Attached files
INTERCREDITOR
AGREEMENT
dated as
of
November
6, 2009
among
WELLS
FARGO BANK, NATIONAL ASSOCIATION acting through its
WELLS
FARGO BUSINESS CREDIT operating division,
MILL ROAD
CAPITAL, L.P.,
and
PHYSICIANS
FORMULA, INC.
INTERCREDITOR
AGREEMENT (this “Agreement”) dated as of November 6, 2009, is made and
entered into among WELLS FARGO BANK, NATIONAL ASSOCIATION acting through its
WELLS FARGO BUSINESS CREDIT operating division (“Wells
Fargo”), MILL ROAD CAPITAL, L.P., a Delaware limited partnership (“Mill
Road”), and PHYSICIANS FORMULA, INC., a New York corporation (the “Company”).
Reference
is made to (a) the Wells Fargo Credit Agreement (such term and each other
capitalized term used and not otherwise defined herein having the meaning
assigned to it in Article I), under which Wells Fargo has extended and
agreed to extend credit to the Company, and (b) the Mill Road Credit
Agreement, under which Mill Road has extended credit to the
Company.
In
consideration of the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Wells Fargo, Mill Road and the Company agree as
follows:
ARTICLE I
Definitions
Section 1.1 Construction;
Certain Defined Terms. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to
have the same meaning and effect as the word “shall”. Unless the
context requires otherwise, (i) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (ii) any reference herein to any person
shall be construed to include such person’s successors and permitted assigns,
but shall not be deemed to include the subsidiaries of such person unless
express reference is made to such subsidiaries, (iii) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (iv) all references herein to Articles and Sections shall be
construed to refer to Articles and Sections of this Agreement and
(v) unless otherwise expressly qualified herein, the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
Section 1.2 As
used in this Agreement, the following terms have the meanings specified
below:
“Bankruptcy
Code” means Title 11 of the United States Code, as
amended.
“Collateral”
means the Wells Fargo Collateral and the Mill Road Collateral.
“Company”
means Physicians Formula, Inc., a New York corporation.
1
“Junior
Documents” means (a) in respect of the Mill Road First Lien
Collateral, the Wells Fargo Documents, and (b) in respect of the Wells
Fargo First Lien Collateral, the Mill Road Documents.
“Junior
Liens” means (a) in respect of the Wells Fargo First Lien
Collateral, the Mill Road Liens on such Collateral, and (b) in respect of
the Mill Road First Lien Collateral, the Wells Fargo Liens on such
Collateral.
“Junior
Obligations” means (a) with respect to the Mill Road Obligations (to
the extent such Obligations are secured by the Mill Road First Lien Collateral),
the Wells Fargo Obligations, and (b) with respect to the Wells Fargo
Obligations (to the extent such Obligations are secured by the Wells Fargo First
Lien Collateral), the Mill Road Obligations.
“Junior
Obligations Collateral” means, with respect to any Senior Obligations,
the Collateral securing the related Junior Obligations.
“Junior
Obligations Event of Default” means (a) with respect to the Mill
Road First Lien Collateral, any Wells Fargo Event of Default, and (b) with
respect to the Wells Fargo First Lien Collateral, any Mill Road Event of
Default.
“Junior
Obligations Secured Party” means (a) with respect to the Mill Road
First Lien Collateral, Wells Fargo, and (b) with respect to the Wells Fargo
First Lien Collateral, Mill Road.
“Junior
Obligations Security Documents” means (a) with respect to the Wells
Fargo First Lien Collateral, the Mill Road Security Documents, and (b) with
respect to the Mill Road First Lien Collateral, the Wells Fargo Security
Documents.
“Lien”
means any pledge, security interest, mortgage or other lien or encumbrance
created to secure any indebtedness or other obligation.
“Mill Road”
means Mill Road Capital, L.P., a Delaware limited partnership.
“Mill Road
Cap” means the result of (a) $8,800,000, minus (b) the aggregate amount
all payments of the principal of the Mill Road Obligations, plus (c) interest,
fees, expenses, and all other amounts that are capitalized pursuant to the terms
of the Mill Road Documents; provided further that this limitation shall not
apply to any warrants issued by Parent to Mill Road
“Mill Road
Collateral” means all assets and properties subject to Liens created by
the Mill Road Security Documents to secure the Mill Road
Obligations.
“Mill Road Credit
Agreement” means the Senior Subordinated Note Purchase and Security
Agreement dated as of November 6, 2009, between the Company, certain other
Obligors, and Mill Road, as amended, extended, renewed, restated, supplemented
or otherwise modified from time to time, with the same or a different
lender.
2
“Mill Road
Documents” means the Mill Road Credit Agreement and the other Mill Road
Security Documents.
“Mill Road Event
of Default” means any “Event of Default”, as defined in the Mill Road
Credit Agreement.
“Mill Road First
Lien Collateral” means any and all of the following assets and properties
now owned or at any time hereafter acquired by the
Company: (a) all Trademarks; and (b) all Related Trademark
Collateral; provided
that Mill Road’s priority claim against such collateral shall be subject
to certain limitations as set forth in the Mill Road Security
Documents.
“Mill Road First
Lien Collateral Transition Date” means the earlier of (a) the date
on which all the Mill Road Obligations shall have been paid in full (other than
contingent indemnity obligations under the relevant Mill Road Documents for
which no demand has been made) and (b) the date on which the Mill Road
First Lien Collateral shall have been released from the Liens created under the
Mill Road Documents.
“Mill Road
Liens” means the Liens on the Mill Road Collateral created under the Mill
Road Security Documents to secure the Mill Road Obligations.
“Mill Road
Obligations” means all “Obligations” as such term is defined in the Mill
Road Credit Agreement.
“Mill Road
Security Documents” means the Mill Road Credit Agreement, any other
documents now existing or entered into after the date hereof that creates Liens
on any assets or properties of the Company or any other Obligors to secure any
Mill Road Obligations, and all guaranties, pledge agreements, and collateral
assignments provided by any Obligor with respect to the Mill Road
Obligations.
“Mill Road
Specified Default” means an Event of Default under Section 8.1 of the
Mill Road Credit Agreement.
“Obligations”
means the Mill Road Obligations and the Wells Fargo Obligations.
“Obligors”
means the Company and each other person or entity that may from time to time
execute and deliver a Wells Fargo Document or a Mill Road Document as a
“debtor”, “borrower”, “guarantor”, “obligor”, “grantor”, or “pledgor” (or the
equivalent thereof), and “Obligor”
means any one of them.
“Parent”
means Physicians Formula Holdings, Inc.
“Payment Blockage
Event” means, at any time that the Wells Fargo Obligations are
outstanding, the occurrence of a Wells Fargo Event of Default.
“Payment Blockage
Notice” means a written notice from Wells Fargo to Mill Road referencing
that a Payment Blockage Event has occurred.
3
“Payment Blockage
Period” means the period from and including the date of receipt by Mill
Road of a Payment Blockage Notice until (a) such time as all of the Wells Fargo
Obligations shall have been paid and satisfied in full and any commitment to
extend credit that would constitute Wells Fargo Obligations shall have been
terminated if the Payment Blockage Period is caused by (i) a Wells Fargo Event
of Default resulting from the failure of the Company to make a timely payment of
principal, interest, or other amount owing with respect to the Wells Fargo
Obligations, or (ii) Wells Fargo declaring the Wells Fargo Obligations to be
immediately due and payable, and (b) one hundred and eighty (180) days after the
date of receipt by Mill Road of such Payment Blockage Notice if the Payment
Blockage Period is caused by any other Payment Blockage Event not described in
clause (a) of this paragraph; provided, however, that with
respect to this clause (b) if on or before the expiration of such one hundred
and eighty (180) day period (x) the Wells Fargo Obligations are declared by
Wells Fargo to be immediately due and payable, or (y) Wells Fargo has either
commenced exercising any of its rights or remedies in respect of the Wells Fargo
Obligations with respect to all or a material portion of the Collateral or
commenced and in good faith is pursuing a judicial proceeding to collect the
Wells Fargo Obligations, then such period shall continue until such time as all
of the Wells Fargo Obligations shall have been paid and satisfied in full and
any commitment to extend credit that would constitute Wells Fargo Obligations
shall have been terminated; provided further,
however, that
if Wells Fargo expressly agrees in writing that the Wells Fargo Obligations are
no longer immediately due and payable, waives in writing the applicable Payment
Blockage Event, or acknowledges in writing the cure of the applicable Payment
Blockage Event, the applicable Payment Blockage Period shall be deemed to have
terminated.
“Refinance”
means, in respect of any indebtedness, to refinance, extend, renew, defease,
amend, modify, supplement, restructure, replace, refund or repay, or to issue
other indebtedness, in exchange or replacement for, such indebtedness in whole
or in part; provided that the Refinancing indebtedness is secured by Liens in
respect of the same assets and properties that secured the Refinanced
indebtedness prior to such Refinancing.
“Refinanced”
and “Refinancing”
shall have correlative meanings.
“Related Trademark
Collateral” means (a) all goodwill of the Company connected with the
use of, and symbolized by the Trademarks, and (b) all general intangibles
(as defined in the UCC), excluding any payment intangibles (as defined in the
UCC) other than payment intangibles which represent proceeds of any Trademarks
or Related Trademark Collateral and excluding any general intangibles relating
specifically to any Wells Fargo First Lien Collateral.
“Secured
Parties” means Mill Road and Wells Fargo.
“Security
Documents” means the Mill Road Security Documents and the Wells Fargo
Security Documents.
“Senior
Liens” means (a) in respect of the Wells Fargo First Lien
Collateral, the Wells Fargo Liens on such Collateral, and (b) in respect of
the Mill Road First Lien Collateral, the Mill Road Liens on such
Collateral.
4
“Senior
Obligations” means (a) with respect to the Wells Fargo Obligations
(to the extent such Obligations are secured by the Mill Road First Lien
Collateral), the Mill Road Obligations, and (b) with respect to Mill Road
Obligations (to the extent such Obligations are secured by the Wells Fargo First
Lien Collateral), the Wells Fargo Obligations.
“Senior
Obligations Collateral” means (a) with respect to the Wells Fargo
Obligations, the Wells Fargo First Lien Collateral, and (b) with respect to
the Mill Road Obligations, the Mill Road First Lien Collateral.
“Senior
Obligations Secured Party” means (a) with respect to the Mill Road
First Lien Collateral, Mill Road, and (b) with respect to the Wells Fargo
First Lien Collateral, Wells Fargo.
“Senior
Obligations Security Documents” means (a) with respect to the Wells
Fargo First Lien Collateral, the Wells Fargo Security Documents, and
(b) with respect to the Mill Road First Lien Collateral, the Mill Road
Security Documents.
“Specified
Default” means a Mill Road Specified Default or a Wells Fargo Specified
Default.
“subsidiary”
means, with respect to any person (herein referred to as the “parent”),
any corporation, partnership, association or other business entity (a) of
which securities or other ownership interests representing more than 50% of the
equity or more than 50% of the ordinary voting power or more than 50% of the
general partnership interests are, at the time any determination is being made,
owned, controlled or held, or (b) that is, at the time any determination is
made, otherwise controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
“Trademarks”
means all of the Company’s trademarks, trademark licenses and trade names
including, without limitation, the Trademarks described on Schedule A to
this Agreement.
“UCC” means
the Uniform Commercial Code as from time to time in effect in the State of
California.
“Wells
Fargo” means Wells Fargo Bank, National Association acting through its
Wells Fargo Business Credit operating division, and its successors and
assigns.
“Wells Fargo
Cap” means the result of (a) $30,000,000, minus (b) the amount of all
payments of the principal amount of revolving loan obligations under the Wells
Fargo Credit Agreement that result in a permanent reduction of the revolving
credit commitment under the Wells Fargo Credit Agreement (other than payments of
such revolving loan obligations in connection with a refinancing thereof subject
to the limitations set forth herein), plus (c) interest, fees, expenses, and all
other amounts that are capitalized pursuant to the terms of the Wells Fargo
Documents.
5
“Wells Fargo
Collateral” means all assets and properties subject to Liens created by
the Wells Fargo Security Documents to secure the Wells Fargo
Obligations.
“Wells Fargo
Credit Agreement” means the Credit and Security Agreement dated as of
November 6, 2009, between the Company and Wells Fargo, as amended,
extended, renewed, restated, supplemented or otherwise modified from time to
time, with the same or a different lender.
“Wells Fargo
Documents” means the Wells Fargo Credit Agreement and the other Wells
Fargo Security Documents.
“Wells Fargo Event
of Default” means any “Event of Default”, as defined in the Wells Fargo
Credit Agreement.
“Wells Fargo First
Lien Collateral” means all now existing or hereafter acquired assets of
the Company, other than the Mill Road First Lien Collateral, including, but not
limited to, any and all of the following assets and properties now owned or at
any time hereafter acquired by the Company: (a) all Accounts,
(b) all chattel paper and electronic chattel paper, (c) all deposit
accounts, (d) all documents, (e) all Equipment, (f) all Payment
Intangibles (other than those which represent proceeds of any Trademarks or
Related Trademark Collateral) and any other General Intangibles that relate
specifically to the Collateral described in this definition, (g) all goods,
(h) all instruments, (i) all Inventory, (j) all Investment
Property, (k) all letter-of-credit rights, (l) all letters of credit,
(m) all sums on deposit in any Collateral Account (as defined in the Wells
Fargo Credit Agreement) and any items in any Lockbox (as defined in the Wells
Fargo Credit Agreement), and (n) all other Collateral not constituting Mill
Road First Lien Collateral; together with (i) all substitutions and
replacements for and products of any of the foregoing; (ii) in the case of
all goods, all accessions; (iii) all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any goods; (iv) all warehouse receipts, bills of lading and
other documents of title now or hereafter covering such goods; (v) all
collateral subject to the Lien of any Wells Fargo Security Document;
(vi) any money, or other assets of the Company that now or hereafter come
into the possession, custody, or control of Wells Fargo (other than that
constituting Mill Road First Lien Collateral); (vii) all sums on deposit in
the Special Account (as defined in the Wells Fargo Credit Agreement);
(viii) proceeds of any and all of the foregoing; (ix) books and
records of the Company, including all mail or electronic mail addressed to the
Company, to the extent they relate specifically to any of the foregoing; and
(x) all of the foregoing, whether now owned or existing or hereafter
acquired or arising or in which the Company now has or hereafter acquires any
rights. All capitalized terms used in this definition and not defined
elsewhere in this Agreement have the meanings assigned to them in the
UCC.
“Wells Fargo First
Lien Collateral Transition Date” means the earlier of (a) the date
on which all the Wells Fargo Obligations shall have been paid in full (other
than contingent indemnity obligations under the relevant Wells Fargo Documents
for which no demand has been made) and the Wells Fargo Credit Agreement shall
have been terminated and (b) the date on which the Wells Fargo First Lien
Collateral shall have been released from the Liens created under the Wells Fargo
Documents.
6
“Wells Fargo
Liens” means the Liens on the Wells Fargo Collateral created under Wells
Fargo Security Documents to secure the Wells Fargo Obligations.
“Wells Fargo
Obligations” means all “Obligations” as such term is defined in the Wells
Fargo Credit Agreement.
“Wells Fargo
Security Documents” means the Wells Fargo Credit Agreement, any other
documents now existing or entered into after the date hereof that create Liens
on any assets or properties of the Company or any other Obligor to secure any
Wells Fargo Obligations, and all guaranties, pledge agreements, and collateral
assignments provided by any Obligor with respect to the Wells Fargo
Obligations.
“Wells Fargo
Specified Default” means an Event of Default under the Wells Fargo Credit
Agreement.
ARTICLE II
Subordination
of Junior Liens; Certain Agreements
Section 2.1
Subordination of
Junior Liens.
(a)
All Junior Liens in respect of any Collateral are expressly
subordinated and made junior in right, priority, operation and effect to any and
all Senior Liens in respect of such Collateral on the terms set forth herein,
notwithstanding anything contained in this Agreement, the Mill Road Documents,
the Wells Fargo Documents or any other agreement or instrument to the contrary,
and irrespective of the time, order or method of creation, attachment or
perfection of such Junior Liens and such Senior Liens or any defect or
deficiency or alleged defect or deficiency in any of the foregoing.
(b)
It is acknowledged that (i) a portion of the
Wells Fargo Obligations consists or may consist of indebtedness that is
revolving in nature, and the amount thereof that may be outstanding at any time
or from time to time may be increased or reduced and subsequently reborrowed,
and (ii) except as set forth in Section 2.7, the Senior Obligations
may be extended, renewed or otherwise amended or modified from time to time, all
without affecting the subordination of the Junior Liens hereunder or the
provisions of this Agreement defining the relative rights of Wells Fargo and
Mill Road. The lien priorities provided for herein shall not be
altered or otherwise affected by any amendment, modification, supplement,
extension, increase, replacement, renewal, restatement or refinancing of either
the Junior Obligations or the Senior Obligations, by the release of any
Collateral or guarantees securing any Senior Obligations or by any action that
any Secured Party may take or fail to take in respect of any
Collateral.
Section 2.2
Payment of Mill
Road Obligations.
(a)
So long as no Payment Blockage Period is in
effect, the Company may pay to Mill Road, and Mill Road may accept and receive
on account of the Mill Road Obligations, regularly scheduled payments of
interest on the Mill Road Obligations.
7
(b)
Upon the occurrence and during the
continuation of a Payment Blockage Event, Wells Fargo may, in Wells Fargo’s
discretion, issue a Payment Blockage Notice to Mill Road. During a
Payment Blockage Period commencing upon Mill Road’s receipt of such Payment
Blockage Notice, Mill Road shall not accept, take or receive by payment or
prepayment, directly or indirectly from the Company, any Obligor, or any other
Person any payment which may now or hereafter be owing to Mill Road on account
of any of the Mill Road Obligations. Any payments received by Mill
Road during a Payment Blockage Period shall be turned over to Wells Fargo for
application to the Wells Fargo Obligations; provided that any proceeds of the
Mill Road First Lien Collateral received by Mill Road may be retained by Mill
Road and shall be applied by Mill Road to the Mill Road
Obligations.
Section 2.3
No Action With
Respect to Junior Obligations Collateral Subject to Senior
Liens.
(a)
Subject to the rights set forth in Section 2.3(b), no Junior
Obligations Secured Party shall commence any judicial or nonjudicial foreclosure
proceedings with respect to, seek to have a trustee, receiver, liquidator or
similar official appointed for or over, attempt any action to take possession
of, exercise any right, remedy or power with respect to, or otherwise take any
action to enforce its interest in or realize upon, or take any other action
available to it in respect of, any Junior Obligations Collateral under any
Junior Obligations Security Document or any guaranty, applicable law or
otherwise, at any time when such Junior Obligations Collateral shall be subject
to any Senior Lien or any Senior Obligations secured by such Senior Lien shall
remain outstanding or any commitment to extend credit that would constitute
Senior Obligations secured by such Senior Lien shall remain in effect, it being
agreed that only the Senior Obligations Secured Party, acting in accordance with
the applicable Senior Obligations Security Documents, shall be entitled to take
any such actions or exercise any such remedies. Notwithstanding the
foregoing, the Junior Obligations Secured Party may, subject to
Section 2.6, take all such actions as it shall deem necessary to perfect or
continue the perfection of its Junior Liens.
(b)
Subject to Section 2.10, notwithstanding the
foregoing, at any time subsequent to one hundred and eighty (180) days after the
delivery of written notice of the occurrence of a Specified Default by a Junior
Obligations Secured Party to a Senior Obligations Secured Party, the Junior
Obligations Secured Party may exercise any of its enforcement rights and
remedies with respect to the Senior Obligations Collateral unless either
(i) such Specified Default has been cured or waived within such one hundred
and eighty (180) period, as determined by the Junior Obligations Secured Lender,
in its sole discretion; or (ii) the Senior Obligations Secured Party has,
within such one hundred and eighty (180) period, commenced to exercise its
enforcement rights and remedies and continues in good faith and in a
commercially reasonable manner to exercise its enforcement rights and remedies
with respect to the Senior Obligations Collateral.
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Section 2.4
No Duties of
Senior Obligations Secured Party. The Junior Obligations
Secured Party acknowledges and agrees that the Senior Obligations Secured Party
shall have no duties or other obligations to the Junior Obligations Secured
Party with respect to any Senior Obligations Collateral, other than to act in a
commercially reasonable manner and to transfer to the Junior Obligations Secured
Party any proceeds of any such Collateral that constitutes Junior Obligations
Collateral remaining in its possession following any sale, transfer or other
disposition of such Collateral, the payment and satisfaction in full of the
Senior Obligations secured thereby and the termination of any commitment to
extend credit that would constitute Senior Obligations secured thereby, or, if
the Senior Obligations Secured Party shall be in possession of all or any part
of such Collateral after such payment and satisfaction in full, such Collateral
or any part thereof remaining, in each case without representation or warranty
on the part of the Senior Obligations Secured Party. In furtherance
of the foregoing, the Junior Obligations Secured Party acknowledges and agrees
that until the Senior Obligations secured by any Collateral shall have been paid
and satisfied in full and any commitment to extend credit that would constitute
Senior Obligations secured thereby shall have been terminated, except as
provided in Sections 2.3(b) and 2.10 hereof, the Senior Obligations Secured
Party shall be entitled to sell, transfer or otherwise dispose of or deal with
such Collateral as provided herein and in the Senior Obligations Security
Documents without regard to any Junior Lien or any rights to which the holders
of the Junior Obligations would otherwise be entitled as a result of such Junior
Lien, except that any such sale, transfer or disposition shall be commercially
reasonable in every respect. Without limiting the foregoing, the
Junior Obligations Secured Party agrees that the Senior Obligations Secured
Party shall not have any duty or obligation first to marshall or realize upon
any type of Collateral (or any other collateral securing the Senior
Obligations). The Junior Obligations Secured Party waives any claim
the Junior Obligations Secured Party may now or hereafter have against the
Senior Obligations Secured Party (or its representatives) arising out of
(i) any actions which the Senior Obligations Secured Party take or omit to
take (including, actions with respect to the creation, perfection or
continuation of Liens on any Collateral, actions with respect to the foreclosure
upon, sale, release or depreciation of, or failure to realize upon, any of the
Collateral and actions with respect to the collection of any claim for all or
any part of the Senior Obligations from any account debtor, guarantor or any
other party) in accordance with the Senior Obligations Security Documents or any
other agreement related thereto or to the collection of the Senior Obligations
or the valuation, use, protection or release of any security for the Senior
Obligations other than those from the Senior Obligations Secured Party’s failure
to act in a commercially reasonable manner or in accordance with the terms of
this Agreement, or (ii) any election by the Senior Obligations Secured
Party, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b) of the Bankruptcy Code.
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Section 2.5
No Interference;
Application of Proceeds; Payment Over; Reinstatement.
(a)
The Junior Obligations Secured Party agrees that (i) it will
not take or cause to be taken any action the purpose or effect of which is, or
could be, to make any Junior Lien pari passu with, or to give the Junior
Obligations Secured Party any preference or priority relative to, the Senior
Lien with respect to the Collateral subject to any Junior Lien or any part
thereof, (ii) it will not challenge or question in any proceeding the
validity or enforceability of any Senior Obligations or Senior Obligations
Security Document, or the validity, attachment, perfection or priority of any
Senior Lien, or the validity or enforceability of the priorities, rights or
duties established by, or other provisions of, this Agreement, (iii) as
long as the Senior Obligations Secured Party acts in a commercially reasonable
manner and otherwise in accordance with the terms of this Agreement, it will not
take any action the purpose or intent of which is to interfere, hinder or delay,
in any manner, whether by judicial proceedings or otherwise, any sale, transfer
or other disposition of any Senior Obligations Collateral subject to any Junior
Lien by the Senior Obligations Secured Party, (iv) it shall have no right
to (A) direct the Senior Obligations Secured Party or any holder of Senior
Obligations to exercise any right, remedy or power with respect to the
Collateral subject to any Junior Lien (except as may result from any action
taken pursuant to Section 2.2 hereof), or (B) limit the exercise by
the Senior Obligations Secured Party of any right, remedy or power with respect
to the Collateral subject to any Junior Lien (except as provided in Section
2.10), (v) it will not institute any suit or assert in any suit,
bankruptcy, insolvency or other proceeding any claim against the Senior
Obligations Secured Party seeking damages from or other relief by way of
specific performance, instructions or otherwise with respect to, and the Senior
Obligations Secured Party shall not be liable for, any action taken or omitted
to be taken by the Senior Obligations Secured Party with respect to any
Collateral securing any Senior Obligations that is subject to any Junior Lien,
as long as the Senior Obligations Secured Party acts in a commercially
reasonable manner and otherwise in accordance with the terms of this Agreement,
(vi) it will not seek, and hereby waives any right, to have any Senior
Obligations Collateral subject to any Junior Lien or any part thereof marshaled
upon any foreclosure or other disposition of such Collateral and (vii) it
will not attempt, directly or indirectly, whether by judicial proceedings or
otherwise, to challenge the enforceability of any provision of this
Agreement.
(b)
Neither Wells Fargo nor Mill Road shall (i)
challenge or question in any proceeding the validity or enforceability of any
obligations owing to the other party or the documents evidencing such
obligations, the validity, attachment, perfection or priority of any Lien, or
the validity or enforceability of the priorities, rights or duties established
by, or other provisions of, this Agreement, and (ii) attempt, directly or
indirectly, whether by judicial proceedings or otherwise, to challenge the
enforceability of any provision of this Agreement.
(c) Prior
to the Wells Fargo First Lien Collateral Transition Date, whether or not any
proceeding under the Bankruptcy Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law by or against the Company
has been commenced, all Wells Fargo First Lien Collateral or proceeds thereof
received in connection with the sale or other disposition of, or collection on,
such Collateral upon the exercise of remedies by Wells Fargo, shall be applied
as follows:
(i)
First, in favor of Wells
Fargo up to the full extent of the Wells Fargo Obligations; and
(ii) Second,
in favor of Mill Road to the full extent of the Mill Road
Obligations.
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(d) After
the Wells Fargo First Lien Collateral Transition Date, Wells Fargo shall deliver
to Mill Road any Wells Fargo First Lien Collateral and proceeds of such
Collateral held by it in the same form as received, with any necessary
endorsements or as a court of competent jurisdiction may otherwise direct, to be
applied by Mill Road in such order as specified in the Mill Road
Documents.
(e) Prior
to the Mill Road First Lien Collateral Transition Date, whether or not any
proceeding under the Bankruptcy Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law by or against the Company or
any of its subsidiaries has been commenced, all Mill Road First Lien Collateral
or proceeds thereof received in connection with the sale or other disposition
of, or collection on, such Collateral upon the exercise of remedies by Mill
Road, shall be applied as follows:
(i)
First, in favor of Mill Road up to the
full extent of the Mill Road Obligations; and
(ii) Second,
in favor of Wells Fargo up to the full extent of the Wells Fargo
Obligations.
(f) After
the Mill Road First Lien Collateral Transition Date, Mill Road shall deliver to
Wells Fargo any Mill Road First Lien Collateral and proceeds of such Collateral
held by it in the same form as received, with any necessary endorsements or as a
court of competent jurisdiction may otherwise direct, to be applied by Wells
Fargo in such order as specified in the relevant Wells Fargo
Documents.
(g) Except
as set forth in Section 2.5(b) and Section 2.5(e), the Junior Secured
Party hereby agrees that if it shall obtain possession of any Senior Obligations
Collateral or shall realize any proceeds or payment in respect of any such
Collateral, pursuant to any Junior Obligations Security Document or by the
exercise of any rights available to it under applicable law or in any
bankruptcy, insolvency or similar proceeding or through any other exercise of
remedies, at any time when any Senior Obligations secured or intended to be
secured by such Collateral shall remain outstanding, then it shall hold such
Collateral, proceeds or payment in trust for the Senior Obligations Secured
Party and promptly transfer such Collateral, proceeds or payment, as the case
may be, to the Senior Obligations Secured Party.
(h) In
the event of a bundled sale of both Wells Fargo First Lien Collateral and Mill
Road First Lien Collateral to a single purchaser, the Secured Parties agree to
negotiate the allocation of the purchase price between themselves in accordance
with this Agreement and in good faith (it being understood that any allocation
of the purchase price by the buyer will not be determinative of the allocation
between the Secured Parties); provided that neither Wells Fargo nor Mill Road
shall have any obligation to agree or consent to a bundled sale of the Wells
Fargo First Lien Collateral and Mill Road First Lien Collateral.
Section 2.6
Automatic Release
of Junior Liens. The Junior Obligations Secured Party agrees
that any Junior Lien on any Senior Obligations Collateral shall terminate and be
released automatically and without further action if the applicable Senior Liens
on such Senior Obligations Collateral are released and such release i) is
in connection with the sale, transfer or other disposition of such Senior
Obligations Collateral subject to such Junior Lien, so long as such sale,
transfer or other disposition is then permitted by the Junior Documents,
ii) occurs in connection with the foreclosure upon or other exercise of
rights and remedies with respect to such Senior Obligations Collateral or
iii) shall have been approved by the Senior Obligations Secured Party and
the proceeds therefrom are applied in accordance with the provisions of
Section 2.5(b) or (e), as applicable. The Junior Obligations
Secured Party agrees to execute and deliver all such releases and other
instruments as shall reasonably be requested by the Senior Obligations Secured
Party or the Company to evidence and confirm any release of Junior Obligations
Collateral provided for in this Section.
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Section 2.7
Amendments to
Agreements
(a) Without
the prior written consent of Wells Fargo, Mill Road shall not (i) increase
any interest rate or fee charged to the Obligors as provided for in the Mill
Road Documents as of the date of this Agreement (other than by virtue of the
application of the default rate (set forth in the Mill Road Credit Agreement as
of the date of this Agreement) and increases to the initial interest rate in
effect on the date of this Agreement of not more than 3% per annum in the
aggregate) or impose any additional fee on the Company not provided for in the
Mill Road Documents as of the date of this Agreement (other than fees that are
capitalized and not payable until the maturity date of the Mill Road
Obligations), (ii) increase the amount of cash payments of interest with
respect to the Mill Road Obligations, (iii) change or add any event of default
or any covenant with respect to the Mill Road Obligations, or change or add any
other undertaking under any of the Mill Road Documents, in any such case in a
manner adverse to the Obligors or to the interests of Wells Fargo, (iv) change
or amend any other term of any Mill Road Document if such change or amendment
would result in an event of default under any of the Wells Fargo Documents,
would materially increase the obligations of any Obligor or confer additional
material rights in favor of Mill Road in a manner adverse to Wells Fargo or the
interests of Wells Fargo under any of the Wells Fargo Documents in any respect,
(v) amend or modify any provisions of the Mill Road Documents to change the
principal payments required on account of the Mill Road Obligations or
accelerate the time for such payments (other than after the occurrence and
during the continuance of a Mill Road Event of Default thereunder), or (vi)
re-lend the principal amount of any Mill Road Obligations that have been repaid
by the Company or make any additional loans to the Company; provided that the
amendments to the Mill Road Documents substantially in the form of Annexes A-1
through A-4 to the Mill Road Credit Agreement (including the issuance of
warrants by the Parent) shall be permitted (the “Pre-Approved
Amendments”); and provided further that any amendments are made to the
covenants or events of default sections of the Wells Fargo Documents, then
amendments to the corresponding sections in the Mill Road Documents may be made
so long as, in each case, the cushions contained in the covenants and events of
default between the Wells Fargo Documents and the Mill Road Documents are
maintained; and provided further that no amendment shall cause the Mill Road
Obligations to exceed the Mill Road Cap.
(b) Wells Fargo
Documents. Without the prior written consent of Mill Road,
Wells Fargo shall not (i) increase any interest rate margin as provided for
in the Wells Fargo Credit Agreement as of the date hereof (other than by virtue
of the application of the default rate (set forth in the Wells Fargo Credit
Agreement as of the date of this Agreement) and increases to the interest rate
margin in effect on the date of this Agreement of not more than 3% per annum in
the aggregate) or impose any additional fee on the Company not provided for in
the Wells Fargo Credit Agreement as of the date of this Agreement (other than
(x) amendment or waiver fees, (y) fees charged by Wells Fargo in connection with
interest rate or currency hedge agreements, foreign exchange, deposits, treasury
management (including lockbox services and account management and maintenance
fees), and other bank products, and/or (z) fees that are capitalized and not
payable until the maturity date of Wells Fargo Obligations), (ii) extend
the maturity date of the Wells Fargo Obligations beyond the scheduled maturity
date of the Mill Road Obligations set forth in the Mill Road Credit Agreement
(as in effect on the date of this Agreement or as amended in connection with the
Pre-Approved Amendments), or (iii) increase the maximum principal amount of the
Wells Fargo Obligations to an amount in excess of the Wells Fargo
Cap.
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Section 2.8
Certain
Agreements With Respect to Bankruptcy or Insolvency
Proceedings.
(a) In
any insolvency or bankruptcy case, including any proceeding under the Bankruptcy
Code or any other Federal, state or foreign bankruptcy, insolvency, receivership
or similar law by or against the Company this Agreement shall continue in full
force and effect and the following provisions shall apply:
(i) If
the Company as debtor(s)-in-possession, moves for approval of financing (“DIP
Financing”) to be provided by Wells Fargo under Section 364 of the
U.S. Bankruptcy Code or the use of cash collateral with the consent of Wells
Fargo under Section 363 of the U.S. Bankruptcy Code, Mill Road agrees that
it will raise no objection to any such financing or to the Liens securing the
same that constitutes Wells Fargo First Lien Collateral (“DIP Financing
Liens”) or to any use of cash collateral that constitutes Wells Fargo
First Lien Collateral. As between Wells Fargo and Mill Road, such
financing or cash collateral usage is deemed to constitute Wells Fargo
Obligations under this Agreement and is subject to the terms and rights of the
parties hereunder.
(ii) Nothing
contained herein shall be deemed to limit the rights of either Secured Party to
take any other actions in connection with an insolvency or bankruptcy case which
it deems necessary and appropriate to protect its interest without the consent
of the other (as long as such action does not otherwise violate the terms of
this Agreement).
(b) In
the event that any of the Senior Obligations shall be paid in full and such
payment or any part thereof shall subsequently, for whatever reason (including
an order or judgment for disgorgement of a preference under Title 11 of the
United Stated Code, or any similar law, or the settlement of any claim in
respect thereof), be required to be returned or repaid, the terms and conditions
of this Article II shall be fully applicable thereto until all such Senior
Obligations shall again have been paid in full in cash.
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Section 2.9
Default
Notices. Each Secured Party shall give to the other Secured
Party concurrently with the giving thereof to the Company, a copy of
(i) any written notice by such Secured Party of either a default or an
event of default under its Security Document or other agreements with the
Company, or written notice of demand of payment upon the Company, and
(ii) any written notice sent by a Secured Party to the Company at any time
an event of default under such Secured Party’s Security Documents or other
agreements with the Company exists stating such Secured Party’s intention to
exercise any of its enforcement rights or remedies, including written notice
pertaining to any foreclosure on any of the Collateral or other judicial or
non-judicial remedy in respect thereof, and any legal process served or filed in
connection therewith, provided, that the failure of any party to give notice as
required hereby shall not affect the relative priorities of the Secured Parties’
respective Liens as provided herein or the Secured Parties’ other rights and
privileges as provided herein or the validity or effectiveness of any such
notice as against the Company.
Section 2.10 Wells Fargo
License. If Wells Fargo takes any enforcement action with
respect to the Wells Fargo First Lien Collateral, Mill Road shall permit Wells
Fargo, its employees, agents, advisers and representatives to use the Mill Road
First Lien Collateral (including the Trademarks and Related Trademark
Collateral), to the extent that Mill Road is in possession or control thereof,
solely for the purposes of (a) creating finished goods out of any existing
inventory (and inventory supplementary to such existing inventory required by
Wells Fargo to complete finished goods out of such existing inventory) of the
Obligors, and/or (b) selling any or all of the Wells Fargo First Lien
Collateral with the use of such Mill Road First Lien Collateral, whether in
bulk, in lots or to customers in the ordinary course of business or
otherwise. Notwithstanding any provision of this Agreement to the
contrary, any proceeds of the Wells Fargo First Lien Collateral received by
Wells Fargo (under any circumstances) shall be applied in the order specified in
Section 2.5(c), even if such Wells Fargo First Lien Collateral includes the use
of Trademarks or Related Trademark Collateral. Nothing contained in
this Agreement shall restrict the rights of Mill Road from selling, assigning or
otherwise transferring any Mill Road First Lien Collateral if the purchaser,
assignee or transferee thereof agrees in writing (pursuant to an agreement
satisfactory to Wells Fargo) to be bound by, and subject to, the provisions of
this Agreement.
Section 2.11 Refinancings. The
Wells Fargo Obligations and Mill Road Obligations may be Refinanced, in whole or
in part, in each case, without notice to, or the consent of Wells Fargo or Mill
Road, as the case may be. The holders or an authorized agent or
trustee on such holders’ behalf (collectively, the “Replacement
Lender”) of such Refinancing indebtedness may succeed to the benefits and
obligations of this Agreement (of Wells Fargo or Mill Road, as applicable) if
(i) such party binds itself in writing to the terms of this Agreement pursuant
to such documents or agreements (including amendments or supplements to this
Agreement) as Wells Fargo or Mill Road, as the case may be, shall reasonably
request and in form and substance reasonably acceptable to Wells Fargo or Mill
Road, as the case may be, and (ii) such Refinancing transaction shall be
substantially the same as the Wells Fargo Obligations or Mill Road Obligations
that are being refinanced, as applicable.
14
Section 2.12 Sale, Transfer,
etc. Mill Road shall not sell, assign, pledge, dispose of or
otherwise transfer all or any portion of the Mill Road Obligations or the Mill
Road Documents (a) without giving prior written notice of such action to
Wells Fargo, and unless prior to the consummation of any such action, the
transferee thereof shall execute and deliver to Wells Fargo an agreement
providing for the continued effectiveness of all of the rights of Wells Fargo
arising under this Agreement. Notwithstanding the failure to execute
or deliver any such agreement, the subordination effected hereby shall survive
any sale, assignment, pledge, disposition or other transfer of all or any
portion of the Mill Road Obligations, and the terms of this Agreement shall be
binding upon the successors and assigns of Mill Road.
Section 2.13 Insurance. Unless
and until Wells Fargo shall have delivered written notice to Mill Road that the
Wells Fargo Obligations have been paid in full, as between Wells Fargo, on the
one hand, and Mill Road, on the other hand, only Wells Fargo will have the right
to adjust or settle any insurance policy or claim covering or constituting Wells
Fargo First Lien Collateral in the event of any loss thereunder and to approve
any award granted in any condemnation or similar proceeding affecting the Wells
Fargo First Lien Collateral (as long as it acts in a commercially reasonable
manner). Unless and until Mill Road shall have delivered written
notice to Wells Fargo that the Mill Road Obligations have been paid in full, as
between Wells Fargo, on the one hand, and Mill Road, on the other hand, only
Mill Road will have the right to adjust or settle any insurance policy covering
or constituting Mill Road First Lien Collateral in the event of any loss
thereunder and to approve any award granted in any condemnation or similar
proceeding solely affecting the Mill Road First Lien Collateral (as long as it
acts in a commercially reasonable manner).
ARTICLE III
Sub-Agency
for Perfection of Certain Security Interests;
Rights
Under Permits and Licenses
Section 3.1
General. The
Senior Obligations Secured Party agrees that if it shall at any time hold a
Senior Lien on any Junior Obligations Collateral that can be perfected by the
possession or control of such Collateral or of any account in which such
Collateral is held, and if such Collateral or any such account is in fact in the
possession or under the control of the Senior Obligations Secured Party, the
Senior Obligations Secured Party will serve as sub-agent for the Junior
Obligations Secured Party for the sole purpose of perfecting the Junior Lien of
the Junior Obligations Secured Party on such Collateral. It is agreed
that the obligations of the Senior Obligations Secured Party and the rights of
the Junior Obligations Secured Party in connection with any such sub-agency
arrangement will be in all respects subject to the provisions of
Article II. The Senior Obligations Secured Party will be deemed
to make no representation as to the adequacy of the steps taken by it to perfect
the Junior Lien on any such Collateral and shall have no responsibility to the
Junior Obligations Secured Party for such perfection, it being understood that
the sole purpose of this Article is to enable the Junior Obligations Secured
Party to obtain a perfected Junior Lien in such Collateral to the extent, if
any, that such perfection results from the possession or control of such
Collateral or any such account by the Senior Obligations Secured
Party. Subject to Section 2.8, at such time as the Senior
Obligations secured by the Senior Lien of the Senior Obligations Secured Party
shall have been paid and satisfied in full and any commitment to extend credit
that would constitute such Senior Obligations shall have been terminated, the
Senior Obligations Secured Party shall take all such actions in its power as
shall reasonably be requested by the Junior Obligations Secured Party to
transfer possession or control of such Collateral or any such account to the
Junior Obligations Secured Party.
15
Section 3.2
Depositary
Accounts. The Company, in accordance with the Wells Fargo
Credit Agreement, shall maintain blocked account arrangements relating to
depositary accounts (the “Depositary
Accounts”) with certain depositary banks (the “Depositary
Banks”) in which all collections from any Inventory and related Accounts
are deposited. Wells Fargo will act as sub-agent for Mill Road for
the purpose of perfecting the Liens of Mill Road in all such Depositary Accounts
and the cash and other assets therein as provided in Section 3.1 (but will
have no duty, responsibility or obligation to Mill Road except as set forth in
the last sentence of this Section).
ARTICLE IV
Existence
and Amounts of Liens and Obligations
Whenever
a Secured Party shall be required, in connection with the exercise of its rights
or the performance of its obligations hereunder, to determine the existence or
amount of any Senior Obligations or Junior Obligations, or the existence of any
Lien securing any such obligations, or the Collateral subject to any such Lien,
it may request that such information be furnished to it in writing by the other
Secured Party and shall be entitled to make such determination on the basis of
the information so furnished; provided, however, that if a Secured Party shall
fail or refuse reasonably promptly to provide the requested information, the
requesting Secured Party shall be entitled to make any such determination by
such commercially reasonable method as it may, in the exercise its good faith
judgment, determine, including by reliance upon a certificate of the
Company. Each Secured Party may rely conclusively, and shall be fully
protected in so relying, on any determination made by it in accordance with the
provisions of the preceding sentence (or as otherwise directed by a court of
competent jurisdiction) and shall have no liability to the Company, any Secured
Party or any other person as a result of such determination.
ARTICLE V
Consent
of the Company
The
Company hereby consents to the provisions of this Agreement and the
intercreditor arrangements provided for herein and agrees that (a) no
Secured Party shall have any liability to the Company as a result of the
performance of its obligations hereunder and (b) the obligations of the
Company under the Security Documents will in no way be diminished or otherwise
affected by such provisions or arrangements.
16
ARTICLE VI
Representations
and Warranties
Section 6.1
Representations
and Warranties of Each Secured Party. Each Secured Party
represents and warrants to the other parties hereto as follows:
(a) Such
party is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has all requisite power and authority
to enter into and perform its obligations under this Agreement.
(b) This
Agreement has been duly executed and delivered by such party and constitutes a
legal, valid and binding obligation of such party, enforceable in accordance
with its terms.
(c) The
execution, delivery and performance by such party of this Agreement (i) do
not require any consent or approval of, registration or filing with or any other
action by any governmental authority and (ii) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of such party or any order of any governmental authority or any
indenture, agreement or other instrument binding upon such party.
(d) In
the case of Mill Road, it represents and warrants to the other parties hereto
that it is authorized under the Mill Road Credit Agreement to enter into this
Agreement.
(e) In
the case of Wells Fargo, it represents and warrants to the other parties hereto
that it is authorized under the Wells Fargo Credit Agreement to enter into this
Agreement.
ARTICLE VII
Miscellaneous
Section 7.1
Notices. All
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if
to Wells Fargo, to it at 245 So. Los Robles Avenue, Suite 700,
Pasadena, California 91101, Attention: Portfolio Manager—Physicians
Formula, Telecopy No.: (626) 844-9063;
(b) if
to Mill Road, to it at Two Sound View Drive, Greenwich, Connecticut 06830,
Attention: Thomas Lynch, Managing Director, Telecopy
No.: (203) 621-3280; and
(c) if
to the Company, to it at 1055 West 8th Street, Azusa,
California 91702, Attention: Jeff Berry, CFO, Telecopy
No.: (626) 812-6010.
Any party
hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt if delivered by hand or overnight courier service or sent by telecopy
or on the date three (3) Business Days after dispatch by certified or registered
mail if mailed, in each case delivered, sent or mailed (properly addressed) to
such party as provided in this Section 7.1 or in accordance with the latest
unrevoked direction from such party given in accordance with this
Section 7.1. As agreed to in writing among the Company and the
Secured Parties from time to time, notices and other communications may also be
delivered by e-mail to the e-mail address of a representative of the applicable
person provided from time to time by such person.
17
Section 7.2
Waivers;
Amendment.
(a) No
failure or delay on the part of any party hereto in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or
power. The rights and remedies of the parties hereto are cumulative
and are not exclusive of any rights or remedies that they would otherwise
have. No waiver of any provision of this Agreement or consent to any
departure by any party therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any party hereto in any case
shall entitle such party to any other or further notice or demand in similar or
other circumstances.
(b) Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by each
Secured Party and the Company.
Section 7.3
Parties in
Interest. This Agreement shall be binding upon and inure to
the benefit of the Secured Parties and their respective successors and assigns,
all of whom are intended to be bound by, and to be third party beneficiaries of,
this Agreement.
Section 7.4
Survival of
Agreement. All covenants, agreements, representations and
warranties made by any party in this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement.
Section 7.5
Counterparts. This
Agreement may be executed in counterparts, each of which shall constitute an
original but all of which when taken together shall constitute a single
contract. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
Section 7.6 Severability. Any
provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction. The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
18
Section 7.7
Governing Law;
Jurisdiction; Consent to Service of Process.
(a) This
Agreement shall be construed in accordance with and governed by the law of the
State of California, without giving effect to the conflict of laws provisions
thereof.
(b) Each
party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the state and federal courts
situated in Los Angeles County, California, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party
hereto may otherwise have to bring any action or proceeding relating to this
Agreement in the courts of any jurisdiction.
(c) Each
party hereto hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 7.1. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by Law.
Section 7.8 Arbitration. The
parties agree to binding arbitration as follows:
(a) Arbitration. The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise arising out of or relating to in any way this
Agreement.
19
(b) Governing
Rules. Any arbitration proceeding will (i) proceed in a
location in Los Angeles County, California selected by the American Arbitration
Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United
States Code), notwithstanding any conflicting choice of law provision in any of
the documents between the parties; and (iii) be conducted by the AAA, or
such other administrator as the parties shall mutually agree upon, in accordance
with the AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party shall
bear all costs and expenses incurred by such other party in compelling
arbitration of any dispute. Nothing contained herein shall be deemed
to be a waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. §91 or any similar applicable state law.
(c) No Waiver of Provisional
Remedies, Self-Help and Foreclosure. The arbitration
requirement does not limit the right of any party to (1) foreclose against
Collateral or real estate collateral; ((2) exercise self-help remedies
relating to Collateral or proceeds of Collateral such as setoff or repossession;
or (3) obtain provisional or ancillary remedies such as replevin,
injunctive relief, attachment or the appointment of a receiver, before during or
after the pendency of any arbitration proceeding. This exclusion does
not constitute a waiver of the right or obligation of any party to submit any
dispute to arbitration or reference hereunder, including those arising from the
exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
(d) Arbitrator Qualifications
and Powers. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater
than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be
a neutral attorney licensed in the State of California or a neutral retired
judge of the state or federal judiciary of California, in either case with a
minimum of ten years experience in the substantive law applicable to the subject
matter of the dispute to be arbitrated. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim. In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator’s discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of California and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The
arbitrator shall also have the power to award recovery of all costs and fees, to
impose sanctions and to take such other action as the arbitrator deems necessary
to the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.
20
(e) Discovery. In
any arbitration proceeding discovery will be permitted in accordance with the
Rules. All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than
twenty (20) days before the hearing date and within one hundred and eighty (180)
days of the filing of the dispute with the AAA. Any requests for an
extension of the discovery periods, or any discovery disputes, will be subject
to final determination by the arbitrator upon a showing that the request for
discovery is essential for the party’s presentation and that no alternative
means for obtaining information is available.
(f)
Class Proceedings and
Consolidations. The resolution of any dispute arising pursuant
to the terms of this Agreement shall be determined by a separate arbitration
proceeding and such dispute shall not be consolidated with other disputes or
included in any class proceeding.
(g) Payment Of Arbitration Costs
And Fees. The arbitrator shall award all costs and expenses of
the arbitration proceeding.
(h) Real Property Collateral;
Judicial Reference. Notwithstanding anything herein to the
contrary, no dispute shall be submitted to arbitration if the dispute concerns
indebtedness secured directly or indirectly, in whole or in part, by any real
property unless (i) the holder of the deed of trust, mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or
benefits that might accrue to them by virtue of the single action rule statute
of California, thereby agreeing that all indebtedness and obligations of the
parties, and all deeds of trust, mortgages, liens and security interests
securing such indebtedness and obligations, shall remain fully valid and
enforceable. If any such dispute is not submitted to arbitration, the
dispute shall be referred to a referee in accordance with California Code of
Civil Procedure Section 638 et seq., and this general reference agreement
is intended to be specifically enforceable in accordance with said
Section 638. A referee with the qualifications required herein
for arbitrators shall be selected pursuant to the AAA’s selection
procedures. Judgment upon the decision rendered by a referee shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.
(i)
Miscellaneous. To
the maximum extent practicable, the AAA, the arbitrators and the parties shall
take all action required to conclude any arbitration proceeding within one
hundred and eighty (180) days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may
disclose the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business or by
applicable law or regulation. If more than one agreement for
arbitration by or between the parties potentially applies to a dispute, the
arbitration provision most directly related to this Agreement or the subject
matter of the dispute shall control. This arbitration provision shall
survive termination, amendment or expiration of this Agreement or any
relationship between the parties.
Section 7.9
Headings. Article
and Section headings used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
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Section 7.10 Conflicts. In
the event of any conflict or inconsistency between the provisions of this
Agreement and the provisions of any of the other Security Documents, the
provisions of this Agreement shall control.
Section 7.11 Provisions Solely
to Define Relative Rights. The provisions of this Agreement
are and are intended solely for the purpose of defining the relative rights of
Wells Fargo, on the one hand, and Mill Road, on the other
hand. Neither the Company nor any other creditor of the Company shall
have any rights or obligations hereunder, except as expressly provided in this
Agreement, and the Company may not rely on the terms hereof. Nothing
in this Agreement is intended to or shall impair the obligations of the Company,
which are absolute and unconditional, to pay the Obligations as and when the
same shall become due and payable in accordance with their terms.
[Signatures
on next page]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
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WELLS
FARGO BANK, NATIONAL ASSOCIATION
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By:
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/s/ Phillip Goessler
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Name:
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Phillip
Goessler
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Title:
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Vice
President
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MILL
ROAD CAPITAL, L.P.
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By:
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/s/ Charles Goldman
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Name:
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Charles
Goldman
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Title:
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Managing
Director
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PHYSICIANS
FORMULA, INC.
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By:
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/s/ Ingrid Jackel
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Name:
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Ingrid
Jackel
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Title:
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Chief
Executive Officer
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[Signature
Page to Intercreditor Agreement]