Exhibit 10.36

 

SIXTH AMENDMENT TO
CREDIT AND SECURITY AGREEMENT AND WAIVER

 

THIS SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER (this
“Amendment”), dated as of March 24, 2003, is entered into between WELLS FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the “Lender”), and NATURADE,
INC., a Delaware corporation (the “Borrower”).

 

RECITALS

 

A.            The Borrower and the Lender have entered into a Credit and
Security Agreement dated as of January 27, 2000, as amended by that certain
First Amendment to Credit and Security Agreement dated as of November 16, 2000,
by that certain Second Amendment to Credit and Security Agreement dated as of
January 3, 2001, by that certain Third Amendment to Credit and Security
Agreement dated as of May 14, 2001, that certain Fourth Amendment to Credit and
Security Agreement dated as of December 20, 2001 and that certain Fifth
Amendment to Credit and Security Agreement dated as of September 19, 2002 (as
amended, the “Credit Agreement”).  Capitalized terms used herein have the
meanings given to them in the Credit Agreement unless otherwise specified.

 

B.            An Event of Default has occurred and is continuing under the
Credit Agreement due to the Borrower’s failure to maintain, when measured as of
December 31, 2002, the minimum amount of Book Net Worth required by Section 6.12
of the Credit Agreement and the minimum amount of Net Income required by Section
6.13 of the Credit Agreement (collectively, the “Known Existing Defaults”).

 

C.            The Borrower has requested that the Lender waive the Known
Existing Defaults and make certain amendments to the Credit Agreement.  The
Lender is willing to waive the Known Existing Defaults and amend the Credit
Agreement on the terms and conditions set forth herein.

 

D.            The Borrower is entering into this Amendment with the
understanding and agreement that, except as specifically provided herein, none
of the Lender’s rights or remedies as set forth in the Credit Agreement is being
waived or modified by the terms of this Amendment.

 

AMENDMENT

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

1.             Amendments to Credit Agreement.

 

(a)          The definition of Floating Rate set forth in Section 1.1 of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

 

“ “Floating Rate” means an annual rate equal to the sum of the Base Rate plus
four and one-half percent (4.5%), which annual rate shall change when and as the
Base Rate changes.”

 

(b)         A new subsection (d) is hereby added to Section 2.3 of the Credit
Agreement which reads in its entirety as follows:

 

“(d)         Other Fees.  In addition to the other fees provided for in this
Agreement, the Borrower shall pay to the Lender a non-refundable fee of $25,000,
which fee is fully-earned as of March 21, 2003 and is due and payable on the
earliest to occur of (i) December 31, 2003, (ii) the Termination Date or (iii)
the sale of all or substantially all of the Borrower’s assets or ownership
interests in the Borrower.”

 

(c)          Section 6.12 of the Credit Agreement is hereby amended and restated
to read in its entirety as follows:

 

“Section 6.12       Minimum Book Net Worth.  The Borrower will maintain its Book
Net Worth, when determined as of the dates set forth below, at an amount not
less than the amount set forth

 

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opposite such date:

 

Date

 

Minimum Book Net Worth

 

March 31, 2003

 

$

(2,547,000

)

April 30, 2003

 

$

(2,661,000

)

May 31, 2003

 

$

(2,705,000

)

June 30, 2003

 

$

(2,709,000

)

July 31, 2003

 

$

(2,828,000

)

August 31, 2003

 

$

(2,917,000

)

September 30, 2003

 

$

(2,970,000

)

October 31, 2003

 

$

(3,024,000

)

November 30, 2003

 

$

(3,168,000

)

December 31, 2003
and the last day of
each month thereafter

 

$

(2,892,000

)

 

(d)         Section 6.13 of the Credit Agreement is hereby amended and restated
to read in its entirety as follows:

 

“Section 6.13       Minimum Net Income.  The Borrower will earn Net Income, when
measured on a year-to-date basis as at the end of each calendar quarter set
forth below, of not less than the amount set forth opposite such quarter-end:

 

Quarter Ending

 

Minimum Net Income

 

March 31, 2003

 

$

(530,000

)

June 30, 2003

 

$

(620,000

)

September 30, 2003

 

$

(810,000

)

December 31, 2003
and the last day of
each quarter thereafter

 

$

(660,000

)

 

2.             Waiver of Known Existing Defaults.  Except as expressly set forth
in this Amendment, the Lender hereby waives enforcement of its rights against
the Borrower arising from the Known Existing Defaults; provided, however,
nothing herein shall be deemed a waiver with respect to any failure of the
Borrower to strictly comply with Sections 6.12 and 6.13 of the Credit Agreement
(as amended or modified by this Amendment).  This waiver shall be effective only
for the specific defaults comprising the Know Existing Defaults, and in no event
shall this waiver be deemed to be a waiver of enforcement of the Lender’s rights
with respect to any other Defaults or Events of Default now existing or
hereafter arising.  Nothing contained in this Amendment nor any communications
between the Borrower and the Lender shall be a waiver of any rights or remedies
the Lender has or may have against the Borrower, except as specifically provided
herein.  Except as specifically provided herein, the Lender hereby reserves and
preserves all of its rights and remedies against the Borrower under the Credit
Agreement and the other Loan Documents.

 

3.             Release; Covenant Not to Sue.

 

(a)          The Borrower hereby absolutely and unconditionally releases and
forever discharges the Lender, 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

 

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directors, officers, agents and employees of any of the foregoing (each a
“Released Party”), from any and all claims, demands or causes of action of any
kind, nature or description, whether arising in law or equity or upon contract
or tort or under any state or federal law or otherwise, which the Borrower 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 Borrower in providing 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 it 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 favor at the time of executing the release, which if
known by him might have materially affected his settlement with the debtor.”

 

(b)         The Borrower acknowledges that it 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.  The Borrower understands, acknowledges
and agrees that the release set forth above may be pleaded as a full and
complete defense and may be used as a basis for an injunction against any
action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such release.

 

(c)          The Borrower, on behalf of itself and its successors, assigns, and
other legal representatives, hereby absolutely, unconditionally and irrevocably,
covenants and agrees with and in favor of each Released Party above that it will
not sue (at law, in equity, in any regulatory proceeding or otherwise) any
Released Party on the basis of any claim released, remised and discharged by
Borrower pursuant to the above release.  If the Borrower or any of its
successors, assigns or other legal representations violates the foregoing
covenant, the Borrower, for itself and its successors, assigns and legal
representatives, agrees to pay, in addition to such other damages as any
Released Party may sustain as a result of such violation, all attorneys’ fees
and costs incurred by such Released Party as a result of such violation.

 

4.             No Other Changes.  Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance or letter of credit
thereunder.

 

5.             Conditions Precedent.  This Amendment shall be effective when the
Lender shall have received each of the following in substance and form
acceptable to the Lender in its sole discretion:

 

(a)          this Amendment executed by the Borrower and the Lender in a
sufficient number or original counterparts for distribution to the parties
hereto;

 

(b)         an amendment and waiver fee in the amount of Nine Thousand Dollars
($9,000), which fee is

 

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fully earned as of and due and payable on the date the Lender executes this
Amendment; and

 

(c)          such other documents related hereto or in furtherance hereof as the
Lender may require.

 

6.             Condition Subsequent.  The obligation of the Lender to continue
to make Advances, or otherwise extend credit under the Credit Agreement, is
subject to the delivery, on or before April 30, 2003, by the Borrower to the
Lender of evidence, in form and substance satisfactory to the Lender in its sole
discretion, of the receipt by the Borrower or no less than an additional
$450,000 in cash equity contributions.  Furthermore, the failure by the Borrower
to fulfill the terms of this Section 0 shall constitute an Event of Default.

 

7.             Representations and Warranties.  The Borrower hereby represents
and warrants to the Lender as follows:

 

(a)          The Borrower has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this Amendment
has been duly executed and delivered by the Borrower and constitutes the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms.

 

(b)         The execution, delivery and performance by the Borrower of this
Amendment 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
the Borrower, or the articles of incorporation or by-laws of the Borrower, or
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.

 

(c)          All of the representations and warranties contained in the Credit
Agreement are correct 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.

 

(d)         This Amendment has been entered into without force or duress, of the
free will of Borrower.  Borrower’s decision to enter into this Amendment is a
fully informed decision and Borrower is aware of all legal and other
ramifications of such decision.  Borrower has read and understands this
Amendment, has consulted with and been represented by legal counsel in
connection herewith, and has been advised by its counsel of its rights and
obligations hereunder and thereunder.

 

8.             No Waiver.  The execution of this Amendment and acceptance of any
other documents related hereto shall not be deemed to be a waiver of any Event
of Default under the Credit Agreement or breach, default or event of default
under any other Financing Agreement, whether or not known to the Lender and
whether or not existing on the date of this Amendment.

 

9.             Costs and Expenses.  The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with

 

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the Loan Documents, including without limitation all reasonable fees and
disbursements of legal counsel.  Without limiting the generality of the
foregoing, the Borrower specifically agrees to pay all fees and disbursements of
counsel to the Lender for the services performed by such counsel in connection
with the preparation of this Amendment and the documents and instruments
incidental hereto.  The Borrower hereby agrees that the Lender may, at any time
or from time to time in its sole discretion and without further authorization by
the Borrower, make a loan to the Borrower under the Credit Agreement, or apply
the proceeds of any loan, for the purpose of paying any such fees,
disbursements, costs and expenses.

 

10.           Integration.  This Amendment, together with the other Loan
Documents, incorporates all negotiations of the parties hereto with respect to
the subject matter hereof and is the final expression and agreement of the
parties hereto with respect to the subject matter hereof.

 

11.           Choice of Law.  The validity of this Amendment, its construction,
interpretation and enforcement, the rights of the parties hereunder, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of California governing contracts only to be performed in that
State.

 

12.           Reference to and Effect on the Loan Documents.

 

(a)          Upon and after the effectiveness of this Amendment, each reference
in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of
like import referring to the Credit Agreement, and each reference in all other
documents or agreements related thereto, including the other Loan Documents, to
“the Credit Agreement”, “thereof” or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
modified and amended hereby.

 

(b)         To the extent that any terms and conditions in any of the Loan
Documents or any documents or agreements related thereto shall contradict or be
in conflict with any terms or conditions of the Credit Agreement, after giving
effect to this Amendment, such terms and conditions are hereby deemed modified
or amended accordingly to reflect the terms and conditions of the Credit
Agreement as modified or amended hereby.

 

13.           Miscellaneous.  This Amendment and the acknowledgment attached
hereto may be executed by facsimile and 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.

 

14.           Submission of Amendment.  The submission of this Amendment to the
parties or their agents or attorneys for review or signature does not constitute
a commitment by Lender to waive any of its rights and remedies under the Loan
Documents, and this Amendment shall have no binding force or effect until all of
the conditions to the effectiveness of this Amendment have been satisfied as set
forth herein.

 

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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.

 

 

 

NATURADE, INC.,
a Delaware corporation

 

 

 

 

 

 

 

 

By:

/s/Bill D. Stewart

 

 

 

Name: Bill D. Stewart

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

 

WELLS FARGO BUSINESS CREDIT, INC.,
a Minnesota corporation

 

 

 

 

 

 

 

 

 

 

 

By:

/s/Tom Makowski

 

 

 

Name: Tom Makowski

 

 

Title: Vice President

 

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