AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS
AMENDMENT
TO LOAN AND SECURITY AGREEMENT
AND
WAIVER OF DEFAULTS
THIS
AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAVIER OF DEFAULTS (this
“Amendment”), dated as of February __, 2008, is entered into by and among
Nutrition 21, Inc., a New York corporation, Nutrition 21, LLC, a New York
limited liability company, Iceland Health, LLC a New York limited liability
company (each a “Borrower” and collectively, “Borrowers”) and Gerber Finance
Inc. (“Lender”).
RECITALS
Borrowers
and Lender are parties to a Loan and Security Agreement dated June 30, 2007
(as
amended from time to time, the “Loan Agreement”).
Borrower
has requested that certain amendments be made to the Loan Agreement and that
Lender waive certain Events of Default arising under the Loan Agreement, which
Lender is willing to make and do 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. Definitions.
Capitalized terms used in this Amendment have the meanings given to them in
the
Loan Agreement unless otherwise specified.
2. Amendments.
Upon the
terms and subject to the conditions set forth in this Amendment, the Loan
Agreement is hereby amended as follows:
(a) The
following defined term in Section 1(a) is amended to provide as
follows:
“Maximum
Revolving Amount”
means
Two Million Dollars ($2,000,000).
(b) The
following defined terms are inserted in the appropriate alphabetical order
in
Section 1(a):
“EBITDA”
means,
with respect to any Person, for any period (a) the Net Income (Loss) of such
Person for such period plus (b) the sum of, in each case to the extent included
in the calculation of such Net Income (Loss) but without duplication, (i) any
provision for income taxes or other taxes measured by net income, (ii) interest
expense, amortization of debt discount and commissions and other fees and
charges associated with indebtedness, (iii) any loss from extraordinary items,
(iv) any depreciation, depletion and amortization expense, (v) any aggregate
net
loss on the sale of property outside the ordinary course of business and (vi)
any other non-cash expenditure, charge or loss for such period and minus (c)
the
sum of, in each case to the extent included in the calculation of such Net
Income (Loss) and without duplication, (i) any credit for income taxes or other
taxes measured by net income, (ii) any interest income, (iii) any gain from
extraordinary items and any other non-recurring gain, (iv) any aggregate net
gain from the sale of property out of the ordinary course of business by such
Person and (v) any other non-cash gain.
“Iceland
Health Direct Response”
means
the division of Iceland Health, LLC known as Iceland Health Direct
Response.
“Net
Income (Loss)”
means,
with respect to any Person, for any period, the consolidated net income (loss)
after all expenses and taxes of such Person for such period.
(c) Section
13 is amended to provide as follows
“13. Financial
Covenants.
(a) Borrowers
and their Subsidiaries shall not at any time permit their Tangible Net Worth
on
a consolidated to be less negative than ($8,200,000).
(b) The
consolidated liabilities of Borrowers and their subsidiaries at the end of
each
month shall not exceed two times the net worth of Borrowers and their
Subsidiaries on a consolidated basis.
(c) Iceland
Health Direct Response shall achieve gross revenues of at least $5,000,000
for
each fiscal quarter.
(d) Borrower
and its Subsidiaries shall not incur a Net Loss in any fiscal quarter commencing
with the fiscal quarter ending September 30, 2008 and each fiscal quarter end
thereafter.
(e) Borrowers
and their Subsidiaries on a consolidated basis shall achieve EBITDA of at least
$1,250,000 for the fiscal quarter ending June 30, 2008.”
3. No
Other Changes.
Except
as explicitly amended by this Amendment, all of the terms and conditions of
the
Loan Agreement shall remain in full force and effect.
4. Waiver
of Defaults.
Upon
the terms and subject to the conditions set forth in this Amendment, Lender
hereby waives the Events of Default arising solely from (a) the failure of
Borrowers to maintain a Tangible Net Worth of at least ($5,000,000) for the
periods ending on and prior to December 31, 2007 and (b) Borrowers having a
loss
greater than $3,000,000 for the six month period ending December 31, 2007.
This
foregoing waiver shall be effective only in this specific instance and for
the
specific purpose for which it is given, and this waiver shall not entitle any
Borrower to any other or further waiver in any similar or other
circumstances.
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5. Amendment
Fee.
Borrowers shall pay Lender as of the date hereof a fully earned, non-refundable
fee in the amount of $60,000 in consideration of Lender’s execution and delivery
of this Amendment.
6. Conditions
Precedent.
This
Amendment, and the waiver set forth in Paragraph 4 hereof. shall be effective
when Lender shall have received an executed original hereof, together with
each
of the following, each in substance and form acceptable to Lender in its sole
discretion:
(a) A
Certificate of the Secretary of each Borrower certifying as to (i) the
resolutions of the board of directors of each Borrower approving the execution
and delivery of this Amendment, (ii) the fact that the articles of incorporation
or formation and bylaws or operating agreement of each Borrower, which were
certified and delivered to Lender pursuant to the Secretarial Certificate of
each Borrower’s secretary or assistant secretary dated June 30, 2007 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 each Borrower who have been certified to Lender, pursuant
to the Secretarial Certificate of each Borrower’s secretary or assistant
secretary dated June 30, 2007, as being authorized to sign and to act on behalf
of each Borrower continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of each Borrower authorized to
execute and deliver this Amendment and all other documents, agreements and
certificates on behalf of each Borrower;
(b) Payment
of the fee described in Paragraph 5 of this Amendment; and
(c) Receipt
by Lender in Lender’s account of $1,000,000 in cash to be held as collateral
security for the Obligations in accordance with Section 7 of this
Amendment.
7. Post
Amendment Items.
On the
date of this Amendment, Borrowers shall have deposited with Lender as cash
collateral for the Obligations cash in the amount of $1,000,000. Borrowers
hereby grant Lender a Lien in such cash to be held as security for the
Obligations. No later than February 15, 2008, Borrowers shall deliver to Lender
(a) evidence that Borrowers have established a Deposit Account owned by a
Borrower (the “Pledged Account”), which Pledged Account shall be free and clean
of all Liens except those in favor of Lender, (b) Borrowers shall have
instructed Lender to deposit the $1,000,000 in cash collateral into such Deposit
Account and (c) each of the following documents, in form and substance
satisfactory to Lender, duly executed by all parties thereto: (i) an agreement
among Borrowers, Lender and the financial institution which maintains the
Pledged Account effective to grant “control” (as defined under the applicable
UCC) over Pledged Account to Lender; (ii) a pledge agreement executed by the
applicable Borrowers pursuant to which Lender is granted a Lien on the Pledged
Account to secure the Obligations. Each Borrower acknowledges and agrees that
its failure to satisfy the requirements set forth in this paragraph 7 within
the
applicable time limit shall, in each event, constitute an Event of Default
under
the Loan Agreement.
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8. Representations
and Warranties.
Each
Borrower hereby represents and warrants to Lender as follows:
(a) Such
Borrower has all requisite power and authority to execute this Amendment and
any
other agreements or instruments required hereunder and to perform all of its
obligations hereunder, and this Amendment and all such other agreements and
instruments has been duly executed and delivered by such Borrower and constitute
the legal, valid and binding obligation of Borrower, enforceable in accordance
with its terms.
(b) The
execution, delivery and performance by such Borrower of this Amendment and
any
other agreements or instruments required hereunder 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 such Borrower, or the articles of incorporation
or formation or by-laws or operating agreement of such 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 such 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 Loan 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.
9. References.
All
references in the Loan Agreement to “this Agreement” shall be deemed to refer to
the Loan Agreement as amended hereby; and any and all references in the
Ancillary Agreement to the Loan Agreement shall be deemed to refer to the Loan
Agreement as amended hereby.
10. No
Other Waiver.
Except
as otherwise provided in Paragraph 4 hereof, the execution of this Amendment
and
the acceptance of all other agreements and instruments related hereto shall
not
be deemed to be a waiver of any Default or Event of Default under the Loan
Agreement or a waiver of any breach, default or event of default under any
Ancillary Agreement, whether or not known to Lender and whether or not existing
on the date of this Amendment.
11. Release.
Each
Borrower hereby absolutely and unconditionally releases and forever discharges
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 such 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.
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12. Costs
and Expenses.
Each
Borrower hereby reaffirms its agreement under the Loan Agreement to pay or
reimburse Lender on demand for all costs and expenses incurred by Lender in
connection with the Loan Agreement and the Ancillary Agreements, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, Borrowers, jointly and
severally, specifically agree to pay all fees and disbursements of counsel
to
Lender for the services performed by such counsel in connection with the
preparation of this Amendment and the documents and instruments incidental
hereto. Each Borrower hereby agrees that Lender may, at any time or from time
to
time in its sole discretion and without further authorization by Borrower,
make
a loan to Borrower under the Loan Agreement, or apply the proceeds of any loan,
for the purpose of paying any such fees, disbursements, costs and
expenses and
the
fee required under Paragraph 5 of this Amendment.
13. Governing
Law.
This
Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
14. Headings.
Section
headings in this Amendment are included herein for convenience of reference
only
and shall not constitute a part of this Amendment for any other
purpose.
15. Counterparts;
Facsimile.
This
Amendment may be executed by the parties hereto in one or more counterparts,
each of which shall be deemed an original and all of which when taken together
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature
hereto.
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IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
GERBER
FINANCE INC.
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NUTRITION
21, INC.
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By:
Name:
Title:
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By:
Name:
Title:
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NUTRITION
21, LLC
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ICELAND
HEALTH, LLC
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By:
Name:
Title:
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By:
Name:
Title:
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