FOURTH AMENDMENT TO CREDIT AGREEMENT
Exhibit 10.1
FOURTH AMENDMENT TO CREDIT
AGREEMENT
This
FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as
of March 30, 2009, is entered into among (1) PHYSICIANS FORMULA, INC., a
New York corporation (the “Borrower”), (2) the
several banks and other lenders from time to time parties to this Amendment (the
“Lenders”) and
(3) UNION BANK, N.A. (formerly known as Union Bank of California, N.A.), as
administrative agent for the Lenders (in such capacity, the “Agent”).
RECITALS
A. The
Borrower, the Lenders and the Agent entered into that certain Credit Agreement
dated as of November 14, 2006, as amended by that certain First Amendment to
Credit Agreement dated as of July 8, 2008, that certain Second Amendment to
Credit Agreement dated as of September 9, 2008 and that certain Third Amendment
to Credit Agreement dated as of December 5, 2008 (as so amended, the “Credit
Agreement”). Capitalized terms used herein and not defined
shall have the meanings ascribed to them in the Credit Agreement.
B. Pursuant
to the Credit Agreement, the Lenders have made available to the Borrower a term
loan facility in the initial aggregate principal amount of $15,000,000 (of which
$10,500,000 in principal amount is outstanding as of the date hereof, prior to
the principal repayment contemplated by Section 2(h) of this Amendment), and a
revolving loan facility in the aggregate maximum principal amount of
$25,000,000, including a letter of credit sublimit of
$2,500,000. There are no Letters of Credit outstanding.
C. The
Borrower has requested that the Lenders restructure the credit facilities under
the Credit Agreement as a single revolving loan facility having a maximum
commitment in the aggregate principal amount of $27,500,000. The
Lenders have agreed to such restructuring, subject to the terms and conditions
set forth herein.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
SECTION
1. Amendments to Credit
Agreement. The
Credit Agreement is hereby amended as follows, effective as of the Fourth
Amendment Effective Date:
(a) Each of
the following definitions is added to Section 1.1, in appropriate alphabetical
order or, if already existing in such Section, is deemed amended in its entirety
to read as follows:
“Accounts”: all
“accounts,” as such term is defined in the UCC, now owned or hereafter acquired
by any Borrowing Base Party, including (a) all accounts receivable, other
receivables, book debts and other forms of obligations (other than forms of
obligations evidenced by “chattel paper,” “documents” or “instruments” (as such
terms are defined in the UCC)), whether arising out of goods sold or services
rendered by it or from any other transaction (including any such obligations
that may be characterized as an account or contract right under the UCC),
(b) all purchase orders or receipts for goods or services, (c) all
rights to any goods represented by any of the foregoing (including
unpaid
sellers’ rights of rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), (d) all monies due or
to become due to such Borrowing Base Party under all purchase orders and
contracts for the sale of goods or the performance of services or both by such
Borrowing Base Party or in connection with any other transaction (whether or not
yet earned by performance on the part of such Borrowing Base Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and
guaranties of any kind, now or hereafter in existence, given by any Person with
respect to any of the foregoing.
“Borrowing
Base”: as of any date of determination, an amount determined
by the Agent with reference to the most recent Borrowing Base Certificate to be
equal to the sum of (a) the Eligible Accounts Component, plus (b) the
Eligible Inventory Component, plus (c) the Canadian
Pledged Account Balance plus (d) the Eligible
Equipment Component; provided that if on
such date the most recent Borrowing Base Certificate is as of a date more than
31 days prior to such date (other than the Borrowing Base Certificates for
February 2009 and March 2009), the Borrowing Base shall mean such amount as may
be determined by the Agent in its sole discretion.
“Borrowing Base
Certificate”: a certificate, duly executed by a Responsible
Officer, substantially in the form of Exhibit I hereto.
“Borrowing Base
Parties”: collectively, the Borrower and its Domestic
Subsidiaries (provided that each such Subsidiary is also a
Guarantor).
“Canadian Blocked
Accounts”: as defined in the definition of Canadian Pledged
Accounts.
“Canadian Disbursement
Account”: as defined in the definition of Canadian Pledged
Accounts.
“Canadian Pledged
Accounts”: collectively, the Borrower’s foreign currency
deposit account, foreign currency time deposit account (collectively, the “Canadian Blocked
Accounts”) and foreign currency disbursement account (the “Canadian Disbursement
Account”), each denominated in Canadian dollars, held by the Agent and
bearing the account name “Physicians Formula, Inc. Collateral Account Union
Bank, N.A. Trustee” or similar designation.
“Canadian Pledged Account
Balance”: as of any date of determination, the available
balance on deposit in the Canadian Blocked Accounts, expressed in Dollars using
such currency conversion rate as the Agent may reasonably
determine.
“Dilution
Items”: with respect to the Accounts of the Borrowing Base
Parties, returns, rebates, discounts, credits and allowances with respect
thereto.
“Eligible
Account”: as of any date of determination, an Account of a
Borrowing Base Party:
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(a) that
has been the subject of an invoice sent to the account debtor within five days
of shipment of the related goods;
(b) that
conforms to all of the representations and warranties pertaining to Accounts set
forth in this Agreement or any other Loan Document;
(c) (i) that
arises from the sale of goods of such Borrowing Base Party in the ordinary
course of its business and (ii) that is subject to a valid, perfected and
continuing first-priority Lien (other than non-consentual Liens described in
Section 6.3(b), so long as such Liens remain inchoate and no such Lien has
matured into a claim by the relevant taxing authority) remain in favor of the
Agent for the benefit of itself and the Lenders and is owned by such Borrowing
Base Party free and clear of any Liens other than Liens in favor of the Agent
(and other than non-consentual Liens described in Section 6.3(b), so long as
such Liens remain inchoate and no such Lien has matured into a claim by the
relevant taxing authority);
(d) that
(i) is a valid and enforceable obligation of the applicable account debtor
upon which such Borrowing Base Party’s right to receive payment is absolute and
not contingent upon the fulfillment of any condition whatsoever (other than an
account debtor’s customary right of inspection), (ii) does not arise with
respect to (A) goods that are placed on consignment, guaranteed sale, sale
or return or sale on approval or delivered on a xxxx-and-hold or
cash-on-delivery basis or (B) goods that have been returned, rejected or
repossessed;
(e) with
respect to which the applicable account debtor has not asserted any defense,
counterclaim or dispute (provided that, as to any account as to which the
account debtor disputes only a portion of the applicable invoice, the remaining
balance of such account shall not be ineligible by reason of this clause), and
such Account is not a “contra” Account;
(f) with
respect to which the applicable account debtor is not (i) a federal, state
or local governmental entity or agency (unless, if the account debtor is the
United States of America, or any department, agency or instrumentality thereof,
the Borrower has complied with the Federal Assignment of Claims Act of 1940 with
respect to such account and has delivered to the Agent evidence thereof in form
and substance satisfactory to the Agent), (ii) an Affiliate, a Subsidiary
or an employee of such Borrowing Base Party or (iii) located outside the
United States of America (such account, a “Foreign Account”)
(unless such Foreign Account is (x) an account of an account debtor located in
Australia or the United Kingdom with respect to which the account debtor has
delivered to the applicable Borrowing Base Party an original irrevocable letter
of credit, which has been delivered to the Agent, along with an amendment to
such Letter of Credit designating the Agent as beneficiary, in each case in form
and substance and on terms acceptable to the Agent, and issued by a U.S.
financial institution acceptable to the Agent, in each case in the Agent’s sole
discretion, covering such account or (y) a Permitted Canadian
Account).
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(g) with
respect to which the applicable account debtor is not subject to any event of
the type described in Section 7(g);
(h) the
collection of which, in the Agent’s reasonable discretion (determined from the
perspective of a secured lender), is not doubtful by reason of the applicable
account debtor’s financial condition or otherwise;
(i) that is
not evidenced by any chattel paper, instrument or judgment;
(j) to the
extent that the total unpaid amount of such Account, when added together with
all other Accounts due to the Borrowing Base Parties from the applicable account
debtor, does not exceed 25% of all Accounts of the Borrowing Base Parties
(provided that, in the case of Rite Aid Corporation or any Subsidiary thereof,
such percentage shall not exceed 10%);
(k) that is
payable only in Dollars or, in the case of Permitted Canadian Accounts, Canadian
dollars;
(l) that is
not in default (an Account shall be deemed to be in default under this clause
(l) if (i) such Account is not paid within the earlier of 60 days following
its due date or 90 days following its original invoice date or (ii) such
Account is an obligation of an account debtor with respect to which more than
25% of all Accounts due to the Borrowing Base Parties from such account debtor
are not otherwise eligible under the other criteria set forth in this
clause (l)); and
(m) that is
otherwise acceptable to the Agent in its reasonable discretion (from the
perspective of a secured lender).
“Eligible Accounts
Component”: with respect to the computation of the Borrowing
Base, 65% of the aggregate book value of the Borrowing Base Parties’ then
existing Eligible Accounts. Such advance rate may be reduced from
time to time in the exercise of the Agent’s reasonable discretion (from the
perspective of a secured lender), including as a result of audits, appraisals
and examinations.
“Eligible
Equipment”: as of any date of determination, Equipment of the
Borrowing Base Parties:
(a) that (i)
is subject to a valid, perfected and continuing first-priority Lien in favor of
the Agent for the benefit of the Lenders, and (ii) is owned by such
Borrowing Base Party free and clear of any Liens of any Person other than Liens
in favor of the Agent for the benefit of the Lenders (other than, in each case,
non-consentual Liens described in (x) Section 6.3(b), so long as such Liens
remain inchoate and no such Lien has matured into a claim by the relevant taxing
authority and (y) Section 6.3 which are not overdue);
(b) that is
(i) located on premises owned, leased or operated by such Borrowing Base
Party or (ii) stored on premises owned or operated by a bailee,
warehouseman, processor or similar Person, in each case with respect to which
any
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applicable
landlord, bailee, warehouseman, processor or similar Person shall have executed
and delivered to the Agent, a landlord waiver, bailee letter or similar
document, in each case, in form and substance acceptable to the
Agent;
(c) that
conforms to all of the representations or warranties pertaining to Equipment set
forth in this Agreement or any other Loan Document;
(d) that is
covered by property and casualty insurance in compliance with Section 5.5;
and
(e) that is
otherwise acceptable to the Agent in its reasonable discretion (from the
perspective of a secured lender).
“Eligible Equipment
Component”: with respect to the computation of the Borrowing
Base, the orderly liquidation value of Eligible Equipment as determined by the
Agent, provided that the Eligible Equipment Component shall not exceed
$1,000,000 at any time.
“Eligible
Inventory”: as of any date of determination, Inventory of the
Borrowing Base Parties:
(a) that
(i) consists of first quality finished goods held for sale, and Eligible
Raw Materials held for manufacture, in the ordinary course of such Borrowing
Base Party’s business, (ii) is subject to a valid, perfected and continuing
first-priority Lien in favor of the Agent for the benefit of the Lenders, and
(iii) is owned by such Borrowing Base Party free and clear of any Liens of
any Person other than Liens in favor of the Agent for the benefit of the Lenders
(other than, with respect to clauses (ii) and (iii), non-consentual Liens
described in (x) Section 6.3(b), so long as such Liens remain inchoate and no
such Lien has matured into a claim by the relevant taxing authority and (y)
Section 6.3 which are not overdue);
(b) that is
(i) located on premises owned, leased or operated by such Borrowing Base
Party or (ii) stored on premises owned or operated by a bailee,
warehouseman, processor or similar Person, in each case with respect to which
any applicable landlord, bailee, warehouseman, processor or similar Person shall
have executed and delivered to the Agent, a landlord waiver, bailee letter or
similar document (it being agreed that Inventory located at the premises
referred to in Section 5.15(a) or (b) shall not be ineligible, during the period
referred to in such Sections 5.15(a) and (b), solely as a result of the fact
that the landlord consents and warehouse letters referred to therein have not
been delivered to the Agent), in each case, in form and substance acceptable to
the Agent;
(c) that
conforms to all of the representations or warranties pertaining to Inventory set
forth in this Agreement or any other Loan Document;
(d) that is
not (i) placed on consignment or (ii) in transit;
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(e) that does
not consist of packaging or shipping materials, pallets, bags, labels, boxes,
capitalized depot freight and handling costs, manufacturing supplies or
replacement parts;
(f) that does
not constitute obsolete, slow-moving, shopworn, unmerchantable, unsalable,
damaged, returned, excess, unusable or unworkable goods or goods unfit for
further processing (it being agreed that, for the purposes of calculating
ineligible Inventory, returned Inventory shall mean that amount for which the
Borrower has established a return recovery reserve, which reserve may be
adjusted by the Borrower from time to time);
(g) that is
covered by property and casualty insurance in compliance with Section
5.5;
(h) that is
only covered by non-negotiable documents of title unless the negotiable document
representing such Inventory has been delivered to the Agent, for the benefit of
itself and the Lenders; and
(i) that is
otherwise acceptable to the Agent in its reasonable discretion (from the
perspective of a secured lender).
“Eligible Inventory
Component”: with respect to the computation of the Borrowing
Base, the lesser of (a) 15% of the Eligible Inventory of the Borrowing Base
Parties (provided that, for the period from the Fourth Amendment Effective Date
to and including June 30, 2009, such percentage shall be 25%), as determined by
the Agent, and (b) $5,000,000 (provided that, for the period from the
Fourth Amendment Effective Date to and including June 30, 2009, such amount
shall be $8,000,000); provided that in no event shall Eligible Raw Materials
exceed 60% of the Eligible Inventory Component. Such advance rate may
be reduced from time to time in the exercise of the Agent’s reasonable
discretion (from the perspective of a secured lender), including as a result of
audits, appraisals and examinations.
“Eligible Raw
Materials”: raw materials Inventory, other than printed
components including any component printed with any Loan Party’s name or
trademark.
“Equipment”: equipment
in good working order, owned by a Borrowing Base Party and of a type described
in that certain asset appraisal performed by Great American Group and delivered
to the Agent on or about the Fourth Amendment Effective Date.
“Fourth
Amendment”: that certain Fourth Amendment to Credit Agreement
dated as of March 30, 2009, amending this Agreement.
“Fourth Amendment Effective
Date”: the date on which the conditions precedent set forth in
Section 2 of the Fourth Amendment are satisfied, and the Fourth Amendment
becomes effective.
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“Interest Coverage
Ratio”: for the Borrower and its Subsidiaries on a
consolidated basis, for the fiscal quarter most recently ended and the
immediately preceding three fiscal quarters, the ratio of Adjusted EBITDA to
Interest Expense.
“Permitted Canadian
Accounts”: those Accounts of the Borrowing Base Parties with
respect to which the account debtors are located in Canada.
“Revolving Loan Commitment
Expiration Date”: March 31, 2010, or such earlier date as the
Revolving Loan Commitments shall expire in accordance with the terms hereof
(whether by acceleration or otherwise).
“UCC”: the
Uniform Commercial Code, as enacted and as in effect from time to time in the
State of California.
(b) The
definition of “Adjusted EBITDA” contained in Section 1.1 is revised as
follows: (1) the introductory clauses reading: “for the Borrower and
its Subsidiaries on a consolidated basis, for the fiscal quarter most recently
ended and the immediately preceding three fiscal quarters,” is changed to: “for
the Borrower and its Subsidiaries on a consolidated basis, for any period,” and
(2) clause (i) is amended in its entirety to read as follows: “(i)
all one-time costs incurred by the Borrower in connection with the Fourth
Amendment (including the $75,000 amendment fee and all legal, diligence,
appraisal, audit and similar fees and expenses paid by the Borrower in
connection with the closing of the Fourth Amendment) in an aggregate amount up
to $300,000.
(c) The
outstanding Term Loans are hereby converted to outstanding Revolving Loans in
the same principal amount. On and after the Fourth Amendment
Effective Date, no Term Loans shall be outstanding, and each reference in the
Loan Documents to Term Loans, Term Loan Lenders, Term Notes and other terms
relating solely to the Term Loan facility shall be deemed amended to reflect
such fact.
(d) The
Revolving Loan Commitment amount of Union Bank, N.A. listed on the signature
pages to the Credit Agreement is hereby increased from “$25,000,000” to
“$27,500,000.”
(e) Section
2.1(a) is amended in its entirety to read as follows:
(a) Subject to the
terms and conditions hereof, each Revolving Loan Lender severally agrees to make
loans on a revolving credit basis through its Applicable Lending Office to the
Borrower from time to time from and including the Closing Date to but excluding
the Revolving Loan Commitment Expiration Date (each a “Revolving Loan”, and
collectively, the “Revolving Loans”) in
accordance with the terms of this Agreement; provided, however, subject to
Section 2.5(a), that the aggregate principal amount of all Revolving Loans
outstanding shall not exceed the Aggregate Revolving Loan Commitment or the
Borrowing Base at any time. Within the limits of each Revolving Loan
Lender’s Revolving Loan Commitment, the Borrower may borrow, prepay and reborrow
Revolving Loans.
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With
respect to each Revolving Loan Lender, the principal amount of each Revolving
Loan to be made by such Revolving Loan Lender shall be in an amount equal to the
product of (i) such Revolving Loan Lender’s Revolving Loan Commitment
Percentage (expressed as a fraction) and (ii) the total amount of the
Revolving Loan(s) requested; provided that in no event
shall any Revolving Loan Lender be obligated to make a Revolving Loan if after
giving effect to such Revolving Loan the sum of such Revolving Loan
Lender’s Revolving Loans outstanding would exceed its Revolving Loan
Commitment or if the amount of such requested Revolving Loan is in excess of
such Revolving Loan Lender’s Available Revolving Loan Commitment.
Notwithstanding any provision in this
Agreement to the contrary, the Aggregate Revolving Loan Commitment shall be
permanently and automatically reduced to $25,000,000 on June 30,
2009. Such reduction shall automatically effect a reduction of the
Revolving Loan Commitment of each Revolving Loan Lender to an amount equal to
the product of (i) the Aggregate Revolving Loan Commitment of all Revolving
Loan Lenders, as so reduced and (ii) the Revolving Loan Commitment
Percentage of such Revolving Loan Lender. Upon such reduction, the
Borrower shall prepay the amount, if any, by which the aggregate unpaid
principal amount of the Revolving Loans exceeds the amount of the Aggregate
Revolving Loan Commitment as so reduced, together with accrued interest on the
amount being prepaid to the date of such prepayment.
(f) Section
2.1(b) is amended in its entirety to read as follows:
(b) All Revolving Loans
shall be Base Rate Loans. Each Revolving Loan Lender may make or
maintain its Revolving Loans to the Borrower or participate in Letters of Credit
to or for the account of the Borrower by or through any Applicable Lending
Office.
For the
avoidance of doubt, on and after the Fourth Amendment Effective Date, LIBOR
Loans shall no longer be available under the Credit Agreement, and each
reference in the Loan Documents to LIBOR, LIBOR Loans, Interest Period and other
terms relating solely to LIBOR Loans shall be deemed amended to reflect such
fact.
(g) Section
2.5(a) is amended in its entirety to read as follows:
(a) If at any time the
aggregate principal amount of all Revolving Loans outstanding exceeds the
Aggregate Revolving Loan Commitment or the Borrowing Base, then the Borrower
shall, within five Business Days after any Responsible Officer shall have
knowledge of such overadvance, without notice or request by the Agent, prepay
the Revolving Loans in an aggregate amount equal to such excess.
(h) Section
2.8(a) is amended in its entirety to read as follows:
(a) Each Revolving Loan
shall bear interest at a rate per annum equal to (i) during the period from the
Fourth Amendment Closing Date to and including June 30, 2009, the Base Rate plus
3.50% and (ii) thereafter, the Base Rate plus 3.00%.
(i) The first
sentence of Section 2.9 is amended in its entirety to read as
follows:
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Interest on the Loans and
all other Obligations shall be calculated on the basis of a year of 365 or 366
days, as applicable, for the actual days elapsed; provided that the unused
commitment fee set forth in Section 2.17 shall be calculated on the basis of a
360-day year, for the actual days elapsed.
(j) In
Section 2.17, the reference to “0.25%” is changed to “0.50%”.
(k) Section
3.14(a) is amended in its entirety to read as follows:
(a) The
proceeds of the Revolving Loans are intended to be and shall be used by the
Borrower as follows: (i) to refinance the outstanding Term
Loans, as contemplated by the Fourth Amendment, (ii) for working capital and
general corporate purposes of the Borrower and its Subsidiaries and (ii) to pay
fees and expenses in connection with preparation and negotiation of the Fourth
Amendment.
(l) In
Section 5.2, (1) the word “and” is deleted from the end of clause (g), (2)
clause (h) is redesignated clause (i) and (3) a new clause (h) is added to read
as follows:
(h) within 30 days after the
end of each month, the Borrower shall deliver to the Agent, (i) a Borrowing Base
Certificate and (ii) an accounts receivable aging report, accounts payable aging
report and inventory report, in each case as of the end of such month and in
form reasonably satisfactory to the Agent; provided that the
Borrowing Base Certificate and such reports (x) with respect to February 2009
shall be due on April 15, 2009 and (y) with respect to March 2009 shall be due
on April 30, 2009; and
(m) The last
sentence of Section 5.6 is amended in its entirety to read as
follows:
In
addition, the Agent shall be permitted to conduct collateral audits of (which
may include audits of the books and records of) the Borrower and the
Subsidiaries up to four times during the period from the Fourth Amendment
Effective Date to the Revolving Loan Expiration Date (or as frequently as the
Agent reasonably deems necessary if a Default has occurred and is
continuing).
(n) Section
5.14 is amended in its entirety to read as follows:
5.14 Canadian Pledged
Accounts. The Borrower shall at all times maintain the
Canadian Pledged Accounts with the Agent. Each Canadian Pledged
Account is pledged to the Agent, for the benefit of the Agent and the Lenders,
under the Security Agreement and is subject to the terms thereof. The
Borrower shall not be permitted to make withdrawals from the Canadian Blocked
Accounts at any time, and all interest and increases, if any, accrued thereon
shall remain in such accounts. The Borrower shall at all times cause
any and all revenue received by the Borrower or its Subsidiaries in Canadian
dollars to be promptly deposited in the Canadian Blocked Accounts. So
long as no Default has occurred and is continuing and the Borrower has delivered
to Agent a Borrowing Base Certificate demonstrating availability under the
Borrowing Base of at least $1,500,000 (on a pro forma basis assuming the
transfer requested below had been made, and based on the Borrowing Base
Certificate most recently delivered to the Agent under Section 5.2, but updated
to reflect outstanding
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Loans as
of the current date), the Borrower may request in writing on a monthly basis, on
or about the first Business Day of each month, that the Agent transfer amounts
from the Canadian Blocked Accounts to the Canadian Disbursement Account in an
aggregate amount that will not cause the balance of the Canadian Disbursement
Account to exceed CN$500,000. In addition, so long as no Default has
occurred and in continuing, the Borrower may from time to time, without the
prior consent of the Agent, use funds in the Canadian Disbursement Account to
pay amounts due to its Canadian vendors in the ordinary course of
business. Notwithstanding the foregoing, the Borrower may, at any
time, request that amounts on deposit in the Canadian Blocked Accounts be
applied by the Agent to prepay outstanding Loans, such prepayment to be made in
accordance with Section 2.4.
(o) A new
Section 5.15 is added to read as follows:
5.15 Post-Closing
Covenants. The Borrower shall deliver the following to the
Agent:
(i)
within 90 days after the Fourth Amendment Effective Date, with respect to the
Borrower’s premises located in Azusa, California, Covina, California and
LaVerne, California, for which no Landlord Consent or warehouse letter, as
applicable, was previously delivered to the Agent, a Landlord Consent or
warehouse letter in form acceptable to the Agent;
(ii) within 90 days after the Fourth
Amendment Effective Date, with respect to the Borrower’s warehouse in Xxxxxx,
Xxxxxxx, Xxxxxx, a warehouse letter executed by the new warehouse owner/manager,
in substantially the form of the letter previously executed for such
location;
(iii)
within one Business Day after the Fourth Amendment Effective Date, the
Borrower’s audited financial statements for fiscal year 2008, as required by
Section 5.1(a) (including the certificate of the Accountants described therein);
and
(iv)
within 30 days after the Fourth Amendment Effective Date, an updated Schedule B
(Copyrights, Patents and Marks) to each of the Security Agreement and the
Guarantor Security Agreement.
The Agent
and the Lenders agree that the failure by the Borrower to deliver the Landlord
Consents and warehouse letters contemplated by clauses (i) and (ii) above shall
not constitute an Event of Default, so long as the Borrower has demonstrated to
the Agent’s reasonable satisfaction that it has used commercially reasonable
efforts to obtain such documents. (Nothing in the foregoing sentence
shall change the effect failure to obtain such documents may have on calculation
of the Borrowing Base.)
(p) Section
6.1(a) is amended in its entirety to read as follows:
(a) Interest Coverage
Ratio. Permit the Interest Coverage Ratio, as of the end of
any fiscal quarter set forth below, to be less than the ratio set forth opposite
such period:
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Quarter Ratio
January
1, 2009 to and including 3.85:1
March 31,
2009
April 1,
2009 to and including
5.00:1
June 30,
2009
July 1,
2009 to and including
3.25:1
September
30, 2009
October
1, 2009 and thereafter 4.25:1
(q) Section
6.1(b) is deleted and replaced with the following:
(b) Minimum
EBITDA. Permit Adjusted EBITDA, as of the end of any fiscal
quarter set forth below, to be less than the amount set forth opposite such
quarter:
Period
Quarter
Fiscal
quarter ended March 31, 2009
$(1,900,000)
Fiscal
quarter ended June 30, 2009 $
800,000
Fiscal
quarter ended September 30, 2009
$1,200,000
Four-quarter
period ended December 31, 2009 $4,500,000
(r) Section
6.1(c) is amended in its entirety to read as follows:
(c) Minimum Tangible Net
Worth. Permit Tangible Net Worth of the Borrower and its
Subsidiaries, on a consolidated basis, as of the end of any fiscal quarter, to
be less than the amount set forth below opposite such period:
Quarter
Amount
January
1, 2009 to and
including $6,000,000
March 31,
2009
April 1,
2009 to and
including
$7,000,000
September
30, 2009
October
1, 2009 and
thereafter
$9,500,000
(s) Section
6.1(d) is amended in its entirety as follows:
(d) Capital
Expenditures. Permit Capital Expenditures of the Borrower and
its Subsidiaries on a consolidated basis for any fiscal year to be more than
$2,000,000.
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(t) Section
6.2(h) is deleted and replaced with “[Intentionally Omitted]”.
(u) Sections
6.6 is amended as follows: (1) in clause (ii), the reference to
$500,000 is changed to $300,000 and (2) clauses (iii) and (iv) are each deleted
and replaced with “[Intentionally Omitted]”.
(v) Section
6.7(d) is deleted and replaced with “[Intentionally Omitted]”.
(w) In
Section 7.1(c), the reference to “or 5.14” is changed to “, 5.14 or
5.15”.
(x) The
Schedules to the Credit Agreement are hereby deleted and replaced with the
Schedules attached hereto as Exhibit A.
(y) Exhibit F
(Form of Covenant Compliance Certificate) is deleted and replaced with Exhibit F
attached hereto.
(z) A new
Exhibit I (Form of Borrowing Base Certificate) is added to the Credit Agreement,
in the form of Exhibit I attached hereto.
SECTION
2. Conditions
Precedent. This
Amendment shall become effective as of the date first set forth above upon
receipt by the Agent of the following, in each case in form and substance
satisfactory to the Agent:
(a) this
Amendment, duly executed by the Borrower and the Lenders;
(b) a consent
to this Amendment, substantially in the form of Exhibit A
hereto;
(c) a
Revolving Note, duly executed by the Borrower in favor of UBOC, in form and
substance acceptable to the Agent and reflecting UBOC’s increased Revolving Loan
Commitment;
(d) resolutions
of the board of directors, or similar authorizing body, of the Borrower,
authorizing this Amendment, certified by an appropriate officer of the
Borrower;
(e) a
Borrowing Base Certificate as of the Closing Date (provided that Eligible
Accounts Receivable, Eligible Inventory and Eligible Equipment shall be as of
January 31, 2009), in form and substance satisfactory to the Agent and
reflecting a Borrowing Base of at least $2,000,000;
(f) evidence
that the Canadian Pledged Accounts shall have been established at Union Bank,
N.A. in accordance with the terms of the Loan Documents, and that the balance
thereof shall be at least C$5,300,000;
(g) (i) the
$750,000 Term Reduction Installment contemplated by Section 2.2(d) and (ii)
amounts due under Section 2.15, as notified by the Agent to the Borrower, as a
result of consummation of the transactions contemplated by this Amendment, in
each case in immediately available funds;
-12-
(h) an
inventory appraisal and a fixed asset appraisal, in each case satisfactory to
the Agent;
(i) receipt
by the Agent of an amendment fee in the amount of $75,000, in immediately
available funds (it being agreed that such fee shall be deemed earned in full
upon execution of this Amendment by the Lenders and shall be nonrefundable,
notwithstanding any subsequent termination of the Agreement or
otherwise);
(j) payment
to the Agent of its costs and expenses incurred in connection with the
negotiation and preparation of this Amendment and its due diligence fees related
thereto, including but not limited to its attorneys’ fees and expenses, and the
fees and expenses of performing the audits and appraisals referred to
herein;
(k) updated
Schedules to the Credit Agreement and the other Loan Documents, as needed;
and
(l) such
other approvals, opinions, evidence and documents as any Lender, through the
Agent, may reasonably request; and the Agent’s reasonable satisfaction as to all
legal matters incident to this Amendment.
SECTION
3. Reference to and Effect on
the Credit Agreement and the Other Loan Documents.
(a) Upon the
effectiveness of this Amendment, each reference in the Credit Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents to “the
Credit Agreement,” “thereunder,” “thereof,” “therein” or words of like import
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended hereby.
(b) Except as
specifically amended herein, the Credit Agreement and all other Loan Documents
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed.
(c) The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Agent or the Lenders under the
Credit Agreement or any other Loan Documents, nor constitute a waiver of any
provision of the Credit Agreement or any other Loan Documents, each of which is
hereby reaffirmed.
SECTION
4. Representations and
Warranties. The
Borrower represents and warrants, for the benefit of the Lenders and the Agent,
as follows: (i) it has all requisite power and authority under
applicable law and under its Organic Documents to execute, deliver and perform
this Amendment, and to perform the Credit Agreement as amended hereby;
(ii) all actions, waivers and consents (corporate, regulatory and
otherwise) necessary or appropriate for it to execute, deliver and perform this
Amendment, and to perform the Credit Agreement as amended hereby, have been
taken and/or received; (iii) this Amendment, and the Credit Agreement, as
amended by this Amendment, constitute the legal, valid and binding obligation of
it enforceable against it in accordance with the terms hereof, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights
-13-
generally
or by equitable principles relating to enforceability; (iv) the execution,
delivery and performance of this Amendment, and the performance of the Credit
Agreement, as amended hereby, will not (a) violate or contravene any
Requirement of Law, (b) result in any material breach or violation of, or
constitute a material default under, any agreement or instrument by which it or
any of its property may be bound or (c) result in or require the creation
of any Lien upon or with respect to any of its properties, whether such
properties are now owned or hereafter acquired, except such as are permitted
under the Credit Agreement; (v) the representations and warranties contained in
the Credit Agreement and the other Loan Documents are correct in all material
respects on and as of the date of this Amendment as though made on and as of
such date, except to the extent that such representations and warranties
specifically relate to an earlier date, in which case, such representations and
warranties were true, correct and complete on and as of such earlier date; (vi)
no Default has occurred and is continuing and (vii) neither the Borrower nor any
Subsidiary owns any equipment that are fixtures with a book value in excess of
$300,000.
SECTION
5. Execution in
Counterparts.
This
Amendment may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed
counterpart of a signature page to this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this
Amendment.
SECTION
6. Governing
Law.
This
Amendment and the rights and obligations of the parties under this Amendment
shall be governed by, and construed and interpreted in accordance with, the law
of the State of California (without reference to its choice of law
rules).
[Signature
page follows.]
-14-
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
| PHYSICIANS FORMULA, INC., a New York corporation | |||
|
|
By:
|
/s/ Xxxxxx X. Xxxxxx | |
| Name: | Xxxxxx X. Xxxxxx | ||
| Title: | Chief Financial Officer | ||
| UNION BANK, N.A., as Agent and as sole Lender | |||
|
|
By:
|
/s/ Xxxx Xxxxxxx | |
| Name: | Xxxx Xxxxxxx | ||
| Title: | Senior Relationship Manager/Vice President | ||
EXHIBIT
A
GUARANTORS’
CONSENT
Each of
the undersigned is a “Guarantor” under that certain Pledgor Guarantee dated as
of November 14, 2006 or that certain Subsidiary Guarantee dated as of November
14, 2006 (each a “Guarantee”) made by
the undersigned in favor of Union Bank, N.A. (formerly known as Union Bank of
California, N.A.), as administrative agent (the “Agent”) for the
lenders from time to time party to that certain Credit Agreement dated as of
November 14, 2006 among PHYSICIANS FORMULA, INC., a New York corporation (the
“Borrower”),
such lenders and the Agent, as amended by that certain First Amendment to Credit
Agreement dated as of July 8, 2008, by that certain Second Amendment to Credit
Agreement dated as of September 9, 2008 and by that certain Third Amendment to
Credit Agreement dated as of December 5, 2008 (as so amended, the “Credit
Agreement”).
In
connection herewith, the Credit Agreement is being amended by that certain
Fourth Amendment to Credit Agreement dated as of even date herewith (the “Amendment”). Each
Guarantor hereby acknowledges that it has received a copy of the
Amendment. Each Guarantor hereby consents to the Amendment, and
hereby confirms and agrees that the Guarantee to which it is a party is and
shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects except that, on and after the effective date of the
Amendment, each reference in such Guarantee to “the Credit Agreement,”
“thereunder,” “thereof,” “therein” or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement, as
amended by the Amendment.
Dated: March
30, 2009
| PHYSICIANS FORMULA HOLDINGS, INC., | |||
| a Delaware corporation | |||
|
|
By:
|
/s/ | |
| Name: | |||
| Title: | |||
| PHYSICIANS FORMULA COSMETICS, INC., | |||
| a Delaware corporation | |||
|
|
By:
|
/s/ | |
| Name: | |||
| Title: | |||
| PHYSICIANS FORMULA DRTV, LLC, | |||
| a Delaware corporation | |||
|
|
By:
|
/s/ | |
| Name: | |||
| Title: | |||
EXHIBIT
A
REPLACEMENT SCHEDULES TO
CREDIT AGREEMENT
SCHEDULE
3.2
QUALIFICATION
JURISDICTIONS
|
Entity
|
Jurisdictions of
Qualification
|
|
Physicians
Formula Cosmetics, Inc.
|
|
|
Physicians
Formula, Inc.
|
|
|
Physicians
Formula DRTV, LLC
|
California,
Michigan
|
SCHEDULE
3.5
LITIGATION
None.
SCHEDULE
3.6
LEGAL AND
OPERATING NAMES
None.
SCHEDULE
3.7
ENVIRONMENTAL MATTERS
| 1. |
All
matters set forth as “Potentially Significant Findings” in Section II.B
and as “Noteworthy Issues” in Section II.C of that certain ENVIRON
International Corporation report entitled “Environmental Review of
Physicians Formula Cosmetics, Inc., City of Industry, California and dated
as of October 2, 2003.
|
SCHEDULE
3.8
INTELLECTUAL
PROPERTY MATTERS
None.
SCHEDULE
3.13
SUBSIDIARIES
Borrower
owns 100% of Physicians Formula Cosmetics, Inc. and Physicians Formula DRTV,
LLC.
SCHEDULE
3.16
REAL
PROPERTY
|
1.
|
Leased
Real Property
|
|
(a)
|
0000
X. Xxxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx
|
|
(b)
|
000
Xxxxx Xxxxx Xxxxxx, Xxxx xx Xxxxxxxx,
Xxxxxxxxxx
|
|
(c)
|
000
Xxxxx Xxxxx Xxxxxx, Xxxx xx Xxxxxxxx,
Xxxxxxxxxx
|
|
(d)
|
000-000
Xxxxx Xxxxx Xxxxxx Xxx, Xxxxxx,
Xxxxxxxxxx
|
|
2.
|
Other
Locations (Collateral in the possession of Third
Parties)
|
|
(a)
|
Agility,
0000 Xxxxxxxx Xxxx, Xxxxxx, Xxxxxxx X0X 0X0,
Xxxxxx
|
|
(b)
|
Xxxxxx’x,
000 Xxxx Xxxxx, Xxxx Xxxxx, Xxxxxxxxx
00000
|
|
(c)
|
Jet,
0000 Xxxxxx Xxx., Xx Xxxxx XX 00000
|
SCHEDULE
3.19
CAPITAL
STRUCTURE AND EQUITY OWNERSHIP (PRE-IPO)
|
Issuer
|
Name of Holder
|
Number of Shares
|
Par Value
|
Percentage of Shares of Common
Stock
|
|
Physicians
Formula, Inc.
|
100
|
$1.00
|
100%
|
|
|
Physicians
Formula Cosmetics, Inc.
|
Physicians
Formula, Inc.
|
1000
|
$0.01
|
100%
|
|
Physicians
Formula DRTV, LLC
|
Physicians
Formula, Inc.
|
1000
|
N/A
|
100%
|
Capitalization
Table
|
Equityholder
|
%
of Common Stock owned by Officers/Directors
|
Shares
of Preferred Stock
|
Shares
of Common Stock
|
Time
Vesting Options to acquire Common Stock
|
Performance
Vesting Options to acquire shares of Common Stock
|
Forfeited
Options
|
Shares
of Common Stock on a fully diluted basis
|
Initial Principal Amount of Subordinated Promissory Notes | |||||||||
|
Summit
Ventures V, L.P.
|
0.000
|
1,419,000
|
1,419,000
|
||||||||||||||
|
Summit
V Companion Fund, L.P.
|
0.000
|
962,500
|
962,500
|
||||||||||||||
|
Summit
V Advisors (QP) Fund, L.P.
|
0.000
|
136,470
|
136,470
|
||||||||||||||
|
Summit
V Advisors Fund, L.P.
|
0.000
|
41,700
|
41,700
|
||||||||||||||
|
Summit
Ventures VI-A, L.P.
|
0.000
|
3,463,490
|
3,463,490
|
||||||||||||||
|
Summit
Ventures VI-B, L.P.
|
0.000
|
1,444,420
|
1,444,420
|
||||||||||||||
|
Summit
VI Advisors Fund, L.P.
|
0.000
|
72,030
|
72,030
|
||||||||||||||
|
Summit
VI Entrepreneurs Fund, L.P.
|
0.000
|
110,590
|
110,590
|
||||||||||||||
|
Summit
Investors VI, L.P.
|
0.000
|
28,790
|
28,790
|
$36,884
|
|||||||||||||
|
Summit
Subordinated Debt Fund II, L.P.
|
0.000
|
321,010
|
321,010
|
$9,767,767
|
|||||||||||||
|
COFILANCE
SA*
|
0.000
|
1,800,000
|
1,800,000
|
$2,451,163
|
|||||||||||||
|
Xxxxxx
Xxxx
|
Director
|
1.92%
|
0.000
|
200,000
|
200,000
|
||||||||||||
|
Xxxxxx
Xxxxxx-Xxxxxx
|
Officer
|
1.64%
|
0.000
|
171,416
|
166,667
|
291,667
|
629,750
|
$5,810
|
Exercised
166,666 Shares on 1/26/2006
|
||||||||
|
Xxxx
Xxxxxx
|
Officer
|
1.78%
|
0.000
|
185,000
|
167,333
|
291,667
|
644,000
|
$23,241
|
Exercised
166,000 Shares on 1/5/2006
|
||||||||
|
Xxxxx
Xxxxxxx
|
Officer/Director
|
0.22%
|
0.000
|
28,000
|
0
|
28,000
|
Exercised
Shares on 4/1/2005 - Resigned 3/31/2005
|
||||||||||
|
Xxxx
Xxxxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxxxxx
Xxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxxxx
Xxxxxxxx
|
0.000
|
0
|
10,000
|
10,000
|
20,000
|
||||||||||||
|
Xxxxx
Xxxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxxxxx
Xxxxxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxx
Xxxxxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxxx
Xxxxxxxxx
|
Officer
|
0.00%
|
0.000
|
0
|
25,000
|
25,000
|
50,000
|
||||||||||
|
XxXxxxx
Xxxxxxx
|
0.000
|
0
|
10,000
|
10,000
|
20,000
|
||||||||||||
|
Xxxxxx
Xxxxxx
|
0.000
|
0
|
5,000
|
5,000
|
|||||||||||||
|
Xxxxxxxx
Xxxxx
|
0.000
|
0
|
10,000
|
10,000
|
20,000
|
||||||||||||
|
Xxxxxx
X. Xxxxxx
|
Officer
|
0.00%
|
0.000
|
37,500
|
37,500
|
75,000
|
150,000
|
Exercised
18,750 Shares on 1/5/2006 & 18,750 in March 2006.
|
|||||||||
|
Xxxxxx
X. Xxxxxx
|
5,000
|
5,000
|
|||||||||||||||
|
Xxxxx
X. Xxxxx
|
5,000
|
5,000
|
|||||||||||||||
|
Xxxxxx
Xxxxxxxx
|
5,000
|
5,000
|
|||||||||||||||
|
Xxxx
Xxxxxxx
|
5,000
|
5,000
|
|||||||||||||||
|
Xxxxxx
X. Firedl
|
5,000
|
5,000
|
|||||||||||||||
|
Xxxxxxx
Xxxxxx-Xxxxxxxx
|
4,000
|
(3,000)
|
1,000
|
Resigned
1/27/06, thus forfeiting unvested portion of shares
|
|||||||||||||
|
Xxxxxxxx
X. Xxxxxxxx
|
4,000
|
4,000
|
|||||||||||||||
|
Xxxxxxxx
X. Xxxxx
|
4,000
|
4,000
|
|||||||||||||||
|
Shares
Remaining under Stock Option Plan (2,500,000 shares in
aggregate)
|
898,000
|
||||||||||||||||
|
Other
|
476,250
|
||||||||||||||||
|
TOTAL
|
0.000
|
10,421,916
|
493,500
|
713,334
|
(3,000)
|
13,000,000
|
$12,284,865
|
||||||||||
|
*
Transferred from Xxxxxx Xxxxx Dermo-Cosmetique, S.A. as of December 12,
2003
|
|||||||||||||||||
SCHEDULE
6.7
ACQUISITIONS,
INVESTMENTS, LOANS AND ADVANCES
None.
SCHEDULE
6.8
AFFILIATE TRANSACTIONS
| 1. |
Stock
Subscription Agreement between PFI Acquisition Corp. and Physicians
Formula Holdings, Inc., a Delaware corporation formerly known as PFI
Holdings Corp., dated November 3, 2003.
|
| 2. |
Stock
Purchase Agreement dated as of November 3, 2003 among PFI Acquisition
Corp., Xxxxxx Xxxxx Dermo-Cosmetique S.A., a French societe anonyme,
Xxxxxx Xxxxx, Inc., a New York corporation, the Physicians Formula
Holdings, Inc., a Delaware corporation formerly known as PFI Holdings
Corp. and Xxxxxx Xxxxx, S.A., a French societe anonyme, as amended,
modified, supplemented or restated.
|
| 3. |
Galenic
side letter by and among Xxxxxx Xxxxx Dermo-Cosmetique, a French societe
anonyme and Xxxxxx Xxxxx, Inc. dated November 3, 2003.
|
| 4. |
Stockholders
Agreement, by and among Physicians Formula Holdings, Inc., a Delaware
corporation formerly known as PFI Holdings Corp., the Summit Stockholders
(as defined therein) and the PFDC Stockholders (as defined therein), dated
November 3, 2003.
|
| 5. |
Employment
Agreements between Xxxxxx Xxxxx, Inc. and each of the following executives
of Xxxxxx Xxxxx, Inc.
|
| (a) Xxxxxx Xxxxxx-Xxxxxx | |
| (b) Xxxx Xxxxxx | |
| 6. |
Protection
of Trade Secrets, Nonsolicitation and Confidentiality Agreements between
Xxxxxx Xxxxx, Inc. and each of the following executives of Xxxxxx Xxxxx,
Inc.
|
| (a) Xxxxxx Xxxxxx-Xxxxxx | |
| (b) Xxxx Xxxxxx | |
| 7. |
Employment
Agreement and Nonsolicitation and Confidentiality Agreement, between
Physicians Formula, Inc. and Xxxxxx X. Xxxxxx, dated March 8,
2004.
|
| 8. |
Custodial
arrangement in connection with the distribution referenced in Section
6.7(i) of the Credit
Agreement.
|
EXHIBIT
F
FORM OF COVENANT COMPLIANCE
CERTIFICATE
PHYSICIANS
FORMULA INC., a New York corporation (the “Borrower”), refers to
that certain Credit Agreement dated as of November 14, 2006 among (1) the
Borrower, (2) the Lenders parties thereto (the “Lenders”) and (3)
UNION BANK, N.A., as administrative agent for the Lenders (formerly known as
Union Bank of California, N.A.) (in such capacity, the “Agent”) (as it may be
amended, modified, restated or supplemented from time to time, the “Credit Agreement”;
capitalized terms used herein and not defined shall have the meanings assigned
to them in the Credit Agreement) and certifies as to the accuracy of the
following as of ___________________, ____ (the “Compliance
Date”):
|
1. Interest Coverage
Ratio
|
|||||||||||||
|
a.
|
Adjusted
EBITDA
|
||||||||||||
|
i.
|
EBITDA
of the Borrower and its Subsidiaries on a consolidated
basis
|
||||||||||||
|
(a)
|
Net
Income
|
$
|
|||||||||||
|
non-recurring
loss reflected in Net Income
|
$
|
||||||||||||
|
(c)
|
non-recurring
gain (excluding any gain received from sale of Inventory in the ordinary
course of business, provided such sales is not in connection with a
winding up or liquidation of the Borrower or any Subsidiary) reflected in
Net Income
|
$
|
|||||||||||
|
(d)
|
Interest
Expense of the Borrower and its Subsidiaries (only to the extent reflected
in Net Income)
|
||||||||||||
|
(i)
|
interest,
fees, charges and related expenses paid or payable (without duplication)
to a lender in connection with borrowed money (including any obligation
for fees, charges and related expenses payable to the issuer of any letter
of credit) or the deferred purchase price of assets that are considered
"interest expense" under GAAP
|
||||||||||||
|
|
|||||||||||||
| $ | |||||||||||||
|
|
rent
paid or payable (without duplication) under Capital Lease Obligations that
should be treated as interest in accordance with Financial Accounting
Standards Board Statement No. 13
|
||||||||||||
| (ii) | |||||||||||||
|
$
|
|||||||||||||
|
(iii)
|
(i)
+ (ii)
|
$
|
|
||||||||||
|
|
the
aggregate amount of each of the following: federal and state
taxes, property taxes and sales taxes (whether or not payable during that
period) (only to the extent reflected in Net Income)
|
||||||||||||
| (e) | |||||||||||||
|
$
|
|||||||||||||
|
(f)
|
depreciation
and amortization expense of Borrower and its Subsidiaries (only to the
extent reflected in Net Income)
|
||||||||||||
|
$
|
|||||||||||||
|
(g)
|
all
other non-cash charges (including all non-cash stock compensation
expenses) of Borrower and its Subsidiaries (only to the extent reflected
in Net Income)
|
||||||||||||
|
$
|
|||||||||||||
|
|
all
other non-recurring expense of Borrower and its Subsidiaries acceptable to
the Agent (only to the extent reflected in Net Income)
|
||||||||||||
|
(h)
|
|||||||||||||
|
$
|
|||||||||||||
|
|
all
one-time costs in connection with the Fourth Amendment, including the
$75,000 amendment fee and all legal, diligence, appraisal, audit and
similar fees and expenses paid by the Borrower in connection with the
closing of the Fourth Amendment up to $300,000 (only to the extent
reflected in Net Income)
|
||||||||||||
| (i) | |||||||||||||
|
$
|
|||||||||||||
|
(j)
|
(a)
+ (b) - (c) + (d) + (e) + (f) + (g) + (h) + (i)
|
$
|
-
|
||||||||||
|
b.
|
Interest
Expense
|
||||||||||||
|
i.
|
all
interest, fees, charges and related expenses paid or payable (without
duplication) in connection with borrowed money (including any obligation
for fees, charges and related expenses payable to the issuer of any letter
of credit) or the deferred purchase price of assets that are considered
"interest expense" under GAAP
|
||||||||||||
|
$
|
|||||||||||||
|
ii.
|
rent
paid or payable (without duplication) under Capital Lease Obligations that
should be treated as interest in accordance with Financial Accounting
Standards Board Statement No. 13
|
||||||||||||
|
$
|
|||||||||||||
|
iii.
|
(i)
+ (ii)
|
$
|
|
||||||||||
|
c.
|
Ratio
of a. to b.
|
|
(1)
|
||||||||||
|
(1)
Section 6.1(a) of the Credit Agreement requires that Interest Coverage
Ratio, as of the end of any fiscal quarter indicated, not be less than (i)
as of January 1, 2009 to and including March 31, 2009, 3.85 : 1; (ii) as
of April 1, 2009 to and including June 30, 2009, 5.00 : 1; (iii) as of
July 1, 2009 to and including September 30, 2009, 3.25 : 1; and (iv) as of
October 1, 2009 and thereafter, 4.25 : 1.
|
|||||||||||||
|
2. Minimum
EBITDA
|
|||||||||||||
| Adjusted EBITDA (see 1.a. above) | |||||||||||||
|
a.
|
$
|
(2) | |||||||||||
|
(2)
Section 6.1(b) of the Credit Agreement requires that Adjusted EBITDA of
the Borrower and its Subsidiaries on a consolidated basis as of the end of
any fiscal quarter not be less than the following amounts for the quarters
indicated: (i) as of March 31, 2009, $1,900,000; (ii) as of June 30, 2009,
$800,000; (iii) as of September 30, 2009, $1,200,000; and (iv) as of
December 31, 2009, $4,500,000.
|
|||||||||||||
|
3. Minimum Tangible Net
Worth
|
|||||||||||||
|
Tangible
Net Worth
|
|||||||||||||
|
a.
|
net
worth
|
$
|
|||||||||||
|
b.
|
intangible
assets (including goodwill)
|
$
|
|||||||||||
|
c.
|
accumulated
amortization
|
$
|
|||||||||||
|
d.
|
a.
- b. - c.
|
$
|
|
(3) | |||||||||
|
(3)
Section 6.1(c) of the Credit Agreement requires that Tangible Net Worth of
the Borrower and its Subsidiaries on a consolidated basis as of the end of
any fiscal quarter not be less than the following amounts for the quarters
indicated: (i) as of January 1, 2009 to and including March 31, 2009,
$6,000,000; (ii) as of April 1, 2009 to and including September 30, 2009,
$7,000,000; and (iii) as of October 1, 2009 and thereafter,
$9,500,000.
|
|||||||||||||
|
4. Capital
Expenditures
|
|||||||||||||
|
|
aggregate
of all expenditures (whether paid in cash or accrued as liabilities) for
property, plant or equipment and which would be reflected as additions to
property, plant or equipment on a balance sheet, including all Capitalized
Lease Obligations.
|
||||||||||||
|
a.
|
|
||||||||||||
|
$
|
(4) | ||||||||||||
|
(4)
Section 6.1(d) of the Credit Agreement requires that Capital Expenditures
of the Borrower and its Subsidiaries on a consolidated basis as of the end
of any fiscal year not be greater than $2,000,000.
|
|||||||||||||
|
5. Funds Subject to
Mandatory Prepayment - Asset Dispositions
|
|||||||||||||
|
a.
|
Asset
Dispositions during the current fiscal year
|
$
|
(5) | ||||||||||
|
(5)
Asset Dispositions under Section 6.5 of the Credit Agreement cannot, when
aggregated with the consideration for all previous Asset Dispositions
during the same fiscal year, exceed $1,000,000. Under Section
2.5(b) of the Credit Agreement, so long as no Event of Default has
occurred and is continuing, no prepayment shall be required with respect
to and Asset Disposition to the extent that, within 90 days following such
disposition, such net Proceeds are used to invest in assets of the same or
similar type and use as those disposed of and provided that the Agent
shall have a first-priority Lien thereon (subject to Section 6.3 of the
Credit Agreement).
|
|||||||||||||
|
6. Funds Subject to
Mandatory Prepayment - Insurance and Condemnation
Proceeds
|
|||||||||||||
|
a.
|
insurance
proceeds aggregating more than $200,000 (or in any amount after the
occurrence and during the continuance of an Event of Default) after the
Closing Date with respect to any Property which are not fully applied (or
contractually committed and approved by the Agent if such proceeds equal
or exceed $500,000) toward repair or replacement of such damaged Property
by the earlier of (i) 90 days after the receipt thereof and (ii) the
occurrence of a Default
|
||||||||||||
|
$
|
|||||||||||||
|
|
condemnation
proceeds aggregating more than $200,000 (or in any amount after the
occurrence and during the continuance of an Event of Default) after the
Closing Date with respect to any Property which are not fully applied (or
contractually committed and approved by the Agent if such proceeds equal
or exceed $500,000) toward repair or replacement of such condemned
Property by the earlier of (i) 90 days after the receipt thereof and (ii)
the occurrence of Default
|
||||||||||||
| b. | |||||||||||||
|
$
|
|||||||||||||
| c. |
[Borrower
to insert language describing any insurance proceeds or condemnation
proceeds that it has received, including the date of receipt, the amount
of such proceeds received and a description of the affected
properties.]
|
||||||||||||
As of the
Compliance Date, the undersigned represents and warrants to the Agent and the
Lenders as follows:
a. The
calculations made and the information contained herein are derived from the
financial statements and books and records of the Borrower and its Subsidiaries
and each and every calculation contained herein correctly reflects in all
material respects those financial statements and books and records.
b. The
representations and warranties contained in the Credit Agreement and in each
other Loan Document and certificate or other writing delivered to the Agent or
any Lender prior to, on or after the Closing Date are correct on and as of the
date hereof in all material respects as though made on and as of the date hereof
except to the extent that such representations and warranties expressly relate
to an earlier date; and
c. No
Default has occurred and is continuing.
d. No
event has occurred and is continuing, or condition exists, which reasonably
could have a Material Adverse Effect.
IN
WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SIGNED HIS/HER RESPECTIVE NAME AS
OF THIS _____ DAY OF __________, ____:
| PHYSICIANS FORMULA INC., | |||
| a New York corporation | |||
|
|
By:
|
||
| Name: | |||
| Title: | |||
EXHIBIT
I
FORM OF BORROWING BASE
CERTIFICATE
|
Union
Bank, N.A.
|
|||||||||||||||||||
|
Borrowing
Base Certificate
|
|||||||||||||||||||
| A. |
ACCOUNTS
RECEIVABLE ACTIVITY
|
||||||||||||||||||
| 1 |
Accounts
Receivable Balance as of ______________
|
||||||||||||||||||
|
(From
Line 11 of Previous Month Certificate)
|
|||||||||||||||||||
| 2 |
ADD
- Gross Sales
|
||||||||||||||||||
| 3 |
LESS
- Credits
|
||||||||||||||||||
| 4 |
NET SALES (Line 2 - Line
3)
|
||||||||||||||||||
| 5 |
LESS
- Net Collections
|
||||||||||||||||||
| 6 |
LESS
- Returns and Allowances
|
||||||||||||||||||
| 7 |
LESS
- Miscellaneous Adjustments
|
||||||||||||||||||
| 8 |
LESS
- Discounts Allowed
|
||||||||||||||||||
| 9 |
GROSS COLLECTIONS (Lines
5+6+7+8)
|
||||||||||||||||||
| 10 |
PLUS
OR MINUS - Net Miscellaneous Adjustments
|
||||||||||||||||||
| 11 |
GROSS
ACCOUNTS RECEIVABLE as of
|
0 | |||||||||||||||||
|
(Line
1+ Line 4 - Line 9 +/- Line 10)
|
|||||||||||||||||||
| 12 |
LESS
- Ineligible Accounts as of
|
0 | |||||||||||||||||
| 13 |
ELIGIBLE ACCOUNTS RECEIVABLE
(Line 11 - Line
12)
|
0 | |||||||||||||||||
| 14 |
GROSS
ACCOUNTS RECEIVABLE AVAILABILITY
|
0 | |||||||||||||||||
|
(Line
13 X 65% Advance Rate)
|
|||||||||||||||||||
| B. |
INVENTORY
|
||||||||||||||||||
| 15 |
INVENTORY
PER STOCK STATUS REPORT DATED ______________
|
0 | |||||||||||||||||
| 16 |
Less
Ineligible Inventory:
|
||||||||||||||||||
| 17 |
Printed
Components
|
0 | |||||||||||||||||
| 18 |
Work
in Process
|
0 | |||||||||||||||||
| 19 |
Promotional
Inventory
|
0 | |||||||||||||||||
| 20 |
Returns
|
0 | |||||||||||||||||
| 21 |
Inventory
in Transit
|
0 | |||||||||||||||||
| 22 |
Raw
materials in excess of 60%
|
0 | |||||||||||||||||
| 23 |
Other
(Describe)
|
0 | |||||||||||||||||
| 24 |
Total
Ineligible Inventory
|
0 | |||||||||||||||||
|
(Line
15- Sum of Lines 17-23)
|
|||||||||||||||||||
| 25 |
Net
Eligible Inventory
|
0 | |||||||||||||||||
|
(Line
15- Line 24)
|
|||||||||||||||||||
| 26 |
Inventory Availability
(Line 25 x 25% or
15% Advance Rate or Sublimit Whichever is
Less)
|
0 | |||||||||||||||||
| C |
EQUIPMENT
|
||||||||||||||||||
| 27 |
ORDERLY
LIQUIDATION VALUE AS OF March 2009
|
0 | |||||||||||||||||
| D |
CANADIAN
PLEDGED ACCOUNTS
|
||||||||||||||||||
| 28 |
FOREIGN
CURRENCY DEMAND ACCOUNT
|
0 | |||||||||||||||||
| 29 |
FOREIGN
CURRENCY TIME DEPOSIT
|
0 | |||||||||||||||||
| 30 |
CONVERSION
RATE AS OF ______________
|
0 | |||||||||||||||||
| 31 |
CANADIAN
PLEDGED ACCOUNT BALANCE
|
0 | |||||||||||||||||
| E |
BORROWING
BASE
|
0 | |||||||||||||||||
|
(Sum
of Line 14, 26, 27 and 31)
|
|||||||||||||||||||
| 32 |
LOAN
BALANCE as of _____________
|
0 | |||||||||||||||||
| 33 |
NET AVAILABILITY (Lesser of Borrowing Base or
Commitment Amount Minus Line 32)
|
0 | |||||||||||||||||
|
The
undersigned represents and warrants that the foregoing information is
true, complete, and correct, and the receivables
|
|||||||||||||||||||
|
and
inventory reflected herein comply with the representations and warranties
set forth in the security agreement and
|
|||||||||||||||||||
|
supplements
or amendments, if any, thereto between the undersigned and Union Bank,
N.A.
|
|||||||||||||||||||
|
By:
_____________________________________
|
|||||||||||||||||||
|
(Signature
and Title)
|
|||||||||||||||||||
|
Date:
__________________
|
|||||||||||||||||||
