**Exhibit 10.36**

 

**SIXTH AMENDMENT TOCREDIT AND SECURITY AGREEMENT AND WAIVER**

 

THIS SIXTH AMENDMENT TO CREDITAND SECURITY AGREEMENT AND WAIVER (this “Amendment”), dated as of March24, 2003, is entered into between WELLS FARGO BUSINESS CREDIT, INC., a Minnesotacorporation (the “Lender”), and NATURADE, INC., a Delaware corporation(the “Borrower”).

 

**RECITALS**

 

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

 

B.            An Event of Default has occurred and is continuing underthe Credit Agreement due to the Borrower’s failure to maintain, when measuredas of December 31, 2002, the minimum amount of Book Net Worth required bySection 6.12 of the Credit Agreement and the minimum amount of Net Incomerequired by Section 6.13 of the Credit Agreement (collectively, the “KnownExisting Defaults”).

 

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

 

D.            The Borrower is entering into this Amendment with theunderstanding and agreement that, except as specifically provided herein, noneof the Lender’s rights or remedies as set forth in the Credit Agreement isbeing waived or modified by the terms of this Amendment.

 

**AMENDMENT**

 

NOW, THEREFORE, inconsideration of the foregoing and the mutual covenants herein contained, andfor other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, the parties hereby agree as follows:

 

1.             Amendmentsto Credit Agreement.

 

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

 

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

 

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

 

“(d)         ***Other Fees.***  In addition to the other fees provided forin 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 payableon 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 orownership interests in the Borrower.”

 

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

 

**“Section 6.12       MinimumBook Net Worth.  The Borrower willmaintain 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 herebyamended and restated to read in its entirety as follows:

 

**“Section 6.13       MinimumNet Income.  The Borrower will earnNet Income, when measured on a year-to-date basis as at the end of eachcalendar quarter set forth below, of not less than the amount set forthopposite 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 KnownExisting Defaults.  Except asexpressly set forth in this Amendment, the Lender hereby waives enforcement ofits rights against the Borrower arising from the Known Existing Defaults; provided,however, nothing herein shall be deemed a waiver with respect to anyfailure of the Borrower to strictly comply with Sections 6.12 and 6.13 of theCredit Agreement (as amended or modified by this Amendment).  This waiver shall be effective only for thespecific defaults comprising the Know Existing Defaults, and in no event shallthis waiver be deemed to be a waiver of enforcement of the Lender’s rights withrespect to any other Defaults or Events of Default now existing or hereafterarising.  Nothing contained in thisAmendment nor any communications between the Borrower and the Lender shall be awaiver of any rights or remedies the Lender has or may have against theBorrower, except as specifically provided herein.  Except as specifically provided herein, the Lender herebyreserves and preserves all of its rights and remedies against the Borrowerunder the Credit Agreement and the other Loan Documents.

 

3.             Release;Covenant Not to Sue.

 

(a)          The Borrower hereby absolutely andunconditionally releases and forever discharges the Lender, and any and allparticipants, parent corporations, subsidiary corporations, affiliatedcorporations, insurers, indemnitors, successors and assigns thereof, togetherwith all of the present and former

 

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directors, officers, agents and employees of any of the foregoing (eacha “Released Party”), from any and all claims, demands or causes ofaction of any kind, nature or description, whether arising in law or equity orupon contract or tort or under any state or federal law or otherwise, which theBorrower has had, now has or has made claim to have against any such person foror by reason of any act, omission, matter, cause or thing whatsoever arisingfrom the beginning of time to and including the date of this Amendment, whethersuch claims, demands and causes of action are matured or unmatured or known orunknown.  It is the intention of theBorrower in providing this release that the same shall be effective as a bar toeach and every claim, demand and cause of action specified, and in furtheranceof this intention it waives and relinquishes all rights and benefits underSection 1542 of the Civil Code of the State of California, which provides:

 

“A general release does not extend to claims which the creditor doesnot 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 thedebtor.”

 

(b)         The Borrower acknowledges that it mayhereafter discover facts different from or in addition to those now known orbelieved to be true with respect to such claims, demands, or causes of actionand agree that this instrument shall be and remain effective in all respectsnotwithstanding any such differences or additional facts.  The Borrower understands, acknowledges andagrees that the release set forth above may be pleaded as a full and completedefense and may be used as a basis for an injunction against any action, suitor other proceeding which may be instituted, prosecuted or attempted in breachof the provisions of such release.

 

(c)          The Borrower, on behalf of itself and itssuccessors, assigns, and other legal representatives, hereby absolutely,unconditionally and irrevocably, covenants and agrees with and in favor of eachReleased Party above that it will not sue (at law, in equity, in any regulatoryproceeding 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, theBorrower, for itself and its successors, assigns and legal representatives,agrees to pay, in addition to such other damages as any Released Party maysustain as a result of such violation, all attorneys’ fees and costs incurredby such Released Party as a result of such violation.

 

4.             No Other Changes.  Except as explicitly amended by thisAmendment, all of the terms and conditions of the Credit Agreement shall remainin full force and effect and shall apply to any advance or letter of creditthereunder.

 

5.             ConditionsPrecedent.  This Amendment shall beeffective when the Lender shall have received each of the following insubstance and form acceptable to the Lender in its sole discretion:

 

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

 

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

 

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

 

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

 

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

 

7.             Representationsand Warranties.  The Borrower herebyrepresents and warrants to the Lender as follows:

 

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

 

(b)         The execution, delivery and performance by theBorrower of this Amendment have been duly authorized by all necessary corporateaction and do not (i) require any authorization, consent or approval byany governmental department, commission, board, bureau, agency orinstrumentality, domestic or foreign, (ii) violate any provision of anylaw, rule or regulation or of any order, writ, injunction or decree presentlyin effect, having applicability to the Borrower, or the articles ofincorporation or by-laws of the Borrower, or (iii) result in a breach ofor constitute a default under any indenture or loan or credit agreement or anyother agreement, lease or instrument to which the Borrower is a party or bywhich it or its properties may be bound or affected.

 

(c)          All of the representations and warrantiescontained in the Credit Agreement are correct on and as of the date hereof asthough made on and as of such date, except to the extent that suchrepresentations and warranties relate solely to an earlier date.

 

(d)         This Amendment has been entered into withoutforce or duress, of the free will of Borrower. Borrower’s decision to enter into this Amendment is a fully informeddecision and Borrower is aware of all legal and other ramifications of suchdecision.  Borrower has read andunderstands this Amendment, has consulted with and been represented by legalcounsel in connection herewith, and has been advised by its counsel of itsrights and obligations hereunder and thereunder.

 

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

 

9.             Costs andExpenses.  The Borrower herebyreaffirms its agreement under the Credit Agreement to pay or reimburse theLender on demand for all costs and expenses incurred by the Lender inconnection with

 

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the LoanDocuments, including without limitation all reasonable fees and disbursementsof legal counsel.  Without limiting thegenerality of the foregoing, the Borrower specifically agrees to pay all feesand disbursements of counsel to the Lender for the services performed by suchcounsel in connection with the preparation of this Amendment and the documentsand instruments incidental hereto.  TheBorrower hereby agrees that the Lender may, at any time or from time to time inits sole discretion and without further authorization by the Borrower, make aloan to the Borrower under the Credit Agreement, or apply the proceeds of anyloan, for the purpose of paying any such fees, disbursements, costs andexpenses.

 

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

 

11.           Choice of Law.  The validity of this Amendment, itsconstruction, interpretation and enforcement, the rights of the partieshereunder, shall be determined under, governed by, and construed in accordancewith the internal laws of the State of California governing contracts only tobe performed in that State.

 

12.           Reference to andEffect on the Loan Documents.

 

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

 

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

 

13.           Miscellaneous.  This Amendment and the acknowledgment attached hereto may be executed byfacsimile and in any number of counterparts, each of which when so executed anddelivered shall be deemed an original and all of which counterparts, takentogether, shall constitute one and the same instrument.

 

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

 

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IN WITNESS WHEREOF, the partieshave 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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