exv10wao



 






Exhibit 10-Ao




FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT




     This Amendment, as of August 17, 2004, is made by and between ZILA
NUTRACEUTICALS, INC., an Arizona corporation (“ZN”), ZILA BIOTECHNOLOGY, INC.,
an Arizona corporation (“ZB”), ZILA PHARMACEUTICALS, INC., a Nevada corporation
(“ZP”), ZILA SWAB TECHNOLOGIES, INC., an Arizona corporation (“ZS”), OXYCAL
LABORATORIES, INCORPORATED, an Arizona corporation (“Oxycal”) (collectively,
jointly and severally the “Borrower”), and WELLS FARGO BUSINESS CREDIT, INC., a
Minnesota corporation (the “Lender”).



Recitals




     The Borrower and the Lender are parties to a Credit and Security Agreement
dated as of February 6, 2004 (the “Credit Agreement”). Capitalized terms used
in these recitals have the meanings given to them in the Credit Agreement
unless otherwise specified.



     The Borrower has requested that certain amendments be made to the Credit
Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.



     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:



     1. Amendments. The Credit Agreement is hereby amended as follows:



          (a) The definition of “Book Net Worth” contained in Section 1.1 of the
Credit Agreement is hereby deleted and replaced as follows:




“Book Net Worth” means the aggregate of the common and
preferred stockholders’ equity in the Guarantor, determined
in accordance with GAAP.



          (b) Romanette (vi) contained in the definition of “Eligible Accounts”
contained in Section 1.1 of the Credit Agreement is hereby deleted and replaced
as follows:




     (vi) Accounts owed by an account debtor (other than
Associated National Brokerage) located outside the United
States which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender,
in the Lender’s possession or control, and with respect to
which a control agreement concerning the letter-of-credit
rights is in effect, and acceptable to the Lender in all
respects, in its sole discretion, or (B)



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     covered by a foreign receivables insurance policy acceptable
to the Lender in its sole discretion;



          (c) Sections 6.2(a) through 6.2(c) are hereby deleted and replaced as
follows:




(a) Quarterly Net Worth. The Borrower covenants
that as of December 31, 2003, the Guarantor had
a Book Net Worth of not less than
$50,000,000.00. The Borrower covenants that,
commencing with the fiscal quarter ending July
31, 2004 and continuing each quarter thereafter,
the Guarantor shall not achieve a Book Net Worth
decrease of more than the amounts set forth
below as measured from the last day of the
immediately preceding fiscal year.



	 	 	 	 	 
	 	 	Maximum Net
	Quarter Ending
	 	Worth Decrease

	July 31, 2004
	 	$	6,000,000.00	 
	October 31, 2004
	 	$	3,600,000.00	 
	January 31, 2005
	 	$	6,200,000.00	 
	April 30, 2005
	 	$	8,200,000.00	 
	July 31, 2005
	 	$	7,200,000.00	 








(b) Monthly Net Worth. The Borrower covenants
that commencing with the month ending July 31,
2004 and continuing on the last day of each
month thereafter, the Guarantor’s Book Net Worth
as of the last day of each such month shall not
be less than the amounts set forth below:



	 	 	 	 	 
	July 31, 2004
	 	$	47,000,000.00	 
	August, 2004 through October, 2004
	 	$	46,000,000.00	 
	November, 2004 through January, 2005
	 	$	43,500,000.00	 
	February, 2005 through June, 2005
	 	$	41,000,000.00	 
	July, 2005
	 	$	42,500,000.00	 








(c) Capital Expenditures. The Borrower and the
Guarantor together will not incur or contract to
incur Capital Expenditures of more than
$1,700,000.00 in the aggregate during 2005
fiscal year.



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          (d) Exhibit B of the Credit Agreement is hereby deleted and replaced with
Exhibit B attached hereto.



     2. 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.



     3. Conditions Precedent. This Amendment shall be effective when the
Lender shall have received an executed original hereof, together with each of
the following, each in substance and form acceptable to the Lender in its sole
discretion:



          (a) The Acknowledgment and Agreement of Guarantor set forth at the end of
this Amendment, duly executed by the Guarantor and Subordinated Creditor.



          (b) A Certificate of the Secretary of the Borrower certifying as to (i)
the resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact that the articles of
incorporation and bylaws of the Borrower, which were certified and delivered to
the Lender pursuant to the Certificate of Authority of the Borrower’s secretary
or assistant secretary dated as of February 6, 2004 continue in full force and
effect and have not been amended or otherwise modified except as set forth in
the Certificate to be delivered, and (iii) certifying that the officers and
agents of the Borrower who have been certified to the Lender, pursuant to the
Certificate of Authority of the Borrower’s secretary or assistant secretary
dated as of February 6, 2004, as being authorized to sign and to act on behalf
of the Borrower continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of the Borrower authorized to
execute and deliver this Amendment and all other documents, agreements and
certificates on behalf of the Borrower.



          (c) Such other matters as the Lender may require.



     4. 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 has 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



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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 Article V of
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.



     5. References. All references in the Credit Agreement to “this Agreement”
shall be deemed to refer to the Credit Agreement as amended hereby; and any and
all references in the Security Documents to the Credit Agreement shall be
deemed to refer to the Credit Agreement as amended hereby.



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



     7. Release. The Borrower and each Guarantor by signing the Acknowledgment
and Agreement of Guarantor each 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 directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower or such Guarantor has
had, now has or has made claim to have against any such person for or by reason
of any act, omission, matter, cause or thing whatsoever arising from the
beginning of time to and including the date of this Amendment, whether such
claims, demands and causes of action are matured or unmatured or known or
unknown.



     8. 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 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.



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     9. Miscellaneous. This Amendment and the Acknowledgment and Agreement of
Guarantor may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.



     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.



	 	 	 	 	 
	 	 	ZILA NUTRACEUTICALS, INC., an Arizona corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	

	 	 	 	Vice President
	 
	 	 	 	 
	 	 	ZILA BIOTECHNOLOGY, INC., an Arizona corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	

	 	 	 	Vice President
	 
	 	 	 	 
	 	 	ZILA PHARMACEUTICALS, INC., a Nevada corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	

	 	 	 	Vice President
	 
	 	 	 	 
	 	 	ZILA SWAB TECHNOLOGIES, INC., an Arizona corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	

	 	 	 	Vice President
	 
	 	 	 	 
	 	 	OXYCAL LABORATORIES, INCORPORATED, an Arizona corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	

	 	 	 	Vice President
	 
	 	 	 	 
	 	 	WELLS FARGO BUSINESS CREDIT, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Darcy Della Flora
	

	 	 	 	
 
	

	 	 	 	Vice President







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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS




     The undersigned, a guarantor of the indebtedness of the Borrower, as
defined above (the “Borrower”) to Wells Fargo Business Credit, Inc. (the
“Lender”) pursuant to a Guaranty dated as of February 6, 2004 (the “Guaranty”),
hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to
the terms (including without limitation the release set forth in paragraph 7 of
the Amendment) and execution thereof; (iii) reaffirms his or its obligations to
the Lender pursuant to the terms of his or its Guaranty; and (iv) acknowledges
that the Lender may amend, restate, extend, renew or otherwise modify the
Credit Agreement and any indebtedness or agreement of the Borrower, or enter
into any agreement or extend additional or other credit accommodations, without
notifying or obtaining the consent of the undersigned and without impairing the
liability of the undersigned under the Guaranty for all of the Borrower’s
present and future indebtedness to the Lender.



	 	 	 	 	 
	 	 	ZILA, INC., a Delaware corporation
	 
	 	 	 	 
	

	 	By:
	 	/s/ Andrew S. Stevens
	

	 	 	 	
 
	 	 	Vice President








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