FIFTH AMENDMENT TO FORBEARANCE AGREEMENT

 

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                    FIFTH AMENDMENT TO FORBEARANCE AGREEMENT

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         THIS FIFTH AMENDMENT TO FORBEARANCE AGREEMENT, made and entered into as

of the 6th day of May, 2005, 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 previously amended by a certain Amendment to

Forbearance Agreement dated as of May 10, 2004 made by and among Borrowers and

Lender, by a certain Second Amendment to Forbearance Agreement dated as of

August 9, 2004 made by and among Borrowers and Lender, by a certain Third

Amendment to Forbearance Agreement dated as of February 7, 2005 made by and

among Borrowers and Lender and by a certain Letter Amendment dated as of April

1, 2005 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 6, 2005, 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)(iii)(C) of the Forbearance Agreement shall be deleted

in its entirety and in its place shall be substituted the following:

 

                  (C) on or before August 31, 2005, the consolidated balance

         sheet of Borrowers and their Consolidated Subsidiaries as of December

         31, 2004 and the related consolidated statements of income, retained

         earnings and cash flows for the fiscal year ended as of December 31,

         2004, all with consolidating disclosures and setting forth in each

         case, in comparative form, the figures for the previous fiscal year,

         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;

 

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         2. Section 1(b)(iii)(E) of the Forbearance Agreement shall be deleted

in its entirety and in its place shall be substituted the following:

 

                  (E) on or before July 15, 2005, the consolidated and

         consolidating balance sheet, income statement projections and cash flow

         projections for Borrowers and their Consolidated Subsidiaries for their

         fiscal year ending December 31, 2005 on a month-by-month basis, all in

         form and detail reasonably acceptable to Bank.

 

         3. 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 September 30, 2005.

 

         4. Section 4(d) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                  (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:

 

                           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 Fifteen

                  Million Dollars ($15,000,000.00) and otherwise amended on the

                  terms and conditions set forth herein, with such loans to

                  mature on September 30, 2005; and

 

Subject to the terms of the Credit Agreement (as amended by Sections 4(a)

through 4(k) of the Forbearance Agreement (as herein amended)), Lender 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 $15,000,000.00 or

the then current Borrowing Base.

 

         5. Section 4(e) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                  (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 September 30, 2005, 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.

 

         6. Section 4(g) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

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                  (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 Fifteen Million Dollars ($15,000,000.00) (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 outstanding hereunder

                  plus the face amount of Letters of Credit issued and

                  outstanding hereunder at any one time shall not exceed the

                  lesser of the Bank's Commitment or the then current Borrowing

                  Base.

 

         Contemporaneously with the execution of that certain Fifth Amendment to

         Forbearance Agreement dated as of May 6, 2005 (amending this

         Agreement), Borrowers shall execute and deliver to Bank a Note of

         Borrowers dated as of May 6, 2005 and payable jointly and severally to

         the order of Bank in the original principal amount of Fifteen Million

         Dollars ($15,000,000.00) in the form attached as Exhibit B to such

         Fifth Amendment to Forbearance Agreement and incorporated herein by

         reference (as the same may from time to time be amended, modified,

         extended or renewed, the "Note"). All references in the Credit

         Agreement, this Agreement, the Security Documents and the other

         Transaction Documents to the "Note," the "Revolving Credit Note" and

         other references of similar import shall hereafter be amended and

         deemed to refer to the Note in the form of the Revolving Credit Note,

         as amended and restated in the form attached as Exhibit B to the Fifth

         Amendment to Forbearance Agreement .

 

         7. Section 4(i) of the Forbearance  Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                  (i) Section 3.1(d) of the Credit Agreement shall be deleted in

         its entirety and in its place shall be substituted the following:

 

                           (d) Borrowing Base Certificate. Borrowers shall

                  deliver to Bank on the twenty-eighth (28th) day of each month,

                  commencing in the month of May, 2005, a borrowing base

                  certificate in the form of Exhibit A attached to the Fifth

                  Amendment to Forbearance Agreement dated as of May 6, 2005

                  made by and among Borrowers and the Bank (the "Forbearance

                  Agreement Amendment") and incorporated herein by reference (a

                  "Borrowing Base Certificate") setting forth:

 

                                    (i) the Borrowing Base and its components as

                  of the end of the immediately preceding month;

 

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                                    (ii) the aggregate principal amount of all

                  outstanding Loans and the aggregate face amount of all issued

                  and outstanding Letters of Credit; and

 

                                    (iii) the difference, if any, between the

                  Borrowing Base and the aggregate principal amount of all

                  outstanding Loans plus the aggregate face amount of all issued

                  and outstanding Letters of Credit.

 

                  The Borrowing Base shown in such Borrowing Base Certificate

                  shall be and remain the Borrowing Base hereunder until the

                  next Borrowing Base Certificate is delivered to Bank, at which

                  time the Borrowing Base shall be the amount shown in such

                  subsequent Borrowing Base Certificate. Each Borrowing Base

                  Certificate shall be certified (subject to normal year-end

                  adjustments) as to truth and accuracy by the President,

                  principal financial officer or controller of each of the

                  Borrowers.

 

All references in the Credit Agreement, the Forbearance Agreement and the other

Transaction Documents to the "Borrowing Base Certificate" and other references

of similar import shall hereafter be amended and deemed to refer to a Borrowing

Base Certificate in the form of the Borrowing Base Certificate, as amended and

restated in the form attached hereto as Exhibit A.

 

         8. Section 4(j) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                  (j) Section 3.16 of the Credit Agreement shall be deleted in

         its entirety and in its place shall be substituted the following:

 

                           3.16 Maturity. All Loans not paid prior to September

                  30, 2005, together with all accrued and unpaid interest

                  thereon, shall be due and payable on September 30, 2005 (the

                  "Maturity Date").

 

         9. Section 4(k) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                  (k) Addition of a new Monthly Consolidated EBITDA Covenant.

         Section 7.1(i) of the Credit Agreement shall be amended to add a new

         subsection 7.1(i)(ii) to such Section immediately following subsection

         7.1(i)(i) therein as follows:

 

                           (ii) Maintain a minimum Consolidated EBITDA for

                  Borrowers and their Subsidiaries of not less than: (A)

                  ($55,000.00) for the month ending May 31, 2005, (B)

                  ($121,000.00) for the month ending June 30, 2005, (C)

                  ($198,000.00) for the month ending July 31, 2005, (D)

                  ($198,000.00) for the month ending August 31, 2005, and (E)

                  ($110,000.00) for the month ending September 30, 2005;

 

         10. Section 5(b) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

                           (b) Borrowers covenant and agree that they will

         promptly furnish to Lender any additional financial or other

         information as Lender may reasonably request from time to time in order

         to assess the progress of Borrowers' ability to repay or

 

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         refinance all of the Obligations on or before September 30, 2005, to

         verify Borrowers' compliance with this Agreement, or to ascertain

         whether any event of termination of the Standstill Period has occurred;