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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