WAIVER AND AMENDMENT NO. 2 TO CREDIT AGREEMENT
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THIS WAIVER AND AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment")
is entered into as of September 1, 2000, by and among XXXXXX, INC., a Colorado
corporation (the "Company"), XXXXXX TECHNICAL SERVICES, INC., a Delaware
corporation ("Technical"), BOTANICALS INTERNATIONAL EXTRACTS, INC., a Delaware
corporation, ZETAPHARM, INC., a New York corporation, XXXXXX NATURAL PRODUCTS,
INC., a Delaware corporation, and XXXXXXX LABORATORIES, INC. a Massachusetts
corporation ("Xxxxxxx" and collectively, the "Borrowers"), and XXXXX FARGO BANK,
N.A. (the "Lender").
RECITALS
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WHEREAS, the Borrowers (other than Technical) are currently indebted to
the Lender pursuant to the terms and conditions of that certain Credit Agreement
dated as of June 11, 1999 (the "Original Agreement") which was amended as of
October 29, 1999 (the Original Agreement, as heretofore amended and as amended
hereby, the "Agreement"); and
WHEREAS, the Lender has agreed to waive compliance by the Borrowers
with certain provisions of the Agreement, and the Lender and the Borrowers have
agreed to certain changes in the terms and conditions set forth in the Agreement
and have agreed to amend the Agreement to reflect said changes;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree to the following
waivers and that the Agreement shall be amended as follows:
A. Amendments.
1. Section 1.01 of the Agreement is amended by deleting entirely the
defined term "Borrowing Base" and replacing it with the following new
definition:
"'BORROWING BASE,' with respect to a Borrower, means an amount
equal to the sum of (i) Eligible Receivables (excluding those included
in clause (ii)) multiplied by 80%, (ii) Eligible Receivables of Nutraco
S.A., Luxembourg insured under FCIA insurance policy satisfactory to
the Lender multiplied by 90% less any deductible payable by Borrowers
under such policy, (iii) 50% of Eligible Inventory not to exceed
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$9,000,000, (iv) Eligible Improved Real Estate multiplied by 75%, and
(v) Eligible Land multiplied by 50%."
2. Section 1.01 of the Agreement is further amended by deleting
entirely the defined term "Change in Control" and replacing it with the
following new definition:
"'CHANGE IN CONTROL,' means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or
group (within the meaning of the Securities Exchange Act of 1934 and
the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) other than the Zuellig Owners, of shares
representing more than 25% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Company;
(b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of any Borrower by Persons who were neither (i)
nominated by the board of directors of such Borrower nor (ii) appointed
by directors so nominated; (c) the acquisition of direct or indirect
Control of any Borrower by any Person or group other than the Zuellig
Owners; (d) the ownership by any Person other than the Company of any
capital stock of a Borrower other than the Company; or (e) the
ownership by any Person other than the Zuellig Owners of any capital
stock of the Zuellig Group."
3. Section 1.01 of the Agreement is further amended by deleting
entirely the defined terms "Commitment," "Revolving Credit Commitment" and "Term
Loan Facility Commitment" and replacing them with the following new definition:
"'COMMITMENT' means the Lender's 'REVOLVING CREDIT COMMITMENT,'
as such commitment may be reduced from time to time pursuant to Section
2.07. The initial amount of the Lender's Revolving Credit Commitment is
$24,500,000, which amount shall be reduced to $21,000,000 effective
October 30, 2000 and $17,000,000 effective March 31, 2001."
4. Section 1.01 of the Agreement is further amended by adding
immediately after the term "Consolidated Net Worth" and immediately prior to the
term "Consolidated Tangible Net Worth" the following:
"'Consolidated Operating Cash Flow' means, for any period, the
net income (or deficit) of the Company and its Subsidiaries for such
period, PLUS depreciation and amortization of the Company and its
Subsidiaries for such period, in each case which would be included as
net income (or deficit), depreciation
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and amortization, as the case may be, on the statements of income of
the Company and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP."
5. Section 1.01 of the Agreement is further amended by adding
immediately after the term "Effective Date" and immediately prior to the term
"Eligible Inventory" the following:
"'Eligible Improved Real Estate' of a Borrower shall mean any
improved real estate of the Borrower with respect to which the Lender
has a first perfected security interest and not including vacant land."
6. Section 1.01 of the Agreement is further amended by adding
immediately after the term "Eligible Inventory" and immediately prior to the
term "Eligible Receivables" the following:
"'Eligible Land' of a Borrower shall mean any vacant land of
Borrower with respect to which the Lender has a first perfected
security interest."
7. Section 2.02 (a) of the Agreement is amended by deleting entirely
the provisions thereof and replacing them with the following:
"Each Borrowing shall be comprised only and entirely of Base Rate
Revolving Loans as the Borrower may request in accordance herewith."
8. Section 2.04(a) of the Agreement is amended by (i) deleting the
words "One Million Dollars ($1,000,000.00)" in the second proviso to the first
sentence thereof and replacing them with the words "Two Hundred Fifty Thousand
Dollars ($250,000.00)"; and (ii) deleting the last sentence of said Section
2.04(a).
9. Section 2.07 (a) of the Agreement is amended by deleting entirely
the provisions thereof and replacing them with the following:
"Section 2.07 TERMINATION AND REDUCTION OF COMMITMENTS. (a) The
Revolving Credit Facility Commitment, unless previously terminated,
shall automatically terminate at 5:00 p.m. California time, on
September 30, 2001. The Term Loan Facility Commitment shall terminate
as of the date of this Amendment."
10. Section 2.10 of the Agreement is amended (i) by deleting the words
"Term Loan Commitment" each time they appear in Section 2.10 and replacing them
with the words "Revolving Credit Commitment," and (ii) by deleting the words
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"Effective Date" from the fourth line thereof and replacing them with the words
"September 1, 2000."
11. Section 5.01 (a) of the Agreement is amended by deleting the words
"120 days" from the first line thereof and replacing them with the words "90
days."
12. Section 5.01 of the Agreement is amended by inserting immediately
after Section 5.01 (b) the following new clause 5.01 (c) and by renumbering each
following clause of Section 5.01 accordingly:
"(c) within 15 days after the end of the first two months of each
of the first three fiscal quarters of each fiscal year of the Company,
(i) its consolidated balance sheet and related statements of operations
and cash flows as of the end of and for such month and (except in the
case of the statements of cash flows) the then elapsed portion of the
fiscal year, all certified by its Chief Financial Officer as presenting
fairly in all material respects the financial condition and results of
operations of the Company and its Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied, subject to normal
year-end audit adjustments and the absence of footnotes, and (ii)
consolidating balance sheets of the Company and of each other Borrower
setting forth such information separately for the Company and for each
other Borrower and related consolidating statements of operations of
the Company and of each other Borrower setting forth such information
separately for the Company and each other Borrower as of the end of and
for such month and then elapsed portion of the fiscal year, all of
which shall be certified by the Chief Financial Officer of the Company
as fairly presenting the financial condition and results of operations
therein shown in accordance with GAAP consistently applied subject to
normal year-end adjustments and the absence of footnotes;"
13. Section 5.01 (d) of the Agreement (prior to this Amendment Section
5.01 (c)) is amended by deleting the words "clause (a) or (b) above" and
replacing them with the words "clause (a), (b) or (c) above."
14. Section 5.01 of the Agreement is further amended by inserting
immediately after Section 5.01 (i) (formerly Section 5.01 (h)) the following:
"(j) within fifteen (15) days after September 30, 2000, and
within fifteen (15) days after the end of each six (6) month period
thereafter, a schedule listing each Account Debtor of the Borrowers and
an aged listing of their balances,
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including both factored and unfactored accounts, and a list of the
names, addresses and phone numbers of all such Account Debtors;"
"(k) Commencing with the week of October 9, 2000, a weekly
rolling forward cash flow forecast of the Company comparing actual cash
flow of the Company with projected cash flow of the Company for such
week; and"
"(l) as soon as the same are available, copies of each report
(monthly or otherwise) submitted by any Borrower to its board of
directors."
15. Section 6.01 of the Agreement is amended by deleting entirely the
provisions thereof and replacing them with the following:
"Section 6.01 INDEBTEDNESS. No Borrower will create, incur,
assume or permit to exist any Indebtedness, including, without
limitation, Indebtedness between or among Borrowers, except
Indebtedness created hereunder or under the other Loan Documents,
Indebtedness set forth on Schedule 4.01 (h) and a subordinated loan to
the Company from Zatpack Inc., a British Virgin Islands corporation,
the amount, terms and conditions of which shall be satisfactory to the
Lender."
16. Section 6.03(a)(ii) of the Agreement is amended by deleting the
number "$500,000" in the seventh line thereof and replacing it with the number
"$100,000."
17. Section 6.07(b) of the Agreement is amended by deleting entirely
the provisions thereof and replacing them with the following:
"The Borrowers shall not permit the Consolidated Tangible Net
Worth at the end of any fiscal quarter of the Company to be less than
$13,500,000."
18. Section 6.07 of the Agreement is amended by adding immediately
after clause (f) the following:
"(g) The Borrowers will not permit Consolidated Operating Cash
Flow for the fiscal quarter to be less than a negative $1,550,000 at
the end of the fiscal quarter of the Company ending September 30, 2000;
a positive $540,000 at the end of the fiscal quarter ending December
31, 2000; a positive $575,000 at the end of the fiscal quarter ending
March 31, 2001; and a positive $250,000 at the end of the fiscal
quarter ending June 30, 2001."
19. Article VII of the Agreement is amended by deleting entirely the
provisions of clause (l) thereof and by renumbering the remaining clauses
accordingly.
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20. Article VII, clause (m) of the Agreement (formerly clause (n)) is
amended by deleting entirely the provisions thereof and replacing them with the
following:
"(m) a Change in Control shall occur or the Zuellig Owners shall
not own, directly or indirectly, forty-two (42%) percent or more of the
outstanding common stock of the Company on a fully diluted basis."
21. Article VII, clause (n) of the Agreement (formerly clause (o)) is
amended by deleting entirely the provisions thereof and replacing them with the
following:
"(n) Xxxxxx Xxxxxxxx or Xxxxxxx Xxxxxxxxx shall cease to be
actively employed by the Company and shall not have been replaced
within sixty (60) days thereafter with another individual acceptable to
the Lender, whose approval shall not be unreasonably delayed or
withheld."
22. Section 8.01(a) of the Agreement is amended by deleting the phrase
"Attention of Xxxx Xxxxx" in the second line thereof and replacing it with the
phrase "Attention Xxxxxx Xxxxxxxx."
B. WAIVERS. The Lender hereby waives, for the Company's fiscal year ending
March 31, 2000 and for the fiscal period ending June 30, 2000 only, compliance
by the Borrowers with their financial covenants contained in Section 6.07 of the
Agreement, with the Company's failure to deliver audited financial statements
within the time period required by Section 5.01(a), and with the failure to
maintain a proper Borrowing Base over advances.
C. RESTRUCTURING FEE. The Borrowers agree, jointly and severally, to pay to
the Lender, not later than the date of this Amendment, a restructuring fee of
$245,000.
D. CONDITIONS. This Amendment shall not become effective until the date on
which each of the following conditions is satisfied (or waived by the Lender in
accordance with Section 8.02 of the Agreement):
(a) The Company shall have received a subordinated loan in an amount
not less than an aggregate of $3,000,000 from Zatpack, Inc., which loan,
and the documentation evidencing such loan, shall be on terms and
conditions satisfactory to the Lender.
(b) Each Borrower shall have permitted the Lender to conduct, or
cause to be conducted, at the Borrowers' expense, a Collateral Audit,
commencing August 22, 2000, using as a base for such Collateral Audit the
Company's fiscal
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year ending March 31, 2000, and the results of such Collateral Audit shall
be satisfactory to the Lender. The provisions of Section 5.12 of the
Agreement shall be applicable to the Collateral Audit.
(c) The Company shall have pledged to the Lender all of the issued
and outstanding capital stock of Xxxxxx Technical Services, Inc. pursuant
to an amendment to the Pledge and Security Agreement, all in form and
substance satisfactory to the Lender.
(d) All conditions precedent to the effectiveness of the
restructuring of that certain Credit Agreement between Zuellig Botanicals,
Inc. and the Lender, dated as of June 11, 1999, as amended, shall have been
satisfied to the satisfaction of the Lender and there shall exist no event
of default under said Credit Agreement, nor any condition, act or event
which with the giving of notice or the passage of time or both would
constitute any such event of default.
(e) The Borrowers shall have delivered to the Lender a General
Release in form and substance satisfactory to the Lender.
(f) Pursuant to the provisions of Section 8.03 of the Agreement, the
Borrowers shall have paid, or reimbursed the Lender for, all of the
Lender's costs and expenses (including the fees and disbursements of
outside counsel and allocated in-house counsel) in connection with, or
related to, the negotiating and execution and effectiveness of this
Agreement.
(g) The Company shall have delivered to the Lender a fully executed
amendment to the Security Agreement dated as of June 11, 1999 among the
Company, Xxxxxxx and the Lender in form and substance satisfactory to the
Lender.
E. COVENANTS. The Company agrees that it shall deliver to the Lender, from
an appraisal company satisfactory to the Lender, on or before December 31, 2000,
an appraisal of the Company's Equipment, which appraisal shall be satisfactory
to the Lender.
F. ADDITIONAL PARTY. Xxxxxx Technical Services, Inc., by its execution of
this Amendment, agrees to become a party to the Agreement for all purposes to
the same extent as if it were an original Borrower signatory thereof.
G. CONSENT TO AFFILIATE TRANSACTIONS. The Lender consents to the formation
by the Company of Technical. The Lender further consents to the merger of
Xxxxxxx with and into Technical, provided the merger agreement is acceptable to
the Lender. The Lender further consents to the contribution by the Company to
Technical of certain assets
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relating to the Company's Xxxxxx Laboratories Division, which Division performs
analytical testing, chemical synthesis, process development, custom chemical
manufacturing, product testing and design of pharmaceutical, dietary supplement,
plastic pipe and medical device products, provided the contribution agreement is
acceptable to the Lender.
H. BORROWING BASE CERTIFICATE. The Borrowing Base Certificate attached to
this Amendment as Exhibit A shall be substituted for and replace the Borrowing
Base Certificate attached as Exhibit A to the Original Agreement.
I. GENERAL. Except as specifically provided herein, all terms and
conditions of the Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Agreement shall have the same meaning
when used in this Amendment. This Amendment and the Agreement shall be read
together as one document. This Amendment shall be effective upon delivery by the
Lender to the Company of an executed counterpart original or facsimile copy.
The Borrowers hereby remake all representations and warranties
contained in the Agreement and reaffirm all covenants set forth therein. The
Borrowers further certify that as of the date of this Amendment, giving effect
to the provisions hereof, there exists no Event of Default as defined in the
Agreement, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first written above.
XXXXXX, INC. XXXXX FARGO BANK, N.A.
By: _______________________________ By: _______________________________
Name: Xxxxxx Xxxxxxxx Name: Art Brokx
Title: Chief Executive Officer Title: Vice President
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BOTANICALS INTERNATIONAL
EXTRACTS, INC.
By: _______________________________
Name: Xxxxxxx Xxxxxxxxx
Title:
ZETAPHARM, INC.
By: _______________________________
Name: Xxxxxxx Xxxxxxxxx
Title:
XXXXXX NATURAL PRODUCTS, INC.
By: ________________________________
Name: Xxxxxxx Xxxxxxxxx
Title:
XXXXXXX LABORATORIES, INC.
By: ________________________________
Name: Xxxxxxx Xxxxxxxxx
Title:
XXXXXX TECHNICAL SERVICES, INC.
By: ________________________________
Name: Xxxxxxx Xxxxxxxxx
Title:
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