Exhibit 10.1
 
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
 
 
THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the “Amendment”), dated
as of June 29, 2010, is entered into by and among PHYSICIANS FORMULA, INC., a
New York corporation (“Company”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Wells Fargo”), acting through its Wells Fargo Business Credit operating
division.
 
RECITALS
 
A.           Company and Wells Fargo are parties to a Credit and Security
Agreement dated November 6, 2009 (as amended, restated or modified from time to
time, the “Credit Agreement”).  Capitalized terms used in this Amendment have
the meanings given to them in the Credit Agreement unless otherwise specified in
this Amendment.
 
B.           Company has requested that the Credit Agreement be amended, and
Wells Fargo is willing to agree to such amendment pursuant to the terms and
conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:
 
1. Amendment to Credit Agreement.  Section 5.2(b) of the Credit Agreement is
amended to read in its entirety as follows:
 
“(b)           Minimum Adjusted EBITDA.  Company shall achieve Adjusted EBITDA
each fiscal quarter, for the twelve-month period then ended, of not less than
the amount set forth below for each such period:
 
12-Month Period Ending
Minimum Adjusted EBITDA
December 31, 2009
$7,600,000
March 31, 2010  $12,300,000 June 30, 2010  $11,000,000 September 30, 2010 
$10,150,000 December 31, 2010  $8,950,000

“
 
2. No Other Changes.  Except as explicitly amended by this Amendment or the
other Loan Documents delivered in connection with this Amendment, all of the
terms and conditions of the Credit Agreement and the other Loan Documents shall
remain in full force and effect and shall apply to any advance or letter of
credit thereunder.  This Amendment shall be deemed to be a “Loan Document” (as
defined in the Credit Agreement).
 
3. Accommodation Fee.  Company shall pay Wells Fargo as of the date hereof a
fully earned and non-refundable fee in the amount of $10,000 in consideration of
Wells Fargo’s execution and delivery of this Amendment (the “Accommodation
Fee”), due and payable upon execution of this Amendment by Company and Wells
Fargo.
 
 
 

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4. Conditions Precedent.  This Amendment shall be effective when Wells Fargo
shall have received a duly executed original hereof, together with each of the
following, each in substance and form acceptable to Wells Fargo in its sole
discretion and duly executed by all relevant parties:
 
4.1 An Acknowledgment and Agreement of Guarantors and Pledgors set forth at the
end of this Amendment;
 
4.2 An Acknowledgment from Mill Road Capital, L.P. and Company;
 
4.3 The Accommodation Fee; and
 
4.4 Such other matters as Wells Fargo may require.
 
5. Representations and Warranties.  Company hereby represents and warrants to
Wells Fargo as follows:
 
5.1 Company has all requisite power and authority to execute this Amendment and
any other agreements or instruments required hereunder and to perform all of its
obligations hereunder, and this Amendment and all such other agreements and
instruments have been duly executed and delivered by Company and constitute the
legal, valid and binding obligation of Company, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
 
5.2 The execution, delivery and performance by Company of this Amendment and any
other agreements or instruments required hereunder have been duly authorized by
all necessary corporate action and do not (i) require any authorization, consent
or approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law,
rule or regulation or of any order, writ, injunction or decree presently in
effect, having applicability to Company, or the articles of incorporation or
by-laws of Company, or (iii) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other material agreement, lease
or instrument to which Company is a party or by which Company or its properties
may be bound or affected.  Without limiting the generality of the foregoing, the
Company represents and warrants that (a) the Consent in Lieu of a Special
Meeting of the Board of Directors, dated November 6, 2009, adopted by the
Company’s board of directors and certified to Wells Fargo pursuant to the
Officer’s Certificate, dated November 6, 2009 (as supplemented by the
Supplemental Secretary’s Certificate, dated November 16, 2009, the “Officer’s
Certificate”), continues in full force and effect, (b) the certificate of
incorporation and bylaws of Company, which were certified and delivered to Wells
Fargo pursuant to the Officer’s Certificate, continue in full force and effect
and have not been amended or otherwise modified, and (c) the officers and agents
of Company who were certified to Wells Fargo pursuant to the Officer’s
Certificate as being authorized to sign and to act on behalf of Company continue
to be so authorized.
 
5.3 All of the representations and warranties contained in Section 4 and Exhibit
D of the Credit Agreement are true and correct in all material respects on and
as of the date hereof as though made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties continue to be true and
correct as of such earlier date).
 
 
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6. References.  All references in the Credit Agreement to “this Agreement” shall
be deemed to refer to the Credit Agreement as amended hereby; and any and all
references in the other Loan Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended hereby.
 
7. No Waiver.  The execution of this Amendment and the acceptance of all other
agreements and instruments related hereto shall not be deemed to be a waiver of
any Default or Event of Default under the Credit Agreement or a waiver of any
breach, default or event of default under any Security Document or other
document held by Wells Fargo, whether or not known to Wells Fargo and whether or
not existing on the date of this Amendment.
 
8. Release.  Company and each of the Persons signing the Acknowledgement and
Agreement of Guarantors and Pledgors (such Persons, the “Guarantors”) set forth
below hereby absolutely and unconditionally release and forever discharge Wells
Fargo, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description relating to the
Credit Agreement, other Loan Documents, or related transactions, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which Company or any Guarantor has had, now has or has made claim to
have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known or unknown.  It is the intention of the
Company and the Guarantors in executing this release that the same shall be
effective as a bar to each and every claim, demand and cause of action specified
and in furtherance of this intention Company and each Guarantor waives and
relinquishes all rights and benefits under Section 1542 of the Civil Code of the
State of California, which provides:
 
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”
 
The parties acknowledge that each may hereafter discover facts different from or
in addition to those now known or believed to be true with respect to such
claims, demands, or causes of action and agree that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts.
 
 
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9. Costs and Expenses.  Company agrees to pay all reasonable fees and
disbursements of counsel to Wells Fargo for the services performed by such
counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto.  Company hereby agrees that Wells Fargo may,
at any time or from time to time in its sole discretion and without further
authorization by Company, make a loan to Company under the Credit Agreement, or
apply the proceeds of any loan, for the purpose of paying any such reasonable
fees and disbursements.
 
10. Miscellaneous.  This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.  Transmission by facsimile or “pdf” file of an executed
counterpart of this Amendment shall be deemed to constitute due and sufficient
delivery of such counterpart.  Any party hereto may request an original
counterpart of any party delivering such electronic counterpart.  This Amendment
and the rights and obligations of the parties hereto shall be construed in
accordance with, and governed by, the laws of the State of California.  In the
event of any conflict between this Amendment and the Credit Agreement, the terms
of this Amendment shall govern.
 
[Signature Page Follows]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
 

 
WELLS FARGO BANK,
NATIONAL ASSOCIATION
            By:  /s/ Gary Whitaker      Name:  Gary Whitaker      Title 
Authorized Signatory                     
PHYSICIANS FORMULA, INC.
            By:  /s/ Jeffrey Rogers      Name:  Jeffrey Rogers      Title: 
President   

 
 
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS AND PLEDGORS
 
The undersigned, each (a) a guarantor of the indebtedness of Physicians Formula,
Inc. (“Company”) to Wells Fargo Bank, National Association (“Wells Fargo”),
acting through its Wells Fargo Business Credit operating division, pursuant to a
Continuing Guaranty, each dated November 6, 2009 (as they may be amended,
restated, or modified from time to time, collectively, the “Guaranties”), and/or
(b) a pledgor and/or grantor of certain collateral in favor of Wells Fargo
pursuant to a Collateral Pledge Agreement and/or a Security Agreement, each
dated November 6, 2009 (as they may be amended, restated, or modified from time
to time, the “Collateral Agreements”), each hereby (i) acknowledges receipt of
the foregoing Amendment; (ii) consents to the terms (including without
limitation the release set forth in Section 8 of the Amendment) and execution
thereof; (iii) reaffirms all obligations to Wells Fargo pursuant to the terms of
the Guaranties and the Collateral Agreements; and (iv) acknowledges that Wells
Fargo may amend, restate, extend, renew or otherwise modify the Credit Agreement
and any indebtedness or agreement of Company, or enter into any agreement or
extend additional or other credit accommodations, without notifying or obtaining
the consent of the undersigned and without impairing the liability of the
undersigned under the Guaranties or Collateral Agreements.
 

 
PHYSICIANS FORMULA HOLDINGS, INC.
            By:  /s/ Jeffrey Rogers      Name:  Jeffrey Rogers      Title 
President                     
PHYSICIANS FORMULA COSMETICS, INC.
            By:  /s/ Jeffrey Rogers      Name:  Jeffrey Rogers      Title: 
President                      PHYSICIANS FORMULA DRTV, LLC             By:  /s/
Jeffrey Rogers      Name:  Jeffrey Rogers      Title:  President   

 
 
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