Amendment No. 3 to LASA [3/10/98]









Exhibit

10.32




 




AMENDMENT

NO. 3 TO LOAN AND SECURITY AGREEMENT




 




 




                AMENDMENT,

dated as of March 19, 2002, by and between IVC INDUSTRIES, INC., a Delaware

corporation (“Borrower”), and CONGRESS FINANCIAL CORPORATION, a Delaware

corporation (“Lender”).




 




 




W  I  T  N  E  S  S  E

T  H :




 




 




                WHEREAS,

Lender and Borrower have entered into financing arrangements pursuant to which

Lender may make loans and advances and provide other financial accommodations

to Borrower as set forth in the Loan and Security Agreement, dated October 16,

2000, between Lender and Borrower, as amended by Amendment No. 1 to Loan and

Security Agreement, dated June 13, 2001 and Amendment No. 2 to Loan and

Security Agreement, dated June 14, 2001 (as further amended hereby and as the

same may hereafter be further amended, modified, supplemented, extended,

renewed, restated or replaced, the “Loan Agreement”, and together with all

agreements, documents and instruments at any time executed and/or delivered in

connection therewith or related thereto, as from time to time amended and

supplemented, collectively, the “Financing Agreements”).




 




                WHEREAS,

Borrower, Nutritionals Acquisition Corp., a Delaware corporation (“NAC”) and

Inverness Medical Innovations, Inc., a Delaware corporation, (“Inverness”) have

agreed that NAC will merge with and into Borrower, and all of the issued and

outstanding shares of the capital stock of the surviving corporation shall be

acquired from the shareholders of Borrower by Inverness as set forth in the

Amended and Restated Agreement and Plan of Merger, dated January 22, 2002, by

and among NAC, Inverness and Borrower; and




 




                WHEREAS,

Borrower has requested that Lender consent to such merger and acquisition and

agree to certain amendments to the Loan Agreement in connection therewith;




 




                WHEREAS,

Lender is willing to provide such consents and agree to such amendments,

subject to the terms and conditions herein; and




 




                WHEREAS,

by this Amendment No. 3, Lender and Borrower desire and intend to evidence such

consents and amendments.




 




                NOW

THEREFORE, in consideration of the foregoing and the mutual agreements and

covenants contained herein, the parties hereto agree as follows:




 




 




1.                                       Definitions.




 




                (a)    Amendments to Definitions.




 




 




1





























 




	

  (i)


  	

   


  	

  All references to the term

  “Borrowing Base” in the Loan Agreement and each such reference is hereby

  amended to mean, at any time, the amount equal to:   eighty-five (85%) percent of the Net Amount of Eligible

  Accounts of Borrower plus (B) the least of:   fifty (50%) percent of the Value of

  Eligible Inventory consisting of finished goods and Bulk Inventory and raw

  materials,   seventy-five (75%)

  percent of the Net Recovery Percentage with respect to Eligible Inventory consisting

  of finished goods and Bulk Inventory and raw materials or  $10,000,000, less (C) any

  Reserves.


  
	

   


  	

   


  	

   


  
	

  (ii)


  	

   


  	

  All references to the term

  “Interest Rate” in the Loan Agreement and each such reference is hereby

  amended to mean:


  





 




	

  (A)


  	

   


  	

  subject to clause (B)

  below,  as to Prime Rate Loans, a rate

  equal to one and one-half (1 1⁄2%) percent per annum in excess of the Prime

  Rate and  as to Eurodollar Rate Loans,

  a rate equal to three and three-quarters (3 3/4%) percent per annum in excess

  of the Adjusted Eurodollar Rate (based on the Adjusted Eurodollar Rate

  applicable for the Interest Period selected by Borrower as in effect three

  (3) Business Days after the date of receipt by Lender of the request of

  Borrower for such Eurodollar Rate Loans in accordance with the terms hereof,

  whether such rate is higher or lower than any rate previously quoted to

  Borrower); and


  
	

   


  	

   


  	

   


  
	

  (B)


  	

   


  	

  notwithstanding anything to

  the contrary contained in clause (A) above, the Interest Rate shall mean, at

  Lender’s option, upon three (3) Business Days prior written notice from

  Lender to Borrower, as to Prime Rate Loans, a rate equal to three and

  one-half (3 1⁄2%) percent per annum in excess of the Prime Rate, and as to

  Eurodollar Rate Loans, the rate of five and three-quarters (5 3/4%) percent

  per annum in excess of the Adjusted Eurodollar Rate,  for the period (aa) from and after the

  date of termination or non-renewal hereof until Lender has received full and

  final payment of all Obligations (notwithstanding entry of a judgement

  against Borrower) and (bb) from and after the date of the occurrence of an

  Event of Default for so long as such Event of Default is continuing, and

   on Loans to Borrower at any time outstanding in excess of the Borrowing

  Base or the Revolving Loan Limit (whether or not such excess(es) arise or are

  made with or without Lender’s knowledge or consent and whether made before or

  after an Event of Default).


  





 




	

  (iii)


  	

   


  	

  All references to the term

  “Maximum Credit” in the Loan Agreement and each such reference is hereby

  amended to mean $19,200,000.


  
	

   


  	

   


  	

   


  
	

  (iv)


  	

   


  	

  All references to the term

  “Revolving Loan Limit” in the Loan Agreement and each such reference is

  hereby amended to mean $15,000,000.


  





 




 




2





























 




 




	

  (v)


  	

   


  	

  All references to the term

  “Reserves” in the Loan Agreement and each such reference is hereby amended to

  include, in addition and not in limitation, a Reserve established at any time

  in an amount by which:  the then

  outstanding principal amount of the Term Loan exceeds  eighty (85%) of the Equipment Net Orderly

  Liquidation Value.


  





 




                (b)    Additional Definitions. As used herein, the following

terms shall have the meanings given to them below, and the Loan Agreement and

the other Financing Agreements are hereby amended to include, in addition to

and not in limitation of, the following definitions:




 




	

  (i)


  	

   


  	

  “Amendment No. 1” shall mean

  Amendment No. 1 to Loan and Security Agreement, dated June 13, 2001, by and

  among Lender, Borrower, Guarantor and International Vitamin Overseas Sales

  Corp., as the same now exists or may hereafter be amended, modified,

  supplemented, extended, renewed, restated or replaced.


  
	

   


  	

   


  	

   


  
	

  (ii)


  	

   


  	

  “Amendment No. 3” shall mean

  this Amendment No. 3 to Loan and Security Agreement by and among Lender,

  Borrower, Guarantor and International Vitamin Overseas Sales Corp., as the

  same now exists or may hereafter be amended, modified, supplemented,

  extended, renewed, restated or replaced.


  
	

   


  	

   


  	

   


  
	

  (iii)


  	

   


  	

  “Consolidated Net Income”

  shall mean, for any period, the aggregate of the net income (loss) of

  Borrower and its Subsidiaries, on a consolidated basis, for such period

  (excluding to the extent included therein any extraordinary and/or one time

  or unusual and non-recurring gains) after deducting all charges which should

  be deducted before arriving at the net income (loss) for such period and,

  without duplication, after deducting the Provision for Taxes for such period,

  all as determined in accordance with GAAP; provided, that,  the net income of any Person that is not a

  wholly-owned Subsidiary or that is accounted for by the equity method of

  accounting shall be included only to the extent of the amount of dividends or

  distributions paid or payable to Borrower or wholly-owned Subsidiary of

  Borrower;  except to the extent

  included pursuant to the foregoing clause, the net income of any Person

  accrued prior to the date it becomes a wholly-owned Subsidiary of Borrower or

  is merged into or consolidated with Borrower or any of its wholly-owned

  Subsidiaries or that Person’s assets are acquired by Borrower or by its

  wholly-owned Subsidiaries shall be excluded; and  the net income (if positive) of any wholly-owned Subsidiary to

  the extent that the declaration or payment of dividends or similar

  distributions by such wholly-owned Subsidiary to Borrower or to any other

  wholly-owned Subsidiary of Borrower is not at the time permitted by operation

  of the terms of its charter or any agreement, instrument, judgment, decree,

  order, statute, rule or governmental regulation applicable to such

  wholly-owned Subsidiary shall be excluded. 

  For the purposes of this definition, net income excludes any gain

  together with any related Provision for 

  Taxes for such gain realized upon the sale or other disposition of any

  assets that are not sold in the ordinary course of


  
	

   


  	

   


  	

   


  





 




3





























 




	

   


  	

   


  	

  business (including, without

  limitation, dispositions pursuant to sale and leaseback transactions) or of

  any Capital Stock of Borrower or Subsidiary of Borrower and any net income

  realized or loss incurred as a result of changes in accounting principles or

  in the application thereof to Borrower.


  
	

   


  	

   


  	

   


  
	

  (iv)


  	

   


  	

  “EBITDA” shall mean with

  respect to any period, an amount equal to: 

  the Consolidated Net Income for such period, plus  depreciation and amortization for such

  period (to the extent deducted in the computation of Consolidated Net

  Income), all in accordance with GAAP, plus  Interest Expense for such period (to the extent deducted in the

  computation of Consolidated Net Income), plus  the Provision of Taxes for such period (to

  the extent deducted in the computation of Consolidated Net Income).


  
	

   


  	

   


  	

   


  
	

  (v)


  	

   


  	

  “Eligible Equipment” shall

  mean manufacturing Equipment owned by Borrower, which is in good order,

  repair, running and marketable condition, located at Borrower’s premises and

  acceptable to Lender in all respects. 

  In general, Eligible Equipment will not include:  Equipment at premises other than those

  owned by Borrower, except as to Equipment at premises that are leased and controlled

  by Borrower if Lender shall have received a Collateral Access Agreement from

  the owner and lessor of such premises duly authorized, executed and delivered

  by such owner and lessor,  Equipment

  which is not subject to the first priority, valid and perfected security

  interest of Lender,  worn-out,

  obsolete, damaged or defective Equipment or Equipment not used or usable in

  the ordinary course of Borrower’s business and  customer specific tooling. 

  Any Equipment which is not Eligible Equipment shall nevertheless be

  part of the Collateral.


  
	

   


  	

   


  	

   


  
	

  (vi)


  	

   


  	

  “Equipment Net Orderly

  Liquidation Value” shall mean, at any time the amount of the recovery in

  respect of the Eligible Equipment at such time on an orderly liquidation

  value basis as set forth in the most recent acceptable appraisal of Eligible

  Equipment received by Lender in accordance with Section 7.4 of the Loan

  Agreement or the terms hereof, net of operating expenses, liquidation

  expenses and commissions.


  
	

   


  	

   


  	

   


  
	

  (vii)


  	

   


  	

  “Merger” shall mean the merger

  of NAC with and into Borrower with Borrower as the surviving corporation

  pursuant to the terms of the Merger Agreements.


  
	

   


  	

   


  	

   


  
	

  (viii)


  	

   


  	

  “Merger Agreements” shall

  mean, collectively, the Amended and Restated Agreement and Plan of Merger,

  dated as of January 22, 2002, by and among NAC, Inverness, and Borrower, the

  Certificate of Merger of NAC and Borrowers and all related agreements,

  documents and instruments, as the same now exist or may hereafter be amended,

  modified, supplemented, extended, renewed, restated or replaced.


  





 




 




4





























 




 




	

  (ix)


  	

   


  	

  “Inverness” shall mean

  Inverness Medical Innovations Inc., a Delaware corporation, and its

  successors and assigns.


  
	

   


  	

   


  	

   


  
	

  (x)


  	

   


  	

  “Inverness Investment” shall

  have the meaning set forth in Section 9.22 of the Loan Agreement as amended

  hereby.


  
	

   


  	

   


  	

   


  
	

  (xi)


  	

   


  	

  “Inverness Subordination

  Agreement” shall mean the Subordination Agreement, dated on or about the date

  hereof, by and between Lender and Inverness, as acknowledged and agreed to by

  Borrower, as the same now exists or may hereafter be amended, modified,

  supplemented, extended, renewed, restated or replaced.


  
	

   


  	

   


  	

   


  
	

  (xii)


  	

   


  	

  “Interest Expense” shall mean,

  for any period, as to Borrower, as determined in accordance with GAAP, the

  total interest expense of Borrower, whether paid or accrued during such

  period (including the interest component of Capital Leases for such period),

  including, without limitation, discounts in connection with the sale of any

  Accounts and bank fees, commissions, discounts and other fees and charges

  owed with respect to letters of credit, banker’s acceptances or similar

  instruments.


  
	

   


  	

   


  	

   


  





 




	

  (xiii)


  	

   


  	

  “Redeemable Preferred Stock”

  shall mean the Capital


  





Stock

of the Borrower consisting of the Series A Preferred Stock having a par value

of $.01 as described in and issued pursuant to the Amended and Restated

Certificate of Incorporation of Borrower.




	

   


  	

   


  	

   


  
	

  (xiv)


  	

   


  	

  “Provision for Taxes” shall

  mean an amount equal to all taxes imposed on or measured by net income,

  whether Federal, State, Provincial, county or local, and whether foreign or

  domestic, that are paid or payable by Borrower in respect of any period in

  accordance with GAAP.


  





 




                (c)   Interpretation. 

For purposes of this Amendment No. 3, unless otherwise defined herein,

all terms used herein, including, but not limited to, those terms used and/or

defined in the recitals above, shall have the respective meanings assigned to

such terms in the Loan Agreement.




 




2.                                       Consent to Acquisition and

Merger.

Subject to the terms and conditions contained herein, Lender hereby consents

to:  the Merger pursuant to the terms of

the Merger Agreements (as in effect on the date hereof) and   the acquisition by Inverness of all of the

issued and outstanding shares of the Capital Stock of Borrower pursuant to the

terms of the Merger Agreements (as in effect on the date hereof).  Lender agrees that such transactions shall

not be deemed to constitute a breach of Section 9.7 of the Loan Agreement.




 




3.                                       Letter of Credit Accommodations.




 




                (a)   Letter of Credit Sublimit.  Section 2.2(e) of the Loan Agreement is hereby amended by

deleting the reference to “$2,500,000” therein and substituting “$1,500,000”

therefor.




 




 




5





























 




 




                (b)    Letter of Credit Fees. 

Section 2.2(b) is hereby deleted in its entirety and the following

substituted therefor:




 




                                                                “(b)  In addition to any charges, fees or expenses

charged by any bank or issuer in connection with the Letter of Credit

Accommodations Borrower shall pay to Lender a letter of credit fee at a rate

equal to two (2%) percent per annum on the daily outstanding balance of the

Letter of Credit Accommodations for the immediately preceding month (or part

thereof), payable in arrears as of the first day of each succeeding month,

except that Borrower shall pay to Lender such letter of credit fee, at Lender’s

option, upon notice to Borrower, at a rate equal to four (4%) percent per annum

on such daily outstanding balance for: (i) the period from and after the date

of termination or non-renewal hereof until Lender has received full and final

payment of all Obligations (notwithstanding entry of a judgment against

Borrower) and (ii) the period from and after the date of the occurrence of an

Event of Default for so long as such Event of Default is continuing as

determined by Lender.  Such letter of

credit fee shall be calculated on the basis of a three hundred sixty (360) day

year and actual days elapsed and the obligation of Borrower to pay such fee

shall survive the termination or non-renewal of this Agreement.”




 




4.                                       Inventory Appraisals.  Section 7.3(d) of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:




 




                                                                “(d)

Borrower shall, at its expense, upon Lender’s request no more than two (2)

times in any twelve (12) month period and in the event Excess Availability at

any time is less than $1,000,000, then two (2) additional times (for a total of

up to four (4) times, but no more often than one (1) time in any calendar  quarter, in any twelve (12) month period),

but in any event at any time or times as Lender may request on or after an

Event of Default, deliver or cause to be delivered to Lender written appraisals

as to the Inventory in form, scope and methodology acceptable to Lender and by

an appraiser acceptable to Lender, addressed to Lender and upon which Lender is

expressly permitted to rely;”




 




5.                                       Equipment and Real Property

Appraisals.  Section 7.4(a) of the Loan Agreement is

hereby deleted in its entirety and the following substituted therefor:




 




                                                                “(a)

(i) upon Lender’s request, Borrower shall, at its expense, no more than once in

any twelve (12) month period, but at any time or times as Lender may request on

or after an Event of Default, deliver or cause to be delivered to Lender

written appraisals as to the Equipment and/or the Real Property in form, scope

and methodology acceptable to Lender and by an appraiser acceptable to Lender,

addressed to Lender and upon which Lender is expressly permitted to rely and

(ii) in addition to, and not in limitation of, the appraisals required to be

delivered to Lender pursuant to clause (i) above, Borrower shall, at its

expense, on or before ninety (90) days after the date of Amendment No. 3 (provided,

that, such appraisal may instead be delivered to Lender one hundred

twenty (120) days after the date of Amendment No. 3 if the additional thirty

(30) days is required solely due to the failure of the 




 




 




6





























 




                                                appraiser to deliver such appraisal), deliver or cause to be

delivered to Lender written appraisals as to the Equipment and the Real

Property in form, scope and methodology acceptable to Lender and by an

appraiser acceptable to Lender, addressed to Lender and upon which Lender is

expressly permitted to rely;”




 




6.                                       Reserves.




 




                (a)   The existing special Reserve in effect as of the date hereof in

the amount of $350,000 shall be terminated upon the satisfaction of each of the

following conditions as determined by Lender:  

the outstanding principal amount of the Term Loan shall be less than the

amount equal to eighty (80%) percent of the Equipment Net Orderly Liquidation

Value and   no Event of Default, or act,

condition or event which with notice or passage of time or both would

constitute and Event of Default, shall exist or have occurred.  The foregoing shall not be construed to in

any manner limit or impair the right of Lender to establish Reserves from time

to time, including any Reserve pursuant to the terms of the amendment to the

term “Reserve” set forth in this Amendment No. 3.




 




                (b)   The existing Special Availability Reserve in effect as of the

date hereof in the amount of $500,000 (as provided for in Amendment No. 1)

shall be terminated upon the satisfaction of each of the following conditions

as determined by Lender:   the EBITDA of

Borrower for any six (6) consecutive months (treated as a single accounting

period), commencing with the six (6) months ending August 31, 2002 shall be

greater than the amount set forth on Schedule 8(b) hereto for such six (6)

consecutive months and  no Event of

Default, or act, condition or event which with notice or passage of time or

both would constitute an Event of Default, shall exist or have occurred.




 




7.                                       Sale of Assets. Section 9.7 of the Loan

Agreement is hereby amended to add a new Section 9.7(b)(vi) at the end thereof

as follows:




 




                                                                “(vi)

except for the issuance and sale by Borrower of the Redeemable Preferred Stock

to the extent permitted in Section 9.22 hereof.”




 




8.                                       Dividends and Redemptions.  Section 9.11 of the Loan Agreement is amended to add the

following sentence at the end thereof:




 




                                                                “except

for the redemption of the Redeemable Preferred Stock and the payment of

dividends with respect to the Redeemable Preferred Stock to the extent

expressly permitted in Section 9.22 hereof.”




 




9.                                       Inverness Investment.  Section 9.22 of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:




 




                                                                “9.22  Redeemable Preferred Stock.  Borrower may issue and sell its Capital

Stock consisting of the Redeemable Preferred Stock to Inverness upon the

effective date of the Merger (the “Inverness Investment”); provided, that,




 




                (a)   the net proceeds of the Inverness Investment payable to Borrower

in immediately available funds shall be not less than $3,900,000,




 




 




7





























 




 




                (b)   not less than $3,900,000 constituting the proceeds of the

Inverness Investment shall be paid to Lender for application to the

Obligations,




 




                (c)     the right of Inverness to redeem, repurchase acquire all or

any portion, or otherwise make any payment in respect of the Inverness Investment

shall be subordinate in right of payment to the indefeasible payment and

satisfaction in full of all of the Obligations to Lender as set forth in the

Inverness Subordination Agreement,




 




                (d)    Lender shall have received, in form and substance satisfactory

to Lender, an original of the Inverness Subordination Agreement duly

authorized, executed and delivered by each of Inverness and Borrower,




 




                (e)   Borrower shall not, and shall not be required to,  redeem repurchase, acquire all or any

portion, or otherwise make any payment in respect of any of the Redeemable

Preferred Stock, except  that, Borrower may make payments to

Inverness to redeem the Redeemable Preferred Stock owned and held by Inverness

and Borrower may pay dividends in cash to Inverness in respect of the

Redeemable Preferred Stock owned and held by Inverness in accordance with the

terms of the Amended and Restated Certificate of Incorporation of Borrower as

in effect on the date of Amendment No. 3, provided, that, as to

any such payment and after giving effect thereto, each of the following

conditions is satisfied as determined by Lender:  no Event of Default, or act, condition or event which with notice

or passage of time or both would constitute such an Event of Default, shall

exist or have occurred,  no such payment

shall be made prior to April 1, 2003, 

in no event shall the aggregate amount of all such payments in any year

exceed $1,000,000,  the Excess

Availability for each of the ten (10) consecutive business days prior to the

date of such payment shall have been not less than $2,000,000,   after giving effect to such payment, the

Excess Availability shall be not less than $2,000,000, and  in no event shall the aggregate amount of

the annual cash dividends paid in respect of the Redeemable Preferred Stock in

any fiscal year of Borrower exceed the amount equal to nine (9%) percent of the

Series A Purchase Price (as such term is defined in the Amended and Restated

Certificate of Incorporation of Borrower as in effect on the date of Amendment

No. 3),




 




                (f)    not less than $1,500,000 of the net cash proceeds of the

Inverness Investment shall be available to Borrower on and after the date of

Amendment No. 3 in immediately available funds for, and shall be used by Borrower

solely for, its working capital in the ordinary course of its business without

condition or limitation,




 




                                                                                                (g)   Inverness and Borrower shall not, directly

or indirectly,  amend, modify, alter or

change the terms of the Inverness Investment or any agreement, document or instrument

related thereto as in effect on the date of Amendment No. 3, except, that,

Inverness and Borrower may, after prior written notice to Lender, amend,

modify, alter or change the terms thereof so as to reduce or eliminate the

redemption or dividend rights in respect thereof, and




 




                (h)   Inverness and Borrower shall furnish to Lender all notices or

demands in connection with such Inverness Investment either received by

Borrower or on its behalf, promptly after the receipt thereof, or sent by Inverness

or on its behalf, concurrently with the sending thereof, as the case may be.”




 




 




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10.                                 Adjusted Tangible Net Worth.  Section 9.18 of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:




 




                                                    “9.18 Adjusted

Tangible Net Worth.  Borrower shall,

at all times, maintain




                                                    Adjusted

Tangible Net Worth of not less than the amounts set forth below for the period

indicated:




 




	

  Amount


  	

   


  	

  Period


  	

   


  
	

  $4,200,000


  	

   


  	

  From the date hereof to and including

  July 31, 2002


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  $3,800,000


  	

   


  	

  From August 1, 2002 to and including

  November 30, 2002


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  $4,500,000


  	

   


  	

  From December 1, 2002 to and

  including February 28, 2003


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  $5,000,000


  	

   


  	

  From March 1, 2003 to and including

  any time thereafter


  	

   


  





 




provided, that, no changes to the calculation of Adjusted

Tangible Net Worth directly attributable to purchase accounting adjustments as

a result of the Merger shall be considered for purposes of this Section 9.18.”




 




11.                     Term.  Section 12.1(a) of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:




 




                                                      “(a)

This Agreement and the other Financing Agreements shall become effective as of

the date set forth on the first page hereof and shall continue in full force and

effect for a term ending October 15, 2003 (the “Renewal Date”), and from year

to year thereafter, unless sooner terminated pursuant to the terms hereof.

Lender or Borrower may terminate this Agreement and the other Financing

Agreements effective on the Renewal Date or on the anniversary of the Renewal

Date in any year by giving to the other party at least ninety (90) days prior

written notice; provided, that, this Agreement and all other

Financing Agreements must be terminated simultaneously.  Upon the effective date of termination or

non-renewal of the Financing Agreements, Borrower shall pay to Lender, in full,

all outstanding and unpaid Obligations and shall furnish cash collateral to

Lender in such amounts as Lender determines are reasonably necessary to secure

Lender from loss, cost, damage or expense, including attorneys’ fees and legal

expenses, in connection with any contingent Obligations, including issued and

outstanding Letter of Credit Accommodations and checks or other payments

provisionally credited to the Obligations and/or as to which Lender has not yet

received final and indefeasible payment. 

Such payments in 




 




 




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respect of the Obligations and

cash collateral shall be remitted by wire transfer in Federal funds to such

bank account of Lender, as Lender may, in its discretion, designate in writing

to Borrower for such purpose.  Interest

shall be due until and including the next business day, if the amounts so paid

by Borrower to the bank account designated by Lender are received in such bank

account later than 12:00 noon, New York City time.”




 




12.       Early Termination Fee.  Section 12.1(c) of the Loan Agreement is

hereby deleted in its entirety and the following substituted therefor:




 




                                                    “(c) If

for any reason this Agreement is terminated prior to the end of the then

current term or renewal term of this Agreement, in view of the impracticality

and extreme difficulty of ascertaining actual damages and by mutual agreement

of the parties as to a reasonable calculation of Lender’s lost profits as a

result thereof, Borrower agrees to pay to Lender, upon the effective date of

such termination, an early termination fee in the amount set forth below if

such termination is effective in the period indicated: 




	

  Amount


  	

   


  	

  Period


  	

   


  
	

  $450,000


  	

   


  	

  From the date hereof to and including

  October 15, 2002


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  $150,000


  	

   


  	

  From October 16, 2002 to but not

  including October 15, 2003, or if the term of this Agreement is extended, at

  any time prior to the end of the then current term.


  	

   


  





 




 




Such early termination fee shall

be presumed to be the amount of damages sustained by Lender as a result of such

early termination and Borrower agrees that it is reasonable under the

circumstances currently existing.”




 




13.                     Eurodollar Rate Loans.




 




            (a)    Section 2 of Amendment No. 1 to Loan and Security Agreement is

hereby deleted in its entirely and the following substituted therefor:

“intentionally deleted”.




 




            (b)   Section 3.1(c) of the Loan Agreement is hereby amended by adding

the following to the end of  thereof:




 




“Upon

the occurrence of an Event of Default or an event which with notice or passage

of time or both would constitute an Event of Default, Lender shall cease making

Eurodollar Rate Loans.”




 




                                    14.           Waiver of Event of Default.




 




 




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            (a)    Subject to the terms and conditions set forth herein, Lender

hereby waives the Event of Default arising under Section 10.1(a) of the Loan

Agreement as a result of the failure of Borrower to maintain an Adjusted

Tangible Net Worth of $5,000,000 as required by Section 9.18 of the Loan

Agreement as of the date hereof; provided, that, such waiver

shall only apply to the failure of Borrower to comply with such Section 9.18

through and including the date hereof (but not at any time after the date

hereof).




 




            (b)    Lender has not waived, is not by this Amendment waiving, and

has no intention of waiving any Event of Default which may have occurred on or

prior to the date hereof, whether or not continuing on the date hereof, or

which may occur after the date hereof (whether the same or similar to the Event

of Default referred to above or otherwise), other than the Event of Default

specifically referred to above through and including the date hereof (subject

to the terms and conditions set forth in Section 14(a) above).   The foregoing waiver shall not be construed

as a bar to or a waiver of any other or further Event of Default on any future

occasion, whether similar in kind (and including the failure of Borrower to

comply with Section 9.18 at any time after the date hereof) or otherwise and

shall not constitute a waiver, express or implied, of any of the rights and

remedies of Lender arising under the terms of the Loan Agreement or any other

Financing Agreements on any future occasion or otherwise.




 




	

  15.


  	

   


  	

  Amendment

  Fee.  In consideration of the amendments set

  forth herein, Borrower shall pay to Lender a fee in the amount of $150,000

  and Lender may, at its option, charge the loan account of Borrower maintained

  by Lender the amount of such fee, which fee is fully earned and payable as of

  the date hereof.


  
	

   


  	

   


  	

   


  
	

  16.


  	

   


  	

  Additional

  Representations, Warranties and Covenants.  Borrower represents, warrants and covenants with and to Lender

  as follows, which representations, warranties and covenants are continuing

  and shall survive the execution and delivery hereof, and the truth and

  accuracy of, or compliance with each, together with the representations,

  warranties and covenants in the other Financing Agreements, being a continuing

  condition of the making of Loans by Lender to Borrower:


  





 




            (a)   The Merger is valid and effective in accordance with the terms

of the Merger Agreements, and the corporation statutes of the State of Delaware

and Borrower is the surviving corporation pursuant to the Merger.




 




            (b)   All actions and proceedings required by the Merger Agreements,

applicable law and regulation (including, but not limited to, compliance with

the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended) have

been taken and the transactions required thereunder have been duly and validly

taken and consummated.




 




            (c)   No court of competent jurisdiction has issued any injunction,

restraining order or other order which prohibits consummation of the

transactions described in the Merger Agreements and no governmental action or

proceeding has been threatened or commenced seeking any injunction, restraining

order or other order which seeks to void or otherwise modify the transactions

described in the Merger Agreements.




 




 




11





























 




 




            (d)   Contemporaneously with the Merger, Borrower, as survivor

pursuant to the Merger, is and shall continue to be liable in all respects for

all of the Obligations and the Obligations are unconditionally owing to Lender

by Borrower as survivor pursuant to the Merger, without offset, defense or

counterclaim of any kind, nature or description whatsoever.  The security interests in and liens upon the

assets and properties of Borrower in favor of Lender shall continue upon such

assets and properties to which Borrower shall succeed pursuant to the Merger,

and such security interests and liens and their perfection and priority shall

continue in all respects in full force and effect.  Without limiting the generality of the foregoing, the Merger

shall in no way limit, impair or adversely affect the Obligations, howsoever

arising, or any security interest or liens securing the same.




 




            (e)   Borrower has delivered, or caused to be delivered, to Lender,

true, correct and complete copies of the Merger Agreements.




 




            (f)   All projected financial statements provided to Lender by

Borrower including, but not limited to, the projected financial statements

delivered in accordance with Section 17(k) hereto, represent Borrower’s reasonable

best estimate of the future financial performance of Borrower for the periods

set forth therein and have been prepared on the assumptions set forth therein

which Borrower believes are fair and reasonable in light of current and

reasonably foreseeable business conditions.




 




            (g)   Borrower shall provide to Lender, in form and substance

satisfactory to Lender, each month, a report outlining the payments made by

Borrower with respect to the restructuring costs and charges of the Merger during

the immediately preceding month, until such time as all such costs and charges

incurred by Borrower in connection with the Merger have been paid in full.




 




            (h)   After giving effect to Section 14 above and the amendments to

the Loan Agreement provided for herein, no Event of Default exists or has

occurred as of the date of this Amendment No. 3.




 




            (i)   This Amendment No. 3 has been duly executed and delivered by

each of Borrower, Guarantor and International Vitamin Overseas Sales Corp. and

is in full force and effect as of the date hereof and the agreements and

obligations of each of Borrower, Guarantor and International Vitamin Overseas

Sales Corp. contained herein constitute legal, valid and binding obligations of

each of Borrower, Guarantor and International Vitamin Overseas Sales Corp.

enforceable against each of them in accordance with their respective terms.




 




	

  17.


  	

   


  	

  Conditions

  Precedent.  The effectiveness of the amendments and

  consents contained herein shall be subject to the satisfaction of each of the

  following, in a manner satisfactory to Lender and its counsel:


  





 




                                            (a)   Lender shall have received this Amendment

No. 3 duly authorized, executed and delivered by the parties hereto;




 




 




12





























 




 




            (b)    no Event of Default, or event, act or condition which with

notice or passage of time or both would constitute an Event of Default, shall

exist or have occurred (after giving effect to the amendments to the Financing

Agreements made by this Amendment No. 3);




 




            (c)   the Excess Availability as determined by Lender, as of the date

hereof, shall not be less than $ 1,000,000 after giving effect to the

amendments to the Loan Agreement provided for in this Amendment No. 3;




 




            (d)   Lender shall have received, in form and substance satisfactory

to Lender, evidence that the Merger Agreements have been duly executed and

delivered by and to the appropriate parties thereto and the transactions

contemplated under the terms of the Merger Agreements have been consummated

prior to or contemporaneously with the execution of this Agreement;




 




            (e)    Lender shall have received, in form and substance satisfactory

to Lender, the opinion letter of counsel(s) to Borrower with respect to the

Merger Agreements, the effectiveness of the Merger as of the date hereof, the

Financing Agreements and the security interests and liens of Lender with

respect to the Collateral and such other matters as Lender may request;




 




            (f)    Immediately upon the effectiveness of the Merger, Lender shall

have received, in form and substance satisfactory to Lender, evidence that the

certificates of Merger with respect to the Merger have been filed with the

Secretary of State of the State of Delaware and the Merger is valid and

effective in accordance with the terms and provisions of the Merger Agreements

and the applicable corporation statutes of the State of Delaware;




 




            (g)   Immediately upon the effectiveness of the Merger, Lender shall

have received, in form and substance satisfactory to Lender, a true, correct

and complete copy of the Amended and Restated Certificate of Incorporation of

Borrower authorizing the Redeemable Preferred Stock issued in connection with

the Inverness Investment;




 




            (h)   Immediately upon the effectiveness of the Merger, Lender shall

have received, in form and substance satisfactory to Lender, the original of

the Inverness Subordination Agreement as duly authorized, executed and

delivered by Inverness and Borrower;




 




            (i)    Immediately upon the effectiveness of the Merger, Lender shall

have received, in form and substance satisfactory to Lender, an opinion letter

from counsel to Borrower and Inverness with respect to the effectiveness of the

Inverness Subordination Agreement.




 




            (j)    Immediately upon the effectiveness of the Merger, Lender shall

have received by wire transfer in immediately available funds, all of the

proceeds of the Inverness Investment, in the amount of not less than $3,900,000

for application to the Obligations;




 




            (k)    Lender shall have received, in form and substance satisfactory

to Lender, a pro–forma balance sheet of Borrower reflecting the initial

transactions contemplated hereunder, including, but not limited to, (i) the

consummation of the Merger and the transactions contemplated in connection

therewith in accordance with the Merger Agreements and (ii) the Inverness

Investment in Borrower on the date hereof and the use of such Inverness

Investment as provided herein,




 




 




13





























 




accompanied

by a certificate, dated of even date herewith, signed by the chief financial

officer of Borrower on its behalf, stating that such pro–forma balance

sheet represents the reasonable, good faith opinion of Borrower as to the

subject matter thereof as of the date of such certificate; and




 




            (l)    Lender shall have received, in form and substance satisfactory

to Lender,  projected consolidated

financial statements of Borrower and its Subsidiaries for the next two (2)

fiscal years following the date hereof (including forecasted income statements,

cash flow statements and balance sheets), all in reasonable detail, on a

monthly basis and in form and substance satisfactory to Lender, together with

such supporting information as Lender may request.




 




	

  18.


  	

   


  	

  Effect

  of this Amendment.  Except as

  expressly set forth herein, no other amendments, consents, changes or

  modifications to the Financing Agreements are intended or implied, and in all

  other respects the Financing Agreements are hereby specifically ratified,

  restated and confirmed by all parties hereto as of the effective date hereof

  and Borrower shall not be entitled to any other or further amendment or

  consent by virtue of the provisions of this Amendment No. 3 or with respect

  to the subject matter of this Amendment No. 3.  To the extent of conflict between the terms of this Amendment

  No. 3 and the other Financing Agreements, the terms of this Amendment No. 3

  shall control.  The Loan Agreement and

  this Amendment No. 3 shall be read and construed as one agreement.


  
	

   


  	

   


  	

   


  
	

  19.


  	

   


  	

  Further

  Assurances.  The parties hereto shall execute and

  deliver such additional documents and take such additional action as may be

  necessary or desirable to effectuate the provisions and purposes of this

  Amendment No. 3, including, without limitation, a written agreement by

  Borrower in favor of Lender, ratifying, among other things, the Financing

  Agreements, the Obligations and the liens and security interests securing the

  Obligations.


  
	

   


  	

   


  	

   


  
	

  20.


  	

   


  	

  Governing

  Law.  The validity, interpretation and

  enforcement of this Amendment No. 3 and the other Financing Agreements and

  any dispute arising out of the relationship between the parties hereto

  whether in contract, tort, equity or otherwise, shall be governed by the

  internal laws of the State of New York (without giving effect to principles

  of conflicts of laws).


  
	

   


  	

   


  	

   


  
	

  21.


  	

   


  	

  Binding

  Effect.  This Amendment No. 3 shall be binding upon

  and inure to the benefit of each of the parties hereto and their respective

  successors and assigns.


  
	

   


  	

   


  	

   


  
	

  22.


  	

   


  	

  Headings.  The headings listed herein are for convenience only and do not

  constitute matters to be construed in interpreting this Amendment No. 3.


  
	

   


  	

   


  	

   


  
	

  23.


  	

   


  	

  Counterparts.  This Amendment No. 3 may be executed in any number of

  counterparts, but all of such counterparts shall together constitute but one

  and the same agreement.  In making

  proof of this Amendment No. 3, it shall not be necessary to produce or

  account for more than one counterpart thereof signed by each of the parties

  hereto.  Delivery of an executed

  counterpart of this Amendment No. 3 by telefacsimile shall have the same

  force and effect as delivery of an original executed counterpart of this

  Amendment No. 3.  Any party delivering

  an executed counterpart of this Amendment No. 3 by telefacsimile also shall

  deliver an original executed counterpart of this Amendment No. 3, but the

  failure to deliver 


  





 




 




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         an original executed counterpart shall not affect the

validity, enforceability, and binding effect of this Amendment No. 3 as to such

party or any other party.




 




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                IN

WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be duly

executed and delivered by their authorized officers as of the day and year

first above written.




 




	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  CONGRESS FINANCIAL CORPORATION


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  By:


  	

  /s/ Thomas Martin


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  Title:


  	

  Vice President


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  IVC INDUSTRIES, INC.


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  By:


  	

  /s/ Thomas Bocchino


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  Title:


  	

  Chief Financial Officer


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  HALL LABORATORIES LTD.


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   

  


  	

  By:


  	

  /s/ William Lederman


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   

  


  	

  Title:


  	

  President


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  INTERNATIONAL VITAMIN OVERSEAS SALES CORP.


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   

  


  	

  By:


  	

  /s/ Thomas Bocchino


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  Title:


  	

  Chief Financial Officer


  





 




 




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