All amounts
that are so withheld by the Company shall be promptly paid to the applicable
tax authorities, except to the extent that they were so paid by the Company or
OMP, Inc. prior to the withholding pursuant to this Section 2(c), and, as a
condition of payment hereunder and by acceptance of this Note or payment
hereunder, the Holder irrevocably waives any claims for specific
performance.  If any federal tax statute
of limitations for the Company or OMP, Inc. for its 2005 or any subsequent taxable
year is extended during the term hereof, then the Company shall withhold from
any subsequent payment to or amount due to the Holder pursuant to this Note a
reasonable amount to cover the Company’s or OMP, Inc.’s potential liability to
tax authorities for such taxable year in connection with (i) or (ii) above
until the issue of any such potential liability has been resolved or such
statute has expired without the assertion of any such liability by a tax
authority, at which time all amounts that were so withheld shall be paid to the
applicable tax authorities and/or paid to the Holder, depending on the
resolution.  All amounts that are
withheld by the Company and paid to the applicable tax authorities pursuant to
this Note shall be treated for all purposes of this Note as having been paid to
the Holder.

 

                (d) No Event of Default.
The limitation of or failure to make a payment on account of the Note Debt by
reason of any provision of this Section 3 shall not be an Event of Default
hereunder.

 

                4. Subordination
of Note.

 

                (a) Generally. The Company,
for itself and its successors and assigns, and the Holder by its acceptance of
this Note or payment hereunder, agree that the payment of the Note Debt by the
Company is subordinated, to the extent and in the manner provided in Sections 3
and 4, hereof, to the prior payment in full of all Senior Indebtedness, and
that the Company shall not make and the Holder shall not accept or receive any
payment of the Note Debt in contravention of the provisions of Sections 3 and
4, hereof. Section 4 and the provisions hereof are made for the benefit of the
Senior Creditors, whether existing on the date hereof or hereafter becoming
Senior Creditors, and each such Senior Creditor is entitled to rely upon the
provisions of Sections 3 and 4, hereof, for purposes of becoming a holder of or
continuing to hold Senior Indebtedness, is made an obligee under Sections 3 and
4, hereof, and may enforce its provisions.

 

                (b) Payment of Principal,
Interest or other Amounts. No payment or distribution of any kind, whether
direct or indirect and whether in cash, securities or other property, shall be
made on account of principal, interest or any other amount of any Note Debt, or
in respect of any redemption, retirement, purchase or other acquisition of any
Note Debt, by or for the account of the Company or any of its Subsidiaries, at
any time during which any Senior Indebtedness shall remain unpaid or any
commitment to lend or otherwise provide additional Senior Indebtedness shall
remain outstanding. Notwithstanding the foregoing, subject to Section 3 hereof
and to the extent permitted under the Merrill Lynch Credit Agreement and under
any other agreement evidencing Senior Indebtedness, the Company may make
regularly scheduled payments of principal and accrued interest as provided in this
Note in accordance with Section 2(a) hereof; provided, that, no payment or
distribution of any kind shall be made (including upon the maturity of this
Note) whether by

 

 

3

 

acceleration or otherwise by the Company or accepted
by Holder if, at the time of such payment or distribution a Senior Default
(including, without limitation, a breach of Section 5.4(a)(y) of the Merrill
Lynch Credit Agreement or (as the case may be) a breach of any of the
restricted payments or restricted distributions covenants of any replacement
Merrill Lynch Credit Agreement) exists or would result therefrom or any
commitment to lend or otherwise provide additional Senior Indebtedness remains
outstanding.

                (c) Subordination on Dissolution,
Liquidation or Reorganization.

 

(i) Upon any distribution of assets of the Company in
any Insolvency Proceeding (other than in connection with a reorganization or
readjustment of the Company, in which case clause (ii) shall apply):

 

(A) the holders of all Senior Indebtedness shall first
be entitled to receive payment in full of all Senior Indebtedness and the
commitments of all Senior Creditors to lend or otherwise provide Senior
Indebtedness shall be terminated before the Holder is entitled to receive any
payment from the Company of principal or interest on this Note; and

 

(B) any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holder would be entitled except for the provisions of Sections 3 and
4, hereof, shall be paid by the liquidating trustee or agent or other Person
making such payment or distribution directly to the Senior Creditors or their
representatives to the extent necessary to make payment in full of the Senior
Indebtedness remaining unpaid.

 

(ii) In any Insolvency Proceeding, any payment or
distribution of assets of the Company of any kind or character, whether in cash
or other property, to which the Holder is entitled pursuant to a plan of
reorganization or debt adjustment shall be paid by the liquidating trustee or
other Person making such payment or distribution directly to the Senior
Creditors or their representatives until payment in full of all Senior
Indebtedness.

 

(iii) The Company will give prompt written notice to
the Holder of the commencement of any Insolvency Proceeding by or against the
Company.

 

(iv) Each Senior Creditor is hereby irrevocably
authorized and empowered (in its own name or in the name of Holder or
otherwise), but shall have no obligation, to file claims and proofs of claim on
account of the Subordinated Indebtedness and to vote such claims in any
Insolvency Proceeding.

 

                (d) Specific Performance.
Each Senior Creditor is hereby authorized to demand specific performance of the
provisions of Sections 3 and 4, hereof, whether or not the Company shall have
complied with any of the provisions hereof that are applicable to it, at any
time that the Holder shall have failed to comply with any of the applicable
provisions of Sections 3 and 4, hereof, to it. As a condition of payment
hereunder and by acceptance of this Note or payment hereunder, the

 

 

4

 

 

Holder
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.

 

                (e) Subrogation Rights.
If any cash or other property otherwise payable or deliverable to the Holder
shall have been applied to the payment of any Senior Indebtedness, then the
Holder shall be subrogated, from and after such time as such Senior
Indebtedness shall have been paid in full and all commitments of the Senior
Creditors to lend or otherwise provide Senior Indebtedness shall be terminated,
to any rights of any holder of such Senior Indebtedness to receive any further
payments or distributions of assets of the Company applicable to such Senior
Indebtedness until this Note shall be paid in full.  For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holder would be entitled except for the
provisions of Sections 3 and 4, hereof, shall, as between the Company and its
creditors other than the Senior Creditors on the one hand, and, the Holder of
this Note on the other hand, be deemed to have been made as a payment by the
Company to or on account of any Senior Indebtedness.

 

                (f) Obligation of the Company.
Nothing contained in Sections 3 and 4, hereof, or elsewhere in this Note is
intended to or shall impair, as between the Company and the Holder, the
obligations of the Company to pay to the Holder the principal of, and interest
on, this Note as and when the same shall become due and payable in accordance
with the terms hereof, or is intended to or shall affect the relative rights of
the Holder and the creditors of the Company other than the Senior Creditors,
nor shall anything herein prevent any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights under Sections 3 and 4, hereof, of the Senior Creditors in respect
of cash, property or securities of the Company received upon the exercise of
any such remedy.

 

                (g) Subordination Rights Not
Impaired. No right of any present or future holders of Senior Indebtedness
to enforce subordination as provided herein shall at any time be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any noncompliance by the Company
with the terms of this Note, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. 
Senior Creditors may extend, renew, modify or amend the terms of the
Senior Indebtedness or any security therefor (subject, in all cases to the
terms contained in the definitions of Senior Indebtedness) and release, sell or
exchange such security and otherwise deal freely with the Company and its
assets, all without impairing the provisions of Sections 3 and  4, hereof, or affecting the liabilities and
obligations of the parties to such arrangements or the Holder, and the Holder,
by acceptance of this note or payment hereunder, irrevocably waives any right
to receive notice of any of the foregoing and any right to require any Senior
Creditor to marshal any security for Senior Indebtedness or to enforce any lien
now or hereafter granted to secure Senior Indebtedness, or to pursue any claim
against any obligor in respect of Senior Indebtedness, as a condition to the
effectiveness of Sections 3 or 4, hereof, or otherwise.

 

                (h) No Event of Default.
The limitation of or failure to make a payment on account of the Note Debt by
reason of any provision of Section 4, hereof, shall not be an Event of Default
hereunder.

 

 

5

 

 

                (i) Turnover of Prohibited
Payments. As a condition to future payment hereunder, if any payment or
distribution of any character, whether in cash or other properties, shall be
received by the Holder in contravention of any of the terms of Sections 3
or  4, hereof, such payment or
distribution shall be received by the Holder in trust for the benefit of, and
shall be paid or delivered and transferred to, the holders of the Senior Indebtedness
outstanding at the time in accordance with the priorities then existing among
such holders, or to a trustee or agent for the benefit of the Senior Creditors,
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to effect payment in full of such Senior Indebtedness
after giving effect to any concurrent payment or distributions to Senior
Creditors.  In connection with any
payment or distribution of cash or property of the Company in any Insolvency
Proceeding, the Holder shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such Insolvency Proceeding is
pending, or a certificate of the liquidating trustee or agent or other Person
making such payment or distribution, delivered to the Holder, for the purpose
of ascertaining the Person or Persons entitled to receive payment from the
Holder, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all of the facts pertinent thereto or to Sections 3 and
4, hereof.

 

                (j) Enforcement of Note Debt.
Until the Senior Indebtedness shall be paid in full and all commitments of the
Senior Creditors to lend or extend credit constituting Senior Indebtedness
shall be terminated, the Holder shall not (i) accelerate the payment of or
otherwise declare due and payable any of the Note Debt prior to when it
otherwise is due and payable in accordance with Section 2, hereof, (ii)
commence or join with any other creditor in commencing any Insolvency
Proceeding, (iii) take any other action to collect or enforce any right to
receive any payment on account of the Note Debt, or (iv) initiate, prosecute or
participate in any claim, action or other proceeding challenging the
enforceability, validity, perfection or priority of the Senior Indebtedness or
any liens and security interests securing the Senior Indebtedness.

 

                (k) Reinstatement. The
provisions of Sections 3 and 4, hereof, shall continue to be effective or be
reinstated, as the case may be, if at any time any payment in respect of any
Senior Indebtedness is rescinded or must otherwise be returned by the holder
thereof upon the filing by or against the Company of any Insolvency Proceeding,
all as if such payment had never been made.

 

                5. Default and
Acceleration.

 

                (a) Events of Default. If
any of the following events (each an “Event of Default”) shall occur:

 

(i) the Company (x) shall fail to pay any principal
under this Note when due, or (y) shall fail to pay any interest accrued on this
principal amount of this Note when due and such failure shall continue for 30
days (for the avoidance of doubt, the failure to make a payment on account of
the Note Debt by reason of any provision of Sections 3 or 4, hereof, shall not
be deemed to be a default or an Event of Default hereunder); or

 

(ii) an Insolvency Proceeding shall occur and, if such
Insolvency Proceeding resulted from the entry by a court of competent
jurisdiction of an order or decree that (x) is for relief against the Company
or any of its Subsidiaries in an

 

 

6

 

involuntary case under the Bankruptcy Code, (y) appoints a
custodian of the Company or any of its Subsidiaries for all or any substantial
part of its assets, or (z) orders the liquidation of the Company or any of its
Subsidiaries, such order or decree shall remains unstayed and in effect for
forty-five (45) days, or any dismissal, stay, rescission or termination thereof
ceases to remain in effect; or

 

(iii) the Company shall fail to comply with any
agreement contained in this Note and such failure shall continue for a period
of 30 days from the date the Holder notifies the Company (pursuant to Section 7
hereof) of such failure by the Company (for the avoidance of doubt, failure to
comply with any agreement contained in the Note by reason of any provision of
Sections 3 and 4, hereof, shall not be deemed to be an Event of Default
hereunder);

 

then in any such event (other than an event with
respect to the Company described in clause (ii) 
of this Section) the Holder, at its option, may, without notice to the
Company, declare the outstanding principal amount hereof, together with all
accrued but unpaid interest thereon, to be (and the same shall thereupon
become) immediately due and payable; and in the event that an Event of Default
specified in clause (ii) shall occur, the outstanding principal amount hereof,
together with all accrued and unpaid interest hereon shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company; provided, that in
any such case payment thereof shall be subject to the provisions of Sections 3
and 4, hereof, if any Senior Indebtedness has not been paid in full as provided
herein, and no such declaration shall be made or other action taken to collect
or enforce payment under this Note unless otherwise permitted by Sections 3 or
4, hereof, as applicable.

                (b) Collection Costs. If
this Note is collected by or through an attorney at law, the Company agrees to
pay, in addition to all unpaid principal and interest thereon as provided in
this Note, reasonable costs of collection of the Holder (including, without
limitation, reasonable attorneys’ fees and court costs actually incurred by the
Holder).

 

                (c) Interest after Default.
From and after the occurrence and during the continuance of an Event of
Default, in lieu of the interest accruing as provided in Section 2, hereof,
interest on the unpaid principal balance of this Note shall accrue at a per
annum rate equal to the Default Rate.

 

                6. Waivers.  The
Company hereby expressly waives presentment, demand, protest, notice of
protest, notice of dishonor and any and all lack of diligence or delays in
collection or enforcement of this Note; provided, that the Company’s
obligations to the Holder shall be subject to the provisions of Sections 3 and
4, hereof.

 

                7. Notices.  Each
notice, authorized or required to be given under this Note must be in writing
and shall be deemed to have been properly given or served by personal delivery
or by sending same by overnight courier or by depositing same in the United
States mail, certified or registered mail and return receipt requested, address
as follows:

 

(i) in the case of the Company, the address for the
Company shown below; and

 

 

7

 

(ii) in the case of the Holder, the address shown
below or such other address as may be specified by the initial Holder or any
successor Holder of this Note by a written notice to the Company given in the
manner provided in this Section 7; and

 

Address for the Holder:

McNamara Family Irrevocable
Trust Under Agreement Dated December 17, 2004

10202 Sycamore Cir.

Villa Park, CA 92861

Address for the Company:

Obagi Medical Products

310 Golden Shore

Long Beach, California 90802

Attention: Chief Financial Officer

                8. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
New York.

 

                9. No Security. 
This Note and the indebtedness evidenced hereby are unsecured.  In the event that Holder shall at any time
have any liens or security interests in any Collateral, Merrill Lynch Capital,
shall be deemed authorized by Holder to file UCC termination statements
sufficient to terminate the liens and security interests in favor of Holder
with respect to such Collateral, and, as a condition to payment hereunder, the
Holder shall promptly execute and deliver to Merrill Lynch Capital, such
releases and terminations as Merrill Lynch Capital shall reasonably request to
effect the release of the liens and security interests of Holder in such
Collateral.  In furtherance of the
foregoing, Holder hereby irrevocably appoints Merrill Lynch Capital its
attorney-in-fact, with full authority in the place and stead of Holder and in
the name of Holder or otherwise, to execute and deliver any document or
instrument which Holder may be required to deliver pursuant to this Section 9.

 

                10. Assignment and Transfer. The Holder may not assign,
sell, negotiate, pledge, hypothecate or otherwise transfer all or any part of
this Note to any Person, without the prior written consent of the Company.  Senior Creditors and every assignee or
transferee of any of the Senior Indebtedness shall be entitled to rely upon and
shall be the third party beneficiaries of Sections 3 and 4 hereof and shall be
entitled to enforce such terms and provisions to the same extent as if such
Persons were initially a party hereto.

 

11. Miscellaneous. 
This Note may not be amended, modified or changed nor shall any waiver
of any provision hereof be effective, except only by an instrument in writing
executed by the  party against whom
enforcement thereof is sought.

 

12. Acknowledgement. As a condition of payment
hereunder and by acceptance of this Note or payment, Holder hereby acknowledges
that the Merrill Lynch Credit Agreement contains

 

 

8

 

 

 

limitations and restrictions
that may prohibit, condition or restrict any payment or distribution of any
kind, whether direct or indirect and whether in cash, securities or other
property, to be made by OMP, Inc. to the Company which may be required to
permit the Company to make such payment or distribution on account of the Note
Debt or in respect of any purchase, redemption, retirement or other acquisition
of any Note Debt or for the account of the Company or any of its Subsidiaries.

 

 

9

 

 

IN WITNESS WHEREOF, the
Company has duly executed this Note as of the date and year first above
written.

	
   

  	
  Obagi
  Medical Products, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

 

10

 

 

Exhibit A

DEFINITIONS 

 

For purposes of this Note,
the following terms shall have the following meanings:

 

“Bankruptcy Code” shall
mean Title 11 of the United States Code, as amended.

“Business Day” shall
mean any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to close.

“Capitalized Lease
Liabilities” shall mean all obligations of a Person under leasing or
similar arrangements which, in accordance with generally accepted accounting
principles in effect from time to time in the United States (“GAAP”), are or
would be classified as capitalized leases.

“Collateral” shall
mean any and all of the now existing and hereafter acquired real and personal
property of the Company and any and all additional property and interests in
property that secures all or any portion of the Senior Indebtedness.

“Default Rate” shall
mean a per annum rate of interest equal to the sum of (x) the per annum rate of
interest otherwise accruing on the principal balance of this Note, plus (y) an
additional 200 basis points (2.00%) per annum.

“Event of Default”
has the meaning given to such term in Section 5 hereof.

“Fiscal Year” shall
mean a fiscal year of the Company, ending on December 31 of each calendar year.

“Indebtedness” of any
Person shall mean, without duplication,

                (a) all obligations of such
Person for borrowed money (including all notes payable and drafts accepted
representing extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are
customarily paid;

 

                (b) all obligations, contingent
or otherwise, relative to the face amount of all letters of credit, whether or
not drawn, and banker’s acceptances issued for the account of such Person;

 

                (c) all Capitalized Lease
Liabilities of such Person (to the extent required by GAAP to be included on
the balance sheet of such Person);

 

                (d) whether or not so included
as liabilities in accordance with GAAP:

 

(i) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable
arising in the ordinary course of business) and Indebtedness secured by a lien
on property owned or being purchased by such Person (including Indebtedness
arising under conditional sales or other title retention agreements),

 

 

 

 

whether or not such Indebtedness shall have been assumed by
such Person or is limited in recourse; and

 

(ii) all obligations of such Person in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of, Indebtedness of another
Person of the type described in clause (a), (b), (c) or (d)(i) above, or
clause(e) below; and

 

                (e) all obligations of such
Person to redeem, purchase or otherwise retire or extinguish any of its capital
stock or other equity or ownership interests at a fixed or determinable date
(whether by operation of a sinking fund or otherwise), at another’s option or
upon the occurrence of a condition not solely within the control of such Person
(e.g., redemption from future
earnings).

 

“Insolvency Proceeding”
shall mean, with respect to the Company or any of its Subsidiaries, the
occurrence of any of the following: (a) the entry of a decree or order for
relief by a court or governmental agency in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointment by a court or governmental agency of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or such Subsidiary or for any substantial part of its property or
assets or the ordering of the winding up or liquidation of its affairs by a
court or governmental agency; or (b) the commencement against the Company or
such Subsidiary of an involuntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or of any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or such Subsidiary or for any substantial part of its
property or assets or for the winding up or liquidation of its affairs, or the
repossession or seizure by a creditor of the Company or such Subsidiary of a
substantial part of its property or assets, which case is not dismissed within
90 days; or (c) the Company or such Subsidiary shall commence a voluntary case
under the Bankruptcy Code or any other applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consent to the entry of an order
for relief in an involuntary case under any such law, or consent to the
appointment of or the taking possession by a receiver, liquidator, assignee,
secured creditor, custodian, trustee, sequestrator (or similar official) of the
Company or such Subsidiary or for any substantial part of its property or
assets or make any general assignment for the benefit of creditors; or (d) the
Company or such Subsidiary shall be unable to, or shall admit in writing its
inability to, pay its debts generally as they become due.

“Merrill Lynch Capital”
shall mean Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc, as administrative agent.

“Merrill Lynch Commitment
Expiry Date” shall mean the Commitment Expiry Date defined in the Merrill
Lynch Credit Agreement.

“Merrill Lynch Credit
Agreement” shall mean the Credit Agreement dated as of January 28, 2005
among the Company, OMP, Inc., the financial institutions or other entities from
time to time parties thereto, and Merrill Lynch Capital, as the same may be
amended, restated, supplemented, refinanced, replaced or otherwise modified
from time to time; provided, however, that the limitations

 

 

12

 

 

and restrictions on payments and distributions on
account of any principal and interest on this Note shall not be more limiting
or restrictive in any refinanced or replacement Merrill Lynch Credit Agreement
than such limitations and restrictions set forth in the Merrill Lynch Credit
Agreement as in effect on the date hereof.

“Merrill Lynch Event of
Default” shall mean a Default or an Event of Default defined under the
Merrill Lynch Credit Agreement.

“Merrill Lynch Revolving
Loan Limit” shall mean the Revolving Loan Limit defined in the Merrill
Lynch Credit Agreement.

“Merrill Lynch Revolving
Loan Outstanding” shall mean the Revolving Loan Outstanding defined in the
Merrill Lynch Credit Agreement.

“Note Debt” has the
meaning given to such term in Section 3 hereof.

“paid in full” or “payment
in full” shall mean the indefeasible receipt by Senior Creditors of all
Senior Indebtedness in cash or in immediately available funds or, in the case
of Senior Indebtedness constituting obligations in respect of letters of
credit, bankers acceptances and other contingent obligations (other than
indemnity obligations that are not then due and payable or for which any events
or claims that would give rise thereto are not then pending), the receipt of
cash collateral or irrevocable standby letters of credit in amounts and on
terms and conditions provided in the documentation governing such Senior
Indebtedness.

“Person” shall mean
any individual, partnership, firm, corporation, association, joint venture,
limited liability company, trust or other entity, or any governmental authority.

“Prime Rate” shall
mean a fluctuating rate of interest per annum as publicly quoted in the Wall
Street Journal (or any successor to it) as the prime rate for interest rate
determinations for commercial banks from time to time.  Changes in the rate of interest shall take
effect on the date of each change in the Prime Rate.

“Senior Creditor”
shall mean a Person who is the holder, payee or obligee of any Senior
Indebtedness.

“Senior Default”
shall mean a default or event of default under any instrument or agreement
governing any Senior Indebtedness or any other agreement or document executed
and delivered in connection therewith, including, without limitation a Merrill
Lynch Event of Default.

“Senior Indebtedness”
shall mean, collectively, all Indebtedness and obligations of the Company
including, without limitation, any of its obligations under the Merrill Lynch
Credit Agreement and such other Indebtedness and obligations which the Company
at any time shall determine and designate as being prior and senior to the Note
Debt hereunder, including, without limitation, the Company’s present and future
obligations to secured lenders; provided, however, that, in any
event, Senior Indebtedness shall not include (a) trade payables incurred in the
ordinary course of business, (b) any accrued expenses (excluding any expense
which constitutes an Obligation (as

 

13

 

defined in the Merrill Lynch Credit Agreement)) of
the Company, or (c) any indebtedness or other obligations as to which, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to this Note, or ranks pari passu with any Note
Debt.

“Subsidiary”
of any Person means any other corporation, partnership or limited liability
company of which greater than 50% of the outstanding shares of capital stock or
other equity or ownership interests having voting power for the election of directors
(or others serving equivalent functions) is owned directly or indirectly by
such Person.  Except as otherwise
indicated herein, references to Subsidiaries shall refer to Subsidiaries of the
Company.

 

 

14

 

THE RIGHTS AND OBLIGATIONS
EVIDENCED BY THIS NOTE ARE SUBORDINATED AND SUBJECT TO THE RIGHTS OF THE SENIOR
CREDITORS IDENTIFIED HEREIN, PURSUANT TO THE TERMS AND CONDITIONS CONTAINED
HEREIN.

SUBORDINATED PROMISSORY NOTE

	
  $21,934,350

  	
   

  	
  Long
  Beach, CA

  November 17, 2006

  

 

FOR VALUE RECEIVED, the
undersigned, Obagi Medical Products, Inc. a Delaware corporation (the “Company”),
promises to pay to the order of McNamara Family Trust (the “Holder”), the
principal sum of Twenty One Million Nine Hundred Thirty Four Thousand Three
Hundred Fifty dollars ($21,934,350) in immediately available funds in lawful
money of the United States of America, together with interest from and after
the date hereof on the unpaid principal balance of this Note.

Capitalized terms not defined
elsewhere in this Note shall have the meanings assigned to them in Exhibit A.

1. Accrual
of Interest.  The unpaid
principal balance of this Note shall bear interest  at a per annum rate equal to the sum of (i)
the Prime Rate in effect from time to time plus 250 basis points (2.50%) (the “Adjustable
Rate”). This Note shall not be construed to require payment of any interest in
excess of the maximum amount permitted by applicable law.

2. Principal
and Interest Payments.

                (a) Payment Schedule.
This Note shall be due and payable in equal quarterly installments of principal
and interest accrued on the unpaid principal amount of this Note from time to
time at the Adjustable Rate, until payment in full of this Note, in an amount
sufficient to amortize the principal of this Note in full in 20 consecutive
quarterly installments, each installment to be due and payable (i) on the last
Business Day of each calendar quarter commencing on March 31, 2007 and
continuing through December 31, 2011 or (ii) immediately upon acceleration,
voluntary prepayment or as otherwise provided for in this Note.  On December 31, 2011 all principal, interest
and other sums accrued under this Note and unpaid shall be due and payable in
full, subject to Sections 3 and 4 hereof. The due dates of any payments not
made in whole or in part hereunder in compliance with  the provisions of Sections 3 and 4 hereof
shall be extended to the next Business Day upon which such payments are
permitted to be made pursuant to said Sections 3 and 4.

 

                (b) Prepayment. This Note
may be prepaid at any time, in whole or in part, without premium or penalty,
but with accrued and unpaid interest on the amount prepaid through the date of
prepayment.

 

 

 

 

                (c) Method of Payment.
Payments of principal and interest shall be made to the Holder at such address
as it may specify from time to time in a written notice to the Company in the
manner provided in Section 7.  If any
payment is due on a day that is not a Business Day, such payment shall be due
on the next succeeding Business Day.

 

                3. Restriction
and Limitation of Payments.

 

                (a) Restriction of Payments.
Notwithstanding Section 2(a) hereof, no payment or distribution of any kind,
whether direct or indirect and whether in cash, securities or other property,
shall be made on account of any principal and interest on this Note and all
other amounts owing with respect hereto, including, without limitation amounts
received pursuant to claims for damages, rights of rescission or other rights
under or in respect of this Note (the “Note Debt”) or in respect of any
purchase, redemption, retirement or other acquisition of any Note Debt, by or
for the account of the Company or any of its Subsidiaries, unless (i) no
Merrill Lynch Event of Default has occurred and is continuing (including if,
after giving effect to such distribution, the Company is unable to demonstrate
compliance with the covenants set forth in Article 6 of the Merrill Lynch
Credit Agreement (or, as the case may be, the financial covenants set forth in
any replacement Merrill Lynch Credit Agreement) recomputed for the most
recently ended quarter for which information is available) and the Company and
Subsidiaries are in compliance with all other terms and conditions of the
Merrill Lynch Credit Agreement, (ii) if such payment or distribution is made
prior to the Merrill Lynch Commitment Expiry Date, the Merrill Lynch Revolving
Loan Limit minus the Merrill Lynch Revolving Loan Outstanding is equal to or
greater than $2,000,000, (iii) the aggregate of all such payments hereunder or
under any similar arrangements described in Section 5.4 of the Merrill Lynch
Credit Agreement (whether voluntary or mandatory on the part of the Company)
after January 28, 2005 do not exceed $1,500,000 in any Fiscal Year and do not
exceed $5,000,000 in the aggregate from and after January 28, 2005, and (iv)
such payment or distribution is not then prohibited by the terms of any
replacement Merrill Lynch Credit Agreement.

 

                (b) Limitation of Payments.
In an event of an insolvency of the Company and/or upon and during the
continuance of a Senior Default by the Company, the Company will not make any
payment or distribution of any kind, whether direct or indirect and whether in
cash, securities or other property, made on account of any Note Debt or in
respect of any purchase, redemption, retirement or other acquisition of any
Note Debt by or for the account of the Company or any of its Subsidiaries.

 

                (c) Withholding Rights.
The Company shall be entitled to deduct, withhold and offset from any payment
to or amount due to the Holder pursuant to this Note such amounts, if any, as
(i) the Company or OMP, Inc. is or was required by any provision of federal,
state or local tax law to deduct and withhold from the Holder or Austin
McNamara in connection with (A) any payments due to the Holder hereunder, or
(B) the redemption of the shares of capital stock of the Company held by the
Holder in consideration of the issuance of this Note and the shares of capital
stock of the Company held by [Name of other McNamara Trust] in consideration of
the issuance of the note issued to [Name of other McNamara Trust] or for any
other consideration, or (ii) any tax authority asserts against the Company or
OMP, Inc. (including without limitation taxes, interest, penalties, additions
to tax and the Company’s or OMP, Inc.’s associated costs, attorney’s fees and
other fees) under any provision of federal, state or local tax law in
connection with the exercise by the Holder,

 

 

2

 

Austin
McNamara or [Name of other McNamara Trust] of options to purchase any or all of
the shares of capital stock of the Company that were held by the Holder or
[Name of other McNamara Trust] and were redeemed in consideration of the
issuance of this Note or the note issued to [Name of other McNamara Trust] or
for any other consideration.  All amounts
that are so withheld by the Company shall be promptly paid to the applicable
tax authorities, except to the extent that they were so paid by the Company or
OMP, Inc. prior to the withholding pursuant to this Section 2(c), and, as a
condition of payment hereunder and by acceptance of this Note or payment
hereunder, the Holder irrevocably waives any claims for specific performance.  If any federal tax statute of limitations for
the Company or OMP, Inc. for its 2005 or any subsequent taxable year is
extended during the term hereof, then the Company shall withhold from any
subsequent payment to or amount due to the Holder pursuant to this Note a
reasonable amount to cover the Company’s or OMP, Inc.’s potential liability to
tax authorities for such taxable year in connection with (i) or (ii) above
until the issue of any such potential liability has been resolved or such
statute has expired without the assertion of any such liability by a tax
authority, at which time all amounts that were so withheld shall be paid to the
applicable tax authorities and/or paid to the Holder, depending on the
resolution.  All amounts that are withheld
by the Company and paid to the applicable tax authorities pursuant to this Note
shall be treated for all purposes of this Note as having been paid to the
Holder.

 

                (d) No Event of Default.
The limitation of or failure to make a payment on account of the Note Debt by
reason of any provision of this Section 3 shall not be an Event of Default
hereunder.

 

                4. Subordination
of Note.

 

                (a) Generally. The
Company, for itself and its successors and assigns, and the Holder by its
acceptance of this Note or payment hereunder, agree that the payment of the
Note Debt by the Company is subordinated, to the extent and in the manner
provided in Sections 3 and 4, hereof, to the prior payment in full of all
Senior Indebtedness, and that the Company shall not make and the Holder shall
not accept or receive any payment of the Note Debt in contravention of the
provisions of Sections 3 and 4, hereof. Section 4 and the provisions hereof are
made for the benefit of the Senior Creditors, whether existing on the date
hereof or hereafter becoming Senior Creditors, and each such Senior Creditor is
entitled to rely upon the provisions of Sections 3 and 4, hereof, for purposes
of becoming a holder of or continuing to hold Senior Indebtedness, is made an
obligee under Sections 3 and 4, hereof, and may enforce its provisions.

 

                (b) Payment of Principal,
Interest or other Amounts. No payment or distribution of any kind, whether
direct or indirect and whether in cash, securities or other property, shall be
made on account of principal, interest or any other amount of any Note Debt, or
in respect of any redemption, retirement, purchase or other acquisition of any
Note Debt, by or for the account of the Company or any of its Subsidiaries, at
any time during which any Senior Indebtedness shall remain unpaid or any
commitment to lend or otherwise provide additional Senior Indebtedness shall
remain outstanding. Notwithstanding the foregoing, subject to Section 3 hereof
and to the extent permitted under the Merrill Lynch Credit Agreement and under
any other agreement evidencing Senior Indebtedness, the Company may make
regularly scheduled payments of principal and accrued interest as provided in
this Note in accordance with Section 2(a) hereof; provided, that, no payment or
distribution of any kind shall be made (including upon the maturity of this
Note) whether by

 

 

3

 

acceleration or otherwise by the Company or accepted
by Holder if, at the time of such payment or distribution a Senior Default
(including, without limitation, a breach of Section 5.4(a)(y) of the Merrill
Lynch Credit Agreement or (as the case may be) a breach of any of the
restricted payments or restricted distributions covenants of any replacement
Merrill Lynch Credit Agreement) exists or would result therefrom or any commitment
to lend or otherwise provide additional Senior Indebtedness remains
outstanding.

                (c) Subordination on
Dissolution, Liquidation or Reorganization.

 

(i) Upon any distribution of assets of the Company in
any Insolvency Proceeding (other than in connection with a reorganization or
readjustment of the Company, in which case clause (ii) shall apply):

 

(A) the holders of all Senior Indebtedness shall first
be entitled to receive payment in full of all Senior Indebtedness and the
commitments of all Senior Creditors to lend or otherwise provide Senior
Indebtedness shall be terminated before the Holder is entitled to receive any
payment from the Company of principal or interest on this Note; and

 

(B) any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holder would be entitled except for the provisions of Sections 3 and
4, hereof, shall be paid by the liquidating trustee or agent or other Person
making such payment or distribution directly to the Senior Creditors or their
representatives to the extent necessary to make payment in full of the Senior
Indebtedness remaining unpaid.

 

(ii) In any Insolvency Proceeding, any payment or
distribution of assets of the Company of any kind or character, whether in cash
or other property, to which the Holder is entitled pursuant to a plan of
reorganization or debt adjustment shall be paid by the liquidating trustee or
other Person making such payment or distribution directly to the Senior Creditors
or their representatives until payment in full of all Senior Indebtedness.

 

(iii) The Company will give prompt written notice to
the Holder of the commencement of any Insolvency Proceeding by or against the
Company.

 

(iv) Each Senior Creditor is hereby irrevocably
authorized and empowered (in its own name or in the name of Holder or
otherwise), but shall have no obligation, to file claims and proofs of claim on
account of the Subordinated Indebtedness and to vote such claims in any
Insolvency Proceeding.

 

                (d) Specific Performance.
Each Senior Creditor is hereby authorized to demand specific performance of the
provisions of Sections 3 and 4, hereof, whether or not the Company shall have
complied with any of the provisions hereof that are applicable to it, at any
time that the Holder shall have failed to comply with any of the applicable
provisions of Sections 3 and 4, hereof, to it. As a condition of payment
hereunder and by acceptance of this Note or payment hereunder, the

 

 

4

 

Holder
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.

 

                (e) Subrogation Rights.
If any cash or other property otherwise payable or deliverable to the Holder
shall have been applied to the payment of any Senior Indebtedness, then the
Holder shall be subrogated, from and after such time as such Senior
Indebtedness shall have been paid in full and all commitments of the Senior
Creditors to lend or otherwise provide Senior Indebtedness shall be terminated,
to any rights of any holder of such Senior Indebtedness to receive any further
payments or distributions of assets of the Company applicable to such Senior
Indebtedness until this Note shall be paid in full.  For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holder would be entitled except for the
provisions of Sections 3 and 4, hereof, shall, as between the Company and its
creditors other than the Senior Creditors on the one hand, and, the Holder of
this Note on the other hand, be deemed to have been made as a payment by the
Company to or on account of any Senior Indebtedness.

 

                (f) Obligation of the Company.
Nothing contained in Sections 3 and 4, hereof, or elsewhere in this Note is
intended to or shall impair, as between the Company and the Holder, the
obligations of the Company to pay to the Holder the principal of, and interest
on, this Note as and when the same shall become due and payable in accordance
with the terms hereof, or is intended to or shall affect the relative rights of
the Holder and the creditors of the Company other than the Senior Creditors,
nor shall anything herein prevent any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights under Sections 3 and 4, hereof, of the Senior Creditors in respect
of cash, property or securities of the Company received upon the exercise of
any such remedy.

 

                (g) Subordination Rights Not
Impaired. No right of any present or future holders of Senior Indebtedness
to enforce subordination as provided herein shall at any time be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any noncompliance by the Company
with the terms of this Note, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. 
Senior Creditors may extend, renew, modify or amend the terms of the
Senior Indebtedness or any security therefor (subject, in all cases to the
terms contained in the definitions of Senior Indebtedness) and release, sell or
exchange such security and otherwise deal freely with the Company and its
assets, all without impairing the provisions of Sections 3 and  4, hereof, or affecting the liabilities and
obligations of the parties to such arrangements or the Holder, and the Holder,
by acceptance of this note or payment hereunder, irrevocably waives any right
to receive notice of any of the foregoing and any right to require any Senior
Creditor to marshal any security for Senior Indebtedness or to enforce any lien
now or hereafter granted to secure Senior Indebtedness, or to pursue any claim
against any obligor in respect of Senior Indebtedness, as a condition to the
effectiveness of Sections 3 or 4, hereof, or otherwise.

 

                (h) No Event of Default.
The limitation of or failure to make a payment on account of the Note Debt by
reason of any provision of Section 4, hereof, shall not be an Event of Default
hereunder.

 

 

5

 

                (i) Turnover of Prohibited
Payments. As a condition to future payment hereunder, if any payment or
distribution of any character, whether in cash or other properties, shall be
received by the Holder in contravention of any of the terms of Sections 3
or  4, hereof, such payment or
distribution shall be received by the Holder in trust for the benefit of, and
shall be paid or delivered and transferred to, the holders of the Senior
Indebtedness outstanding at the time in accordance with the priorities then
existing among such holders, or to a trustee or agent for the benefit of the
Senior Creditors, for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to effect payment in full of such
Senior Indebtedness after giving effect to any concurrent payment or
distributions to Senior Creditors.  In
connection with any payment or distribution of cash or property of the Company
in any Insolvency Proceeding, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
Insolvency Proceeding is pending, or a certificate of the liquidating trustee
or agent or other Person making such payment or distribution, delivered to the
Holder, for the purpose of ascertaining the Person or Persons entitled to
receive payment from the Holder, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all of the facts pertinent
thereto or to Sections 3 and 4, hereof.

 

                (j) Enforcement of Note Debt.
Until the Senior Indebtedness shall be paid in full and all commitments of the
Senior Creditors to lend or extend credit constituting Senior Indebtedness
shall be terminated, the Holder shall not (i) accelerate the payment of or
otherwise declare due and payable any of the Note Debt prior to when it
otherwise is due and payable in accordance with Section 2, hereof, (ii)
commence or join with any other creditor in commencing any Insolvency
Proceeding, (iii) take any other action to collect or enforce any right to
receive any payment on account of the Note Debt, or (iv) initiate, prosecute or
participate in any claim, action or other proceeding challenging the
enforceability, validity, perfection or priority of the Senior Indebtedness or
any liens and security interests securing the Senior Indebtedness.

 

                (k) Reinstatement. The
provisions of Sections 3 and 4, hereof, shall continue to be effective or be
reinstated, as the case may be, if at any time any payment in respect of any
Senior Indebtedness is rescinded or must otherwise be returned by the holder
thereof upon the filing by or against the Company of any Insolvency Proceeding,
all as if such payment had never been made.

 

                5. Default and
Acceleration.

 

                (a) Events of Default. If
any of the following events (each an “Event of Default”) shall occur:

 

(i) the Company (x) shall fail to pay any principal
under this Note when due, or (y) shall fail to pay any interest accrued on this
principal amount of this Note when due and such failure shall continue for 30
days (for the avoidance of doubt, the failure to make a payment on account of
the Note Debt by reason of any provision of Sections 3 or 4, hereof, shall not
be deemed to be a default or an Event of Default hereunder); or

 

(ii) an Insolvency Proceeding shall occur and, if such
Insolvency Proceeding resulted from the entry by a court of competent
jurisdiction of an order or decree that (x) is for relief against the Company
or any of its Subsidiaries in an

 

 

6

 

 

involuntary case under the Bankruptcy Code, (y) appoints a
custodian of the Company or any of its Subsidiaries for all or any substantial
part of its assets, or (z) orders the liquidation of the Company or any of its
Subsidiaries, such order or decree shall remains unstayed and in effect for
forty-five (45) days, or any dismissal, stay, rescission or termination thereof
ceases to remain in effect; or

 

(iii) the Company shall fail to comply with any
agreement contained in this Note and such failure shall continue for a period
of 30 days from the date the Holder notifies the Company (pursuant to Section 7
hereof) of such failure by the Company (for the avoidance of doubt, failure to
comply with any agreement contained in the Note by reason of any provision of
Sections 3 and 4, hereof, shall not be deemed to be an Event of Default
hereunder);

 

then in any such event (other than an event with
respect to the Company described in clause (ii) 
of this Section) the Holder, at its option, may, without notice to the
Company, declare the outstanding principal amount hereof, together with all accrued
but unpaid interest thereon, to be (and the same shall thereupon become)
immediately due and payable; and in the event that an Event of Default
specified in clause (ii) shall occur, the outstanding principal amount hereof,
together with all accrued and unpaid interest hereon shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company; provided, that in
any such case payment thereof shall be subject to the provisions of Sections 3
and 4, hereof, if any Senior Indebtedness has not been paid in full as provided
herein, and no such declaration shall be made or other action taken to collect
or enforce payment under this Note unless otherwise permitted by Sections 3 or
4, hereof, as applicable.

                (b) Collection Costs. If
this Note is collected by or through an attorney at law, the Company agrees to
pay, in addition to all unpaid principal and interest thereon as provided in
this Note, reasonable costs of collection of the Holder (including, without
limitation, reasonable attorneys’ fees and court costs actually incurred by the
Holder).

 

                (c) Interest after Default.
From and after the occurrence and during the continuance of an Event of
Default, in lieu of the interest accruing as provided in Section 2, hereof,
interest on the unpaid principal balance of this Note shall accrue at a per
annum rate equal to the Default Rate.

 

                6. Waivers.  The
Company hereby expressly waives presentment, demand, protest, notice of
protest, notice of dishonor and any and all lack of diligence or delays in
collection or enforcement of this Note; provided, that the Company’s
obligations to the Holder shall be subject to the provisions of Sections 3 and
4, hereof.

 

                7. Notices.  Each
notice, authorized or required to be given under this Note must be in writing
and shall be deemed to have been properly given or served by personal delivery
or by sending same by overnight courier or by depositing same in the United
States mail, certified or registered mail and return receipt requested, address
as follows:

 

(i) in the case of the Company, the address for the
Company shown below; and

 

 

7

 

(ii) in the case of the Holder, the address shown
below or such other address as may be specified by the initial Holder or any
successor Holder of this Note by a written notice to the Company given in the
manner provided in this Section 7; and

 

Address for the Holder:

McNamara Family Trust  

10202 Sycamore Cir. 

Villa Park, CA 92861

Address for the Company:

Obagi Medical Products

310 Golden Shore

Long Beach, California 90802

Attention: Chief Financial Officer

                8. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
New York.

 

                9. No Security. 
This Note and the indebtedness evidenced hereby are unsecured.  In the event that Holder shall at any time
have any liens or security interests in any Collateral, Merrill Lynch Capital,
shall be deemed authorized by Holder to file UCC termination statements
sufficient to terminate the liens and security interests in favor of Holder
with respect to such Collateral, and, as a condition to payment hereunder, the
Holder shall promptly execute and deliver to Merrill Lynch Capital, such
releases and terminations as Merrill Lynch Capital shall reasonably request to
effect the release of the liens and security interests of Holder in such
Collateral.  In furtherance of the
foregoing, Holder hereby irrevocably appoints Merrill Lynch Capital its
attorney-in-fact, with full authority in the place and stead of Holder and in
the name of Holder or otherwise, to execute and deliver any document or
instrument which Holder may be required to deliver pursuant to this Section

 

                10. Assignment and Transfer. The Holder may not assign,
sell, negotiate, pledge, hypothecate or otherwise transfer all or any part of
this Note to any Person, without the prior written consent of the Company.  Senior Creditors and every assignee or
transferee of any of the Senior Indebtedness shall be entitled to rely upon and
shall be the third party beneficiaries of Sections 3 and 4 hereof and shall be
entitled to enforce such terms and provisions to the same extent as if such
Persons were initially a party hereto.

 

11. Miscellaneous. 
This Note may not be amended, modified or changed nor shall any waiver
of any provision hereof be effective, except only by an instrument in writing
executed by the  party against whom
enforcement thereof is sought.

 

12. Acknowledgement. As a condition of payment
hereunder and by acceptance of this Note or payment, Holder hereby acknowledges
that the Merrill Lynch Credit Agreement contains limitations and restrictions
that may prohibit, condition or restrict any payment or distribution of any

 

 

 

8

 

kind, whether direct or
indirect and whether in cash, securities or other property, to be made by OMP,
Inc. to the Company which may be required to permit the Company to make such
payment or distribution on account of the Note Debt or in respect of any
purchase, redemption, retirement or other acquisition of any Note Debt or for
the account of the Company or any of its Subsidiaries.

 

 

9

 

IN WITNESS WHEREOF, the
Company has duly executed this Note as of the date and year first above
written.

	
   

  	
  Obagi
  Medical Products, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

 

 

10

 

Exhibit A

DEFINITIONS

 

For purposes of this Note,
the following terms shall have the following meanings:

 

“Bankruptcy Code”
shall mean Title 11 of the United States Code, as amended.

“Business Day” shall
mean any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to close.

“Capitalized Lease
Liabilities” shall mean all obligations of a Person under leasing or
similar arrangements which, in accordance with generally accepted accounting
principles in effect from time to time in the United States (“GAAP”), are or
would be classified as capitalized leases.

“Collateral” shall
mean any and all of the now existing and hereafter acquired real and personal
property of the Company and any and all additional property and interests in
property that secures all or any portion of the Senior Indebtedness.

“Default Rate” shall
mean a per annum rate of interest equal to the sum of (x) the per annum rate of
interest otherwise accruing on the principal balance of this Note, plus (y) an
additional 200 basis points (2.00%) per annum.

“Event of Default”
has the meaning given to such term in Section 5 hereof.

“Fiscal Year” shall
mean a fiscal year of the Company, ending on December 31 of each calendar year.

“Indebtedness” of any
Person shall mean, without duplication,

                (a) all obligations of such
Person for borrowed money (including all notes payable and drafts accepted
representing extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are customarily
paid;

 

                (b) all obligations, contingent
or otherwise, relative to the face amount of all letters of credit, whether or
not drawn, and banker’s acceptances issued for the account of such Person;

 

                (c) all Capitalized Lease
Liabilities of such Person (to the extent required by GAAP to be included on
the balance sheet of such Person);

 

                (d) whether or not so included
as liabilities in accordance with GAAP:

 

(i) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable
arising in the ordinary course of business) and Indebtedness secured by a lien
on property owned or being purchased by such Person (including Indebtedness
arising under conditional sales or other title retention agreements),

 

 

 

 

whether or not such Indebtedness shall have been assumed by
such Person or is limited in recourse; and

 

(ii) all obligations of such Person in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of, Indebtedness of another
Person of the type described in clause (a), (b), (c) or (d)(i) above, or
clause(e) below; and

 

                (e) all obligations of such
Person to redeem, purchase or otherwise retire or extinguish any of its capital
stock or other equity or ownership interests at a fixed or determinable date
(whether by operation of a sinking fund or otherwise), at another’s option or
upon the occurrence of a condition not solely within the control of such Person
(e.g., redemption from future
earnings).

 

“Insolvency Proceeding”
shall mean, with respect to the Company or any of its Subsidiaries, the
occurrence of any of the following: (a) the entry of a decree or order for
relief by a court or governmental agency in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointment by a court or governmental agency of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or such Subsidiary or for any substantial part of its property or
assets or the ordering of the winding up or liquidation of its affairs by a
court or governmental agency; or (b) the commencement against the Company or
such Subsidiary of an involuntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or of any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or such Subsidiary or for any substantial part of its
property or assets or for the winding up or liquidation of its affairs, or the
repossession or seizure by a creditor of the Company or such Subsidiary of a
substantial part of its property or assets, which case is not dismissed within
90 days; or (c) the Company or such Subsidiary shall commence a voluntary case
under the Bankruptcy Code or any other applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent to the
appointment of or the taking possession by a receiver, liquidator, assignee,
secured creditor, custodian, trustee, sequestrator (or similar official) of the
Company or such Subsidiary or for any substantial part of its property or
assets or make any general assignment for the benefit of creditors; or (d) the
Company or such Subsidiary shall be unable to, or shall admit in writing its
inability to, pay its debts generally as they become due.

“Merrill Lynch Capital”
shall mean Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc, as administrative agent.

“Merrill Lynch Commitment
Expiry Date” shall mean the Commitment Expiry Date defined in the Merrill
Lynch Credit Agreement.

“Merrill Lynch Credit
Agreement” shall mean the Credit Agreement dated as of January 28, 2005
among the Company, OMP, Inc., the financial institutions or other entities from
time to time parties thereto, and Merrill Lynch Capital, as the same may be
amended, restated, supplemented, refinanced, replaced or otherwise modified
from time to time; provided, however, that the limitations

 

12

 

and restrictions on payments and distributions on
account of any principal and interest on this Note shall not be more limiting
or restrictive in any refinanced or replacement Merrill Lynch Credit Agreement
than such limitations and restrictions set forth in the Merrill Lynch Credit
Agreement as in effect on the date hereof.

“Merrill Lynch Event of
Default” shall mean a Default or an Event of Default defined under the
Merrill Lynch Credit Agreement.

“Merrill Lynch Revolving
Loan Limit” shall mean the Revolving Loan Limit defined in the Merrill
Lynch Credit Agreement.

“Merrill Lynch Revolving
Loan Outstanding” shall mean the Revolving Loan Outstanding defined in the
Merrill Lynch Credit Agreement.

“Note Debt” has the
meaning given to such term in Section 3 hereof.

“paid in full” or “payment
in full” shall mean the indefeasible receipt by Senior Creditors of all
Senior Indebtedness in cash or in immediately available funds or, in the case
of Senior Indebtedness constituting obligations in respect of letters of
credit, bankers acceptances and other contingent obligations (other than
indemnity obligations that are not then due and payable or for which any events
or claims that would give rise thereto are not then pending), the receipt of
cash collateral or irrevocable standby letters of credit in amounts and on
terms and conditions provided in the documentation governing such Senior
Indebtedness.

“Person” shall mean
any individual, partnership, firm, corporation, association, joint venture,
limited liability company, trust or other entity, or any governmental
authority.

“Prime Rate” shall
mean a fluctuating rate of interest per annum as publicly quoted in the Wall
Street Journal (or any successor to it) as the prime rate for interest rate
determinations for commercial banks from time to time.  Changes in the rate of interest shall take
effect on the date of each change in the Prime Rate.

“Senior Creditor” shall
mean a Person who is the holder, payee or obligee of any Senior Indebtedness.

“Senior Default”
shall mean a default or event of default under any instrument or agreement
governing any Senior Indebtedness or any other agreement or document executed
and delivered in connection therewith, including, without limitation a Merrill
Lynch Event of Default.

“Senior Indebtedness”
shall mean, collectively, all Indebtedness and obligations of the Company
including, without limitation, any of its obligations under the Merrill Lynch
Credit Agreement and such other Indebtedness and obligations which the Company
at any time shall determine and designate as being prior and senior to the Note
Debt hereunder, including, without limitation, the Company’s present and future
obligations to secured lenders; provided, however, that, in any
event, Senior Indebtedness shall not include (a) trade payables incurred in the
ordinary course of business, (b) any accrued expenses (excluding any expense
which constitutes an Obligation (as

 

 

13

 

defined in the Merrill Lynch Credit Agreement)) of
the Company, or (c) any indebtedness or other obligations as to which, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to this Note, or ranks pari passu with any
Note Debt.

“Subsidiary” of
any Person means any other corporation, partnership or limited liability
company of which greater than 50% of the outstanding shares of capital stock or
other equity or ownership interests having voting power for the election of
directors (or others serving equivalent functions) is owned directly or
indirectly by such Person.  Except as
otherwise indicated herein, references to Subsidiaries shall refer to
Subsidiaries of the Company.

 

 

 

14

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