SECOND AMENDMENT TO FOREBEARANCE AGREEMENT

 

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                    SECOND AMENDMENT TO FORBEARANCE AGREEMENT

 

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

of the 9th day of August, 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 previously amended by a certain Amendment to

Forbearance Agreement dated as of May 10, 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 August 9, 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)(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 December 31, 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.

 

      2.    Section 3(a) of the Forbearance Agreement shall be deleted in its

entirety and in its place shall be substituted the following:

 

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                  (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

      February 7, 2005.

 

      3.    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 Twenty Million Dollars

            ($20,000,000.00) and otherwise amended on the terms and conditions

            set forth herein, with such loans to mature on February 7, 2005; and

 

      4.    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 February 7, 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.

 

      5.    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 February 7, 2005,

            together with all accrued and unpaid interest thereon, shall be due

            and payable on February 7, 2005 (the "Maturity Date").

 

      6.    A new Section 4(k) shall be added to the Forbearance Agreement

immediately following Section 4(j) therein as follows:

 

            (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) ($124,000.00) for the month ending

      August 31, 2004, (B) ($251,000.00) for the month ending September 30,

      2004, (C) $428,000.00 for the

 

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      month ending October 31, 2004, (D) ($408,000.00) for the month ending

      November 30, 2004, and (E) ($288,000.00) for the month ending December 31,

      2004;

 

      7.    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 refinance all of the Obligations on or

      before February 7, 2005, to verify Borrowers' compliance with this

      Agreement, or to ascertain whether any event of termination of the

      Standstill Period has occurred;

 

      8.    Contemporaneously with the execution of this Second Amendment to

Forbearance Agreement, the Revolving Credit Note made by the Borrowers payable

to the order of Lender shall be amended and restated in the form of that certain

Revolving Credit Note made by the Borrowers payable to the order of Lender

attached hereto as Exhibit B, to extend the maturity thereof and to make certain

amendments as set forth therein (as the same may from time to time be amended,

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

Agreement, the Forbearance 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 hereto as Exhibit B.

 

      9.    Borrowers hereby agrees to reimburse Lender, upon demand, for all

out-of-pocket costs and expenses, including reasonable legal fees and expenses

of the attorneys for the Lender incurred by Lender in the preparation,

negotiation and execution of this Second Amendment to Forbearance Agreement and

all other documents, instruments and agreements relating to this Second

Amendment to Forbearance Agreement with Lender.

 

      10.   In consideration of the amendments made by Lender hereunder,

Borrowers shall jointly and severally pay to Lender on the date hereof an

amendment fee in the amount of $75,000.00, which fee shall be fully earned by

Lender on the date hereof.

 

      11.