FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND AMENDMENT TO REIMBURSEMENT AGREEMENT
Exhibit 10.1
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
AND AMENDMENT TO REIMBURSEMENT AGREEMENT
AND AMENDMENT TO REIMBURSEMENT AGREEMENT
This Amendment, dated as of January 27, 2006, 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”), XXXX XXXX TECHNOLOGIES, INC., an Arizona
corporation (“ZS”), (collectively, jointly and severally the “Borrower”), and XXXXX FARGO BANK,
NATIONAL ASSOCIATION, acting through its XXXXX FARGO BUSINESS CREDIT operating division (the
“Lender”).
Recitals
The Borrower and the Lender are parties to a Credit and Security Agreement dated as of
February 6, 2004, as amended from time to time (the “Credit Agreement”). Capitalized terms used in
these recitals have the meanings given to them in the Credit Agreement unless otherwise specified.
ZN (successor by merger to Oxycal Laboratories, Incorporated) and Lender are the parties to
that certain Reimbursement Agreement dated as of February 4, 2004 (the “Reimbursement Agreement”).
The Borrower as to the Credit Agreement, and ZN, as to the Reimbursement Agreement, have
requested that certain amendments be made to said agreements, 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. Credit Agreement Amendments. The Credit Agreement is hereby amended as
follows:
(a) The definition of “Borrowing Base” contained in Section 1.1 of the Credit
Agreement is hereby deleted and replaced as follows:
“Borrowing Base” means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender’s sole
discretion, the lesser of (A) 70% of Eligible Accounts or (B)
$10,000,000.00.
(b) The definition of “Floating Rate” contained in Section 1.1 of the Credit
Agreement is hereby deleted and replaced as follows:
“Floating Rate” means an annual interest rate equal to the
sum of the Base Rate plus three percent (3.0%), which
interest rate shall change when and as the Base Rate changes.
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(c) Section 2.11(c) of the Credit Agreement is hereby deleted and replaced as
follows:
(c) Letter of Credit Fees. The Borrower agrees to pay
the Lender a fee with respect to each Letter of Credit, if
any, accruing on a daily basis and computed at the annual
rate of four and one-half percent (4.5%) of the aggregate
amount that may then be drawn under it assuming compliance
with all conditions for drawing (the “Aggregate Face
Amount”), from and including the date of issuance of such
Letter of Credit until such date as such Letter of Credit
shall terminate by its terms or be returned to the Lender,
due and payable monthly in arrears on the first day of each
month and on the Termination Date; provided,
however that during Default Periods, in the Lender’s
sole discretion and without waiving any of its other rights
and remedies, such fee shall increase to seven and one-half
percent (7.5%) of the Aggregate Face Amount. The foregoing
fee shall be in addition to any and all fees, commissions and
charges of any Issuer of a Letter of Credit with respect to
or in connection with such Letter of Credit.
(d) Section 2.11(e) of the Credit Agreement is hereby deleted and replaced as
follows:
(e) Termination and Line Reduction Fees. If the Credit
Facility is terminated (i) by the Lender during a Default
Period that begins before a Maturity Date, (ii) by the
Borrower (A) as of a date other than a Maturity Date or (B)
as of a Maturity Date but without the Lender having received
written notice of such termination at least 90 days before
such Maturity Date, or if the Borrower reduces the Maximum
Line, the Borrower shall pay to the Lender a fee in an amount
equal to a percentage of the Maximum Line (or the reduction
of the Maximum Line, as the case may be) as follows: (A) two
percent (2.0%) if the termination or reduction occurs on or
before January 31, 2007; and (B) one percent (1.0%) if the
termination or reduction occurs after January 31, 2007.
(e) Effective December 31, 2005, Sections 6.2(a) through 6.2(c) are hereby deleted
and replaced as follows:
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(a) Quarterly Net Worth. The Borrower covenants that as of
July 31, 2005, 2005, the Guarantor had a Book Net Worth of
not less than $51,721,950. The Borrower covenants that,
commencing with the fiscal quarter ending October 31, 2005
and continuing each quarter thereafter, the Guarantor shall
not achieve a Book Net Worth decrease of more than the
amounts set forth below as measured from the last day of the
immediately preceding fiscal year.
| Quarter Ending | Maximum
Net Worth Decrease |
|||
October 31, 2005 |
($ 7,820,000.00 | ) | ||
January 31, 2006 |
($14,500,000.00 | ) | ||
April 30, 2006 |
($17,500,000.00 | ) | ||
July 31, 2006 |
($20,500,000.00 | ) | ||
(b) Monthly Net Worth. The Borrower covenants that
commencing with the month ending August 30, 2005 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:
August, 2005 through October, 2005 |
$ | 44,000,000.00 | ||
November, 2005 through January, 2006 |
$ | 37,222,000.00 | ||
February, 2006 through April, 2006 |
$ | 34,222,000.00 | ||
May, 2006 through July, 2006 |
$ | 31,222,000.00 |
(c) Capital Expenditures. The Borrower and the Guarantor
together will not incur or contract to incur Capital
Expenditures of more than $1,500,000.00 in the aggregate
during 2006 fiscal year.
(f) There is hereby added a new Section 7.1(r) to the Credit Agreement, which
provides as follows:
(r) The Premises has not been sold on or before March
31, 2006 and the Borrower has failed to increase the value of
the securities held in Xxxxx Fargo Brokerage Services, LLC
account no. 00000000 to not less than $1,000,000.00.
(g) There is hereby added a new Section 7.1(s) to the Credit Agreement, which
provides as follows:
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(s) The Borrower shall sell the Premises and fail to
provide Lender with a Landlord’s Disclaimer and Consent (and
Memorandum thereof) in form and substance satisfactory to the
Lender.
(h) Exhibit B of the Credit Agreement is hereby deleted and replaced with Exhibit B
attached hereto.
2. Reimbursement Agreement Amendments. The Reimbursement Agreement is
hereby amended as follows:
(a) The phrase “one and one-half percent (1.5%)” contained in the definition of
“Facility Fee” contained in Section 1.1 of the Reimbursement Agreement is hereby deleted and
replaced with the phrase “four and one-half percent (4.5%)”.
(b) There is hereby added a new Section 2.2(c) to the Reimbursement Agreement which
provides as follows:
(c) If the Letter of Credit is terminated or cancelled
at any time on or before January 31, 2007, the Borrower shall
pay to the Lender a termination fee in an amount equal to two
percent (2.0%) of the Available Amount. If the Letter of
Credit is terminated or cancelled at any time after January
31, 2007, the Borrower shall pay to the Lender a termination
fee in an amount equal to one percent (1.0%) of the Available
Amount.
3. 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.
4. 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.
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(c) Such other matters as the Lender may require.
5. 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 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.
6. 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.
7. 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.
8. 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.
9. Amendment Fee. The Borrower shall pay the Lender as of the date hereof a
fully earned, non-refundable fee in the amount of $50,000.00 in consideration of the Lender’s
execution and delivery of this amendment.
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10. 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 and the fee
detailed in Section 9 above.
11. 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.
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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/ Xxxxxx X. Xxxxxxx | |||
| Its Vice President | ||||
| ZILA BIOTECHNOLOGY, INC., an Arizona | ||||
| corporation | ||||
| By | /s/ Xxxxxx X. Xxxxxxx | |||
| Its Vice President | ||||
| ZILA PHARMACEUTICALS, INC., a Nevada | ||||
| corporation | ||||
| By | /s/ Xxxxxx X. Xxxxxxx | |||
| Its Vice President | ||||
| XXXX XXXX TECHNOLOGIES, INC., an | ||||
| Arizona corporation | ||||
| By | /s/ Xxxxxx X. Xxxxxxx | |||
| Its Vice President | ||||
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| XXXXX FARGO BANK, NATIONAL | ||||
| ASSOCIATION, acting through its Xxxxx Fargo | ||||
| Business Credit operating division | ||||
| By | /s/ Xxxxx Xxxxx Xxxxx | |||
| Its 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 Xxxxx 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 8 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/ Xxxxxx X. Xxxxxxx | |||
| Its Vice President | ||||
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Exhibit B to Credit and Security Agreement
Compliance Certificate
To:
|
||
| XXXXX FARGO BANK, NATIONAL ASSOCIATION, acting through its Xxxxx Fargo Business Credit operating division |
||
Date:
|
, 2006 | |
Subject:
|
ZILA NUTRACEUTICALS, INC., an Arizona corporation, ZILA BIOTECHNOLOGY, INC., an Arizona corporation, ZILA PHARMACEUTICALS, INC., a Nevada corporation, XXXX XXXX TECHNOLOGIES, INC., an Arizona corporation | |
| Financial Statements |
In accordance with our Credit and Security Agreement dated as of February 6, 2004 (the “Credit
Agreement”), attached are the financial statements of ZILA NUTRACEUTICALS, INC., an Arizona
corporation, ZILA BIOTECHNOLOGY, INC., an Arizona corporation, ZILA PHARMACEUTICALS, INC., a Nevada
corporation, XXXX XXXX TECHNOLOGIES, INC., an Arizona corporation (collectively, jointly and
severally the “Borrower”), as of and for , (the “Reporting Date”) and the
year-to-date period then ended (the “Current Financials”). All terms used in this certificate have
the meanings given in the Credit Agreement.
I certify (as an officer of the Borrower, but not in my personal capacity) that the Current
Financials have been prepared in accordance with GAAP, subject to year-end audit adjustments, and
fairly present the Borrower’s financial condition and the results of its operations as of the date
thereof.
Events of Default. (Check one):
o The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under
the Credit Agreement except as previously reported
in writing to the Lender.
o The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit
Agreement not previously reported in writing to the
Lender and attached hereto is a statement of the
facts with respect to thereto. The Borrower
acknowledges that pursuant to Section 2.10(d) of the
Credit Agreement, the Lender may impose the Default
Rate at any time during the resulting Default
Period.
I hereby certify to the Lender as follows:
o The Reporting Date does not xxxx the end of one of
the Borrower’s fiscal quarters, hence I am
completing only paragraph below.
o The Reporting Date marks the end of one of the Borrower’s fiscal quarters,
hence I am completing all paragraphs below except paragraph .
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o The Reporting Date marks the end of the Borrower’s fiscal year, hence I am
completing all paragraphs below.
Financial Covenants. I further hereby certify that (as an officer of the Borrower, but not
in my personal capacity) the Borrower is in compliance with the covenants set forth in Section 6(a)
through (c) of the Agreement, except as indicated below. The calculations made to determine
compliance are as follows:
Covenant 6.2(a) Quarterly Net Worth
| Maximum Net Worth | ||||||
| Quarter Ending | Decrease | Actual | ||||
October 31, 2005 |
($ 7,820,000.00 | ) | ||||
January 31, 2006 |
($14,500,000.00 | ) | ||||
April 30, 2006 |
($17,500,000.00 | ) | ||||
July 31, 2006 |
($20,500,000.00 | ) | ||||
Covenant 6.2(b) Monthly Net Worth
| Minimum Net Worth | ||||||
| Month Ending | Required | Actual | ||||
August, 2005 through October,
2005 |
$ | 44,000,000.00 | ||||
November, 2005 through
January, 2006 |
$ | 37,222,000.00 | ||||
February, 2006 through April,
2006 |
$ | 34,222,000.00 | ||||
May, 2006 through July, 2006 |
$ | 31,222,000.00 | ||||
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Covenant 6.2(c) Capital Expenditures
| Maximum Allowable Capital | ||||||||
| Year | Expenditures | Actual | ||||||
2006 |
$1,500,000.00 | |||||||
Attached hereto are all relevant facts in reasonable detail to evidence, and the computations
of the financial covenants referred to above.
| ZILA NUTRACEUTICALS, INC., an Arizona | ||||||
| corporation | ||||||
| By | ||||||
| Its | ||||||
| ZILA BIOTECHNOLOGY, INC., an Arizona | ||||||
| corporation | ||||||
| By | ||||||
| Its | ||||||
| ZILA PHARMACEUTICALS, INC., a Nevada | ||||||
| corporation | ||||||
| By | ||||||
| Its | ||||||
| XXXX XXXX TECHNOLOGIES, INC., an | ||||||
| Arizona corporation | ||||||
| By | ||||||
| Its | ||||||
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