WELLS FARGO BANK SUBORDINATION AGREEMENT
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THIS AGREEMENT, dated as of October 11, 2000, is entered into by and among
HAUSER, INC. ("Borrower"), ZATPACK INC. ("Creditor"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is indebted to Creditor, and Borrower proposes to obtain credit
or has obtained credit from Bank; and
B. Bank has indicated that it will extend or continue credit to Borrower if
certain conditions are met, including without limitation, the requirement
that Creditor execute this Agreement.
NOW, THEREFORE, as an inducement to Bank to extend or continue credit and for
other valuable consideration, the parties hereto agree as follows:
1. INDEBTEDNESS SUBORDINATED. Creditor subordinates all Indebtedness
now or at any time hereafter owing from Borrower to Creditor (including without
limitation, interest thereon which may accrue subsequent to Borrower becoming
subject to any state or federal debtor-relief statute) ("Junior Debt") to all
Indebtedness now or at any time hereafter owing from Borrower to Bank ("Senior
Debt") pursuant to that certain Credit Agreement, dated as of June 11, 1999,
among the Bank, Borrowers, Botanicals International Extracts, Inc. (f/k/a
Zuellig Botanical Extracts, Inc.), Wilcox Natural Products, Inc. (f/k/a Wilcox
Drug Company, Inc.), ZetaPharm, Inc., and Shuster Laboratories, Inc. , as
amended by that certain Waiver and Amendment to Credit Agreement, dated October
29, 1999, and that certain Waiver and Amendment No. 2 to the Credit Agreement,
dated October 11, 2000 (the "Credit Agreement"). Creditor irrevocably consents
and directs that all Senior Debt shall be paid in full prior to Borrower making
any payment on any Junior Debt. Creditor will, and Bank is authorized in the
name of Creditor from time to time to, execute and file such financing
statements and other documents as Bank may require in order to give notice to
other persons and entities of the terms and provisions of this Agreement. Unless
otherwise permitted hereunder, prior to payment in full of the Senior Debt,
Creditor will not take any action or initiate any proceedings, judicial or
otherwise, to enforce Creditor's rights or remedies with respect to any Junior
Debt (other than filing a proof of claim, defensive actions or compulsory
counterclaims (i.e. counterclaims which if not asserted by Creditor may not be
brought at a later time)), including without limitation, any action to enforce
remedies with respect to any collateral securing any Junior Debt or to obtain
any judgment or prejudgment remedy against Borrower or any such collateral.
Notwithstanding the foregoing, Creditor may take any such action or initiate any
such proceedings, judicial or otherwise, to enforce Creditor's rights or
remedies with respect to any Junior Debt, including without limitation, any
action to enforce remedies with respect to any collateral securing any Junior
Debt or to obtain any judgment or prejudgment remedy against Borrower or any
such collateral at any time after (i) 150 days after the Senior Debt has become
due and the Bank or its successor has taken action to enforce payment thereof,
(ii) 150 days after the Bank or its successor has accelerated the Senior Debt
pursuant to the terms of the Credit Agreement or (iii) 90 days after a
Bankruptcy Event has occurred. For purposes hereof, a "Bankruptcy Event" shall
mean any event described in (h) or (i) of Article VII of the Credit Agreement.
2. INDEBTEDNESS DEFINED. The word "Indebtedness" is used herein in its
most comprehensive sense and includes any and all advances, debts, obligations
and liabilities of Borrower heretofore, now or hereafter made, incurred or
created, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether Borrower may be liable individually or jointly with
others, including without limitation, obligations and liabilities arising from
notes, repurchase agreements and trust receipts.
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3. RESTRICTION OF PAYMENT OF JUNIOR DEBT; DISPOSITION OF PAYMENTS
RECEIVED BY CREDITOR. Borrower will not make, and Creditor will not accept or
receive, any payment or benefit in cash or otherwise, directly or indirectly, on
account of principal, interest or any other amounts owing on any Junior Debt
prior to the payment in full of the Senior Debt. If any such payment is made in
violation of this Paragraph, Creditor shall promptly deliver the same to Bank in
the form received, with any endorsement or assignment necessary for the transfer
of such payment from Creditor to Bank, to be either (in Bank's sole discretion)
held as cash collateral securing the Senior Debt or applied in reduction of the
Senior Debt in such order as Bank shall determine, and until so delivered,
Creditor shall hold such payment in trust for and on behalf of, and as the
property of, Bank. For purposes hereof, the Senior Debt shall be deemed to be
'paid in full' when (i) all outstanding Senior Debt has been paid in full, (ii)
the Bank has no further obligation to extend any credit to Borrower pursuant to
the Credit Agreement and (iii) all letters of credit outstanding under the
Credit Agreement have been terminated.
4. DISPOSITION OF EVIDENCE OF INDEBTEDNESS. If there is any existing
promissory note or other evidence of any Junior Debt, or if any promissory note
or other evidence of Indebtedness is executed at any time hereafter with respect
thereto, then Borrower and Creditor will mark the same with a legend stating
that it is subject to this Agreement, and if asked to do so, will deliver a copy
of the same to Bank. Creditor shall not, without Bank's prior written consent,
assign, transfer, hypothecate or otherwise dispose of any claim it now has or
may at any time hereafter have against Borrower at any time that any Senior Debt
remains outstanding and/or Bank remains committed to extend any credit to
Borrower under the Credit Agreement.
5. AGREEMENT TO BE CONTINUING; APPLIES TO BORROWER'S EXISTING
INDEBTEDNESS AND ANY INDEBTEDNESS HEREAFTER ARISING. This Agreement shall be a
continuing agreement and, for so long as any Indebtedness of Borrower to Bank
shall exist pursuant to the Credit Agreement, shall apply to any and all
Indebtedness of Borrower to Bank now existing or hereafter arising pursuant to
the Credit Agreement and any and all Indebtedness of Borrower to Creditor now
existing or hereafter arising.
6. TERMINATION BY CREDITOR. Creditor may, to the extent provided
herein, terminate this Agreement by delivering written notice to Bank. Any such
notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed
to Wells Fargo Bank, National Association, c/o Wells Fargo Bank, N.A., 333 South
Grand Avenue, 9th Floor, Los Angeles California 90071, Attention; Art Brokx
(Telecopy No. (213) 253-5913), with a copy to G. Carla Axelrod Wells Fargo Bank,
National Association, 333 South Grand Avenue, 10th Floor, Los Angeles California
90071 (Telecopy No. (213) 628-9918), or at such other address as Bank shall from
time to time designate. If such notice is received by Bank, this Agreement shall
terminate as of the date of receipt, except that the obligations of Creditor and
the rights of Bank hereunder shall continue with respect to all Senior Debt
which existed at the time of Bank's receipt of such notice, or thereafter arose
pursuant to any agreement to extend credit by which Bank is bound at the time of
its receipt of such notice, and any extensions, renewals or modifications of any
such then existing or committed Senior Debt, including without limitation,
modifications to the amount of principal or interest payable on any Senior Debt
and the release of any security for or any guarantors of all or any portion of
any Senior Debt.
7. INFORMATION. Creditor has established adequate, independent means of
obtaining from Borrower on a continuing basis financial and other information
pertaining to Borrower's financial condition. Creditor agrees to keep adequately
informed from such means of any facts, events or circumstances which might in
any way affect Creditor's risks hereunder, and Creditor agrees that Bank shall
have no obligation to disclose to Creditor information or material about
Borrower which is acquired by Bank in any manner. Bank may, at Bank's sole
option and without obligation to do so, disclose to Creditor any information or
material relating to Borrower which is acquired by Bank by any means, and
Borrower hereby agrees to and authorizes any such disclosure by Bank.
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8. TRANSFER OF ASSETS OR REORGANIZATION OF BORROWER. If any petition is
filed or any proceeding is instituted by or against Borrower under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, or
any other or similar law relating to bankruptcy, insolvency, reorganization or
other relief for debtors, or generally affecting creditors' rights, or seeking
the appointment of a receiver, trustee, custodian or liquidator of or for
Borrower or any of its assets, any payment or distribution of any of Borrower's
assets other than Permitted Securities (as hereinafter defined), whether in
cash, securities or any other property, which would be payable or deliverable
with respect to any Junior Debt, shall be paid or delivered to Bank until all
Senior Debt is paid in full. For purposes hereof, "Permitted Securities" means
(a) debt securities of the Borrower as reorganized or readjusted, or debt
securities of the Borrower (or any other company, trust or organization provided
for by a plan of reorganization or readjustment succeeding to the assets and
liabilities of the Borrower), that, in each case, are subordinated, to at least
the same extent as the Junior Debt, to the payment of all Senior Debt that will
be outstanding after giving effect to such reorganization or readjustment or (b)
shares of stock of the Borrower as reorganized or readjusted pursuant to a
reorganization or readjustment.
9. OTHER AGREEMENTS; NO THIRD PARTY BENEFICIARIES. Bank shall have no
direct or indirect obligations to Creditor of any kind with respect to the
manner or time in which Bank exercises (or refrains from exercising) any of its
rights or remedies with respect to the Senior Debt, Borrower or any of
Borrower's assets. Creditor understands that there may be various agreements
between Bank and Borrower evidencing and governing the Senior Debt, and Creditor
acknowledges and agrees that such agreements are not intended to confer any
benefits on Creditor. Creditor further acknowledges that Bank may administer the
Senior Debt and any of Bank's agreements with Borrower in any way Bank deems
appropriate, without regard to Creditor or the Junior Debt. Creditor waives any
right Creditor might otherwise have to require a marshalling of any security
held by Bank for all or any part of the Senior Debt or to direct or affect the
manner or timing with which Bank enforces any of its security. Nothing in this
Agreement shall impair or adversely affect any right, privilege, power or remedy
of Bank with respect to the Senior Debt, Borrower or any assets of Borrower,
including without limitation, Bank's right to: (a) waive, release or subordinate
any of Bank's security or rights; (b) waive or ignore any defaults by Borrower;
and/or (c) upon ten days prior written notice to the Creditor, restructure,
renew, modify or supplement the Senior Debt, or any portion thereof, or any
agreement with Borrower relating to any Senior Debt. All rights, privileges,
powers and remedies of Bank may be exercised from time to time by Bank without
notice to or consent of Creditor.
10. BREACH OF AGREEMENT BY BORROWER OR CREDITOR. In the event of any
breach of this Agreement by Borrower or Creditor, then and at any time
thereafter Bank shall have the right to declare immediately due and payable all
or any portion of the Senior Debt without presentment, demand, protest or notice
of dishonor, all of which are hereby expressly waived by Borrower and Creditor.
No delay, failure or discontinuance of Bank in exercising any right, privilege,
power or remedy hereunder shall be deemed a waiver of such right, privilege,
power or remedy; nor shall any single or partial exercise of any such right,
privilege, power or remedy preclude, waive or otherwise affect the further
exercise thereof or the exercise of any other right, privilege, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank with respect to this
Agreement must be in writing and shall be effective only to the extent set forth
in such writing.
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11. MISCELLANEOUS. This Agreement shall be binding upon and inure to
the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties. If this Agreement is executed by more
than one Creditor, it shall bind them jointly and severally. All words used
herein in the singular shall be deemed to have been used in the plural where the
context so requires.
12. REPRESENTATIONS BY BORROWER AND CREDITOR. Borrower and Creditor
warrant and represent that payment of the Junior Debt has not been heretofore
subordinated to any other creditor of Borrower.
13. LIQUIDATED DAMAGES. Inasmuch as the actual damages which could
result from a breach by Creditor of its duties under Paragraph 3 hereof are
uncertain and would be impractical or extremely difficult to fix, Creditor shall
pay to Bank, in the event of any such breach by Creditor, as liquidated and
agreed damages, and not as a penalty, all sums received by Creditor in violation
of this Agreement on account of the Junior Debt, which sums represent a
reasonable endeavor to estimate a fair compensation for the foreseeable losses
that might result from such a breach.
14. COSTS, EXPENSES AND ATTORNEYS' FEES. If any party hereto institutes
any judicial or administrative action or proceeding to enforce any provisions of
this Agreement, or alleging any breach of any provision hereof or seeking
damages or any other judicial or administrative remedy, the losing party or
parties shall pay to the prevailing party or parties all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of such prevailing party's in-house counsel), expended or
incurred by the prevailing party or parties in connection therewith, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower, Creditor or any other person or entity.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
16. ARBITRATION.
16.1 ARBITRATION. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration in accordance with
the terms of this Agreement. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether
in contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this
Agreement and each other document, contract and instrument
required hereby or now or hereafter delivered to Bank in
connection herewith (collectively, the "Documents"), or any
past, present or future extensions of credit and other
activities, transactions or obligations of any kind related
directly or indirectly to any of the Documents, including
without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or
other remedies pursuant to any of the Documents. Any party
may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who fails or
refuses to submit to arbitration following a lawful demand
by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration of
any Dispute.
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16.2 GOVERNING RULES. Arbitration proceedings shall be
administered by the American Arbitration Association
("AAA") or such other administrator as the parties shall
mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration
shall be resolved in accordance with the Federal
Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in
any of the Documents. The arbitration shall be conducted at
a location in California selected by the AAA or other
administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures
set forth herein shall control. All statutes of limitation
applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being
arbitrated. Judgment upon any award rendered in an
arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that is a
bank of the protections afforded to it under 12 U.S.C.'91 or
any similar applicable state law.
16.3 NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE.
No provision hereof shall limit the right of any party to
exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral
or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief,
sequestration, attachment, garnishment or the appointment
of a receiver, from a court of competent jurisdiction
before, after or during the pendency of any arbitration or
other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration or
reference hereunder.
16.4 ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators
must be active members of the California State Bar or
retired judges of the state or federal judiciary of
California, with expertise in the substantive law
applicable to the subject matter of the Dispute.
Arbitrators are empowered to resolve Disputes by summary
rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the
state of California, (ii) may grant any remedy or relief
that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as
is necessary to make effective any award, and (iii) shall
have the power to award recovery of all costs and fees, to
impose sanctions and to take such other actions as they
deem necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the California Rules
of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an
award of greater than $5,000,000 (including damages, costs,
fees and expenses). By submission to a single arbitrator,
each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in
controversy exceeds $5,000,000 shall be decided by majority
vote of a panel of three arbitrators; provided however,
that all three arbitrators must actively participate in all
hearings and deliberations.
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16.5 REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE.
Notwithstanding anything herein to the contrary, no Dispute
shall be submitted to arbitration if the Dispute concerns
indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the
mortgage, lien or security interest specifically elects in
writing to proceed with the arbitration, or (ii) all
parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action
rule statute of California, thereby agreeing that all
indebtedness and obligations of the parties, and all
mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and
enforceable. If any such Dispute is not submitted to
arbitration, the Dispute shall be referred to a referee in
accordance with California Code of Civil Procedure Section
638 et seq., and this general reference agreement is
intended to be specifically enforceable in accordance with
said Section 638. A referee with the qualifications
required herein for arbitrators shall be selected pursuant
to the AAA's selection procedures. Judgment upon the
decision rendered by a referee shall be entered in the
court in which such proceeding was commenced in accordance
with California Code of Civil Procedure Sections 644 and
645.
16.6 MISCELLANEOUS. To the maximum extent practicable, the AAA,
the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180
days of the filing of the Dispute with the AAA. No
arbitrator or other party to an arbitration proceeding may
disclose the existence, content or results thereof, except
for disclosures of information by a party required in the
ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than one
agreement for arbitration by or between the parties
potentially applies to a Dispute, the arbitration provision
most directly related to the Documents or the subject
matter of the Dispute shall control. This arbitration
provision shall survive termination, amendment or
expiration of any of the Documents or any relationship
between the parties.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
"BORROWER"
HAUSER, INC.
By: /S/ VOLKER WYPYSZYK
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Name:
Title:
"LENDER"
WELLS FARGO,
NATIONAL ASSOCIATION
By: /S/ ART BROKX
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Name: Art Brokx
Title: VP
"CREDITOR"
Zatpack Inc.
By: /S/ HARVEY L. SPERRY
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Name: Harvey L. Sperry
Title: Director
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