AMENDMENT NO. 1 TO
FINANCE AGREEMENT
This AMENDMENT NO. 1 TO FINANCE AGREEMENT (this "Amendment"), dated as of June
1, 1999, by and between NATURADE, INC., a Delaware corporation (the "Borrower"),
and HEALTH HOLDINGS AND BOTANICALS, INC., a California corporation (the
"Lender").
PRELIMINARY STATEMENT
Reference is made to the Finance Agreement, dated as of March 17, 1999 (the
"Finance Agreement"), between Borrower and Lender (collectively, the "Parties").
Capitalized terms appearing herein have the meanings specified in the Finance
Agreement.
AMENDMENT
In consideration of the premises, and in consideration of the
representations, warranties, and covenants herein contained, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged by each Party, the Parties agree as follows:
PARAGRAPH 1. Section 1.01 of the Finance Agreement is hereby amended by
redefining the "Commitment" to be One Million Six Hundred Thousand Dollars
1
($1,600,000), effective as of the Effective Amendment Date (defined below).
PARAGRAPH 2. Sections 1.03 of the Finance Agreement is hereby amended and
restated in full as follows, effective as of the Effective Amendment Date:
SECTION 1.03. REPAYMENT. The Borrower shall repay the
aggregate unpaid principal amount of all Advances made prior to June
1, 1999, together with all amounts of interest then accrued thereon,
by no later than March 7, 2000. The Borrower shall repay the
aggregate unpaid principal amount of all Advances made after June 1,
1999, together with all amounts of interest then accrued thereon, by
no later than May 31, 2000 (such date, or the earlier date on which
the Advances shall become due and payable in accordance with the terms
hereof, "Maturity Date"). All amounts received by the Lender in
repayment of Advances shall be applied to such of the Advances as the
Lender shall determine in its sole and complete discretion.
PARAGRAPH 3. Sections 3.01(h), (i) and (j) of the Finance Agreement are
hereby amended and restated in full as follows, effective as of the Effective
Amendment Date:
(h) Except as set forth in Schedule 3.1(h), the Borrower is the
legal and beneficial owner of the Collateral (defined below) free and
clear of any lien, security interest, option or other encumbrance of
any kind (collectively, "Liens") except for (i) the security interest
created by this Agreement, (ii) security interests in favor of South
Bay Bank (the "Bank") arising under agreements in effect on the date
hereof (such Liens being
2
referred to herein as the "Prior Liens"), (iii) Liens other than
Prior Liens permitted by Section 4.02(a)(ii) (such Liens
beingreferred to herein as the "Additional Prior Liens" and the
Debt secured thereby being referred to herein as "Additional
Secured Debt") and (iv) Liens described on Schedule 3.1(h). Except
as set forth in Schedule 3.1(h), no effective financing statement
or other instrument similar in effect covering all or any part of
the Collateral is on file in any recording office, except such as
may have been filed in favor of the Lender relating to this
Agreement, in favor of the Bank relating to the Prior Liens, and
the Additional Prior Liens in favor of the lenders secured thereby
(the "Additional Prior Lenders");
(i) Appropriate financing statements covering the Collateral and
the Lien created hereby ("Financing Statements") were recorded in all
applicable jurisdictions no later than March 18, 1999. The recordings
of such Financing Statements and this Agreement create a valid and
perfected security interest in the Collateral, securing the payment of
the Secured Obligations (defined below), subject, as to priority, only
to the Prior Liens, the Additional Prior Liens and Liens listed on
Schedule 3.1(h), and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly
taken.
3
(j) Except with respect to South Bay Bank and the Additional
Prior Lenders (and the filings of all continuation financing
statements necessary to maintain the effectiveness of the Financing
Statements), no consent of any other person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other third party is
required either (i) for the grant by the Borrower of the assignment
and security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Borrower, (ii) for the perfection
or maintenance of the pledge, assignment and security interest created
hereby (including as to the priority of such pledge, assignment or
security interest) or (iii) to the best knowledge of Borrower, for the
exercise by the Lender of its the remedies in respect of the
Collateral pursuant to this Agreement.
.
PARAGRAPH 4. Section 5.01(g) the Finance Agreement is hereby amended and
restated in full as follows, effective as of the Effective Amendment Date:
(g) This Agreement shall fail to create a valid and
perfected Lien in any material portion of the Collateral securing the
payment of the Secured Obligations, subject, as to priority, only to
the Prior Liens, the Additional Prior Liens and Liens described on
Schedule 3.1(h); or
PARAGRAPH 5. Section 5.02 of the Finance Agreement is hereby amended and
restated in full as follows, effective as of the Effective Amendment Date:
SECTION 5.02. LENDER'S RIGHT TO CONVERT. Without limitation to
any other right or remedy Lender may have under this Agreement,
applicable law, or otherwise, upon the occurrence and during the
continuance of any Event of Default, the Lender may, by notice to the
Borrower in accordance with Section 8.02, convert all or any part of
the Advances and other Secured Obligations into Common Stock of the
Borrower at a conversion price equal to the lower of (i) $1.00 per
share or (b) the Fair Market Value of the Borrower's Common Stock
determined with respect to the date of such notice or, at Lender's
sole election, at a date specified in such notice on or prior to the
Maturity Date and occurring during the continuance of any Event of
Default.Upon Borrower's receipt of such notice, Borrower shall
immediately issue shares of Common Stock to the Lender as provided in
such notice. Upon such issuance the amount of the Secured Obligations
shall be reduced by the amount applied to such conversion.
4
PARAGRAPH 6. Section 7.01 of the Finance Agreement is hereby amended and
restated in full as follows, effective as of the Effective Amendment Date:
SECTION 7.01. GRANT OF WARRANTS.
(a) The Borrower hereby agrees to grant to the Lender warrants
(the "Warrants") to acquire an initial aggregate of 600,000 shares of
common stock of the Borrower (the "Common Stock") on the terms and
conditions set forth below.
(b) Simultaneously with each Advance, and as a condition
precedent thereto, the Borrower shall issue to Lender Warrants to
purchase the number of shares of Common Stock equal to the product of
(.3) and the amount of such Advance; PROVIDED, HOWEVER, anything to
the contrary appearing herein notwithstanding, with respect to any
Advance made after June 1, 1999, the Borrower shall issue to Lender
Warrants to purchase the number of shares of Common Stock equal to the
product of (.5) and the amount of such Advance;
(c) The initial exercise price for each of the Warrants shall be
$2.125 per share, subject to adjustment as provided herein; PROVIDED,
HOWEVER, anything to the contrary appearing herein notwithstanding,
the initial exercise price for each of the Warrants issued with
respect to an Advance made after June 1, 1999 shall be $1.00 per
share, subject to adjustment as provided herein (the exercise price of
each Warrant being referred to as the"Exercise Price").
(d) Each of the Warrants shall expire on the tenth anniversary of
the date on which such Warrant is issued.
PARAGRAPH 7. Anything to the contrary appearing in the Finance Agreement
or any Warrant notwithstanding, the Exercise Price of each Warrant issued prior
to June 1, 1999 is hereby reset as of the Effective Amendment Date to be $1.00
per share, subject to further adjustment as provided in the Finance Agreement,
as amended hereby. The Parties hereby acknowedge that as of the Effective
Amenmdnet Date, 300,000 Warrants have already been issued.
PARAGRAPH 8. Section 8.10 of the Finance Agreement is hereby amended and
restated in full as follows, effective as of the Effective Amendment Date:
5
SECTION 8.10 SUBORDINATION. The Borrower's obligations under
this Agreement shall in all respects be subject and subordinate to the
Borrower's obligations to the Bank. Lender hereby agrees that, upon
Borrower's request, Lender will in good faith negotiate and enter into
a reasonable subordination agreement with the Bank or Additional Prior
Lenders, as applicable, respecting subordinating the Liens created
hereby and by the Mortgages to the Prior Liens or Additional Prior
Liens, as applicable.
PARAGRAPH 9. The Borrower hereby makes, as of the date hereof and as of the
Effective Amendment Date, each representation and warranty appearing in Section
3.01 of the Finance Agreement. If any of the representations and warranties
made by the Borrower pursuant to this Paragraph 9 shall prove to have been
incorrect in any material respect when made, such incorrectness shall constitute
an Event of Default under Section 5.01(b) of the Finance Agreement.
PARAGRAPH 10. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
PARAGRAPH 11. This Amendment may be executed in any number of counterparts
with the same effect as if each of the Parties had signed the same document.
All counterparts shall be construed together and shall constitute one agreement.
PARAGRAPH 12. This Amendment shall be adopted and be effective as an
amendment to the Finance Agreement on the date of delivery (including by
facsimile) by each of the Parties to each other of an executed counterpart
hereto (the "Effective Amendment Date"). From and after the Effective Amendment
Date the Finance Agreement shall be amended as provided in this Amendment. This
Amendment shall be effective only to amend to provisions of the Finance
Agreement as specifically provided hereby, all other provisions of the Finance
Agreement are hereby confirmed as fully effective in their entireties in
accordance with their terms, and the Liens created by the Finance Agreement as
amended hereby shall continue to secure all obligations of the Borrower under
the Finance Agreement as amended hereby.
6
IN WITNESS WHEREOF, the Parties have entered into this Amendment No. 1
as of the date first above set forth.
NATURADE, INC.
By: /s/ Xxxx X. Xxxxxxx /s/ Xxxxxxxx X. Xxxxxx
------------------------- -------------------------
Title: CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
HEALTH HOLDINGS AND
BOTANICALS, INC.
By /s/ Xxxxxx X. Boisseire, Jr.
----------------------------
Title: PRESIDENT
7
