EXHIBIT 10.22
MASTER SEPARATION AGREEMENT
This AGREEMENT ("Agreement") is made as of December 6, 2000, by and among
XXXXXXX XXX ("Xxx"), XXXXX NU-TECH, INC., a California corporation ("Maron") and
OBAGI MEDICAL PRODUCTS, INC., a California corporation ("Company").
RECITALS
WHEREAS, Xxx and Company have previously entered into certain agreements
that provided Xxx with rights to distribute Company's products and, in addition,
Xxx has acquired certain interests in entities which hold rights to distribute
Company's products,
WHEREAS, Xxx hereby agrees to sell, transfer, convey and relinquish all
rights to distribute the Company's products, and to transfer to Company any
interest held by Xxx in any entity, except as provided in Section 1 herein,
which holds the rights to distribute the Company's products,
WHEREAS, Xxx believes that neither he, Maron, nor his affiliates have any
ownership interests in Obagi Singapore Pte. Ltd. ("Obagi Singapore") (other than
a possible ownership interest of Dermatech in Obagi Singapore and a legal charge
over shares of Obagi Singapore in favor of Dermatech) and he believes that Obagi
Asia Pte. Ltd. ("Obagi Asia") is dormant, with no activity,
WHEREAS, Xxx is willing to agree not to compete with Company, as provided
in Section 5.1 of this Agreement, subject to the terms and conditions set forth
in this Agreement,
WHEREAS, in consideration for the relinquishment by Xxx as set forth
above, Company agrees to pay Xxx the sum of two million one hundred thousand
one United States Dollars ($2,100,001) payable in accordance with the
terms of this Agreement,
WHEREAS, Maron and Company executed a Restated and Amended International
Product Distribution Agreement on June 7, 1999 ("1999 Agreement"),
WHEREAS, Company executed a Promissory Note payable to Maron dated June 7,
1999, providing for payments over time on an original principal amount of
$900,000 ("1999 Note") arising out of a Settlement Agreement dated June 7, 1999
among Company, Xxx and Xxxxx (the "Settlement Agreement"),
WHEREAS, Maron and Company both wish to terminate the 1999 Agreement and to
effect the extinguishment of all obligations under the 1999 Agreement, except
for the obligations set forth in sections 9 and 11.1 of the 1999 Agreement and
in the 1999 Note, which obligations shall specifically survive the termination
of the 1999 Agreement, and
WHEREAS, in consideration for the termination of the 1999 Agreement,
Company agrees to pay Maron the sum of nine hundred thousand United States
Dollars ($900,000) payable in accordance with the terms of this Agreement,
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NOW, THEREFORE, in consideration of these premises, and the mutual terms
and conditions contained herein, Kim, Maron and Company hereby agree as follows:
SECTION 1. TRANSFER OF INTERESTS; TERMINATION OF 1999 AGREEMENT PAYMENTS BY
COMPANY
1.1 TRANSFER OF INTERESTS BY XXX. Upon the terms and conditions of this
Agreement and in consideration for the payments to be made by Company pursuant
to Section 1.3 herein, effective at the closing of the transactions contemplated
in this Agreement (the "Closing") on December 21, 2000 or sooner (the "Closing
Date"), Xxx hereby agrees as follows:
(a) To sell, transfer, convey and assign to Company all shares of
Derma Tech, Inc. (the "Shares") owned by Xxx, which Shares represent fifty
percent (50%) of the issued and outstanding shares of Derma Tech, Inc. ("Derma
Tech").
(b) To sell, transfer, convey and assign to Company, or cause to be
sold, transferred, conveyed and assigned to Company, any interest in any loan,
security, any right to receive any remuneration and/or any equity interest that
Xxx or his respective agents, assignees, or entities in which Xxx holds any
interest ("Xxx Affiliates") may have in or to Obagi Singapore or any of its
shareholders.
(c) To sell, transfer, convey and assign to Company, or cause to be
sold, transferred, conveyed and assigned to Company, all rights held by Xxx in
the Obagi name and the Obagi Asia name (the "Names"), the right to use the Names
and any interest in the Names held by Obagi Asia.
(d) To sell, transfer, convey and assign to Company, or cause to be
sold, transferred, conveyed and assigned to Company, all other ownership
interests or rights to receive any remuneration held by Xxx or the Xxx
Affiliates, directly or indirectly, in any entity (other than Maron) which holds
the rights to distribute any of the Company's products, a complete list of all
such entities, if any, is attached hereto as Schedule 1.1(d).
1.2 TERMINATION OF 1999 AGREEMENT. Maron and Company agree that the
1999 Agreement shall be terminated as of the Closing Date, with the exception of
sections 9 and 11.1 thereof which shall survive the termination of the 1999
Agreement. Effective on the Closing, Maron and Company shall each expressly
release the other, and the other's shareholders, directors and officers, as to
all liability for claims and demands arising from the other's performance of the
1999 Agreement, except for claims and demands arising from sections 9 and 11.1
thereof and claims for any amounts which are due and payable thereunder as of
the Closing Date, which shall survive the termination of the 1999 Agreement. For
the elimination of any doubt, the parties hereby acknowledge and agree that
Company remains and shall remain liable to Maron under the 1999 Note, in
accordance with its original terms and that a true and complete copy of the Note
is attached hereto as EXHIBIT A.
1.3 PAYMENTS BY COMPANY.
(a) In consideration of all of the foregoing provisions, the
provisions of Section 5 of this Agreement, and the terms and conditions hereof,
effective at the Closing
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Company agrees to pay Xxx the sum of two million one hundred thousand one
United States Dollars ($2,100,001), payable as follows:
(i) A cash payment of Xxx Xxxxxxx Xxxxxxxx Xxx Xxxxxx
Xxxxxx Dollars ($100,001) which has previously been paid to Xxx, receipt of
which is hereby acknowledged; and
(ii) A cash payment of Four Hundred Thousand United
States Dollars ($400,000) at the Closing.
(iii) The balance of Xxx Xxxxxxx Xxx Xxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx Dollars ($1,600,000) according to the following payment
schedule:
6/30/2001 $500,000 1/1/2002 $375,000
6/30/2002 $625,000 1/1/2003 $100,000
(b) In consideration of all of the foregoing provisions and
the terms and conditions hereof, effective at the Closing Company agrees to
pay Maron the sum of Nine Hundred Thousand United States Dollars ($900,000)
according to the following payment schedule:
1/1/2003 $150,000 6/30/2003 $250,000
1/1/2004 $250,000 6/30/2004 $250,000
1.4 INTEREST. In addition to the payments pursuant to Section 1.3,
Company agrees to pay interest to Xxx and to Maron on the outstanding
principal balance during the period from the Closing Date through January 1,
2003. Interest shall be calculated based on a 365-day year at the time of
each principal payment on the outstanding principal balance on the day before
the principal payment is due and shall be fixed for the period at the rate of
six percent (6%) per annum. Beginning on January 2, 2003, interest shall be
due and payable on the then outstanding principal balance only as follows:
(a) Interest at the rate of One United States Dollar ($1.00) per
annum, payable on January 1, 2004; and
(b) Interest at the rate of One United States Dollar ($1.00) per
annum, payable on June 30, 2004;
1.5 PROMISSORY NOTES. At the Closing, Company shall execute and deliver
to the respective payees thereof two subordinated promissory notes (the
"Notes") for the aggregate outstanding balance of Xxx Xxxxxxx Xxxx
Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars ($2,500,000) payable under Section
1.3 above, payable to Xxx and Xxxxx, respectively, in the forms attached
hereto as of EXHIBIT B and EXHIBIT C, respectively. Maron and Xxx hereby
agree that the Notes and related lien shall be subordinate to the loan and
related lien of Imperial Bank (or such other commercial lender as may succeed
Imperial Bank as commercial lender to Company ("Successor Lender")) (such
senior loan or loans, however, not to exceed in any event the principal
amount of
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$10,000,000), and further agree to execute the Subordination Agreements in favor
of Imperial Bank in the form of EXHIBIT D attached hereto at the Closing and to
execute in the future a subordination agreement in favor of any Successor Lender
provided that such subordination agreement is the same in substance as the
Subordination Agreement, as amended, in favor of Imperial Bank.
1.6 INSTRUMENTS OF CONVEYANCE AND TRANSFER / CLOSING DELIVERIES. At the
Closing:
(a) Xxx shall deliver to Company certificate(s) representing the
Shares duly endorsed in blank with stock powers attached duly executed in blank,
in proper form for transfer.
(b) Xxx shall deliver or cause to be delivered to Company accurate and
complete copies of the documents in his possession consisting of the Articles
(or Certificate) of Incorporation, Bylaws, shareholder and director (to the
extent, and if, relevant) minutes, written consents and other shareholder (and
director) actions taken, list of all shareholders, all qualification or other
authorities (or clearances) issued by all state and other governmental bodies as
required for all of such company's stock issuances with all amendments to each
of the same, and the books and records, of each entity other than Maron (i) in
which Xxx has an ownership interest or has a right to receive remuneration and
(ii) which holds rights to distribute any of the Company's products
(collectively, the "Transferred Companies").
(c) Simultaneously with such delivery, Xxx will take all steps as may
be reasonably necessary to effectuate the transfer to the Company of all
ownership interests or rights to receive remuneration held by Xxx or the Xxx
Affiliates, directly or indirectly, in Obagi Singapore, Obagi Asia and each
other Transferred Company.
(d) The Company shall cause each of the Transferred Companies to
execute and deliver to Xxx and Xxxxx a waiver and release in the form of EXHIBIT
E attached hereto.
(e) At the Closing, Maron and Xxx shall deliver to Company checks in
the amounts, if any, they respectively owe to Company as of the Closing Date.
Company shall have furnished to Maron and Xxx accurate invoices for orders
through the Closing Date at the Closing.
1.7 SECURITY INTEREST. As security for Company's payment obligations under
the Notes, Company hereby grants to Xxx and Maron, as secured parties, a
security interest in the assets of Company described in EXHIBIT F attached
hereto, which security interest shall be subordinate to the lien of Imperial
Bank (or of a Successor Lender, if any, which is party to a subordination
agreement as provided in Section 1.5 of this Agreement). Xxx and Xxxxx shall
each have all the rights of a secured party under the California Uniform
Commercial Code as to the security interest granted herein.
1.8 SUB-DISTRIBUTORS. On or before the Closing Date, Company shall enter
into new distribution agreements with Maron's sub-distributors, including but
not limited to Malaysia, Indonesia, and Singapore, and with Korea (which is a
direct distributor for which Maron acts as handling agent, but for simplicity of
reference herein shall be included among the subdistributors) with regard to
distribution of Company's products, and Xxx and Xxxxx agree to reasonably
cooperate with Company in facilitating the execution of such agreements. Such
new
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agreements shall contain provisions releasing Maron and Xxx from any
liability under the sub-distribution agreements between Maron and such
sub-distributors, as a condition to the effectiveness of the new
distribution agreements with Company. If one or more such new distribution
agreements are not executed as of the Closing Date, at the Closing Maron
shall be deemed to have assigned, and Company shall be deemed to have
assumed, without further action on the part of either party, the
sub-distribution agreements of those sub-distributors which have not entered
into new distribution agreements with Company, and Company shall indemnify,
defend and hold harmless Maron for all claims against Maron for actions or
omissions arising under the sub-distribution agreements after the Closing
Date. Upon demand by Company, Maron shall cooperate with Company to
terminate any sub-distribution agreement after the Closing, provided that
Company indemnifies and holds harmless Maron, its shareholders, officers,
and directors from any claims arising out of Maron's termination and its
cooperation with such termination.
SECTION 2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF XXX. Xxx and Xxxxx hereby represent
and warrant to Company as follows, which representations and warranties shall be
true and correct at and as of the Closing Date:
(a) ENFORCEABILITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been authorized and approved by Kim, Maron, and Derma Tech. This
Agreement has been duly executed and delivered by Xxx and constitutes a valid
and legally binding agreement of Xxx enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles. This Agreement
has been duly executed and delivered by Maron and constitutes a valid and
legally binding agreement of Maron enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
(b) THE SHARES. The Shares are owned, directly by Xxx, free and clear
of any lien, claim, charge, encumbrance, pledge, security interest or
restriction of any nature whatsoever ("Encumbrances") and represent fifty
percent (50%) of the issued and outstanding shares of Derma Tech. Upon delivery
of the Shares and payment therefor pursuant hereto, good and valid title to the
Shares, free and clear of all Encumbrances, will pass to Company.
(c) THE TRANSFERRED COMPANIES. Kim's ownership interest or right to
receive remuneration from the Transferred Companies or their shareholders is
free and clear of any Encumbrances.
(d) FINANCIAL STATEMENTS. [INTENTIONALLY OMITTED].
(e) ABSENCE OF CERTAIN CHANGES. To the best of Kim's knowledge, other
than as specifically disclosed in this Agreement or in any of the exhibits
hereto, since January 1, 2000:
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(i) None of the assets of any Transferred Company has been sold
or transferred, and none of the debts or claims of any Transferred Company has
been cancelled, except in the ordinary course of business;
(ii) None of the assets of any Transferred Company has been
leased, mortgaged, pledged, subjected to any liens, encumbrances or security
interests;
(iii) None of the Transferred Companies have acquired any
additional assets except as acquired in the ordinary course of business and as
consistent with its prior business practices;
(iv) There has been no payment by any Transferred Company of any
dividends or any distribution by the Transferred Company of any of its assets to
any of its shareholders in redemption or as the purchase price of any of its
capital stock or in discharge or cancellation, whether in part or in whole, of
any indebtedness (whether in payment of principal, interest or otherwise), owing
to any of its said shareholders, except a pro-rata distribution to Xxx and
Company of the balance in the Derma Tech bank account at Bank of America on the
date of the Closing;
(v) There has not been any material increase in the compensation
payable or to become payable by any Transferred Company to any of its employees
or agents, or any bonus payment or arrangement made to or with any of them;
(vi) There has not been any amendment or termination of any
material contract, agreement or license to which any Transferred Company is a
party other than in the ordinary course of business;
(vii) There has not been any payment to or commitment entered
into by any Transferred Company respecting any liabilities, expenses or costs
incurred in connection with this Agreement (including, without limitation, any
finder's fee or commission, but excluding any legal or accounting fees
occasioned hereby); and
(viii) There has been no material damage, destruction or loss, or
other change of a material nature, to the financial condition, assets,
liabilities, obligations or operations of any Transferred Company.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. To the best of Kim's
knowledge, except as set forth in Derma Tech's balance sheet as of June 30, 2000
attached hereto as EXHIBIT G, or otherwise disclosed in this Agreement, or in
any other exhibit to this Agreement, Derma Tech is not obligated for, nor are
any of its assets or properties subject to, any liabilities or obligations,
whether or not such liabilities or obligations are normally shown or reflected
on a balance sheet in a manner consistent with generally accepted accounting
principles, other than liabilities or obligations arising in the ordinary course
of business since June 30, 2000, which ordinary course liabilities and
obligations, in the aggregate, are not materially adverse to Derma Tech. Derma
Tech is not in default with respect to any material term or condition of any
material indebtedness or liability (including trade payables). In addition,
there are no facts in existence on the date hereof and known to Xxx which might
reasonably serve as the basis, in whole or in part, for any material liabilities
or obligations of
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Derma Tech, not disclosed in this Agreement or in any of the exhibits attached
hereto. [***].
(g) CLAIMS BY XXX. Except as set forth on Schedule 2.1(g), no
Transferred Company is, and as of the Closing Date will not be, indebted to Xxx,
its trustor, trustee or any of its beneficiaries for any liability or
obligation, whether arising by reason of an ownership interest in such company
or otherwise.
(h) ARTICLES, BYLAWS, MINUTES AND PERMITS. To his best knowledge, Xxx
has made available to Company accurate and complete copies, to the extent they
are in his possession, of each Transferred Company's Articles (or Certificate)
of Incorporation, Bylaws, shareholder and director (to the extent, and if,
relevant) minutes, written consents and other shareholder (and director) actions
taken, list of all shareholders, and all qualification or other authorities (or
clearances) issued by all state and other governmental bodies as required for
all of such company's stock issuances, together with all amendments to each of
the same, and the books and records in his or Maron's possession of each
Transferred Company. To Kim's best knowledge, nothing contained in any of the
foregoing prevents or adversely affects the consummation of the transactions
contemplated by this Agreement. The articles of incorporation, bylaws,
qualification documents for stock issuances, and minutes of Derma Tech are
accurate and complete and in full force and effect.
(i) NO OTHER RIGHTS OF PAYMENT. Xxx is not aware of any agreements or
arrangements other than as disclosed herein, whereby any person or entity,
including but not limited to any other shareholders of any company or such
shareholder's relatives or entities in which such shareholders have an interest,
is entitled to a payment of cash distributions from any Transferred Company.
(j) SUB-DISTRIBUTION AGREEMENTS. EXHIBIT H attached hereto contains a
true and complete list of Maron's sub-distributors, and prior to the Closing
Maron shall have delivered to Company true and complete copies of all of Maron's
agreements with such sub-distributors. Such agreements contain the complete
agreements between Maron and each such sub-distributor, and are valid and in
full force and effect, to Kim's and Maron's best knowledge, and, to Kim's and
Maron's best knowledge, there are no liabilities of Maron connected with such
agreements which have not been previously disclosed to Company.
(k) MARON LICENSES. Maron represents that all licenses held by it are
listed on Schedule 2.1(k) attached hereto.
2.2 REPRESENTATIONS AND WARRANTIES OF COMPANY. Company hereby represents
and warrants to Xxx, which representations and warranties shall be true and
correct at and as of the Closing Date:
(a) ENFORCEABILITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been authorized and approved by Company. This Agreement has been
duly executed and delivered by Company and constitutes a valid and legally
binding agreement of Company enforceable in
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[***] Material has been omitted pursuant to a request for confidential
treatment and such material has been filed separately with the
Securities and Exchange Commission.
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(b) DUE DILIGENCE. Company has had ample opportunity to perform due
diligence in connection with this Agreement and review any and all financial
statements, documents, records, reports, schedules and other forms of data as
requested by Company.
(c) SUB-DISTRIBUTORS. [INTENTIONALLY OMITTED].
(d) SHAREHOLDERS OF COMPANY. The shareholders of Company holding of
record as of the date of this Agreement more than ten percent (10%) of Company's
voting shares are identified in Schedule 2.2(d) hereto.
SECTION 3. INDEMNIFICATION
3.1 INDEMNIFICATION BY XXX. Effective at the Closing, Xxx agrees to
indemnify Company against and hold Company harmless from and in respect of any
and all losses, liabilities, damages, reasonable expenses (including without
limitation reasonable expenses of investigation and defense and reasonable fees
and disbursements of counsel), claims, liens or other obligations of any nature
whatsoever (collectively, "Losses") which may arise out of, be based upon, be
incurred by virtue of or result from or relate to the breach of any
representation or warranty made by Xxx in this Agreement or in any document or
instrument delivered by Xxx at the Closing Date pursuant hereto.
3.2 INDEMNIFICATION BY COMPANY. Effective at the Closing, Company agrees to
indemnify Xxx and Maron against and hold Xxx and Xxxxx harmless from and in
respect of any and all Losses which may arise out of, be based upon, be incurred
by virtue of or result from or relate to the breach of any representation or
warranty made by Company in this Agreement or in any document or instrument
delivered by Company at the Closing Date pursuant hereto.
3.3 DEFENSE OF CLAIMS. In the case of any claim for indemnification under
Section 3.1 or 3.2 arising from a claim of a third party, an indemnified person
shall give prompt written notice to the indemnifying person of any claim, suit
or demand of which such indemnified person has knowledge and as to which it may
request indemnification hereunder. The indemnifying person shall have the right
to defend and to direct the defense against any such claim, suit or demand, in
its name or in the name of the indemnified person, as the case may be, at the
expense of the indemnifying person, and with counsel selected by the
indemnifying person unless (i) such claim, suit or demand seeks an order,
injunction or other equitable relief against the indemnified person, or (ii) the
indemnified person shall have reasonably concluded that there is an actual
conflict of interest between the indemnified person and the indemnifying person
in the conduct of the defense of such claim, suit or demand, in which case the
indemnified person may, with the approval of the indemnifying person (which
approval shall not be unreasonably withheld), select counsel for itself to
defend such claim, suit or demand. The indemnified person shall have the right
to participate in the defense of any claim, suit or demand with counsel selected
by it. The reasonable fees and disbursements of such counsel shall be at the
expense of the indemnified person. The indemnifying person may settle any claim,
suit or demand for
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which an indemnified person has sought indemnification under Section 3.1 or
Section 3.2. The indemnifying person shall have no indemnification obligations
with respect to any such claim, suit or demand which shall be settled by the
indemnified person without the prior written consent of the indemnifying person
(which consent shall not be unreasonably withheld, conditioned or delayed) other
than a claim, suit or demand as to which the indemnifying person shall not in
fact have employed counsel to assume the defense of such claim, suit or demand.
SECTION 4. MUTUAL RELEASES
4.1 RELEASES BY COMPANY. Effective at the Closing, Company, on behalf of
itself and its shareholders, parent or sister companies, employees,
representatives, agents, insurers, attorneys, administrators, heirs,
beneficiaries, executors, trustees, principals, predecessors, successors,
assignors, assignees, past and present, hereby fully releases and discharges Xxx
and his respective employees, officers, agents, representatives, attorneys,
administrators, heirs, insurers, corporations in which Xxx holds any interest,
and each of their respective predecessors, successors, assignors and assignees,
past and present, with respect to any and all claims, actions, and causes of
action, of any kind or nature whatsoever, in law, equity, or otherwise, whether
fixed or contingent, whether now known or unknown whether suspected or
unsuspected, and whether concealed or hidden, which now exist or which may exist
hereafter, relating to, or arising out of, any act, transaction, agreement
occurrence, event, error, or omission by any of them prior to the effective date
of this Agreement. Notwithstanding anything to the contrary contained herein,
the releases set forth in this paragraph shall not be deemed to effect a release
of Kim's or Maron's obligations set forth in this Agreement.
4.2 RELEASES BY MARON. Effective at the Closing, Maron, on behalf of itself
and its shareholders, parent or sister companies, employees, representatives,
agents, insurers, attorneys, administrators, heirs, beneficiaries, executors,
trustees, principals, predecessors, successors, assignors, assignees, past and
present, hereby fully releases and discharges Company, and its respective
employees, officers, shareholders, agents, representatives, attorneys,
administrators, insurers, corporations in which Company holds any interest, and
each of their respective predecessors, successors, assignors and assignees, past
and present, with respect to any and all claims, actions, and causes of action,
of any kind or nature whatsoever, in law, equity, or otherwise, whether fixed or
contingent, whether now known or unknown, whether suspected or unsuspected, and
whether concealed or hidden, which now exist, or which may exist hereafter,
relating to, or arising out of, any act, transaction, agreement, occurrence,
event, error, or omission by any of them prior to the effective date of this
Agreement. Notwithstanding anything to the contrary contained herein, the
releases set forth in this paragraph shall NOT be deemed to effect a release of
the Company's obligations under this Agreement or under the 1999 Note, nor any
other obligations set forth in this Agreement. Instead, the obligations assumed
by Company pursuant to this Agreement shall survive the execution and delivery
of this Agreement and shall remain binding upon Company until all of its
obligations hereunder have been fully performed.
4.3 RELEASES BY XXX. Effective at the Closing, Xxx, on behalf of himself
and his representatives, agents, insurers, attorneys, administrators, heirs,
beneficiaries, executors, trustees, principals, corporations in which Xxx holds
any interest, predecessors, successors, assignors, assignees, past and present,
hereby fully releases and discharges Company, Obagi Asia, Obagi Singapore, and
Derma Tech, and their respective employees, officers, shareholders,
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agents, representatives, attorneys, administrators, insurers, corporations in
which they hold any interest, and each of their respective predecessors,
successors, assignors and assignees, past and present, with respect to any and
all claims, actions, and causes of action, of any kind or nature whatsoever, in
law, equity, or otherwise, whether fixed or contingent, whether now known or
unknown, whether suspected or unsuspected, and whether concealed or hidden,
which now exist, or which may exist hereafter, relating to, or arising out of,
any act, transaction, agreement, occurrence, event, error, or omission by any of
them prior to the effective date of this Agreement. Notwithstanding anything to
the contrary contained herein, the releases set forth in this paragraph shall
NOT be deemed to effect a release of Company's obligations under this Agreement.
Instead, the obligations assumed by Company pursuant to this Agreement shall
survive the execution and delivery of this Agreement and shall remain binding
upon Company until all of its obligations hereunder have been fully performed.
SECTION 5. NON-COMPETITION AGREEMENT
5.1 NON-COMPETITION. Effective at the Closing, during the seven (7) year
period ("Restrictive Period') commencing as of the Closing Date, Kim, Maron, and
each Xxx Affiliate shall not, either directly or indirectly, (i) promote, sell
or offer for sale in any country in the world any goods or articles which
contain hydroquinone as one of its ingredients or any system of products in
which one of the products contains hydroquinone as one of its ingredients
("Competitive Activity") (ii) engage in a Competitive Activity for his or its
account, (iii) enter the employ of, render any services to, or lend the use of
his or its name to, any entity engaged in a Competitive Activity, and/or (iv)
become interested in any such entity in any capacity, including as an
individual, partner, shareholder, officer, director, principal, agent, member,
trustee or consultant; provided, however, that Xxx xxx own a passive security
investment in any class of securities of an entity the securities of which are
publicly traded so long as the ownership of said securities does not exceed 2%
of the issued and outstanding securities of the class so owned. Xxx or Maron or
a Xxx Affiliate may purchase products from or sell products to an entity engaged
in a Competitive Activity so long as Kim's, Maron's, or the Xxx Affiliate's
business with that entity are entirely separate from the Competitive Activity of
such entity and the confidentiality obligations of Kim, Maron and the Xxx
Affiliate are observed.
5.2 INTENTIONALLY OMITTED.
5.3 CONFIDENTIALITY. Effective at the Closing, Xxx and Maron hereafter
agree to hold in trust and confidence all financial, personal, customer and
other information of a confidential nature concerning Company and not to use or
disclose such information in any manner other than for the purpose of
transactions with Company. Nothing herein shall prevent Xxx from discussing the
terms of this Agreement with his legal representative and/or tax and financial
advisors or as necessary to enforce this Agreement in a court of law or to
comply with the law or a request from a regulatory organization. Information
shall not be deemed confidential, if such information is that which:
(a) Xxx or Maron can prove by documentary evidence was already in its
possession and subject to free disposal prior to the disclosure of the
information by Company;
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(b) Is hereafter disclosed to Xxx or Xxxxx or a Xxx Affiliate without
the obligation of confidence by a third party who did not derive such
information directly or indirectly from Company;
(c) Is or becomes generally available to the public in printed
publications in general circulation through no breach by Xxx or Maron or a Xxx
Affiliate. However, confidential information shall not be deemed to be generally
available to the public if it is known only to a few of those people to whom it
might be of commercial interest, and a combination of two or more portions of
the confidential information shall not be deemed to be generally available to
the public only by reason of each separate portion being so available;
(d) Is disclosed pursuant to the agreement of the parties; or
(e) Is disclosed to a person who separately had received that
information from Company without the obligation of confidence.
5.4 RIGHTS AND REMEDIES UPON BREACH. If any party breaches, or threatens to
commit a breach of, any of the provisions hereof, the party not in breach shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which shall be in addition to,
and not in lieu of, any other rights or remedies available to the party not in
breach, at law or in equity under this Agreement or otherwise:
(a) SPECIFIC PERFORMANCE. The right and remedy to have each and every
one of the covenants in this Agreement specifically enforced and the right and
remedy to obtain injunctive relief, it being agreed that any breach or
threatened breach of any of the covenants herein would cause irreparable injury
to the party not in breach and that money damages would not provide an adequate
remedy.
(b) ACCOUNTING. The right and remedy to require the party in breach to
account for and pay over to the party not in breach, as the case may be, all
compensation, profits, monies, accruals, increments or other benefits derived or
received as the result of any transaction or activity constituting a breach of
this Agreement.
5.5 SEVERABILITY OF COVENANTS. Xxx and Maron acknowledge and agree that the
restrictive covenants in this Agreement are reasonable and valid in geographic,
temporal and subject matter scope and in all other respects, and do not impose
limitations greater than are necessary to protect the goodwill, confidential
information, and other business interests of Company. If, however, any court
subsequently determines that any of the restrictive covenants, or any part
thereof is invalid or unenforceable, the remainder of the restrictive covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions.
5.6 DURATION OR SCOPE REDUCTION. If any court determines that any of the
restrictive covenants, or any part thereof, is unenforceable because of the
duration or scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable to the maximum extent permitted
by applicable law.
-11-
5.7 ENFORCEABILITY IN ALL JURISDICTIONS. Xxx and Xxxxx intend to and hereby
confer jurisdiction to enforce each and every one of the covenants in this
Agreement upon the courts of any jurisdiction within the geographic scope of
such restrictive covenants. If the courts of any one or more of such
jurisdictions hold the restrictive covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of Xxx and Xxxxx that
such determination shall not bar or in any way affect Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographic scope of such restrictive covenants, as to breaches of such
restrictive covenants in such other respective jurisdictions, such restrictive
covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
SECTION 6. MISCELLANEOUS AND GENERAL
6.1 PAYMENT OF EXPENSES. Upon Closing, each party hereto shall be
responsible for its own expenses incident to preparing for, entering into and
carrying out this Agreement and the transactions contemplated hereby.
6.2 SURVIVAL. The representations and warranties made or deemed made in
this Agreement shall survive the Closing.
6.3 MODIFICATION AND AMENDMENT. Subject to applicable law, at any time
prior to the Closing, the parties hereto may modify or amend this Agreement, by
written agreement between Kim, Maron, and Company.
6.4 COUNTERPARTS. For the convenience of the parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart being
deemed an original instrument, and all such counterparts shall together
constitute the same agreement. The signatures to this Agreement may be delivered
in facsimile form, rather than original, and the parties agree that such
facsimile signatures shall be deemed for all purposes as original signatures.
6.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California. Jurisdiction and
venue in any action arising hereunder shall be in a court of competent subject
matter jurisdiction in Los Angeles, California.
6.6 NOTICE. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and shall be deemed to
have been duly given (i) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, (ii) on the first business day following the date of
dispatch if delivered by Federal Express or other next-day courier service, or
(iii) on the third business day following the date of mailing if delivered by
registered or certified mail, return receipt requested, postage prepaid. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice.
-12-
(a) If to Company:
Obagi Medical Products, Inc.
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxxxxx 00000
Attn: CEO
Facsimile: (000) 000-0000
With copy to:
Xxxxxx X. Xxxxxxx, Esq.
Keesal, Young & Xxxxx
000 Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
(b) If to Xxx:
Xxxxxxx X. Xxx
c/o Maron Nu-Tech, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With copy to:
Xxxxx X. Xxx, Esq.
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
(c) If to Maron:
Maron Nu-Tech, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With copy to:
Xxxxx X. Xxx, Esq.
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
-13-
6.7 ASSIGNMENT. This Agreement and the rights hereunder shall not be
assignable or transferable by Company, Maron, or Xxx (including by operation of
law in connection with a merger, or sale of substantially all the assets)
without the prior written consent of the other parties hereto, except:
(a) Xxx xxx transfer Kim's right to receive payment hereunder without
the consent of the Company to Kim's ancestors, descendants or spouse, or to a
trust, partnership, limited liability company, custodianship or other fiduciary
account for the benefit of Xxx and/or such ancestors, descendants or spouse,
including any distribution from any such trust, partnership, limited liability
company, custodianship or other fiduciary account to any of the foregoing
permitted beneficial owners or beneficiaries thereof,
(b) Maron may distribute its rights hereunder without the consent of
the Company to Xxx, Xxx'x ancestors, descendants or spouse, or to a trust,
partnership, limited liability company, custodianship or other fiduciary account
for the benefit of Xxx and/or such ancestors, descendants or spouse in a
liquidating distribution, and
(c) Company may, one time only, transfer without the consent of Xxx or
Xxxxx its rights, duties and obligations under this Agreement to a Delaware
corporation whose assets and shareholders are identical to those of Company
prior to such transfer; provided that such Delaware corporation shall execute
and deliver appropriate assignment and assumption documents (including allonges
to the Notes) necessary and appropriate to achieve the assumption of Company's
rights, duties and obligations under this Agreement, including its obligations
under the Notes.
6.8 ATTORNEYS' FEES. If any legal proceeding is brought for the enforcement
of this Agreement, or because of an alleged breach, default or misrepresentation
in connection with any provision of this Agreement or other dispute concerning
this Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that proceeding, in
addition to any other relief to which it may be entitled.
6.9 CAPTIONS. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
6.10 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, the other party shall execute and deliver, or cause to be executed
and delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement.
-14-
IN WITNESS WHEREOF this Agreement has been duly executed and delivered by
Company, Maron, and Xxx as of the date first written above.
MARON NU-TECH, INC.
By: /s/ XXXXXXX X. HIM
-----------------------------------------
Its: President
-----------------------------------------
OBAGI MEDICAL PRODUCTS, INC.
By: /s/ XXXXXXX X. XXXX
-----------------------------------------
Xxxxxxx X. Xxxx
Its: President
-----------------------------------------
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxxxx
Its: Secretary
/s/ XXXXXXX X. XXX
--------------------------------------------
Xxxxxxx X. Xxx
-15-
EXHIBIT A
1999 PROMISSORY NOTE
PROMISSORY NOTE
$900,000 Dated: as of 7 JUNE, 1999
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, OBAGI MEDICAL PRODUCTS, INC.,
("Borrower"), hereby promises to pay to the order of MARON NU-TECH, INC.
("Lender") the principal sum of Nine Hundred Thousand United States Dollars
and No Cents (U.S.$900,000) (the "Loan") with interest from the date of this
Note on the unpaid principal until paid at the per annum rate equivalent to
the rate designated as the "Prime Rate" in the Money Rates Table of WALL
STREET JOURNAL, Western Edition, on the date of this Note, changing on each
anniversary date of this Note to the per annum rate equivalent to the rate
designated as the "Prime Rate" in the Money Rates Table of WALL STREET
JOURNAL, Western Edition, on such anniversary date (if the Wall Street
Journal, Western Edition is not published on such dates, then the Prime Rate
to be used shall be such Prime Rate in the immediately preceding issue of the
Wall Street Journal, Western Edition. If the Wall Street Journal, Western
Edition is no longer published at any such date or if it no longer publishes
a "Prime Rate", then the "Prime Rate" shall be that rate announced as of such
date by the national bank in the United States having the greatest amount of
assets, in aggregate dollar terms, as its "prime" or "reference" rate.
2. PAYMENT, MATURITY DATE.
Borrower shall make principal payments, commencing on the first
anniversary of this Note and on each anniversary date thereafter, of Three
Hundred Thousand United States Dollars and No Cents (U.S.$300,000), plus all
then accrued but unpaid interest. Unless accelerated pursuant to the terms of
this Note, the unpaid principal balance of this Note, together with all
unpaid interest accrued thereon, and all other amounts payable by Borrower
under the terms of this Note shall be due and payable on the third
anniversary date of this Note (the "Maturity Date").
If any payment of principal or interest to be made by Borrower
shall become due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall be
included in computing any interest with respect to such payment. "Business
Day" shall mean any Monday, Tuesday, Wednesday, Thursday or Friday on which
banks are open for business in Los Angeles, California.
1
All interest due hereunder shall be computed on the basis of a year
of 360 days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all
payments received by Lender under this Note shall be credited first to any
charges or other expenses for which Lender is entitled to payment hereunder,
next to accrued but unpaid interest, and third to unpaid principal.
Notwithstanding anything to the contrary set forth in this Note, if
at any time until payment in full of all amounts due Lender hereunder, the
rate of interest payable by the Borrower pursuant to this Note (the "Stated
Rate") exceeds the amount payable under the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then
in such event and so long as the Maximum Lawful Rate would be so exceeded,
the rate of interest payable hereunder shall be equal to the amount payable
under the Maximum Lawful Rate: PROVIDED, HOWEVER, that if at any time
thereafter the Stated Rate is less than the Maximum Lawful Rate, the Borrower
shall continue to pay interest hereunder at the Maximum Lawful Rate until
such time as the total interest received by the Lender hereunder is equal to
the total interest which the Lender would have received had the Stated Rate
been (but for the operation of this paragraph) the interest rate payable
since the date hereof. Thereafter, the interest rate payable hereunder shall
be the Stated Rate unless and until the Stated Rate again exceeds the Maximum
Lawful Rate, in which event this paragraph shall again apply. In no event
shall the total interest payable by the Borrower hereunder exceed the amount
payable under the Maximum Lawful Rate. In the event that a court of competent
jurisdiction shall make a final determination that the Lender has received
interest hereunder in excess of the amount payable under the Maximum Lawful
Rate, the Lender shall, to the extent permitted by applicable law, promptly
apply such excess in the following order: (i) then due and payable fees and
expenses; (ii) then due and payable interest payments; (iii) then due and
payable principal payments on the Loan; (iv) then to any other unpaid
obligations of Borrower to Lender under this Note; and (v) thereafter as a
refund to the Borrower or as a court of competent jurisdiction may otherwise
order.
3. MANNER OF PAYMENT.
Principal and Interest on the Loan, and all other amounts payable
hereunder, is payable in lawful currency of the United States of America in
immediately available funds at Lender's address of 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, payable to Maron Nu-Tech, Inc.
2
4. EVENT OF DEFAULT/REMEDIES.
a. EVENTS OF DEFAULT. Any of the following events shall
constitute an Event of Default:
(1) breach by Borrower of any of Borrower's obligations or
covenants under this Note; provided that Borrower shall have ten (10) days
from the date of any failure to perform any of its obligations or covenants
under this Note not involving the payment of money to Lender, within which to
cure said failure; or
(2) Borrower (A) becomes insolvent or admits in writing
Borrower's inability to pay Borrower's debts as they mature, (B) makes any
assignment for the benefit of creditors, or (C) applies for or consents to
the appointment of a receiver or trustee for Borrower or for a substantial
part of Borrower's property or business, or a receiver or trustee otherwise
is appointed and is not discharged within thirty (30) days after such
appointment; or
(3) any of Borrower's representations or warranties made
herein or in any statement or certificate at any time given by Borrower
pursuant hereto or in connection herewith is false or misleading in any
material respect; or
(4) any bankruptcy, insolvency, reorganization or liquidation
proceeding or other proceeding for relief under any bankruptcy law or any law
for the relief of debtors is instituted by or against Borrower; or
(5) any money judgment, writ or warrant of attachment, or
similar process (singly or, if more than one, cumulatively in excess of
$25,000) is entered or filed against Borrower or any of the assets of
Borrower and (A) remains unvacated, unbonded, unstayed, undismissed or
undischarged for a period of thirty (30) days or in any event later than five
(5) days before the date of any proposed sale thereunder, or (B) Borrower has
not appealed the same in good faith to Lender's satisfaction, or
(6) the condition, financial or otherwise, of the Borrower
suffers any material adverse change, in the reasonable opinion of the Lender;
or
(7) more than fifty percent (50%) of the equity interests in
Borrower is held by a person or persons other than the holders of such equity
interests on the date of this Note.
b. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default described in Subsections 4(a)(2) or 4(a)(4) above, all
indebtedness under this Note shall automatically be immediately due and
payable. In addition, Lender, at its option, and without notice to Borrower,
may take one or more of the
3
actions described below. Upon the occurrence and during the continuance of any
other Event of Default, Lender at its option and, unless otherwise specified
below, without notice to Borrower, may do any one or more of the following:
(1) declare all indebtedness under this Note immediately due
and payable and credit any sums received thereafter in such manner as it
elects upon such indebtedness; provided, however, that such application of
sums so received shall not serve to waive or cure any default existing under
this Note nor to invalidate any notice of default or any act done pursuant to
such notice and shall not prejudice any rights of Lender; and
(2) exercise any or all rights provided or permitted by law
or granted pursuant to this Note in such order and in such manner as Lender
may, in its sole judgment, determine.
c. NO WAIVER OF REMEDIES. No waiver of any breach of or default
under any provision of this Note shall constitute or be construed as a waiver
by Lender of any subsequent breach of or default under that or any other
provision of this Note.
d. REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender
is intended to be exclusive of any other remedy herein or in any other
agreement between the parties hereto or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity or by statute.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower hereby makes the following representations and warranties,
which shall be deemed to be continuing representations and warranties until
payment in full of all indebtedness of Borrower to Lender arising pursuant to
this Note.
a. NO CONFLICT. The execution, delivery and performance of this
Note are not in contravention of or in conflict with any agreement, indenture
or undertaking to which Borrower is a party or by which Borrower or any of
Borrower's assets or property may be bound or affected and do not cause any
security interest, lien or other encumbrance to be created or imposed upon
any such property by reason thereof.
b. NO DEFAULT. There has occurred and is continuing no Event of
Default or any event which with the giving of notice or the lapse of time,
or both, would constitute an Event of Default.
c. LITIGATION. There is no action, suit or proceeding pending or,
to the best of Borrower's knowledge and belief, threatened against or
affecting Borrower which could impair the validity, effectiveness or
enforceability of, or impair Borrower's ability to
4
perform its obligations under this Note, whether said actions, suits or
proceedings are at law or in equity or before or by any governmental authority.
6. DEFAULT RATE.
Any amounts not paid when due shall thereafter bear interest at a
rate per annum equal to the interest rate calculated pursuant to Section 1
above, plus two percent (2%).
7. WAIVER.
Borrower hereby waives any right of offset Borrower may now or
hereafter have against Lender (without limiting the foregoing, Borrower
waives any offset it might have against Lender arising out of any agreements
or any commercial relationship between Borrower and Lender), and Borrower
hereby also waives diligence, presentment, protest and demand, notice of
protest, dishonor and nonpayment of this Note and expressly agrees that,
without in any way affecting the liability of Borrower hereunder, Lender may
extend any maturity date or the time for payment of any installment due
hereunder, accept additional security, release any party liable hereunder and
release any security now or hereafter securing this Note. Borrower further
waives, to the full extent permitted by law, the right to plead any and all
statutes of limitations as a defense to any demand on this Note, or on any
deed of trust, security agreement, lease assignment, guaranty or other
agreement now or hereafter securing this Note.
8. RIGHT OF SETOFF.
Upon and after the occurrence of any Event of Default, Lender is
hereby authorized by Borrower, at any time and from time to time, without
notice to Borrower, to set off against, and to appropriate and apply to the
payment of, the obligations and liabilities of Borrower hereunder (whether
matured or unmatured), any accounts maintained with it by Borrower and/or any
and all amounts owing by Lender to Borrower (whether matured or unmatured,
and however evidenced).
9. JURISDICTION.
For any action related to the judicial enforcement or interpretation
of this Note, Borrower expressly submits to the nonexclusive jurisdiction of
the state or federal courts located in the County of Los Angeles in the State
of California at the election of Lender, which election may be made from time
to time. Borrower further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by
mailing of copies thereof by registered or certified mail, postage prepaid,
to Borrower at Borrower's address for notice furnished to Lender, such
service to become effective five (5) days after such mailing. Nothing herein
shall affect the right
5
to serve process in any other manner permitted by law or the right of Lender to
bring legal action or proceedings in any other jurisdiction.
10. WAIVER OF JURY TRIAL.
BORROWER HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, OR ANY DEALINGS
RELATING TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP
THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Borrower acknowledges that this waiver is a material
inducement to Lender to make the Loan and that Lender has already relied on this
waiver in entering into this transaction, and that Lender will continue to rely
on this waiver in its related future dealings. Borrower further warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE,
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO, IN THE EVENT OF
LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11. LEGAL FEES.
Borrower agrees to pay all costs and expenses, including without
limitation attorney's fees actually incurred by Lender in connection with the
enforcement of any obligation of Borrower under this Note.
12. SEVERABILITY.
In case any term or any provision of this Note shall be invalid,
illegal or unenforceable, such provision shall be severable from the rest of
this Note and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
13. HEADINGS.
Headings used in this Note are inserted for convenience only and shall
not be deemed to constitute a part hereof.
6
14. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
Borrower:
OBAGI MEDICAL PRODUCTS, INC.
By: /s/ [illegible]
--------------------------
Name: [illegible]
--------------------
Title: C.O.O.
--------------------
Payment of this Note is subordinated to the payment of all the obligations
of the maker hereof to Imperial Bank pursuant to the terms of a Subordination
Agreement dated 7 JUNE 1999.
7
EXHIBIT B
PROMISSORY NOTE PAYABLE TO XXXXXXX XXX
PROMISSORY NOTE
$1,600,000 Dated: as of _________, 2000
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, OBAGI MEDICAL PRODUCTS,
INC., ("Borrower"), hereby promises to pay to the order of XXXXXXX X. XXX
("Lender") the principal sum of Xxx Xxxxxxx Xxx Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxxx Dollars and No Cents (U.S.$1,600,000) (the "Loan") with interest from
the date of this Note on the unpaid principal until paid at the rate of six
percent per annum.
2. PAYMENT, MATURITY DATE.
Borrower shall make principal payments (plus all accrued but then unpaid
interest on the Loan), on the dates and in the amounts indicated below:
6/30/2001 $500,000 1/1/2002 $375,000
6/30/2002 $625,000 1/1/2003 $100,000
Unless accelerated pursuant to the terms of this Note, the unpaid principal
balance of this Note, together with all unpaid interest accrued thereon, and all
other amounts payable by Borrower under the terms of this Note shall be due and
payable on January 1, 2003 (the "Maturity Date").
If any payment of principal or interest to be made by Borrower shall become
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing any interest with respect to such payment. "Business Day" shall mean
any Monday, Tuesday, Wednesday, Thursday or Friday on which banks are open for
business in Los Angeles, California.
All interest due hereunder shall be computed on the basis of a year of 365
days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all payments
received by Lender under this Note shall be credited first to any charges or
other expenses for which Lender is entitled to payment hereunder, next to
accrued but unpaid interest, and third to unpaid principal.
-1-
3. MANNER OF PAYMENT.
Principal and interest on the Loan, and all other amounts payable
hereunder, is payable in lawful currency of the United States of America in
immediately available funds at Lender's address of 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, payable to Xxxxxxx X. Xxx, or such
other address as Lender may designate in writing to Borrower.
4. EVENTS OF DEFAULT/REMEDIES.
a. EVENTS OF DEFAULT. Any of the following events shall constitute
an Event of Default:
(1) breach by Borrower of any of Borrower's obligations or
covenants under this Note; provided that Borrower shall have ten (10) days from
the date of any failure to perform any of its obligations or covenants under
this Note not involving the payment of money to Lender, within which to cure
said failure; or
(2) Borrower (A) becomes insolvent or admits in writing
Borrower's inability to pay Borrower's debts as they mature, (B) makes any
assignment for the benefit of creditors, or (C) applies for or consents to the
appointment of a receiver or trustee for Borrower or for a substantial part of
Borrower's property or business, or a receiver or trustee otherwise is appointed
and is not discharged within thirty (30) days after such appointment; or
(3) any of Borrower's representations or warranties made herein
or in any statement or certificate at any time given by Borrower pursuant hereto
or in connection herewith is false or misleading in any material respect and has
not been cured within ten (10) days after notice of such breach by Lender to
Borrower; or
(4) any bankruptcy, insolvency, reorganization or liquidation
proceeding or other proceeding for relief under any bankruptcy law or any law
for the relief of debtors is instituted by or against Borrower; or
(5) any money judgment, writ or warrant of attachment, or similar
process (singly or, if more than one, cumulatively in excess of $100,000) is
entered or filed against Borrower or any of the assets of Borrower and (A)
remains unvacated, unbonded, unstayed, undismissed or undischarged for a period
of thirty (30) days or in any event later than five (5) days before the date of
any proposed sale thereunder, or (B) Borrower has not appealed the same in good
faith to Lender's satisfaction; or
(6) the condition, financial or otherwise, of the Borrower
suffers any material adverse change, in the reasonable opinion of the Lender,
and has not been cured within ten (10) days after notice of such breach by
Lender to Borrower; or
(7) more than fifty percent (50%) of the equity interests in
Borrower is held by a person or persons other than the holders of such equity
interests on the date of this Note, except that no Event of Default under this
clause shall occur (i) if Borrower is, at the time of such change in equity
interest, a publicly traded company or (ii) if Mandarin Partners, LLC,
-2-
which holds in excess of seventy percent (70%) of the outstanding shares of
Borrower on the date of this Note, distributes shares of Borrower on a pro rata
basis to each of its members (provided that such members are the same on the
date of such distribution as on the date of this Note); or
(8) more than fifty percent (50%) of the equity interests in
Borrower or in the assets of Borrower is transferred or sold in a single
transaction, except that Company may, one time only, transfer without it
constituting an Event of Default its duties and obligations under this Note to a
Delaware corporation whose assets and shareholders are identical to those of
Company prior to such transfer; provided that such Delaware corporation shall
execute and deliver appropriate allonges to this Note necessary and appropriate
to achieve the assumption of Company's duties and obligations under this Note.
b. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default described in Subsections 4(a)(2) or 4(a)(4) above, all
indebtedness under this Note shall automatically be immediately due and payable.
In addition, Lender, at its option, and without notice to Borrower, may take one
or more of the actions described below. Upon the occurrence and during the
continuance of any other Event of Default, Lender at its option and, unless
otherwise specified below, without notice to Borrower, may do any one or more of
the following:
(1) declare all indebtedness under this Note immediately due and
payable and credit any sums received thereafter in such manner as it elects upon
such indebtedness; provided, however, that such application of sums so received
shall not serve to waive or cure any default existing under this Note nor to
invalidate any notice of default or any act done pursuant to such notice and
shall not prejudice any rights of Lender; and
(2) exercise any or all rights provided or permitted by law or
granted pursuant to this Note in such order and in such manner as Lender may, in
its sole judgment, determine.
c. NO WAIVER OF REMEDIES. No waiver of any breach of or default under any
provision of this Note shall constitute or be construed as a waiver by Lender of
any subsequent breach of or default under that or any other provision of this
Note.
d. REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender is
intended to be exclusive of any other remedy herein or in any other agreement
between the parties hereto or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower hereby makes the following representations and warranties, which
shall be deemed to be continuing representations and warranties until payment in
full of all indebtedness of Borrower to Lender arising pursuant to this Note.
a. NO CONFLICT. The execution, delivery and performance of this Note are
not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower
-3-
is a party or by which Borrower or any of Borrower's assets or property may be
bound or affected and do not cause any security interest, lien or other
encumbrance to be created or imposed upon any such property by reason thereof.
b. NO DEFAULT. There has occurred and is continuing no Event of Default
or any event which with the giving of notice or the lapse of time, or both,
would constitute an Event of Default.
c. LITIGATION. There is no action, suit or proceeding pending or, to the
best of Borrower's knowledge and belief, threatened against or affecting
Borrower which could impair the validity, effectiveness or enforceability of, or
impair Borrower's ability to perform its obligations under this Note, whether
said actions, suits or proceedings are at law or in equity or before or by any
governmental authority.
6. DEFAULT RATE.
Any amounts not paid when due shall thereafter bear interest at the rate of
eight percent (8.0%) per annum.
7. WAIVER.
Borrower hereby waives any right of offset Borrower may now or hereafter
have against Lender (without limiting the foregoing, Borrower waives any offset
it might have against Lender arising out of any agreements or any commercial
relationship between Borrower and Lender), and Borrower hereby also waives
diligence, presentment, protest and demand, notice of protest, dishonor and
nonpayment of this Note and expressly agrees that, without in any way affecting
the liability of Borrower hereunder, Lender may extend any maturity date or the
time for payment of any installment due hereunder, accept additional security,
release any party liable hereunder and release any security now or hereafter
securing this Note. Borrower further waives, to the full extent permitted by
law, the right to plead any and all statutes of limitations as a defense to any
demand on this Note, or on any deed of trust, security agreement, lease
assignment, guaranty or other agreement now or hereafter securing this Note.
8. RIGHT OF SETOFF.
Upon and after the occurrence of any Event of Default, Lender is hereby
authorized by Borrower, at any time and from time to time, without notice to
Borrower, to set off against, and to appropriate and apply to the payment of,
the obligations and liabilities of Borrower hereunder (whether matured or
unmatured), any accounts maintained with it by Borrower and/or any and all
amounts owing by Lender to Borrower (whether matured or unmatured, and however
evidenced).
9. JURISDICTION.
For any action related to the judicial enforcement or interpretation of
this Note, Borrower expressly submits to the nonexclusive jurisdiction of the
state or federal courts located in the County of Los Angeles in the State of
California at the election of Lender, which election may be made from time to
time. Borrower further irrevocably consents to the service of process
-4-
out of any of the aforementioned courts in any such action or proceeding by
mailing of copies thereof by registered or certified mail, postage prepaid, to
Borrower at Borrower's address for notice furnished to Lender, such service to
become effective five (5) days after such mailing. Nothing herein shall affect
the right to serve process in any other manner permitted by law or the right of
Lender to bring legal action or proceedings in any other jurisdiction.
10. WAIVER OF JURY TRIAL.
BORROWER HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, OR ANY DEALINGS RELATING
TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation, contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Borrower acknowledges that this waiver is a material
inducement to Lender to make the Loan and that Lender has already relied on this
waiver in entering into this transaction, and that Lender will continue to rely
on this waiver in its related future dealings. Borrower further warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE,
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO. IN THE EVENT OF
LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11. LEGAL FEES.
Borrower agrees to pay all costs and expenses, including without limitation
attorneys' fees actually incurred by Lender in connection with the enforcement
of any obligation of Borrower under this Note.
12. SEVERABILITY.
In case any term or any provision of this Note shall be invalid, illegal or
unenforceable, such provision shall be severable from the rest of this Note and
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
13. HEADINGS.
Headings used in this Note are inserted for convenience only and shall not
be deemed to constitute a part hereof.
-5-
14. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the laws of
the State of California.
Borrower:
OBAGI MEDICAL PRODUCTS, INC.
By:
------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Payment of this Note is subordinated to the payment of all the obligations
of the maker hereof to Imperial Bank pursuant to the terms of a Subordination
Agreement dated June 7, 1999, as amended through the date of this Note.
-6-
EXHIBIT C
PROMISSORY NOTE PAYABLE TO MARON NU-TECH
PROMISSORY NOTE
$900,000 Dated: as of _________, 2000
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, OBAGI MEDICAL PRODUCTS, INC.,
("Borrower"), hereby promises to pay to the order of MARON NU-TECH, INC.
("Lender") the principal sum of Nine Hundred Thousand United States Dollars
and No Cents (U.S.$900,000) (the "Loan") with interest from the date of this
Note on the unpaid principal until paid at the rate of six percent (6%) per
annum rate through and including December 31, 2002 and at one dollar ($1.00)
per annum thereafter.
2. PAYMENT, MATURITY DATE.
Borrower shall make principal payments (plus all accrued but then unpaid
interest on the Loan), on the dates and in the amounts indicated below:
1/1/2003 $150,000 6/30/2003 $250,000
1/1/2004 $250,000 6/30/2004 $250,000
Unless accelerated pursuant to the terms of this Note, the unpaid principal
balance of this Note, together with all unpaid interest accrued thereon, and all
other amounts payable by Borrower under the terms of this Note shall be due and
payable on the third anniversary date of this Note (the "Maturity Date").
If any payment of principal or interest to be made by Borrower shall become
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing any interest with respect to such payment. "Business Day" shall mean
any Monday, Tuesday, Wednesday, Thursday or Friday on which banks are open for
business in Los Angeles, California.
All interest due hereunder shall be computed on the basis of a year of 365
days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all payments
received by Lender under this Note shall be credited first to any charges or
other expenses for which Lender is entitled to payment hereunder, next to
accrued but unpaid interest, and third to unpaid principal.
-1-
3. MANNER OF PAYMENT.
Principal and interest on the Loan, and all other amounts payable
hereunder, is payable in lawful currency of the United States of America in
immediately available funds at Lender's address of 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, payable to Maron Nu-Tech, Inc., or
such other address as Lender may designate in writing to Borrower.
4. EVENTS OF DEFAULT/REMEDIES.
a. EVENTS OF DEFAULT. Any of the following events shall constitute
an Event of Default:
(1) breach by Borrower of any of Borrower's obligations or
covenants under this Note; provided that Borrower shall have ten (10) days from
the date of any failure to perform any of its obligations or covenants under
this Note not involving the payment of money to Lender, within which to cure
said failure; or
(2) Borrower (A) becomes insolvent or admits in writing
Borrower's inability to pay Borrower's debts as they mature, (B) makes any
assignment for the benefit of creditors, or (C) applies for or consents to the
appointment of a receiver or trustee for Borrower or for a substantial part of
Borrower's property or business, or a receiver or trustee otherwise is appointed
and is not discharged within thirty (30) days after such appointment; or
(3) any of Borrower's representations or warranties made herein
or in any statement or certificate at any time given by Borrower pursuant hereto
or in connection herewith is false or misleading in any material respect and has
not been cured within ten (10) days after notice of such breach by Lender to
Borrower; or
(4) any bankruptcy, insolvency, reorganization or liquidation
proceeding or other proceeding for relief under any bankruptcy law or any law
for the relief of debtors is instituted by or against Borrower; or
(5) any money judgment, writ or warrant of attachment, or
similar process (singly or, if more than one, cumulatively in excess of
$100,000) is entered or filed against Borrower or any of the assets of Borrower
and (A) remains unvacated, unbonded, unstayed, undismissed or undischarged for a
period of thirty (30) days or in any event later than five (5) days before the
date of any proposed sale thereunder, or (B) Borrower has not appealed the same
in good faith to Lender's satisfaction; or
(6) the condition, financial or otherwise, of the Borrower
suffers any material adverse change, in the reasonable opinion of the Lender and
has not been cured within ten (10) days after notice of such breach by Lender to
Borrower; or
(7) more than fifty percent (50%) of the equity interests in
Borrower is held by a person or persons other than the holders of such equity
interests on the date of this Note, except that no Event of Default under this
clause shall occur (i) if Borrower is, at the time of such change in equity
interest, a publicly traded company or (ii) if Mandarin Partners, LLC,
-2-
which holds in excess of seventy percent (70%) of the outstanding shares of
Borrower on the date of this Note, distributes shares of Borrower on a pro rata
basis to each of its members (provided that such members are the same on the
date of such distribution as on the date of this Note); or
(8) more than fifty percent (50%) of the equity interests in
Borrower or in the assets of Borrower is transferred or sold in a single
transaction, except that Company may, one time only, transfer without it
constituting an Event of Default its duties and obligations under this Note to a
Delaware corporation whose assets and shareholders are identical to those of
Company prior to such transfer; provided that such Delaware corporation shall
execute and deliver appropriate allonges to this Note necessary and appropriate
to achieve the assumption of Company's duties and obligations under this Note.
b. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default described in Subsections 4(a)(2) or 4(a)(4) above, all
indebtedness under this Note shall automatically be immediately due and payable.
In addition, Lender, at its option, and without notice to Borrower, may take one
or more of the actions described below. Upon the occurrence and during the
continuance of any other Event of Default, Lender at its option and, unless
otherwise specified below, without notice to Borrower, may do any one or more of
the following:
(1) declare all indebtedness under this Note immediately due and
payable and credit any sums received thereafter in such manner as it elects upon
such indebtedness; provided, however, that such application of sums so received
shall not serve to waive or cure any default existing under this Note nor to
invalidate any notice of default or any act done pursuant to such notice and
shall not prejudice any rights of Lender; and
(2) exercise any or all rights provided or permitted by law or
granted pursuant to this Note in such order and in such manner as Lender may, in
its sole judgment, determine.
c. NO WAIVER OF REMEDIES. No waiver of any breach of or default under any
provision of this Note shall constitute or be construed as a waiver by Lender of
any subsequent breach of or default under that or any other provision of this
Note.
d. REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender is
intended to be exclusive of any other remedy herein or in any other agreement
between the parties hereto or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower hereby makes the following representations and warranties, which
shall be deemed to be continuing representations and warranties until payment in
full of all indebtedness of Borrower to Lender arising pursuant to this Note.
a. NO CONFLICT. The execution, delivery and performance of this Note are
not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower
-3-
is a party or by which Borrower or any of Borrower's assets or property may be
bound or affected and do not cause any security interest, lien or other
encumbrance to be created or imposed upon any such property by reason thereof.
b. NO DEFAULT. There has occurred and is continuing no Event of Default
or any event which with the giving of notice or the lapse of time, or both,
would constitute an Event of Default.
c. LITIGATION. There is no action, suit or proceeding pending or, to the
best of Borrower's knowledge and belief, threatened against or affecting
Borrower which could impair the validity, effectiveness or enforceability of, or
impair Borrower's ability to perform its obligations under this Note, whether
said actions, suits or proceedings are at law or in equity or before or by any
governmental authority.
6. DEFAULT RATE.
Any amounts not paid when due shall thereafter bear interest at the rate of
eight percent (8.0%) per annum.
7. WAIVER.
Borrower hereby waives any right of offset Borrower may now or hereafter
have against Lender (without limiting the foregoing, Borrower waives any offset
it might have against Lender arising out of any agreements or any commercial
relationship between Borrower and Lender), and Borrower hereby also waives
diligence, presentment, protest and demand, notice of protest, dishonor and
nonpayment of this Note and expressly agrees that, without in any way affecting
the liability of Borrower hereunder, Lender may extend any maturity date or the
time for payment of any installment due hereunder, accept additional security,
release any party liable hereunder and release any security now or hereafter
securing this Note. Borrower further waives, to the full extent permitted by
law, the right to plead any and all statutes of limitations as a defense to any
demand on this Note, or on any deed of trust, security agreement, lease
assignment, guaranty or other agreement now or hereafter securing this Note.
8. RIGHT OF SETOFF.
Upon and after the occurrence of any Event of Default, Lender is hereby
authorized by Borrower, at any time and from time to time, without notice to
Borrower, to set off against, and to appropriate and apply to the payment of,
the obligations and liabilities of Borrower hereunder (whether matured or
unmatured), any accounts maintained with it by Borrower and/or any and all
amounts owing by Lender to Borrower (whether matured or unmatured, and however
evidenced).
9. JURISDICTION.
For any action related to the judicial enforcement or interpretation of
this Note, Borrower expressly submits to the nonexclusive jurisdiction of the
state or federal courts located in the County of Los Angeles in the State of
California at the election of Lender, which election may be made from time to
time. Borrower further irrevocably consents to the service of process out of
-4-
any of the aforementioned courts in any such action or proceeding by mailing of
copies thereof by registered or certified mail, postage prepaid, to Borrower at
Borrower's address for notice furnished to Lender, such service to become
effective five (5) days after such mailing. Nothing herein shall affect the
right to serve process in any other manner permitted by law or the right of
Lender to bring legal action or proceedings in any other jurisdiction.
10. WAIVER OF JURY TRIAL.
BORROWER HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, OR ANY DEALINGS RELATING
TO THE SUBJECT MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation, contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Borrower acknowledges that this waiver is a material
inducement to Lender to make the Loan and that Lender has already relied on this
waiver in entering into this transaction, and that Lender will continue to rely
on this waiver in its related future dealings. Borrower further warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE,
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO. IN THE EVENT OF
LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11. LEGAL FEES.
Borrower agrees to pay all costs and expenses, including without limitation
attorneys' fees actually incurred by Lender in connection with the enforcement
of any obligation of Borrower under this Note.
12. SEVERABILITY.
In case any term or any provision of this Note shall be invalid, illegal or
unenforceable, such provision shall be severable from the rest of this Note and
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
13. HEADINGS.
Headings used in this Note are inserted for convenience only and shall not
be deemed to constitute a part hereof.
-5-
14. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the laws of
the State of California.
Borrower:
OBAGI MEDICAL PRODUCTS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
Payment of this Note is subordinated to the payment of all the obligations
of the maker hereof to Imperial Bank pursuant to the terms of a Subordination
Agreement dated June 7, 1999, as amended through the date of this Note.
-6-
EXHIBIT D
AMENDED AND RESTATED ADDENDUM
TO SUBORDINATION AGREEMENT
This Amended and Restated Addendum is made and entered into as of ______, 2000
between Maron Nu-Tech, Inc. and Xxxxxxx X. Xxx (jointly and severally, "We" or
"Subordinated Creditor") and Imperial Bank ("Bank" and "You") and Obagi Medical
Products, INc. ("Borrower"). This Amended and Restated Addendum amends and
supplements the Subordination Agreement (Payment Authorized)("Subordination
Agreement") dated June 7, 1999 executed by Maron Nu-Tech, Inc. in favor of Bank
and accepted by the Borrower and amends and restates that Addendum to
Subordination Agreement (Payment Authorized) dated June 7, 1999 executied by
Maron Nu-Tech, Inc. in favor of BAnk and accepted by the Borrower. In the case
of any inconsistency between the terms herein and the terms of teh Subordination
Agreement, the terms herein shallin all cases govern and control. All
capitalized terms herein, unless otherwise defined herein shall have the meaning
set forth in the Subordination Agreement.
1. Notwithstanding any other provisions of the Subordination Agreement, the
claims of the Borrower owing to the Subordinated Creditor ("Subordinated
Claims") which are subordianted to the claims of the Borrower to the Bank
("Senior Claims") pursuant to the Suboridation Agreement are only those
relating to that Promissory Note executed by the Borrower in favor of Maron
Nu-Tech, Inc. Dated June 7, 1999 in the prinicpal amount of $900,000, that
Promissory NOte executed by the Borrower in favor of Maron Nu-Tech, Inc. of
even date herewith in the principal amount of $900,000, and that Promissory
Note executed by teh Borrower in favor of Xxxxxxx X. Xxx of even date
herewith in the prinicpal amount of $1,600,000. Wherever the term "Claims"
is used in the Subordination Agreement relating to the claims of the
Borrower to the Subordinated Creditor, it shall mean the Subordinated
Claims.
2. Notwithstanding any other provisions in the Subordiantion Agreement, if the
Subordinated Creditor shall notify the Bank that a payment default has
occurred in the Subordinated Claims, after a period of 180 days following
such notice the Subordinated Creditor may accept or receive any payments of
any kin of, or on account of, the Subordinated Claims and may take any
action to enforce the Subordinated Claims.
3. Because the Subordinated Creditors are taking security interest in the assets
of Borrower to secure their claims under the Notes dated of even date herewith,
the last paragraph on page 1 of the Subordination Agreement is not applicable
and is hereby deleted.
MARON NU-TECH, INC.
By:
------------------------------------------
Its:
------------------------------------------
OBAGI MEDICAL PRODUCTS, INC.
By:
------------------------------------------
Its:
------------------------------------------
---------------------------------------------
Xxxxxxx X. Xxx
IMPERIAL BANK
By:
------------------------------------------
Its:
------------------------------------------
EXHIBIT E
WAIVER AND RELEASE
For good and valuable consideration, the receipt of which is hereby
acknowledged, in the form of the change of ownership of the undersigned, the
undersigned, on behalf of itself and its shareholders, parent or sister
companies, employees, representatives, agents, insurers, attorneys,
administrators, heirs, beneficiaries, executors, trustees, principals,
predecessors, successors, assignors, assignees, past and present, hereby fully
releases and discharges Maron Nu- Tech, Xxxxxxx Xxx and their respective
employees, officers, agents, representatives, attorneys, administrators, heirs,
insurers, corporations in which either Maron Nu-Tech or Xxx holds any interest,
and each of their respective predecessors, successors, assignors and assignees,
past and present, with respect to any and all claims, actions, and causes of
action, of any kind or nature whatsoever, in law, equity, or otherwise, whether
fixed or contingent, whether now known or unknown whether suspected or
unsuspected, and whether concealed or hidden, which now exist or which may exist
hereafter, relating to, or arising out of, any act, transaction, agreement
occurrence, event, error, or omission by any of them prior to the effective date
of this Agreement.
DERMA TECH, INC.
By:
----------------------------------------
Name:
Title:
EXHIBIT E
WAIVER AND RELEASE
For good and valuable consideration, the receipt of which is hereby
acknowledged, in the form of the change of ownership of the undersigned, the
undersigned, on behalf of itself and its shareholders, parent or sister
companies, employees, representatives, agents, insurers, attorneys,
administrators, heirs, beneficiaries, executors, trustees, principals,
predecessors, successors, assignors, assignees, past and present, hereby fully
releases and discharges Maron Nu- Tech, Xxxxxxx Xxx and their respective
employees, officers, agents, representatives, attorneys, administrators, heirs,
insurers, corporations in which either Maron Nu-Tech or Xxx holds any interest,
and each of their respective predecessors, successors, assignors and assignees,
past and present, with respect to any and all claims, actions, and causes of
action, of any kind or nature whatsoever, in law, equity, or otherwise, whether
fixed or contingent, whether now known or unknown whether suspected or
unsuspected, and whether concealed or hidden, which now exist or which may exist
hereafter, relating to, or arising out of, any act, transaction, agreement
occurrence, event, error, or omission by any of them prior to the effective date
of this Agreement.
OBAGI SINGAPORE PTE LTD.
By:
-------------------------------------------
Name:
Title:
EXHIBIT E
WAIVER AND RELEASE
For good and valuable consideration, the receipt of which is hereby
acknowledged, in the form of the change of ownership of the undersigned, the
undersigned, on behalf of itself and its shareholders, parent or sister
companies, employees, representatives, agents, insurers, attorneys,
administrators, heirs, beneficiaries, executors, trustees, principals,
predecessors, successors, assignors, assignees, past and present, hereby fully
releases and discharges Maron Nu- Tech, Xxxxxxx Xxx and their respective
employees, officers, agents, representatives, attorneys, administrators, heirs,
insurers, corporations in which either Maron Nu-Tech or Xxx holds any interest,
and each of their respective predecessors, successors, assignors and assignees,
past and present, with respect to any and all claims, actions, and causes of
action, of any kind or nature whatsoever, in law, equity, or otherwise, whether
fixed or contingent, whether now known or unknown whether suspected or
unsuspected, and whether concealed or hidden, which now exist or which may exist
hereafter, relating to, or arising out of, any act, transaction, agreement
occurrence, event, error, or omission by any of them prior to the effective date
of this Agreement.
OBAGI ASIA PTE LTD.
By:
-------------------------------------------
Name:
Title:
EXHIBIT F
DESCRIPTION OF COLLATERAL
All of the following described property and any and all proceeds and products
thereof, whether now owned or hereafter existing, and in which Obagi Medical
Products, Inc. now has or hereafter has any right, title or interest:
(a) all equipment, wherever located, and all additions and accessions
thereto and replacements therefor,
(b) all inventory,
(c) all accounts, documents, contract rights, chattel paper,
instruments, and general intangibles,
(d) all rights, agreements, contracts and assignments of Obagi
Medical Products, Inc.,
(e) all machinery, furniture and fixtures,
(f) all patent applications, trademarks and tradenames, rights and
interests in copyrights, trade secrets,
(g) all deposit accounts and all cash,
(h) all goodwill,
(i) all ledger sheets, books, files, and other documents and records
and all equipment containing such ledger sheets, files, documents and records,
and
(j) all proceeds of any of the foregoing.
EXHIBIT G
--------------------------------------------------------------------------------
DERMA TECH BALANCE SHEET
EXHIBIT H
SUB-DISTRIBUTORS *
INDONESIA: Pt. Obagi Indonesia
Wisma Danamon Aetna Life, 14/F
Jl. Jend, Xxxxxxxx Xxx 00-00
Xxxxxxx 00000, Xxxxxxxxx
Tel: No. (00-00) 000-0000
Fax No. (00-00) 000-0000
Contact Person: Xxxxxxx Xxxxxxx
KOREA: Maron Cosmetic Co., Ltd. *
00-0 Xxxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx
Tel. No. (000) 000-0000
Fax No. (000) 000-0000
Contact Person: Jung In Xxx and Jong Xxx Xxx
MALAYSIA: Obagi Malaysia
Shop Xxx 0-0-0, Xxxxx 0
0xx Xxxxx, Xxx-Xxx Xxxxxx
Xxxxx Xxxxxx Xxxxx, Xxxx Xxxxxxxx 00000
Xxxxx, Xxxxxxxx
Tel. No. (60-88) 261-013
Fax No. (60-88) 266-186
Contact Person: Fan Xxxx Xxxx
SINGAPORE: Obagi (S) Pte Ltd.
000 Xxxxxxx Xxxx
#00-00/00/00/00
Xxxxxxx Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx 000000
Tel. No. (00) 000-0000
Fax No. (00) 000-0000
Contact Person: Xxxx Xxx
* (Maron Cosmetic Co., Ltd. is a direct distributor for which Maron acts as
handling agent)
SCHEDULE 1.1(d)
OTHER INTERESTS
Derma Tech, Inc.
Obagi Singapore Pte. Ltd.
Obagi Asia Pte. Ltd.
SCHEDULE 2.1(g)
CLAIMS BY XXX
None.
SCHEDULE 2.1(k)
MARON LICENSES
None.
SCHEDULE 2.2(d)
10% OR MORE SHAREHOLDERS OF COMPANY
Xxxx Xxxxx and Samar Obagi Family Trust
Mandarin Partners, LLC
XXXXXXX X. XXX
PRESIDENT
MARON NU-TECH, INC.
0000 XXXXXXXX XXXXXXXXX
XXXXX 000
XXXXXXX XXXXX, XXXXXXXXXX 00000
December 18, 2000
Xx. Xxxxxx X. Xxxx
President and CEO
Obagi Medical Products, Inc.
000 Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
RE: Master Separation Agreement
Dear Phil:
This letter will confirm our agreement, at your request, to amend Section 1.1
of the Master Separation Agreement, to extend the Closing Date from December
18, 2000 to December 21, 2000, by mutual agreement. This letter will also
confirm that I will date the Stock Assignment as of January 2, 2001. Your
countersignature below will confirm this agreement.
Very truly yours,
/s/ Xxxxxxx X. Xxx
XXXXXXX X. XXX, individually and as President of Maron Nu-Tech, Inc.
The foregoing is agreed, without prejudice to the undersigned's position in
the dispute over the payment schedule set forth in the Master Separation
Agreement and the Promissory Notes which are exhibits thereto:
Obagi Medical Products, Inc.
By: /s/ Xxxxxx X. Xxxx
----------------------------
Xxxxxx X. Xxxx
President and CEO
XXXXXXX X. XXX
PRESIDENT
MARON NU-TECH, INC.
0000 XXXXXXXX XXXXXXXXX
XXXXX 000
XXXXXXX XXXXX, XXXXXXXXXX 00000
December 22, 2000
Xx. Xxxxxx X. Xxxx
President and CEO
Obagi Medical Products, Inc.
000 Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
RE: Master Separation Agreement
Dear Phil:
This letter will confirm our agreement to amend the Master Separation
Agreement and the note payable to Xx. Xxx under the Master Separation
Agreement ("Xxx Note") to change the payment schedule on payments to be made
to Xxxxxxx X. Xxx. The principal payment which would otherwise be due to be
paid to Xxxxxxx X. Xxx on January 1, 2001 in the amount of $250,000 shall
instead be payable in equal parts on January 1, 2002 and June 30, 2002 (so
that the principal payment due on January 1, 2002 shall now total $375,000
and the principal payment due on June 30, 2002 shall be $625,000). The first
interest payment on the Xxx Note shall now be due on June 30, 2001.
My attorneys will be authorized to revise the pages of the Master Separation
Agreement and Xxx Note necessary to reflect this amendment, and those revised
pages shall be inserted into the final Master Separation Agreement and Xxx
Note.
Your countersignature below will confirm your agreement to this amendment.
Very truly yours,
/s/ Xxxxxxx X. Xxx
XXXXXXX X. XXX, individually and as President of Maron Nu-Tech, Inc.
The foregoing is agreed:
Obagi Medical Products, Inc.
By: /s/ Xxxxxx X. Xxxx
----------------------------
Xxxxxx X. Xxxx
President and CEO
Company agrees to pay Xxx the sum of Xxx Xxxxxxx Xxx Xxxxxxxx Xxxxxxxx Xxx
Xxxxxx Xxxxxx Dollars ($2,100,001), payable as follows:
(i) A cash payment of Xxx Xxxxxxxx Xxxxxxxx Xxx Xxxxxx
Xxxxxx Dollars ($100,001) which has previously been paid to Xxx, receipt of
which is hereby acknowledged; and
(ii) A cash payment of Four Hundred Thousand United
States Dollars ($400,000) at the Closing.
(iii) The balance of Xxx Xxxxxxx Xxx Xxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx Dollars ($1,600,000) according to the following payment
schedule:
6/30/2001 $500,000 1/1/2002 $375,000
6/30/2002 $625,000 1/1/2003 $100,000
(b) In consideration of all of the foregoing provisions and the
terms and conditions hereof, effective at the Closing Company agrees to pay
Maron the sum of Nine Hundred Thousand United States Dollars ($900,000)
according to the following payment schedule:
1/1/2003 $150,000 6/30/2003 $250,000
1/1/2004 $250,000 6/30/2004 $250,000
1.4 INTEREST. In addition to the payments pursuant to Section 1.3,
Company agrees to pay interest to Xxx and to Maron on the outstanding
principal balance during the period from the Closing Date through January 1,
2003. Interest shall be calculated based on a 365-day year at the time of
each principal payment on the outstanding principal balance on the day
before the principal payment is due and shall be fixed for the period at the
rate of six percent (6%) per annum. Beginning on January 2, 2003, interest
sahll be due and payable on the then outstanding principal balance only as
follows:
(a) Interest at the rate of One United States Dollar ($1.00) per
annum, payable on January 1, 2004; and
(b) Interest at the rate of One United States Dollar ($1.00) per
annum, payable on June 30, 2004; and
1.5 PROMISSORY NOTES. At the Closing, Company shall execute and deliver
to the respective payees thereof two subordinated promissory notes (the
"Notes") for the aggregate outstanding balance of Xxx Xxxxxxx Xxxx
Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars ($2,500,000) payable under Section
1.3 above, payable to Xxx and Xxxxx, respectively, in the forms attached
hereto as of EXHIBIT B and EXHIBIT C, respectively. Maron and Xxx hereby
agree that the Notes and related lien shall be subordinate to the loan and
related lien of Imperial Bank (or such other commercial lender as may succeed
Imperial Bank as commercial lender to Company ("Successor Lender")) (such
senior loan or loans, however, not to exceed in any event the principal
amount of
-3-
PROMISSORY NOTE
$1,600,000 Dated: as of _________, 2000
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, OBAGI MEDICAL PRODUCTS,
INC., ("Borrower"), hereby promises to pay to the order of XXXXXXX X. XXX
("Lender") the principal sum of Xxx Xxxxxxx Xxx Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxxx Dollars and No Cents (U.S.$1,600,000) (the "Loan") with interest from
the date of this Note on the unpaid principal until paid at the rate of six
percent per annum.
2. PAYMENT, MATURITY DATE.
Borrower shall make principal payments (plus all accrued but then unpaid
interest on the Loan), on the dates and in the amounts indicated below:
6/30/2001 $500,000 1/1/2002 $375,000
6/30/2002 $625,000 1/1/2003 $100,000
Unless accelerated pursuant to the terms of this Note, the unpaid principal
balance of this Note, together with all unpaid interest accrued thereon, and all
other amounts payable by Borrower under the terms of this Note shall be due and
payable on January 1, 2003 (the "Maturity Date").
If any payment of principal or interest to be made by Borrower shall become
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing any interest with respect to such payment. "Business Day" shall mean
any Monday, Tuesday, Wednesday, Thursday or Friday on which banks are open for
business in Los Angeles, California.
All interest due hereunder shall be computed on the basis of a year of 365
days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all payments
received by Lender under this Note shall be credited first to any charges or
other expenses for which Lender is entitled to payment hereunder, next to
accrued but unpaid interest, and third to unpaid principal.
-1-
XXXXXXX X. XXX
PRESIDENT
MARON NU-TECH, INC.
0000 XXXXXXXX XXXXXXXXX
XXXXX 000
XXXXXXX XXXXX, XXXXXXXXXX 00000
December 22, 2000
Xx. Xxxxxx X. Xxxx
President and CEO
Obagi Medical Products, Inc.
000 Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
RE: Master Separation Agreement
Dear Phil:
This letter will confirm our agreement to amend further the Master Separation
Agreement by substituting two forms of Subordination Agreement for the
Amended and Restated Addendum to Subordination Agreement, Exhibit D to the
Master Separation Agreement.
Exhibit D to the Master Separation Agreement therefore should read in its
entirety as in the pages attached to this letter amendment, and Section 1.5
of the Master Separation Agreement is hereby amended so that the phrase
"Amended and Restated Addendum to Subordination Agreement" in that Section
1.5 shall be amended and restated to read as "Subordination Agreements".
Your countersignature below will confirm your agreement to this amendment.
Very truly yours,
/s/ Xxxxxxx X. Xxx
XXXXXXX X. XXX, individually and as President of Maron Nu-Tech, Inc.
The foregoing is agreed:
Obagi Medical Products, Inc.
By:
----------------------------
Xxxxxx X. Xxxx
President and CEO
SUBORDINATION AGREEMENT
The undersigned Subordinated Creditor is interested in the financial success
of OBAGI MEDICAL PRODUCTS, INC. ("Borrower"), and agrees that financial
accommodation from IMPERIAL BANK ("Bank") to Borrower is necessary, and
accordingly requests that Bank grant to or renew for Borrower such financial
accommodation as it may deem proper, and for the purpose of inducing Bank to
grant, renew or extend such financial accommodation, it is hereby severally
agreed as follows:
Notwithstanding any other provisions of this agreement, the claims of the
Borrower owing to the Subordinated Creditor ("Subordinated Claims") which are
subordinated to the claims of the Borrower to the Bank ("Senior Claims")
pursuant to this Subordination Agreement are only those relating to that
Promissory Note executed by Borrower in favor of Subordinated Creditor dated
December 22, 2000, in the principal amount of $900,000. Wherever the term
"claims" is used in the Subordination Agreement relating to the claims of the
Borrower to the Subordinated Creditor it shall mean the Subordinated Claims.
All claims of each of the undersigned against Borrower now or hereafter
existing, whether matured or not (subject to the maximum if specified below),
are and shall be at all times subordinate and subject to any and all claims
of Bank's part against Borrower now or hereafter existing, whether matured or
not, so long as any such claim on Bank's part against Borrower shall remain
unpaid, in whole or in part, and each of the undersigned agrees not to xxx
upon, or collect, or to receive payment upon, by setoff or in any other
manner, any claim or claims on its part against Borrower now or hereafter
existing, nor to sell, assign, transfer, pledge, or give a security interest
in the same (except subject expressly to this Agreement), nor to enforce or
apply any security now or hereafter existing, nor to join in any petition in
bankruptcy or any assignment for the benefit of creditors, or any creditors
agreement, nor take any lien or security on any of Borrower's property, real
or personal, nor to incur any obligation to nor receive any loans, advances
or gifts from Borrower, so long as any such claim on Bank's part against
Borrower shall exist or so long as Bank is committed or otherwise obligated
to make any loans to, or grant any credit to, Borrower.
All claims on Bank's part against Borrower now or hereafter existing shall be
first paid by Borrower before any payment shall be made by Borrower to any of
the undersigned. Borrower may make regularly scheduled payment(s) on the
claims so long as no default exists on its obligations to Bank. Said priority
of payment shall apply during the ordinary course of Borrower's business and
in case of any assignment by Borrower for the benefit of Borrower's
creditors, and in case of any bankruptcy proceedings instituted by or against
Borrower, and in case of the appointment of any receiver for Borrower or
Borrower's business or assets, and in case of any dissolution or other
winding up of the affairs of Borrower, or of Borrower's business, and in all
such cases respectively, the officers of Borrower and any assignee, trustee
in bankruptcy, receiver, and other person or persons in charge, are hereby
directed to pay to Bank the full amount of Bank's claims against Borrower
before persons in charge, are hereby directed to pay to Bank the full amount
of Bank's claims against Borrower before making any payment to any of the
undersigned, and so far as may be necessary for that purpose, each of the
undersigned hereby transfers and assigns to Bank all of its rights to any
payment or distribution which might otherwise be coming to it. Bank is hereby
irrevocably constituted and appointed the attorney-in-fact of each of the
undersigned to file any and all proofs of claim and any other documents and
take all other action, either in Bank's name, or in the name of the
undersigned, or any of them, which in Bank's opinion is necessary or
desirable to enable Bank to obtain all such payments.
Page 1 of 3
The undersigned agrees that if part or all of any claim of the undersigned
shall be evidenced by a promissory note or other instrument, the undersigned
shall cause to be placed thereon a legend stating that the payment thereof is
subordinate to the payment of all claims on Bank's part against Borrower
pursuant to the terms of this Subordination Agreement, and each of the
undersigned agrees to xxxx all books of account in such manner to indicate
that payment thereof is subordinated pursuant to the terms of this
Subordination Agreement.
This Agreement shall be and constitute full and sufficient ground to entitle
Bank to be and become a party to any proceedings at law, or otherwise,
initiated by Bank or by any other party, in or by which Bank may deem it
proper to protect its interest hereunder, and the party so violating this
Agreement shall be liable to Bank for all loss and damages sustained by it
by reason of such breach, including attorney's fees to Bank's attorney in any
such legal action.
If the undersigned, or any of them, shall receive any payment or property in
violation of this Agreement, such payment or property shall be received by
such undersigned in trust for Bank and forthwith will be delivered and
transferred to Bank.
This Agreement shall be continuing in effect, it shall not be canceled or
otherwise rendered ineffective by the payment or discharge at any time of all
of Borrower's obligations to Bank, and it shall apply to any and all
financial accommodations subsequently granted, renewed or extended by Bank
for Borrower, unless the undersigned shall deliver to Bank a written notice
of revocation as to future transactions, at a time when Borrower is no longer
obligated by Bank in any way, and while Bank is not committed or otherwise
obligated to make any loans to, or grant any credit to, Borrower.
Notwithstanding any other provisions of this Subordination Agreement, if the
Subordinated Creditor shall notify the Bank that a payment default has
occurred in the Subordinated Claims, after a period of 180 days following
such date the Subordinated Creditor may take any lawful action to enforce the
Subordinated Claims, it being understood and agreed that payment of the
Subordinated Claims to the undersigned may not occur prior to the payment in
full of all obligations owed from Borrower to Bank, to Bank's satisfaction.
Notwithstanding any other provision of this Agreement, Subordinated Creditor
may secure its Subordinated Claims with a subordinated security interest in
certain assets of Borrower. Subordinated Creditor hereby subordinates such
security interest(s) whether now existing or hereafter arising, to the
security interest(s) of Bank, whether now existing or hereafter arising, with
respect to any and all assets of Borrower. Except as herein otherwise
provided, the priorities between the parties shall be determined in
accordance with the provisions of the Uniform Commercial Code. The
Subordinated Creditor may not enforce its security interest in Borrower's
assets, or commence any action to enforce such security interest until the
earlier of (i) repayment in full of all Senior Claims to the satisfaction of
the Bank, or (ii) upon the expiration of the 180 day period mentioned above,
provided that any proceeds from the Borrower's assets must first be applied
to repayment of the Senior Claim prior to applying any such proceeds to the
Subordinated Claim. Upon receipt of any proceeds by the Subordinated Creditor
from the exercise of its security interest, such payment or property shall be
received by such undersigned in trust for Bank and forthwith will be
delivered and transferred to Bank until payment in full of the Senior Claim
to the satisfaction of bank.
Page 2 of 3
Signature page follows.
The undersigned hereby acknowledges this Subordination Agreement and agrees
to be bound by its provisions.
SUBORDINATED CREDITOR:
Dated: December 22, 2000 /s/ XXXXXXX X. XXX
----------------------------- -----------------------------
Xx. Xxxxxxx X. Xxx
ACCEPTANCE OF SUBORDINATION AGREEMENT BY BORROWER
The undersigned, being the Borrower named in the foregoing Subordination
Agreement, hereby accepts and consents thereto and agrees to be bound by all
of the provisions thereof and to recognize all priorities and other rights
granted thereby to IMPERIAL BANK, and to pay said Bank in accordance
therewith.
Obagi Medical Products, Inc.
Dated: By:
---------------------- -------------------------
By:
-------------------------
Page 3 of 3
SUBORDINATION AGREEMENT
The undersigned Subordinated Creditor is interested in the financial success
of OBAGI MEDICAL PRODUCTS, INC. ("Borrower"), and agrees that financial
accommodation from IMPERIAL BANK ("Bank") to Borrower is necessary, and
accordingly requests that Bank grant to or renew for Borrower such financial
accommodation as it may deem proper, and for the purpose of inducing Bank to
grant, renew or extend such financial accommodation, it is hereby severally
agreed as follows:
Notwithstanding any other provisions of this agreement, the claims of the
Borrower owing to the Subordinated Creditor ("Subordinated Claims") which are
subordinated to the claims of the Borrower to the Bank ("Senior Claims")
pursuant to this Subordination Agreement are only those relating to that
Promissory Note executed by Borrower in favor of Subordinated Creditor dated
December 22, 2000, in the principal amount of $1,600,000. Wherever the term
"claims" is used in the Subordination Agreement relating to the claims of the
Borrower to the Subordinated Creditor it shall mean the Subordinated Claims.
All claims of each of the undersigned against Borrower now or hereafter
existing, whether matured or not (subject to the maximum if specified below),
are and shall be at all times subordinate and subject to any and all claims
on Bank's part against Borrower now or hereafter existing, whether matured or
not, so long as any such claim on Bank's part against Borrower shall remain
unpaid, in whole or in part, and each of the undersigned agrees not to xxx
upon, or collect, or to receive payment upon, by setoff or in any other
manner, any claim or claims on its part against Borrower now or hereafter
existing, nor to sell, assign, transfer, pledge, or give a security interest
in the same (except subject expressly to this Agreement), nor to enforce or
apply any security now or hereafter existing, nor to join in any petition in
bankruptcy or any assignment for the benefit of creditors, or any creditors
agreement, nor take any lien or security on any of Borrower's property, real
or personal, nor to incur any obligation to nor receive any loans, advances
or gifts from Borrower, so long as any such claim on Bank's part against
Borrower shall exist or so long as Bank is committed or otherwise obligated
to make any loans to, or grant any credit to, Borrower.
All claims on Bank's part against Borrower now or hereafter existing shall be
first paid by Borrower before any payment shall be made by Borrower to any of
the undersigned. Borrower may make regularly scheduled payment(s) on the
claims so long as no default exists on its obligations to Bank. Said priority
of payment shall apply during the ordinary course of Borrower's business and
in case of any assignment by Borrower for the benefit of Borrower's
creditors, and in case of any bankruptcy proceedings instituted by or against
Borrower, and in case of the appointment of any receiver for Borrower or
Borrower's business or assets, and in case of any dissolution or other
winding up of the affairs of Borrower, or of Borrower's business, and in all
such cases respectively, the officers of Borrower and any assignee, trustee
in bankruptcy, receiver, and other person or persons in charge, are hereby
directed to pay to Bank the full amount of Bank's claims against Borrower
before persons in charge, are hereby directed to pay to Bank the full amount
of Bank's claims against Borrower before making any payment to any of the
undersigned, and so far as may be necessary for that purpose, each of the
undersigned hereby transfers and assigns to Bank all of its rights to any
payment or distribution which might otherwise be coming to it. Bank is hereby
irrevocably constituted and appointed the attorney-in-fact of each of the
undersigned to file any and all proofs of claim and any other documents and
take all other action, either in Bank's name, or in the name of the
undersigned, or any of them, which in Bank's opinion is necessary or
desirable to enable Bank to obtain all such payments.
Page 1 of 3
The undersigned agrees that if part or all of any claim of the undersigned
shall be evidenced by a promissory note or other instrument, the undersigned
shall cause to be placed thereon a legend stating that the payment thereof is
subordinate to the payment of all claims on Bank's part against Borrower
pursuant to the terms of this Subordination Agreement, and each of the
undersigned agrees to xxxx all books of account in such manner to indicate
that payment thereof is subordinated pursuant to the terms of this
Subordination Agreement.
This Agreement shall be and constitute full and sufficient ground to entitle
Bank to be and become a party to any proceedings at law, or otherwise,
initiated by Bank or by any other party, in or by which Bank may deem it
proper to protect its interest hereunder, and the party so violating this
Agreement shall be liable to Bank for all loss and damages sustained by it
by reason of such breach, including attorney's fees to Bank's attorney in any
such legal action.
If the undersigned, or any of them, shall receive any payment or property in
violation of this Agreement, such payment or property shall be received by
such undersigned in trust for Bank and forthwith will be delivered and
transferred to Bank.
This Agreement shall be continuing in effect, it shall not be canceled or
otherwise rendered ineffective by the payment or discharge at any time of all
of Borrower's obligations to Bank, and it shall apply to any and all
financial accommodations subsequently granted, renewed or extended by Bank
for Borrower, unless the undersigned shall deliver to Bank a written notice
of revocation as to future transactions, at a time when Borrower is no longer
obligated to Bank in any way, and while Bank is not committed or otherwise
obligated to make any loans to, or grant any credit to, Borrower.
Notwithstanding any other provisions of this Subordination Agreement, if the
Subordinated Creditor shall notify the Bank that a payment default has
occurred in the Subordinated Claims, after a period of 180 days following
such date the Subordinated Creditor may take any lawful action to enforce the
Subordinated Claims, it being understood and agreed that payment of the
Subordinated Claims to the undersigned may not occur prior to the payment in
full of all obligations owed from Borrower to Bank, to Bank's satisfaction.
Notwithstanding any other provision of this Agreement, Subordinated Creditor
may secure its Subordinated Claims with a subordinated security interest in
certain assets of Borrower. Subordinated Creditor hereby subordinates such
security interest(s) whether now existing or hereafter arising, to the
security interest(s) of Bank, whether now existing or hereafter arising, with
respect to any and all assets of Borrower. Except as herein otherwise
provided, the priorities between the parties shall be determined in
accordance with the provisions of the Uniform Commercial Code. The
Subordinated Creditor may not enforce its security interest in Borrower's
assets, or commence any action to enforce such security interest until the
earlier of (i) repayment in full of all Senior Claims to the satisfaction of
the Bank, or (ii) upon the expiration of the 180 day period mentioned above,
provided that any proceeds from the Borrower's assets must first be applied
to repayment of the Senior Claim prior to applying any such proceeds to the
Subordinated Claim. Upon receipt of any proceeds by the Subordinated Creditor
from the exercise of its security interest, such payment or property shall be
received by such undersigned in trust for Bank and forthwith will be
delivered and transferred to Bank until payment in full of the Senior Claim
to the satisfaction of bank.
Page 2 of 3
Signature page follows.
The undersigned hereby acknowledges this Subordination Agreement and agrees
to be bound by its provisions.
SUBORDINATED CREDITOR:
Maron Nu-Tech, Inc.
Dated: December 22, 2000 /s/ XXXXXXX X. XXX
----------------------------- -----------------------------
Xxxxxxx X. Xxx President
ACCEPTANCE OF SUBORDINATION AGREEMENT BY BORROWER
The undersigned, being the Borrower named in the foregoing Subordination
Agreement, hereby accepts and consents thereto and agrees to be bound by all
of the provisions thereof and to recognize all priorities and other rights
granted thereby to IMPERIAL BANK, and to pay said Bank in accordance
therewith.
Obagi Medical Products, Inc.
Dated: By:
---------------------- -------------------------
By:
-------------------------
Page 3 of 3
