-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UtOjMwDrUYnnXbHwqcEqM5ixV6zvqo7Pc+eSbnmqx5ABIuFEj/aNwrTwKpN53X+I aMceBPsyElHOVaA5hMYJzA== 0000930661-01-501056.txt : 20010628 0000930661-01-501056.hdr.sgml : 20010628 ACCESSION NUMBER: 0000930661-01-501056 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010613 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED NUTRACEUTICALS INC/TX CENTRAL INDEX KEY: 0000913614 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 760416176 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-26362 FILM NUMBER: 1669187 BUSINESS ADDRESS: STREET 1: 9101 JAMEEL RD STREET 2: STE 180 CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7134601976 MAIL ADDRESS: STREET 1: 9101 JAMEEL RD STREET 2: STE 180 CITY: HOUSTON STATE: TX ZIP: 77040 FORMER COMPANY: FORMER CONFORMED NAME: NUTRITION FOR LIFE INTERNATIONAL INC DATE OF NAME CHANGE: 19931018 8-K 1 d8k.txt CURRENT REPORT DATED JUNE 13, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 13, 2001 ------------- Advanced Nutraceuticals, Inc. ----------------------------- (Exact Name of Registrant as Specified in its Charter) Texas ---------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-26362 76-0642336 ------------------------ ------------------------------------ (Commission File Number) (I.R.S. Employer Identification No.) 106 South University Blvd. #14, Denver, Colorado 80209 ------------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) - (303) 722-4008 --------------------------------------------------------------------- INFORMATION TO BE INCLUDED IN THE REPORT Item 2. Acquisition or Disposition of Assets On June 13, 2001, Advanced Nutraceuticals, Inc. ("ANI" or the "Company") completed the sale of its network marketing subsidiary, Nutrition For Life International, Inc. ("NFLI"), to Everest Group Holdings, Inc. At closing the Company received $3.2 million in cash and a $5 million note payable by NFLI based on a ten-year amortization with quarterly payments for three years and a final balloon payment in June 2004. NFLI entered into a product supply agreement with the Company's subsidiary, Bactolac Pharmaceutical, Inc. and Bactolac received a $650,000 note from NFLI due in June 2002. The purchase price may also be increased up to an additional $750,000, depending upon future operating results of NFLI's Japanese subsidiary. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. Not applicable (b) Pro Forma Financial Information (1) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2001. (2) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended March 31, 2001. (3) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended September 30, 2000. (4) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended September 30, 1999. (5) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended September 30, 1998. (c) Exhibits. 10.54 Stock Purchase Agreement, dated December 29, 2000 among Advanced Nutraceuticals, Inc., Everest International, LLC and Nutrition For Life International, Inc. filed as an exhibit to the Company's Report on Form 10-K for the fiscal year ended September 30, 2000 and incorporated by reference herein. 10.54(a) First Amendment to Stock Purchase Agreement dated June 5, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ADVANCED NUTRACEUTICALS, INC. Dated: June 27, 2001 By: /s/ Jeffrey G. McGonegal ---------------------------------- Jeffrey G. McGonegal Senior Vice President of Finance 2 ADVANCED NUTRACEUTICALS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2001 and the unaudited pro forma condensed consolidated statements of operations for the six months ended March 31, 2001 and the three years in the period ended September 30, 2000, give effect to the disposition of NFLI by ANI, which closed on June 13, 2001. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2001 assumes that the disposition took place as of March 31, 2001. The unaudited pro forma condensed consolidated statements of operations gives effect to the disposition as if it had occurred at the beginning of the earliest period presented. The unaudited pro forma consolidated financial statements give effect to the terms of the disposition, including the cash portion of the purchase price as well as the $5 million Note issued as part of the consideration, but do not give effect to any amounts which may be paid in the future under an earn-out based upon future operations of NFLI Japan. Such earn-out amounts would be recorded as income at which future time, collection of such amounts would be assured. For subsequently issued financial statements of ANI, the operations of NFLI to be included in such financial statements will be treated as discontinued operations for all prior periods. The pro forma statements for the year ended September 30, 2000, also give effect to the acquisitions of Bactolac, ASH and Advanced Nutraceuticals, Inc., a Delaware corporation ("Old-ANI") as though such acquisitions had occurred as of the beginning of that year. All periods outstanding share amounts have been retroactively restated to reflect a four-for-one reverse common stock split that was effected as of June 1, 2001. The unaudited pro forma condensed consolidated balance sheet and statements of operations are presented for information purposes only and are not necessarily indicative of the financial position or the results of operations that would have been obtained had the disposition actually occurred as of the dates assumed nor is it necessarily indicative of the financial position or future results of operations. The pro forma adjustments are based upon estimates, information and assumptions available at the time of the filing of this document. The pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of ANI, and should be read in conjunction with the audited consolidated financial statements and related notes thereto of ANI contained in its Annual Report on Form 10-K/A for the year ended September 30, 2000 and the condensed consolidated financial statements in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, as well as the estimates and assumptions set forth below and in the notes to the unaudited pro forma financial statements. For financial reporting purposes, management of ANI is unable to determine that it is probable that the future cash flows from NFLI's operations will be sufficient to fund the entire balloon payment required at maturity under the terms of the $5 million Note. Accordingly, an allowance of approximately $2,800,000 is being provided against the face amount of the $5 million Note. ANI will account for collections on the $5 million Note under the cost recovery method, whereby any future collections are recorded as a reduction of the balance recorded for the $5 million Note (after the allowance). Additional collections above that amount are recorded as income as collected. 3 Advanced Nutraceuticals, Inc. Unaudited Pro Forma Consolidated Balance Sheet March 31, 2001
Pro Forma Adjustments - DR (CR) --------------------------------------- Pro Forma ANI Ref. Amount Ref. Amount Adjusted ----------- ---- ----------- ---- ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 1,681,842 2 $ (628,286) 3 $ 2,873,000 $ 3,926,556 Restricted cash 101,266 2 (101,266) - - Trade accounts receivable, net 3,920,788 2 (325,519) - 3,595,269 Inventories 7,057,761 2 (5,201,182) - 1,856,579 Net assets of NFLI operation - 2 4,791,893 5 (4,791,893) - Deferred tax asset, net 1,678,000 2 (1,119,000) - 559,000 Prepaid expenses and other 1,158,050 2 (875,632) 3 500,000 782,418 ----------- ----------- ----------- ----------- Total current assets 15,597,707 (3,458,992) (1,418,893) 10,719,822 Property and equipment, net 13,586,596 2 (4,155,235) - 9,431,361 Intangible assets, net 9,048,446 2 (43,400) - 9,005,046 Notes receivable - - 3 1,688,893 1,688,893 Other assets 654,062 2 (518,730) - 135,332 ----------- ----------- ----------- ----------- Total assets $38,886,811 $(8,176,357) $ 270,000 $30,980,454 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,688,298 2 $ 3,238,947 $ - $ 2,449,351 Accrued distributor bonuses 991,932 2 991,932 - - Deferred income 298,956 2 271,178 - 27,778 Accrued expenses and other 2,051,598 2 905,048 3 (270,000) 1,416,550 Credit facility 4,480,945 2 807,509 - 3,673,436 Current portion of long-term debt 3,734,717 2 1,659,743 - 2,074,974 ----------- ----------- ----------- ----------- Total current liabilities 17,246,446 7,874,357 (270,000) 9,642,089 ----------- ----------- ----------- ----------- Deferred tax liability 2,807,000 302,000 - 2,505,000 Long-term debt 1,750,000 - - 1,750,000 ----------- ----------- ----------- ----------- Total liabilities 21,803,446 8,176,357 (270,000) 13,897,089 ----------- ----------- ----------- ----------- Stockholders' Equity: Common stock 20,270 - - 20,270 Additional paid-in capital 18,026,446 - - 18,026,446 Retained earnings (deficit) (1,107,798) - - (1,107,798) Accumulated other comp. inc. 144,447 - - 144,447 ----------- ----------- ----------- ----------- Total stockholders' equity 17,083,365 - - 17,083,365 ----------- ----------- ----------- ----------- Total liabilities and equity $38,886,811 $ 8,176,357 $ (270,000) $30,980,454 =========== =========== =========== ===========
See accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements 4 Advanced Nutraceuticals, Inc. Unaudited Pro Forma Consolidated Statement of Operations Six Months Ended March 31, 2001
Pro Forma Adjustments - DR (CR) --------------------- Pro Forma ANI Ref. Amount Adjusted ----------- ---- ------------ ---------- Net sales $32,847,462 2 $ 23,124,060 $9,723,402 Cost of sales 21,762,987 2 (15,056,736) 6,706,251 ----------- ---------- Gross profit 11,084,475 3,017,151 General and administrative exp. 10,339,539 2 (7,481,674) 2,857,865 ----------- ---------- Operating income 744,936 159,286 Other income (expense) (813,081) 2 (363,685) (449,396) ----------- ---------- Income (loss) from operations Before income tax expense (68,145) (290,110) Income tax expense (benefit) (227,178) 2 218,178 (14,000) ----------- ------------ ---------- Net income (loss) $ 159,033 $ 435,143 $ (276,110) =========== ============ ========== Net income (loss) per share: Basic and Diluted $ 0.08 $(0.14) =========== ========== Shares used in computing net income (loss) per share: Basic 2,015,970 6 2,015,970 =========== ========== Diluted 2,015,970 6 2,015,970 =========== ==========
See accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements 5 Advanced Nutraceuticals, Inc. Unaudited Pro Forma Consolidated Statement of Operations Year Ended September 30, 2000
Pro Forma Pro Forma Adjustments - DR Adjustments - DR (CR) Subtotal - (CR) ------------------- Revised ------------------ Pro Forma ANI Ref. Amount Historical Ref. Amount Adjusted ----------- ---- ------------ ---------- ---- ----------- ----------- Net sales $69,258,328 2 $ 53,190,439 $16,067,889 4 $(2,694,000) $18,761,889 Cost of sales 48,320,748 2 (37,750,401) 10,570,347 4 2,362,000 12,932,347 ----------- ----------- ----------- Gross profit 20,937,580 5,497,542 5,829,542 General and administrative exp. 24,556,847 2 (19,829,044) 4,727,803 4 686,000 5,413,803 ----------- ----------- ----------- Operating income (loss) (3,619,267) 769,739 415,739 Other income (expense) (1,042,064) 2 (498,336) (543,728) 4 85,000 (628,728) ----------- ----------- ----------- Income (loss) from operations before income tax expense (4,661,331) 226,011 (212,989) Income tax expense (benefit) (657,000) 2 917,000 260,000 4 (65,000) 195,000 ----------- ------------ ----------- ----------- ----------- Net income (loss) from continuing operations $(4,004,331) $ (3,970,342) $ (33,989) $ 374,000 $ (407,989) =========== ============ =========== =========== =========== Net income (loss) per share: Basic and Diluted $ (2.08) $ (0.20) =========== =========== Shares used in computing net income (loss) per share: Basic and Diluted 1,928,438 6 74,237 2,002,675 =========== =========== ===========
See accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements 6 Advanced Nutraceuticals, Inc. Unaudited Pro Forma Consolidated Statement of Operations Year Ended September 30, 1999
Pro Forma Adjustments - DR (CR) --------------------- Pro Forma ANI Ref. Amount Adjusted ----------- ---- ------------ ---------- Net sales $66,569,875 2 $ 66,569,875 $ - Cost of sales 44,742,050 2 (44,742,050) - ----------- ---------- Gross profit 21,827,825 - General and administrative exp. 22,329,914 2 (21,701,467) 628,447 ----------- ---------- Operating income (loss) (502,089) (628,447) Other income (expense) 210,737 2 210,737 - ----------- ---------- Income (loss) from operations before income tax expense (291,352) (628,447) Income tax expense (benefit) 557,000 2 (557,000) - ----------- ------------ ---------- Net loss from continuing operations $ (848,352) $ (219,905) $ (628,447) =========== ============ ========== Net income (loss) per share: Basic and Diluted $ (0.58) $ (0.43) =========== ========== Shares used in computing net income (loss) per share: Basic and Diluted 1,452,149 6 1,452,149 =========== ==========
See accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements 7 Advanced Nutraceuticals, Inc. Unaudited Pro Forma Consolidated Statement of Operations Year Ended September 30, 1998
Pro Forma Adjustments - DR (CR) --------------------- Pro Forma ANI Ref. Amount Adjusted ----------- ---- ------------ ---------- Net sales $69,658,095 2 $ 69,658,095 $ - Cost of sales 47,939,482 2 (47,939,482) - ----------- ---------- Gross profit 21,718,613 - General and administrative exp. 21,021,056 2 (20,435,417) 585,639 ----------- ---------- Operating income (loss) 697,557 (585,639) Other income (expense) (774,963) 2 (774,963) - ----------- ---------- Income (loss) from operations before income tax expense (77,406) (585,639) Income tax expense (benefit) 790,050 2 (790,050) - ----------- ------------ ---------- Net loss from continuing operations $ (867,456) $ (281,817) $ (585,639) =========== ============ ========== Net income (loss) per share: Basic and Diluted $ (0.59) $ (0.40) =========== ========== Shares used in computing net income (loss) per share: Basic and Diluted 1,458,222 6 1,458,222 =========== ==========
See accompanying Headnote and Notes to Pro Forma Consolidated Financial Statements 8 ADVANCED NUTRACEUTICALS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2001 and the unaudited pro forma condensed consolidated statements of operations for the six months ended March 31, 2001 and the three years in the period ended September 30, 2000, give effect to the disposition of NFLI by ANI, which closed on June 13, 2001. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2001 assumes that the disposition took place as of March 31, 2001. The unaudited pro forma condensed consolidated statements of operations gives effect to the disposition as if it had occurred at the beginning of the earliest period presented. The pro forma statements for the year ended September 30, 2000, also give effect to the acquisitions of Bactolac, ASH and Old-ANI as though such acquisitions had occurred as of the beginning of that year. The pro forma adjustments only give effect to amounts that are directly attributable to the Sale and acquisition transactions. For subsequently issued financial statements of ANI, the operations of NFLI to be included in such financial statements will be treated as discontinued operations for all prior periods. Note 2 - NFLI Operations Adjustments to remove from the balance sheet the individual amounts of assets and liabilities associated with the NFLI entities sold. Also to delete the amounts representing the items of revenue and expense associated with the NFLI entities sold from the statements of operations. Note 3 - Sale of NFLI As of June 13, 2001, ANI sold to Everest Group Holdings, Inc., a privately held entity, all of the outstanding capital stock of NFLI and its subsidiaries engaged in the network marketing business. The agreement provided for $3.2 million in cash at closing and a $5 million, prime plus one-half percent note, payable based upon a ten-year amortization with quarterly payments for three years and final balloon payment at the end of the third year. The note will be an obligation of NFLI and subordinate to the purchaser's secured lender and will be without recourse to the purchaser. Accordingly, collectability of the note will depend upon the success of operations of NFLI after the closing of the sale, including NFLI's ability to service its debt with its senior lender. For financial reporting purposes, management of ANI is unable to determine that it is probable that the future cash flows from NFLI's operations will be sufficient to fund the entire balloon payment required under the terms of the Note. Accordingly, an allowance of approximately $2,800,000 is being provided against the face amount of the Note. ANI will account for collections on the Note under the cost recovery method, whereby any future collections are recorded as a reduction of the balance recorded for the Note (after the allowance). Additional collections above that amount are recorded as income as collected. In addition, Bactolac Pharmaceutical, Inc. (a subsidiary of ANI) received a $650,000 note relating to an inter-company liability, due one year and a day from closing. The following summarizes the sale amounts had closing occurred based upon the NFLI balance sheet as of March 31, 2001:
Note Receivable received at closing (of which $500,000 is to be collected within next twelve months) $ 5,000,000 Valuation allowance being established against face amount of Note, Due to estimated insufficient operating cash flow to pay balloon payment (2,811,107) ----------- Net carrying value of Note for financial reporting purposes $ 2,188,893 Cash portion at closing: Cash portion of price $3,200,000 Transaction expenses payable at closing (327,000) ---------- Net cash from closing 2,873,000 -----------
9 Total proceeds 5,061,893 Less transaction expenses payable after closing (270,000) ----------- Revised total 4,791,893 Financial reporting basis in net assets being disposed 4,791,893 ----------- Financial reporting gain on Sale $ - ===========
Note 4 - Acquisitions Adjusts the pro forma unaudited statement of operations for the year ended September 30, 2000 to also give effect to the acquisitions of Bactolac, ASH and Old-ANI, as though such acquisitions had occurred as of the beginning of that year. Note 5 - Net Assets of NFLI Operations Removes net assets relating to entities sold from the balance sheet. Note 6 - Net Income (Loss) Per Share Adjusts average shares outstanding (basic and diluted) for the year ended September 30, 2000 to record the additional shares issued for the acquisitions of Bactolac, ASH and Old-ANI, as though the acquisitions had occurred as of the beginning of that year. All periods outstanding share amounts have been retroactively restated to reflect a four-for-one reverse common stock split that was effected as of June 1, 2001. On a pro forma basis, the effect of outstanding options and warrants are presented where applicable, but they have no effect on the rounded computation of diluted pro forma adjusted income per share. 10 EX-10.54(A) 2 dex1054a.txt FIRST AMENDMENT TO STOCK PURCHASE PLAN EXHIBIT 10.54(a) FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT THIS First Amendment to the Stock Purchase Agreement (the "First Amendment") dated June 5, 2001, is entered into by and among Advanced Nutraceuticals, Inc., a Texas corporation ("ANI"), Everest International, L.L.C., a limited liability company organized under the laws of Kansas ("Everest") and Nutrition For Life International, Inc., a Texas corporation ("NFLI"). Each of ANI, Everest and NFLI is sometimes referred to as a "Party" and may be collectively referred to as the "Parties." R E C I T A L S: = = = = = = = = A. The Parties have entered into that certain Stock Purchase Agreement dated December 29, 2000 (the "Agreement"). B. The Parties have agreed to amend certain terms and provisions of the Agreement. Statement of Agreement ---------------------- NOW, THEREFORE, in consideration of the premises and of the respective covenants and provisions herein contained, and intending to be legally bound hereby, the Parties agree as follows: Unless otherwise defined, all capitalized terms used herein shall have the same meanings as are ascribed to such terms in the Agreement, hereinbelow. 1. The Sale 1.1 The Sale. Section 1.2 of the Agreement is hereby amended to read in its entirety as follows: 1.2 Purchase Price. (a) The aggregate purchase price to be paid by Everest shall be $8,200,000, plus an Earnout Payment based upon NFLI's operations in Japan (the "Purchase Price"). The Purchase Price shall be payable as follows: (i) $3,200,000 plus the interest earned on the Escrowed Funds from June 5, 2001 through Closing, minus the amount of Escrowed Funds received by ANI from the escrow account (as described in Section 1.3) shall be paid at the Closing by wire transfer or other immediately available funds to ANI; (ii) A promissory note (the "Promissory Note") shall be delivered at the Closing executed by NFLI in the principal amount of $5,000,000, bearing interest at the rate of prime plus one-half of one percent (.5%) per annum with interest only payable at the end of the calendar quarter in which the Closing occurs and thereafter with principal and interest being payable at the end of each succeeding quarter based upon a ten-year amortization, with a maturity date of three (3) years after the Closing Date, substantially in the form provided as Exhibit 1.2(a)(ii), said Promissory Note to be subordinated in payment to the senior secured lender of NFLI (which shall not include the debt associated with acquisition of the Stock of NFLI), secured by all or substantially all of the assets of NFLI and to otherwise be without recourse to any other Person other than NFLI or its successors as assigns; and (iii) Any amounts due pursuant to the Earnout Agreement shall be paid within sixty (60) days after each of the four (4) twelve-month periods following the Closing Date as provided in the Earnout Agreement. (b) In connection with the purchase and sale of the Shares, a portion of the debt of NFLI to GECC (which is a joint obligation with ANI and other Persons) will be assumed (with GECC's consent) or paid by Everest on the Closing Date; provided, that such debt shall be limited to the sum of (i) term debt of $166,000 and (ii) the revolving line of credit portion of the debt to GECC which is attributable to advances made by GECC in respect of eligible inventory of NFLI, which portion as of the date of this First Amendment is $1,260,000. ANI and NFLI shall not be entitled to increase the principal balance of the NFLI revolving line of credit prior to the Closing. 1.2 Purchase Price Escrow Agreement. Section 1.3 of the Agreement is hereby amended to read in its entirety as follows: 1.3 Purchase Price Escrow Agreement. (a) Attached to this Agreement as Exhibit 1.3 is the form of Purchase Price Escrow Agreement among Everest, ANI and an escrow agent (the "Purchase Price Escrow Agreement"), as amended pursuant to the First Amendment, which provides for the deposit by Everest of the aggregate sum of $3,200,000. The amounts deposited by Everest pursuant to this Section 1.3 shall be referred to as the "Escrowed Funds". Except as otherwise provided in the Purchase Price Escrow Agreement, at the Closing, the Escrowed Funds, together with all accrued interest thereon, shall be delivered to ANI and applied to the cash portion of the Purchase Price payable as provided in Section 1.2 of this Agreement. 2. CLOSING. Section 2 of the Agreement is hereby amended to read in its entirety as follows: Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") will take place at 11:00 a.m. (Houston time) on June 12, 2001, unless another time or date is agreed to in writing by the Parties (the actual time and date of the Closing being referred to herein as the "Closing Date"). The Closing shall be held at the offices of Jackson Walker L.L.P., 1100 Louisiana, Suite 4200, Houston, Texas 77002, unless another place is agreed to in writing by the Parties hereto. -2- 3. REPRESENTATION AND WARRANTIES OF ANI. 3.1 Financial Statements. Section 3.4 of the Agreement is hereby deleted in its entirety. 3.2 No Undisclosed Liabilities. Section 3.7 of the Agreement is hereby deleted in its entirety. 4. COVENANTS OF ANI AND NFLI PRIOR TO CLOSING. 4.1 Conduct of Business Pending Closing. Section 5.2(g) of the Agreement is amended to read in its entirety as follows: (g) Maintain present debt and lease instruments and not enter into new or amended debt or lease instruments, without the knowledge and consent of Everest. Neither ANI nor NFLI shall, for any reason, increase the amount of the revolving line of credit portion of the debt to GECC which is attributable to working capital of NFLI. All collections received by NFLI from June 1, 2001 to the Closing Date shall be applied as a principal reduction of the revolving line of credit portion of the debt to GECC which is attributable to working capital of NFLI. 4.2 Final Financial Statements. Section 5.6 of the Agreement is hereby deleted in its entirety. 5. COVENANTS OF EVEREST PRIOR TO CLOSING. A new Section 6.2(d) is hereby added to the Agreement as follows: (d) From June 5, 2001, to the Closing Date, Everest shall provide working capital as reasonably required by NFLI in the Ordinary Course of Business. 6. CONDITIONS PRECEDENT TO OBLIGATIONS TO EVEREST. A new Section 7.17 is hereby added to the Agreement as follows: 7.17 Vitarich Agreement. The Parties, GECC and Vitarich Laboratories, Inc. ("Vitarich") shall have entered into an Agreement acknowledging, confirming and agreeing to the terms and conditions of a $1,000,000 advance under the GECC revolving line of credit agreement pursuant to which such funds were paid directly to Bactolac Pharmaceutical, Inc. ("Bactolac"), credits in the same amount were issued by Bactolac to Vitarich and Vitarich applied such amount against accounts payable owing to it by NFLI. -3- 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF NFLI AND ANI. A new Section 8.17 is hereby added to the Agreement as follows: 8.17 Everest's Financing Commitment. At the Closing Everest shall have sufficient funds to pay off the portion of the debt of NFLI to GECC (which is a joint obligation with ANI and other Persons) which sums are solely comprised of (i) term debt of $166,000 and (ii) the revolving line of credit portion of the debt to GECC which is attributable to advances made by GECC in respect of working capital of NFLI, which portion as of the date of this Agreement is $1,260,000. 8. LIABILITIES IN EVENT OF TERMINATION. 8.1 The first sentence of Section 10.2(a) is hereby amended in its entirety as follows: 10.2 Liabilities in Event of Termination. (a) Except as hereinafter provided, if this Agreement is terminated for any reason or if the Closing shall not have occurred on or before June 12, 2001 through no fault of ANI or NFLI, Everest shall pay a termination fee to ANI in the amount of all Escrowed Funds together with all interest thereon held by the Escrow Agent (the "Termination Fee"). 8.2 Section 10.2(a)(ii) and Section 10.2(a)(iii) are hereby amended in their entirety as follows: (ii) The conditions of Closing set forth in Sections 7.13, 7.14, 7.16 and 7.17 shall not have been satisfied on or prior to the Closing Date, unless such condition was not satisfied due to unreasonable acts or inaction by Everest; or (iii) The Closing shall not have occurred on or before June 12, 2001, through no fault of Everest. -4- 9. GENERAL PROVISIONS. 9.1 Extent of Amendments. Except as otherwise expressly provided herein, the Agreement, and the other instruments and agreements referred to therein are not amended, modified or affected by this First Amendment. Except as expressly set forth herein, all of the terms, conditions, covenants, representations, warranties and all other provisions of the Agreement are herein ratified and confirmed and shall remain in full force and effect. 9.2 References. On and after the date on which this First Amendment becomes effective, the terms, "Agreement," "hereof," "herein," "hereunder" and terms of like import, when used herein or in the Agreement shall, except where the context otherwise requires, refer to the Agreement, as amended by this First Amendment. 9.3 Counterparts. This First Amendment may be executed in two or more counterparts, and it shall not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written. ADVANCED NUTRACEUTICALS, INC. By: ------------------------------------- Name: Jeffrey G. McGonegal Title: Senior Vice President of Finance NUTRITION FOR LIFE INTERNATIONAL, INC. EVEREST INTERNATIONAL, L.L.C. By: By: ------------------------------------- ---------------------------- Name: John R. Brown, Jr. Name: Robert Hamlin Title: Vice President Title: Executive Vice President -5- -----END PRIVACY-ENHANCED MESSAGE-----