Exhibit 10.8
SUBSIDIARY
GUARANTEE
This SUBSIDIARY GUARANTEE (“
Guarantee ”), dated as of September 4, 2009 is made by
each entity listed on the signature pages hereof and by each entity
which becomes a party hereto by execution of the Joinder referred
to in Section 10 (each a “ Guarantor ” and
collectively, the “ Guarantors ”), whose
obligations hereunder are joint and several, in favor of MILL ROAD
CAPITAL, L.P. (the “ Lender ”).
RECITALS
A. In
connection herewith, Physicians Formula, Inc., a New York
corporation (the “ Borrower ”), is entering into
a Term Loan Agreement dated as of September 4, 2009 (said
Agreement, as it may hereafter be amended, modified, supplemented
or restated from time to time, herein referred to as the “
Loan Agreement ”) with the Lender.
B. It
is a condition precedent to the extension of credit by the Lender
under the Loan Agreement that each Guarantor shall have executed
and delivered this Guarantee. Each Guarantor, as a
Domestic Subsidiary of the Borrower, desires to execute this
Guarantee because it is interested in the financial success of the
Borrower and, in addition, anticipates that extensions of credit
under the Loan Agreement may be distributed by the Borrower to it
or otherwise used to its benefit.
C. Terms
defined in the Loan Agreement and not otherwise defined herein have
the same respective meanings when used herein, and the rules of
interpretation set forth in Section 1.2 of the Loan Agreement
are incorporated herein by reference.
AGREEMENT
NOW, THEREFORE, in order to induce the Lender to
enter into the Loan Agreement and for other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, each Guarantor hereby agrees as follows:
SECTION 1.
Guarantee.
(a) Each
Guarantor hereby unconditionally, continually and irrevocably
guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and performance of all
obligations of the Borrower now or hereafter existing under the
Loan Agreement, the Term Loan Note and the other Loan Documents,
whether for principal, interest, fees, expenses or otherwise and
whether accruing before or after the filing of a petition
initiating any insolvency, bankruptcy, reorganization or similar
proceeding affecting the Borrower or any Guarantor (collectively,
the “ Obligations ”). Notwithstanding
the foregoing, it is the intention of each Guarantor and the Lender
that the amount of the Obligations guaranteed by such Guarantor
under this Guarantee shall be in, but not in excess of, the maximum
amount permitted by fraudulent conveyance, fraudulent transfer or
similar or other laws applicable to such
Guarantor. Accordingly, notwithstanding anything to the
contrary contained in this Guarantee or any other agreement or
instrument executed in connection with the payment of any of the
Obligations, the amount of the Obligations shall be limited to an
aggregate amount equal
to the largest
amount that would not render any Guarantor’s obligations
hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision of any
applicable state law. This is a guaranty of payment and
not of collection only.
(b) Each
Guarantor agrees to pay or reimburse the Lender without duplication
thereof for all its reasonable costs and out-of-pocket expenses
incurred in connection with the enforcement or preservation of any
rights under this Guarantee and any other documents executed in
connection herewith or in connection with any refinancing or
restructuring of the credit arrangements provided under the Loan
Agreement involving this Guarantee in the nature of a
“work-out” or of any insolvency or bankruptcy
proceeding, including, without limitation, reasonable legal fees
and disbursements of counsel to the Lender and each Lender and the
allocated reasonable cost of internal counsel to the
Lender.
(c) Without
limiting the generality of the foregoing, this Guarantee
guarantees, to the extent provided herein, the payment of all
amounts which constitute part of the Obligations and would be owed
by the Borrower to the Lender under any Loan Document but for the
fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding
involving the Borrower or any Guarantor.
SECTION 2. Guarantee
Absolute . Each Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of
the Loan Agreement, the Term Loan Note and the other Loan
Documents, regardless of any Requirement of Law now or hereafter in
effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The
obligations of each Guarantor hereunder shall remain in full force
and effect without regard to, and shall not be affected or impaired
by the following, any of which may be taken without the consent of,
or notice to, such Guarantor, nor shall any of the following give
such Guarantor any recourse or right of action against the
Lender:
(a) any lack
of validity or enforceability of, or any release or discharge of
the Borrower or any other Loan Party from liability under, the Loan
Agreement or any other Loan Document;
(b) any
change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations or any other amendment or
waiver of, or any consent to departure from, the Loan Agreement or
any other Loan Document;
(c) any
subordination, compromise, exchange, release, nonperfection or
liquidation of any collateral, or any release, amendment or waiver
of, or consent to departure from, any other guaranty, for any or
all of the Obligations;
(d) any
express or implied amendment, modification, renewal, supplement,
extension (including, without limitation, extensions beyond the
original term) or acceleration of the Obligations or any of the
Loan Documents;
(e) any
exercise or nonexercise by the Lender of any right or privilege
under this Guarantee or any of the other Loan Documents;
(f) any
bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to any
Guarantor, the Borrower or any other guarantor of the Obligations
or any action taken with respect to this Guarantee by any trustee,
receiver or court in any such proceeding, whether or not such
Guarantor shall have had notice or knowledge of any of the
foregoing;
(g) any
assignment or other transfer, in whole or in part, of this
Guarantee or any of the other Loan Documents;
(h) any
acceptance of partial performance of the Obligations;
(i) any
consent to the transfer of, or any bid or purchase at sale of, any
collateral for the Obligations; or
(j) any other
circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or any guarantor (other than
the indefeasible payment by the Borrower or any other Loan Party of
the Obligations).
So long as any
of the Obligations shall be owing to the Lender, or the Term Loan
Commitment shall be outstanding, no Guarantor shall, without the
prior written consent of the Lender, commence or join with any
other party in commencing any bankruptcy, reorganization or
insolvency proceedings of or against the Borrower. Each
Guarantor understands and acknowledges that by virtue of this
Guarantee, it has specifically assumed any and all risks of a
bankruptcy or reorganization case or proceeding with respect to the
Borrower. As an example and not in any way of
limitation, a subsequent modification of the Obligations in any
reorganization case concerning the Borrower shall not affect the
obligation of any Guarantor to pay and perform the Obligations in
accordance with their respective terms prior to such reorganization
case. If claim is ever made upon the Lender for
repayment of any amount or amounts received by them in payment of
the Obligations and the Lender, repays all or any part of said
amount, then, notwithstanding any revocation or termination of this
Guarantee or any other instrument evidencing the Obligations, each
Guarantor shall be and remain liable to the Lender in accordance
with the terms of this Guarantee for the amount so repaid to the
same extent as if such amount had never originally been received by
the Lender.
SECTION 3. Waivers
. Each Guarantor unconditionally waives any defense to
the enforcement of this Guarantee (other than the payment in cash
by the Borrower or any other Loan Party of the Obligations),
including the following:
(a) all
presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor and notices of
acceptance of this Guarantee;
(b) any right
to require the Lender to proceed against the Borrower or any other
guarantor of the Obligations at any time, to proceed against or
exhaust any security held by the Lender at any time or to pursue
any other remedy whatsoever at any time;
(c) the
defense of any statute of limitations affecting the liability of
any Guarantor hereunder, the liability of the Borrower or any other
guarantor of the Obligations or the enforcement hereof, to the
extent permitted by law;
(d) any
defense arising by reason of any invalidity or unenforceability of
any of the Loan Documents, any disability of the Borrower or any
other guarantor of the Obligations, any manner in which the Lender
has exercised its rights and remedies under the Loan Documents or
any cessation from any cause whatsoever of the liability of the
Borrower or any other guarantor of the Obligations;
(e) any
defense based on any action taken or omitted by the Lender in any
bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding involving the
Borrower or any Guarantor, including any election to have the
Lender’s claim allowed as being secured, partially secured or
unsecured, any extension of credit by the Lender to the Borrower in
any such proceeding and the taking and holding by the Lender of any
security for any such extension of credit;
(f) any
defense based upon an election of remedies by the Lender, including
any election to proceed by judicial or nonjudicial foreclosure of
any Lien, whether on real property or personal property, or by deed
in lieu thereof, whether or not every aspect of any foreclosure
sale is commercially reasonable, or any election of remedies,
including remedies relating to real-property or personal-property
security, that destroys or otherwise impairs any subrogation rights
of any Guarantor or any rights of such Guarantor to proceed against
the Borrower or any other guarantor of the Obligations for
reimbursement, or both;
(g) any right
any Guarantor may have under applicable law to a hearing with
respect to the fair market value of the Collateral, either before
or after foreclosure, and any right any Guarantor may have to
require the Lender to proceed against any Collateral before seeking
to obtain a judgment against any Guarantor hereunder;
(h) any duty
of the Lender to advise any Guarantor of any information known to
the Lender regarding the financial condition of the Borrower or any
other circumstance affecting the Borrower’s ability to
perform its obligations to the Lender, it being agreed that each
Guarantor assumes responsibility for being and keeping informed
regarding such condition or any such circumstance;
(i) any right
of subrogation, reimbursement, exoneration, contribution, indemnity
or otherwise against the Borrower that may arise out of or be
caused by this Guarantee, all rights and/or claims against the
Borrower which may arise against the Borrower by reason of this
Guarantee, any right to enforce any remedy that the Lender now has
or may hereafter have against the Borrower and any benefit of, and
any right to participate in, any security now or hereafter held by
the Lender;
(j) any right
any Guarantor might have to revoke this Guarantee as to any
advances made by the Lender to or on behalf of the Borrower or
pursuant to the terms of any of the Loan Documents;
(k) any
failure by the Lender to perfect or continue the perfection of any
lien or security interest in any collateral, including, but not
limited to, the collateral given under the Loan Documents or any
failure by the Lender to protect the property covered by any such
lien or security interest;
(l)
any right to interpose any
defense, counter-claim or offset of any nature and description
which any Guarantor may now have or which may exist between and
among the Lender and the Loan Parties;
(m) in
furtherance and not in limitation of the foregoing to the maximum
extent permitted by applicable law, each Guarantor waives all
rights and defenses arising out of an election of remedies by the
Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to any mortgages or deeds of
trust securing the Obligations from time to time, may have
destroyed such Guarantor’s rights of subrogation and
reimbursement against the Borrower; and
(n) without
limiting the generality of any other provision of this Guarantee,
each Guarantor waives all rights and defenses that it may have
because the Borrower’s debt may be secured by real
property. This means, among other things,
that:
(i) the
Lender may collect from any Guarantor without first foreclosing on
any real or personal property collateral pledged by the Borrower;
and
(ii) if
the Lender forecloses in accordance with applicable law on any real
property collateral pledged by the Borrower:
(A) the
amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral
is worth more than the sale price; and
(B) the
Lender may collect from any Guarantor even if the Lender, by
foreclosing on the real property collateral, has destroyed any
right that such Guarantor may have to collect from the
Borrower.
This is an
unconditional and irrevocable waiver of any rights and defenses
that each Guarantor may have in the event that the Borrower’s
debt is secured by real property.
SECTION 4. Payments in Trust
. If any amount shall be paid to any Guarantor contrary
to the provisions of Section 3(i), such amount shall be held
in trust for the benefit of the Lender and shall, subject to the
Subordination Agreement, forthwith be paid to the Lender to be
credited and applied to the Obligations, whether matured or
unmatured, in accordance with the terms of the Loan
Agreement.
SECTION 5. Continuing Guarantee;
Successors . The obligations of each Guarantor under
this Guarantee and the Loan Documents executed by such Guarantor in
connection herewith shall continue in full force and effect until
the Obligations (other than contingent obligations to the extent no
claim giving rise thereto has been asserted) shall have been fully
paid and performed, the Term Loan Commitment shall have been
terminated or shall have expired and the expiration of the period
of time during which payments by the Borrower to the Lender may be
deemed to be preferential payments under the United States
Bankruptcy Code or other similar applicable laws. This
Guarantee shall be binding upon each Guarantor and its
successors and
assigns (provided that a Guarantor may not assign this Guarantee
without the prior written consent of the Lender) and shall inure to
the benefit of and be enforceable by the Lender and its successors,
transferees and assigns. Without limiting the generality
of the foregoing, and without notice to any Guarantor, the Lender
may assign or otherwise transfer any of its rights and obligations
under the Loan Documents to any other Person in accordance with the
terms of the Loan Agreement, and such other Person shall thereupon
become vested with all the rights in respect thereof granted to the
Lender, as applicable, herein or otherwise. The term
“Borrower” shall mean both the named Borrower and any
other Person at any time assuming or otherwise becoming primarily
liable on all or any part of the Obligations.
SECTION 6. Subordination
. Any indebtedness of the Borrower now or hereafter held
by any Guarantor is hereby subordinated to the prior payment
an
