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AMENDMENT TO FORBEARANCE AGREEMENT
THIS
AMENDMENT TO FORBEARANCE AGREEMENT, made and entered into as of
the
10th day of May, 2004, by and between
VIRBAC CORPORATION, a Delaware corporation
("Virbac"), PM RESOURCES, INC., a Missouri
corporation ("PM Resources"), ST. JON
LABORATORIES, INC., a California
corporation ("St. JON"), FRANCODEX
LABORATORIES, INC., a Kansas corporation
("Francodex"), VIRBAC AH, INC., a
Delaware corporation ("Virbac AH,"), and
DELMARVA LABORATORIES, INC., a Virginia
corporation ("Delmarva," and collectively
with Virbac, PM Resources, St. JON,
Francodex and Virbac AH referred to herein
as the "Borrowers"), and FIRST BANK,
a Missouri banking corporation (the
"Lender").
WITNESSETH:
WHEREAS,
Borrowers and Lender have heretofore executed a Credit
Agreement
dated as of September 7, 1999 made by and
among Borrowers and Lender, as
previously amended from time to time (as
amended, the "Credit Agreement"); and
WHEREAS, Borrowers are
presently in default under such Credit Agreement
and the other Security Documents and
Transaction Documents as more fully set
forth in that certain Forbearance Agreement
dated as of April 9, 2004 made by
and among Borrowers and Lender (as amended,
the "Forbearance Agreement;"
capitalized terms used herein and not
otherwise defined shall have the meanings
ascribed to such terms in the Forbearance
Agreement); and
WHEREAS,
Lender's agreement to forebear with respect to Borrowers'
existing events of default as set forth in
the Forbearance Agreement is
presently set to expire on May 10, 2004,
and Borrowers have requested that
Lender extend such agreement to forebear;
and
WHEREAS,
Borrowers and Lender desire to amend the Forbearance Agreement
on
the terms and conditions set forth
herein;
NOW,
THEREFORE, in consideration of the premises and the mutual
provisions
and agreements hereinafter set forth, the
parties hereto do hereby mutually
promise and agree as follows:
1. Section 1(b)(ii) of
the Forbearance Agreement shall be deleted in its
entirety and in its place shall be
substituted the following:
(ii) On or before May 10, 2004, Borrowers shall pay to Lender
such
additional
principal payments as may be necessary to reduce the amount by
which
Borrowers' outstanding Loans then exceeds their Borrowing Base
under
the Credit
Agreement and the Note to $0.00, provided that prior to such
payment
Borrowers shall have: (A) notified Lender of the source of
funds
for making
such repayment (which if in the form of debt must be
subordinated to the Obligations in form and substance satisfactory
to
Lender)
and (B) provided copies of any agreements to be made by any of
the
Borrowers with respect to
obtaining such funds, all of which must be in
form and
substance acceptable to Lender (subject to satisfaction of such
conditions, Lender agrees to waive the limitation of Sections
7.2(a) and
7.2(b) of
the Credit Agreement for purposes of Borrowers incurring
Indebtedness to make such payment);
2. Section
1(b)(iii)(C) of the Forbearance Agreement shall be deleted in
its entirety and in its place shall be
substituted the following:
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(C) on or before July 16, 2004, the consolidated balance sheet
of
Borrowers and their Consolidated Subsidiaries as of December 31,
2003
and the
related consolidated statements of income, retained earnings
and
cash flows
for the fiscal year ended as of December 31, 2003, all with
consolidating disclosures and setting forth in each case, in
comparative
form, the
figures for the previous fiscal year, together with any and all
restated
financial statements (balance sheets and statements of income,
retained
earnings and cash flows) for the fiscal years (or any periods
during the
fiscal years) ending December 31, 2002 and December 31, 2001,
all such
financial statements to be prepared in accordance with
Generally
Accepted
Accounting Principles consistently applied and audited by and
accompanied by the unqualified opinion of PriceWaterhouse
Coopers.
3. A new
Section 1(b)(iii)(D) shall be added to the Forbearance
Agreement
immediately following Section 1(b)(iii)(C)
therein as follows:
(D) Within twenty-eight (28) days after the end of each month and
in
any event,
simultaneously with the delivery of the preceding month's
Borrowing
Base Certificate, (A) an Accounts trial balance of Borrowers
and
their
Consolidated Subsidiaries indicating which Accounts are up to 30,
31
to 60, 61
to 90 and 91 days or more past the invoice date and including,
if
requested by the Bank, a listing of the names and addresses of
all
applicable
Account Debtors, (B) a summary of accounts payable of Borrowers
and their
Consolidated Subsidiaries showing which accounts payable are
current,
up to 30, 31 to 60, 61 to 90 and 91 days or more past due, with
contra
accounts identified therein, and including, if requested by the
Bank, a
listing of the names and addresses of applicable creditors, (C)
an
Inventory
listing, with obsolete, packaging and offsite inventory noted
thereon,
(D) a listing of all foreign account debtors, (E) a listing of
all
Accounts for which the Account Debtor is a Related Party to one
or
more of
the Borrowers, (F) any other additional schedules necessary to
compute
the Borrowing Base which may be required by the Bank, (G) if
requested
by Bank, a schedule of the current outstanding orders of the
ten
largest
customers of the Borrowers as of the preceding month-end, and
(H)
a schedule
of the preceding month's gross sales and net sales (after
discounts
and other incentives) to each customer of the Borrowers, all in
form and
detail reasonably satisfactory to Bank and certified as being
true,
correct and complete by the President or the chief financial
officer
of the
Borrowers;
4. Section
3(a) of the Forbearance Agreement shall be deleted in its
entirety and in its place shall be
substituted the following:
(a) The Standstill Period shall commence at such time as all
conditions
precedent to this Agreement have occurred or have been
satisfied,
as provided in Section 2 hereof, and shall terminate on August
9,
2004.
5. Section
3(b)(iv) of the Forbearance Agreement shall be deleted in its
entirety and in its place shall be
substituted the following Sections 3(b)(iv)
and (v):
(iv) that certain Subordination Agreement dated as of April 9,
2004
made by
Virbac S. A. in favor of the Bank and acknowledged by the
Borrowers
(as amended or restated from time to time, the "Subordination
Agreement") shall at any time for any reason cease to be in full
force and
effect or
shall be declared to be null and void by a court of competent
jurisdiction, or if the validity or enforceability of the
Subordination
Agreement
shall be contested or denied by Virbac S. A., or if Virbac S.
A.
shall deny
that it has any
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further
liability or obligation under the Subordination Agreement or if
any
repayment of any of the Subordinated Indebtedness (as defined in
such
Subordination Agreement) except to the extent any such
repayments
constitute
"Permitted Payments" (as defined in such Subordination
Agreement); and
(v) the payment by Borrowers of all of the Obligations to
Lender.
6. The
lead-in paragraph to Section 4 on page five of the Forbearance
Agreement shall be deleted in its entirety
and in its place shall be substituted
the following:
4. Amendments to the Credit Agreement and the other Transaction
Documents.
Provided an event of termination as defined in Section 3(b)
above
does not
then exist or would not be created thereby or any event which,
after
notice or lapse of time or both should constitute such an event
of
termination, does not then exist, Lender shall continue to make
advances
to the
Borrower under the terms of the Credit Agreement and the Note
subject to
the following amendments to the Credit Agreement and the Note:
With such revision to the lead-in paragraph
to Section 4, and notwithstanding
the termination of the Bank's obligation to
make any new Loans to any of the
Borrowers from and after March 1, 2004 as
set forth in Paragraph 1 of the
Seventh Amendment to Credit Agreement and
Amendment to Note dated as of March 1,
2004 made by and among Borrowers and Bank,
subject to the terms of the Credit
Agreement (as amended by Sections 4(a)
through 4(j) of the Forbearance Agreement
(as herein amended)), Bank will again make
new Loans to Borrowers (provided that
an event of termination as defined in
Section 3(b) of the Forbearance Agreement
does not then exist or any event which,
after notice or lapse of time or both
would constitute such an event of
termination, does not then exist) up to the
lesser of $20,000,000.00 or the then
current Borrowing Base.
7. Section
4(b) of the Forbearance Agreement shall be deleted in its
entirety and in its place shall be
substituted the following:
(b) Amendment to Consolidated Net Worth Covenant. Section
7.1(i)(i)
of the Loan Agreement shall be deleted in its entirety and in
its place
shall be substituted the following:.
(i) Maintain a minimum Consolidated Net Worth at all times
during
the Term
hereof of not less than the sum of: (A) the lesser of (1)
$27,500,000.00 or (2) the December 31, 2003 Net Worth reflected
on
Borrowers'
audited Consolidated financial statements, plus (B)
Seventy-Five Percent (75%) of the Consolidated Net Income of
Borrowers
(with no
deductions for any consolidated losses for any such month)
shown
on
Borrowers' monthly consolidated financial statements for each
month,
commencing
with the fiscal month ending April 30, 2004, such required
increases
to be cumulative from month to month;
8. A new
Section 4(d) shall be added to the Forbearance Agreement
immediately following Section 4(c) therein
as follows:
(d) The third paragraph beginning with the word "WHEREAS" on
the
first page
of the Credit Agreement shall be deleted in its entirety and in
its place
shall be substituted the following:
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WHEREAS, Borrowers, including Virbac AH, Francodex and
Delmarva which have been added as parties to the credit
facilities,
have requested that the aggregate amount thereof be amended to
an
aggregate principal amount of up to Twenty Million Dollars
($20,000,000.00) and otherwise amended on the terms and
conditions
set forth herein, with such loans to mature on August 9, 2004;
and
9. A new
Section 4(e) shall be added to the Forbearance Agreement
immediately following Section 4(d) therein
as follows:
(e) Section 1 of the Credit Agreement shall be deleted in its
entirety
and in its place shall be substituted the following:
The "Term" of this Agreement shall commence on the date hereof
and shall end on August 9, 2004, unless earlier terminated upon
the
occurrence of an Event of Default under this Agreement or upon
an
event of termination as defined in Section 3(b) of that certain
Forbearance Agreement dated as of April 9, 2004 made by and
among
Borrowers and Lender, as amended.
10. A new
Section 4(f) shall be added to the Forbearance Agreement
immediately following Section 4(e) therein
as follows:
(f)
The definition of "Eligible Accounts" in Section 2 of the
Credit
Agreement
shall be deleted in its entirety and in its place shall be
substituted the following:
Eligible Accounts shall mean all Accounts other than: (a)
Accounts which remain unpaid for more than ninety (90) days
after
their invoice dates and Accounts which are not due and payable
within ninety (90) days after their invoice dates; (b) Accounts
owing by a single Account Debtor, including a currently
scheduled
Account, if ten percent (10%) or more of the balance owing by
said
Account Debtor upon said Accounts is ineligible pursuant to
clause
(a) above; (c) Accounts owing by a single Account Debtor,
including
a currently scheduled Account, to the extent the balance owing
by
said Account Debtor upon its Accounts exceeds Thirty Percent
(30%)
of the then outstanding amount of Borrowers' total Accounts);
(d)
Accounts with respect to which the Account Debtor is a
shareholder
or partner of any of the Borrowers or a Related Party of any of
the
Borrowers; (e) Accounts with respect to which payment by the
Account
Debtor is or may be conditional; (f) Accounts with respect to
which
the Account Debtor is not a resident or citizen of or otherwise
located in the continental United States of America; (g)
Accounts
with respect to which the Account Debtor is the United States
of
America or any department, agency or instrumentality thereof
unless
such Accounts are duly assigned to Bank in accordance with all
applicable governmental and regulatory rules and regulations
(including, without limitation, the Federal Assignment of Claims
Act
of 1940, as amended, if applicable) so that Bank is recognized
by
the Account Debtor to have all of the rights of an assignee of
such
Accounts; (h) Accounts with respect to which any of the Borrowers
is
or may become liable to the Account Debtor for goods sold or
services rendered by such Account Debtor to any such Borrower;
(i)
Accounts with respect to which the goods giving rise thereto
have
not been shipped and delivered to and accepted as satisfactory
by
the Account Debtor thereof or with respect to which the
services
performed giving rise thereto have
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not been completed and accepted as satisfactory by the Account
Debtor thereof; (j) Accounts which are not invoiced (and dated as
of
such date) and sent to the Account Debtor thereof concurrently
with
or not later than five (5) days after the shipment and delivery
to
and acceptance by said Account Debtor of the goods giving rise
thereto or the performance of the services giving rise thereto;
(k)
Accounts arising from a "sale on approval" or a "sale or
return;"
(l) Accounts as to which Bank, at any time or times hereafter,
determines, in good faith, that the prospects of payment or
performance by the Account Debtor is or will be impaired; (m)
Accounts of an Account Debtor to the extent, but only to the
extent,
that the same exceed a credit limit determined by Bank in its
discretion, at any time or times hereafter; (n) Accounts with
respect to which the Account Debtor is located in the State of
New
Jersey or the State of Minnesota; provided, however, that such
restriction shall not apply if such Borrower (i) has filed and
has
effective (A) in respect of Account Debtors located in the State
of
New Jersey, a Notice of Business Activities Report with the New
Jersey Division of Taxation for the then current year or (B) in
respect of Account Debtors located in the State of Minnesota, a
Minnesota Business Activity Report with the Minnesota Department
of
Revenue for the then current year, as applicable, or (ii) is
otherwise exempt from such reporting requirements under the laws
of
such State(s); (o) Accounts which are not subject to a first
priority perfected security interest in favor of Bank; and (p)
Accounts which have been factored by any of the Borrowers.
11. A new
Section 4(g) shall be added to the Forbearance Agreement
immediately following Section 4(f) therein
as follows:
(g) Section 3.1(a) of the Credit Agreement shall be deleted in
its
entirety
and in its place shall be substituted the following:
(a) Revolving Credit Loans. Subject to the terms and
conditions hereof, during the Term of this Agreement, Bank
hereby
agrees to make such loans (individually, a "Loan" and
collectively,
the "Loans") to Borrowers, jointly and severally, as any of the
Borrowers may from time to time request pursuant to Section 3.2
and
in Bank's discretion, to issue Letters of Credit for the account
of
the Borrowers, or any of them, upon any Borrower's execution of
a
Letter of Credit Application therefor pursuant to Section 3.3
(subject to Bank's approval of the form of the Letters of
Credit
requested to be issued). The maximum aggregate principal amount
of
Loans plus the face amount of issued and outstanding Letters of
Credit which Bank, cumulatively, may be required to have
outstanding
hereunder at any one time shall not exceed the lesser of Twenty
Million Dollars ($20,000,000.00) (the "Bank's Commitment"), or
(ii)
the Borrowing Base (as hereinafter defined). Subject to the
terms
and conditions hereof, Borrowers may jointly and severally
borrow,
repay and reborrow
such sums from Bank, provided, however, that the
aggregate principal amount of all Loans
