SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended September 30, 1999
Commission File Number: 0-24312
VIRBAC CORPORATION
(formerly Agri-Nutrition Group Limited)
State of Incorporation: Delaware I.R.S. Employer I.D. 43-1648680
3200 Meacham Boulevard
Fort Worth, TX 76137
(817) 831-5030
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
The number of shares of common stock outstanding at November 12, 1999 is
21,012,798 shares.
<PAGE>
VIRBAC CORPORATION (formerly Agri-Nutrition Group Limited)
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Operations (unaudited) three months and nine
months ended September 30, 1999
and 1998 4
Consolidated Statements of Cash Flows (unaudited) -
nine months ended September 30, 1999 and 1998 5
Consolidated Statement of Shareholders' Equity (unaudited) -
nine months ended September 30, 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II. Other information
Item 6. Exhibits and Reports on Form 8-K 18
Signature 18
</TABLE>
<PAGE>
PART I - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS PAGE 3
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 259,344 $ 412,378
Accounts receivable 7,218,816 1,230,361
Accounts receivable - Virbac SA 51,881 91,212
Inventories 13,430,870 3,355,504
Prepaid expenses and other assets 975,689 845,840
---------------- --------------
21,936,600 5,935,295
Property, plant and equipment, net 12,731,892 4,904,520
Goodwill 7,176,739 1,464,058
Other assets 832,903 376,778
---------------- --------------
Total Assets $ 42,678,134 $ 12,680,651
================ ==============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt and notes payable $ 799,188 $ 3,200,000
Advance from Virbac SA -- 2,000,000
Accounts payable
Trade 2,981,033 503,724
Virbac SA 204,338 262,487
Accrued expenses 2,740,812 823,740
---------------- --------------
6,725,371 6,789,951
Long-term debt and notes payable 8,247,047 4,000,000
Commitments and contingencies (Note 2)
Shareholders' equity:
Common stock ($.01 par value; 38,000,000 shares authorized;
21,975,747 and 12,580,918 issued, respectively) 219,757 125,809
Additional paid-in capital 35,618,794 8,284,453
Treasury stock at cost (962,949 shares) (2,924,171) --
Accumulated deficit (5,208,664) (6,519,562)
---------------- --------------
27,705,716 1,890,700
Total Liabilities and Shareholders' Equity $ 42,678,134 $ 12,680,651
================ ==============
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) PAGE 4
<TABLE>
<CAPTION>
For the three months For the nine months
Ended September 30, Ended September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net revenues $ 12,854,051 $ 3,775,782 $ 34,980,231 $ 12,771,345
Cost of goods sold 7,912,284 1,757,170 20,272,064 5,690,417
---------------- ----------------- ---------------- ----------------
Gross profit 4,941,767 2,018,612 14,708,167 7,080,928
Operating expenses:
Selling, general and administrative 3,165,636 1,860,002 10,644,657 6,341,397
Research and development 307,916 197,163 890,784 549,388
Warehouse and distribution 445,285 220,121 1,310,842 631,413
---------------- ----------------- ---------------- ----------------
Income (loss) from operations 1,022,930 (258,674) 1,861,884 (441,270)
Interest expense (155,511) (147,995) (396,039) (420,660)
Other expense (61,270) (17,547) (154,947) (17,472)
---------------- ----------------- ---------------- ----------------
Income (loss) before income tax 806,149 (424,216) 1,310,898 (879,402)
Benefit
Income tax benefit -- -- -- --
---------------- ----------------- ---------------- ----------------
Net income (loss) $ 806,149 $ (424,216) $ 1,310,898 $ (879,402)
================ ================= ================ =================
Basic income (loss) per share $ 0.04 $ (0.03) $ 0.07 $ (0.07)
================= ================= ================ =================
Diluted income (loss) per share $ 0.04 $ (0.03) $ 0.07 $ (0.07)
================= ================= ================ =================
Basic shares outstanding 20,978,163 12,580,918 19,229,769 12,580,918
================= ================= ================ ================
Diluted shares outstanding 21,054,573 12,580,918 19,305,793 12,580,918
================= ================= ================ ================
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) PAGE 5
<TABLE>
<CAPTION>
For Nine Months
Ended September 30,
1999 1998
<S> <C> <C>
Operating activities:
$ 1,310,898 $ (879,402)
Net income (loss) from operations
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:-
Depreciation and amortization 1,170,217 860,297
Changes in operating assets and liabilities:
(Increase) in accounts receivable (1,610,421) (1,011,041)
(Increase) in inventories (2,204,766) (566,564)
Decrease in prepaid expenses and other 152,161 112,161
Increase (decrease) in accounts payable (1,149,426) 240,428
Increase (decrease) in accrued expenses 229,059 (72,120)
-------------- ---------------
Net cash used in operating activities (2,102,278) (1,316,241)
-------------- ---------------
Investing activities:
Purchase of property, plant and equipment (274,418) (57,733)
Merger with Agri-Nutrition Group Limited (see Note 1) (643,979) --
Other 139,056 (79,357)
-------------- ---------------
Net cash used in investing activities (779,341) (137,090)
-------------- ---------------
Financing activities:
Proceeds from long-term debt and notes payable 8,126,679 800,000
Repayment of long-term debt and notes payable (16,119,802) --
Advance from Virbac S.A. -- 800,000
Cash infusion by Virbac S.A. in connection with the Merger 13,749,897 --
(see Note 1)
Repurchase of treasury shares (3,036,683) --
Issuance of stock to directors 8,494 --
-------------- ---------------
Net cash provided by financing activities 2,728,585 1,600,000
-------------- ---------------
Increase (decrease) in cash and cash equivalents (153,034) 146,669
Cash and cash equivalents, beginning of period 412,378 84,047
-------------- ---------------
Cash and cash equivalents, end of period $ 259,344 $ 230,716
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) PAGE 6
Supplemental disclosure of non-cash investing and financing activities:
On March 5, 1999, Agri-Nutrition Group Limited ("AGNU") consummated a
merger with Virbac, Inc., a Delaware corporation and indirect subsidiary of
Virbac SA, a French corporation ("VBSA"), pursuant to which (i) Virbac received
a cash infusion from VBSA of approximately $13.7 million plus a contribution of
$2.0 million of intercompany debt that was recapitalized to Virbac, Inc.'s
equity, (ii) AGNU issued 12,580,918 shares of its Common Stock to a subsidiary
of VBSA and (iii) Virbac was merged with and into AGNU, with AGNU being the
surviving entity and VBSA its controlling stockholder (see Note 1). Because
VBSA, the parent of Virbac, received 60% of the voting equity of the Company,
Virbac is considered to be the acquirer for financial statement purposes.
Therefore, the Merger has been accounted for as a purchase of AGNU by Virbac.
See notes 1 and 2 for further discussion.
In September 1999, the Company repaid debt in the amount of $51,000 by
issuing 37,051 shares of the Company's common stock.
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) PAGE 7
<TABLE>
<CAPTION>
Common Stock Treasury Stock
Additional Number
Number Par Paid In of Shares Amount Accumulated Total
of Shares Value Capital Deficit
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, 12,580,918 $ 125,809 $ 8,284,453 -- $ -- $ (6,519,562) $ 1,890,700
December 31, 1998
Cash infusion by Virbac S.A.
in connection with the 13,749,897 13,749,897
Merger (see Note 1)
Debt payable to Virbac
S.A. recapitalized as 2,000,000 2,000,000
equity (see Note 1)
Merger with
Agri-Nutrition Group 9,387,279 93,873 11,637,538 11,731,411
Limited (see Note 1)
Issuance of shares to 7,550 75 8,418 8,493
directors
Purchase of treasury (1,000,000) (3,036,683) (3,036,683)
Shares (see Note 2)
Issuance of treasury (61,512) 37,051 112,512 51,000
shares to retire debt
Net income 1,310,898 1,310,898
------------- ----------- ------------- ------------ ------------- -------------- -------------
Balance,
September 30, 1999 21,975,747 $ 219,757 $ 35,618,794 (962,949) $ (2,924,171) $ (5,208,664) $ 27,705,716
============ =========== ============= ============ ============= ============== =============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) PAGE 8
1. Nature of Operations and Basis of Presentation
Virbac Corporation (the "Company" or "Virbac") manufactures and distributes a
wide variety of health, grooming, dental and parasiticidal products for pets and
other companion animals under the C.E.T., Allerderm, St. JON, Zema, and
Francodex brand names.
The Company is the result of the March 5, 1999 merger of Virbac, Inc.,
a subsidiary of Virbac SA, a French veterinary pharmaceutical manufacturer
("VBSA"), and Agri-Nutrition Group Limited ("AGNU"), a publicly held company.
Pursuant to the merger agreement dated October 16, 1998 (the "Merger
Agreement"), the merger was completed by the following series of transactions:
(i) VBSA contributed a total of $15.7 million to Virbac, Inc. consisting of
$13.7 million in cash and $2 million in intercompany debt recapitalized as
equity; (ii) AGNU issued 12,580,918 shares of AGNU stock to VBSA; and (iii)
Virbac, Inc. merged with AGNU with AGNU being the surviving entity with VBSA its
majority stockholder. The name of the surviving entity was then changed to
Virbac Corporation.
For financial statement reporting purposes, the merger is considered a
purchase of AGNU by Virbac, Inc. Accordingly, the accompanying unaudited
consolidated financial statements are the historical financial statements of
Virbac, Inc., which reflect its acquisition of AGNU as of March 5, 1999. See
Note 2.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, these
statements include all adjustments (which consist of normal, recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at and for periods ending September 30, 1999 and 1998.
The accompanying consolidated statements of operations reflect the historic
operations of Virbac, Inc. and include the operations of AGNU since the date of
the Merger. The results of operations for the three months and nine months
ending September 30, 1999 and 1998 are not necessarily indicative of the
operating results for the full year. This interim report should be read in
conjunction with the Virbac, Inc. and AGNU consolidated financial statements and
notes related thereto, included in the Proxy Statement of Agri-Nutrition Group
Limited for the 1999 Annual Meeting of Stockholders filed with the Securities
and Exchange Commission on February 10, 1999 ("the Proxy Statement").
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) PAGE 9
2. The Merger
As discussed in Note 1, the Company is the combination of Virbac, Inc.
and AGNU, the merger of which has been accounted for as a purchase of AGNU by
Virbac, Inc. The purchase price of $13.0 million assigned to the transaction is
the market value of the outstanding Common Stock shares of AGNU at the time of
the merger announcement (9,387,279 shares of AGNU at $1.25 per share, or $11.7
million) plus the direct acquisition cost incurred by Virbac, Inc. The purchase
price has been allocated to the acquired assets and liabilities as follows
($000's)
Working Capital $ (1,627)
Fixed Assets 8,413
Identifiable Intangible Assets 223
Goodwill 5,952
$ 12,961
Goodwill is being amortized over 20 years.
The results of the operations of AGNU have been included in the
Company's consolidated financial statements only since the date of the Merger,
March 5, 1999. The following table reflects the pro forma sales, net income, and
net income per share as if the merger had occurred at the beginning of each
period. Adjustments to net income include a reduction in interest expense to
reflect a contribution of $15.7 million from Virbac S.A., which was primarily
used to reduce debt.
PRO FORMA INFORMATION
(in thousands except per share data)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1999 1998
<S> <C> <C>
Net sales $ 40,168 $ 38,437
Net income (loss) $ 1,181 $ (248)
Basic and diluted earnings (loss) per share $ 0.06 $ (0.01)
Basic weighted average shares outstanding 20,977 20,886
Diluted weighted average shares outstanding 21,051 20,960
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) PAGE 10
Also pursuant to the Merger Agreement in April 1999, the Company
commenced a public tender offer to purchase 1,000,000 shares of the Company's
outstanding Common Stock for $3.00 per share (the "Mandatory Tender Offer"). The
shares issued to VBSA as part of the merger were excluded from this tender
offer. Following the Mandatory tender Offer, VBSA controls approximately 60% of
the outstanding Common Stock of the Company. In addition, if, during the period
ending on the second anniversary of the merger, the closing sale price of the
Company's Common Stock has not reached $3.00 per share for 40 consecutive
trading days, the Company will conduct another public tender offer to purchase
up to 1,395,000 shares of the Company's outstanding Common Stock at a price of
$3.00 per share. Pursuant to the Merger Agreement, such tender offer will be
funded by VBSA's direct purchase from the Company of 1,395,000 shares of
unissued Common Stock at a price of $3.00 per share.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Raw materials $ 2,478,179 $ 799,848
Packaging 6,812,421 855,305
Finished goods 4,888,259 1,756,137
--------------- -------------
14,178,859 3,411,290
Less: reserve for excess and (747,989) (55,786)
obsolete inventories
--------------- --------------
$ 13,430,870 $ 3,355,504
=============== ==============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) PAGE 11
4. Financing
The Company has a revolving credit facility of $10.0 million at
September 30, 1999. Notes payable as of September 30, 1999 and December 31,
1998, consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Revolving line of credit with a financial institution up to
$1,000,000, interest paid quarterly at LIBOR +.95%,
uncollateralized and guaranteed by Virbac, SA., paid in full. $ -- $ 1,000,000
Note payable to a financial institution, dated March 5, 1999,
with interest paid quarterly from the date of initial advance
at LIBOR plus .95%, uncollateralized and guaranteed by
Virbac, SA., paid in full. -- 2,200,000
Revolving line of credit with a financial institution up to
$4,000,000, with interest paid quarterly at LIBOR plus .75%,
guaranteed by Virbac, SA., paid in full. -- 4,000,000
Revolving credit facility with a financial institution up to
$10.0 million based upon specified percentages of qualified
accounts receivable and inventory, collateralized by accounts
receivable, inventory, equipment, intangibles, and certain
real estate, with interest varying based upon financial
performance (7.5%, as of September 30, 1999), available
amounts being reduced $150,000 per quarter, due in full on
July 31, 2002. 8,747,047 --
Notes payable, dated September 25, 1997, interest at prime,
approximately $200,000 plus accrued interest due in 2000,
$51,000 of which is payable in shares of the Company's Common
stock and a final payment of approximately $100,000 due in
2001. 299,188 --
-------------- --------------
9,046,235 7,200,000
Less- Current maturities (799,188) (3,200,000)
-------------- --------------
$ 8,247,047 $ 4,000,000
============== ==============
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) PAGE 12
On September 7, 1999, the Company replaced all of the revolving lines of
credit with one credit facility of $10 million. Of the total, $7 million is
subject to a borrowing formula based upon eligible accounts receivable and
inventory and serves as a revolving line of credit. The availability of the
remaining $3 million will be reduced by $150,000 per quarter. At September 30,
1999, approximately $1.2 million was available under the credit facility. The
interest rate and fees vary based upon the financial performance of the Company
as measured by the ratio of EBITDA to interest expense paid and current
maturities due. Interest rates could vary from prime plus 25 basis points to
prime minus 75 basis points. At September 30, 1999, the interest rate was prime
minus 75 basis points, or 7.5%.
At September 30, 1999, the Company was in compliance with all covenants
related to its credit facility. The covenants include minimum ratios of EBITDA
to interest expense plus current maturities of long-term debt and minimum
tangible net worth requirements.
5. Stock Options
During the nine months ended September 30, 1999, options to purchase
240,500 shares of the Company's Common Stock were granted to employees. The
exercise price of 50,000 of the options was $1.25 per share and was $1.34 per
share for the remaining 190,500 options. The exercise prices were determined
based upon the fair value of the shares on the dates of grant. These options
vest ratably over three years from the dates of grant and will expire ten years
from the grant date. During the same period, non-qualified options to purchase
558,000 shares of the Company's Common Stock expired.
6. Facility Closures
In the third quarter, the Company announced its definitive plans to
consolidate its manufacturing and distribution operations. Under the plan, which
is already underway, all pet product distribution operations will be transferred
from the Company's Chicago, Illinois, and Los Angeles, California facilities to
the Company's larger Fort Worth, Texas facility. Manufacturing operations
currently carried out at the Chicago facility will cease by December 31, 1999,
and such operations will be transferred to other existing Company facilities. In
addition, manufacturing operations related to the majority of products presently
produced at the Los Angeles facility will be transferred to the Fort Worth
facility.
The costs to close the Chicago facility and to reduce operations at the
Los Angeles facility, which comprise mostly severance costs, are estimated at
$535,000. These costs are expected to be paid by December 31, 1999. Because
these plans were initiated in connection with the merger, these costs have been
recognized as part of the purchase price of AGNU. Additional investments at the
remaining facilities to increase capacity are expected to be insignificant.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PAGE 13
Overview
Virbac Corporation (the "Company") manufactures and distributes
companion animal health products. The Company is a leader in dermatological and
oral hygiene products for companion animals, or pets, and provides a broad array
of health care products to its customers under the C.E.T., Allerderm, St. JON,
Zema, and Francodex brand names.
On March 5, 1999, the Company, formerly named Agri-Nutrition Group
Limited, merged with Virbac, Inc., with the Company being the surviving
corporation. Virbac SA, the parent of Virbac, Inc., received 60% of the voting
equity of the Company; therefore, Virbac, Inc. is considered to be the acquirer
for financial statement purposes. Accordingly, the merger has been accounted for
as a purchase of Agri-Nutrition Group Limited by Virbac, Inc.
The Management's Discussion and Analysis that follows contains forward
looking information made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements may
be affected by certain risks and uncertainties described in the Company's
filings with the Securities and Exchange Commission. Projections of gross margin
improvements anticipated due to the consolidation of manufacturing and
distribution facilities and of expense reductions that should result from actual
or planned headcount reductions may not be achieved if management is not
vigilant in executing its plans or if assumptions made in the plans are
inaccurate. Forward-looking statements regarding future sales may be affected by
new competitive or technological entries into the market or by lack of
acceptance of the Company's products by the market. Therefore, the Company's
actual results could differ materially from such forward-looking statements.
Results of Operations
The actual results of operations for the three and nine months ended
September 30, 1999 as presented in the Consolidated Statements of Operations
(unaudited) include the operations of Virbac, Inc. plus the results of
Agri-Nutrition since March 5, 1999. The actual results of operations for the
three and nine months ended September 1998 as presented in the Consolidated
Statements of Operations (unaudited) include only the operations of Virbac, Inc.
Because Agri-Nutrition operations were significantly larger than
Virbac, Inc., substantially all of the increase in each component is due to the
acquisition of Agri-Nutrition. For the nine months ended September 1999 as
compared to September 1998, the acquisition accounts for 89% of the increase in
revenue, 81% of the increase in gross profit and all of the increase in
operating expenses. The impact is just as significant when comparing the
three-month periods ending September 30, 1999 and 1998.
For comparative purposes, management believes that an analysis upon
which 1998 results are presented on a basis that is equivalent to 1999 will
provide a more meaningful discussion of the results of operations. To that end,
the actual results for the periods ending September 30, 1998 have been adjusted
to include the results of Agri-Nutrition since March 1998 in order to be
comparable with the actual results of 1999. The 1998 amounts have also been
adjusted to reflect the effects of the merger, primarily adjustments to reduce
interest expense reflecting the repayment of debt in conjunction with the merger
and adjustments to depreciation and amortization related to certain purchase
accounting adjustments. Management believes the amounts and discussion below
provide a more meaningful comparison of the Company's results of operations.
<PAGE>
MANAGEMENT'S DISCUSSION (continued) PAGE 14
<TABLE>
<CAPTION>
(in thousands of dollars) For the quarter ended For the nine months ended
September 30, September 30,
1999 1998 1999 1998
(as adjusted) (as adjusted)
<S> <C> <C> <C> <C>
Net Revenues $ 12,854 $ 12,374 $ 34,980 $ 32,520
Gross Profit 4,942 4,696 14,708 13,275
Gross Profit % 38% 38% 42% 41%
Operating Expenses 3,919 4,335 12,846 13,248
Interest and other expenses 217 167 551 496
Net income (loss) $ 806 $ 194 $ 1,311 $ (469)
</TABLE>
Quarter Ended September 30, 1999 Compared to As Adjusted Quarter Ended September
30, 1998
The $480 thousand, or 4% increase in sales for the three months ended
September 30,1999 is primarily volume driven. Positive factors impacting sales
were:
Strong volumes of the Company's Preventic tick collar.
The introduction of advanced formula and patent protected Spherulites
in the Company's dermatological line, which management believes has led
to an increase in market share in the dermatological line.
Increased volumes of bromethalin rodenticides under contract
manufacturing.
These positive factors were partially offset by lower sales in the
Company's OTC channel due to a combination of comptitive pressures and the
elimination of duplicate product lines resulting from the merger.
The gross profit percentage remained stable at 38.4%. The Company expects
that the gross profit percentage will improve beginning in 2000 as the Company
consolidates its manufacturing and distribution facilities. This consolidation
is expected to be completed by the end of 1999, resulting in approximately $1.1
million in annual savings.
The Company's operating expenses were approximately $416 thousand lower as
compared to 1998 as adjusted. This reduction is the result of actions taken in
the second quarter 1999 to reduce commercial and administrative costs and of
actions taken in 1998 by Agri-Nutrition to consolidate the Zema, Mardel, and
St. JON operations into one unit. The 1999 actions include a 17% reduction in
commercial and administrative headcount, resulting in expected net annualized
savings of $750,000.
<PAGE>
MANAGEMENT'S DISCUSSION (CONTINUED) PAGE 15
In 1999, income tax expense has been offset by a reduction in the
valuation allowance established in prior years in connection with certain loss
carryforwards. The aggregate amount of the deferred tax asset valuation
allowance at September 30, 1999 was approximately $1.5 million. This valuation
allowance reflects the significant losses incurred by Virbac, Inc. and
Agri-Nutrition over the last three years. Management will continue to evaluate
the valuation allowance and may make an adjustment in the fourth quarter if
operations continue to improve. If an adjustment to the valuation allowance is
made, the immediate impact would be to record an income tax benefit for the
portion of Virbac, Inc.'s valuation allowance reversed and to reduce goodwill by
the amount of Agri-Nutrition's valuation allowance reversed. Future periods
would then be charged a deferred tax expense at the statutory rate.
Nine Months Ended September 30, 1999 Compared to As Adjusted Nine Months Ended
September 30, 1998
The results of operations for the nine-month period ended September 30,
1999 include the operations of Virbac, Inc. for the entire nine months and the
operations of Agri-Nutrition since the date of the merger, March 5, 1999. For
purposes of this Management's Discussion and Analysis, 1999 amounts are compared
to 1998 amounts adjusted to include Agri-Nutrition for the same period as 1999.
See "Results of Operations" on page 14.
The $2.5 million or 8% increase in sales for the nine months ended
September 30, 1999 is primarily volume driven. Positive factors impacting sales
were:
Strong volumes of the Company's Preventic tick collar.
The introduction of advanced formula and patent protected Spherulites
in the Company's dermatological line, which management believes
have led to an increase in market share in the dermatological
line.
Increased volumes of bromethalin rodenticides under contract
manufacturing.
These positive factors were partially offset by the following negative
factors:
A disruption to the dental line's marketing efforts caused by the
relocation of the line's marketing staff from California to Texas;
this relocation is now complete and volumes are recovering.
Increased competition in the OTC distribution channel, particularly for
the insecticides.
A shift in the Company's focus in the product lines sold through the
OTC distribution channel. As the Company integrates the Francodex
business of Virbac, Inc. with the St. JON business of
Agri-Nutrition, it is focusing on the more profitable products as
it eliminates duplication.
The improved gross profit percentage (42% in 1999, 41% in 1998) reflect
fixed overhead charges being absorbed by higher sales. The Company expects that
the gross profit percentage will improve beginning in 2000 as the Company
consolidates its manufacturing and distribution facilities. This consolidation
is expected to be completed by the end of 1999, resulting in approximately $1.1
million in annual savings.
<PAGE>
MANAGEMENT'S DISCUSSION (CONTINUED) PAGE 16
The Company's operating expenses decreased a net $402 thousand compared
to 1998 due to actions taken by Agri-Nutrition in 1998 to reduce costs and to
cost cutting measures taken in the second quarter 1999 to reduce commercial and
administrative expenses. These measures include a 17% reduction in commercial
and administrative headcount, resulting in estimated net annualized savings of
$750,000. This headcount reduction is expected to have no impact on sales,
because the Company has gained efficiencies in marketing as a result of the
merger, especially by integrating telemarketing with its direct sales force.
Partially offsetting these expense reductions were $300 thousand of
non-recurring expenses, such as severance pay.
In 1999, income tax expense has been offset by a reduction in the
valuation allowance established in prior years in connection with certain loss
carryforwards. The aggregate amount of the deferred tax asset valuation
allowance at September 30, 1999 was approximately $1.5 million. This valuation
allowance reflects the significant losses incurred by Virbac, Inc. and
Agri-Nutrition over the last three years. Management will continue to evaluate
the valuation allowance and may make an adjustment in the fourth quarter if
operations continue to improve. If an adjustment to the valuation allowance is
made, the immediate impact would be to record an income tax benefit for the
portion of Virbac, Inc.'s valuation allowance reversed and to reduce goodwill by
the amount of Agri-Nutrition's valuation allowance reversed. Future periods
would then be charged a deferred tax expense at the statutory rate.
Liquidity and Capital Resources
During the nine months ended September 30, 1999, $2.1 million of cash
was used in operations. Although $2.5 million was generated by the Company's net
income before depreciation and amortization, working capital needs consumed $4.6
million. The increase in working capital reflects increases in accounts
receivable and in inventory. The increased accounts receivable balance arises
from the increase in sales and from seasonality. Inventory increased for several
reasons: (1) the build-up in inventory prior to commencing the consolidation of
the manufacturing and distribution facilities so that service to customers is
not interrupted; (2) the significant back-order position at the beginning of the
year; (3) the build-up of inventory by PMR to serve the Purina Mills' dealer
distribution network; and (4) the seasonality of the Company's business.
Cash flows used in investing activities include cash costs related to
the merger and capital improvements at the Company's St. Louis and Fort Worth
facilities.
Cash flows from financing activities reflect primarily the merger with
Agri-Nutrition Group Limited. In conjunction with the merger, Virbac S.A.
invested approximately $15.7 million in the Company. These funds were used to
pay down debt and to repurchase 1,000,000 shares of the Company's outstanding
Common Stock at $3.00 per share in April 1999 pursuant to the mandatory tender
offer required under the merger agreement. In addition, borrowing under a credit
facility increased to fund working capital needs.
On September 7, 1999, the Company replaced all of its then-existing
credit facilities with a three-year, $10 million facility, which management
believes is sufficient for its needs. Of the total, $7 million is subject to a
borrowing formula based upon eligible accounts receivable and inventory and
serves as a revolving line of credit. The availability of the remaining $3
million will be reduced by $150,000 per quarter. At September 30, 1999, $1.2
million was available under the credit facility. The interest rate and fees vary
based upon the financial performance of the Company as measured by the ratio of
EBITDA to interest expense paid and current maturities due. Interest rates can
vary from prime plus 25 basis points to prime minus 75 basis points. At
September 30, 1999, the Company is paying prime minus 75 basis points (7.5%).
<PAGE>
MANAGEMENT'S DISCUSSION (CONTINUED) PAGE 17
Management believes that the Company will have sufficient cash to meet
the needs of its current operations for at least the next twelve months from
cash flows from current operations and from existing financing facilities.
The Company has no current plans to significantly increase capacity of
any of its plant facilities or to expend significant capital in modifying them.
Management is currently consolidating certain manufacturing and distribution
operations currently carried out at several different facilities and expects
such consolidation to require expenditures of approximately $600,000 for plant
closing costs and minor upgrades to remaining facilities. These requirements are
expected to be funded from current operations and from the existing credit
facility.
The Company is committed to conduct a public tender offer to purchase up
to 1,395,000 of the Company's outstanding Common Stock at a price of $3.00 per
share if, during the period ending on the second anniversary of the merger, the
closing sale price of the Company's Common Stock has not reached $3.00 per share
for a period of 40 consecutive trading days. Pursuant to the merger agreement,
such tender offer, if necessary, will be funded by Virbac SA's direct purchase
from the Company of 1,395,000 shares of Common Stock at $3.00 per share.
The Company has no plans to pay dividends to stockholders in the
foreseeable future.
Year 2000 Compliance
The Year 2000 issue arises as a result of computer programs being
written using two digits rather than four to define the applicable year.
Consequently, these computer programs may contain time-sensitive software which
recognizes a date using "00" as the year 1900 rather than the year 2000. The
impact of the Year 2000 issue extends beyond traditional computer hardware and
software systems and may potentially impact telephone systems, building
facilities systems, security systems and systems utilized by outside vendors and
customers. Failure to effectively address the Year 2000 issue could result in a
disruption of operations and the inability to process transactions or to perform
other normal business activities.
The Company has reviewed its key hardware and software systems for
compliance. Those systems that were not in compliance have been repaired or
updated to support Year 2000 compliance. The repairs and upgrades have been
tested or are in the process of being tested. Less critical systems, such as
personal computers, have also been evaluated and upgraded. The cost of the
repairs and upgrades to the key hardware and software systems and to the less
critical systems have not been, and are not expected to be, material to the
Company's financial statements.
The Company is completing the evaluation of its mission critical
vendors and suppliers. The Company recognizes that if its external business
partners experience any significant Year 2000 problems, they could adversely
effect its business operations. The most likely worst case scenario, which the
Company does not believe will occur, is that business is interrupted because of
Year 2000 problems at one or more of its business partners such as vendors or
customers. The Company is unable to estimate the impact on its income statement
if such an event were to occur. Accordingly, the Company continues to assess its
risks and take appropriate actions to mitigate identified risks.
The Company believes that the Year 2000 issues will not pose
significant operational problems for the Company because of its preparedness and
because the Company's operations are not driven by systems technology. However,
there can be no assurance that the Company will not experience unanticipated
costs and/or business interruptions due to Year 2000 problems in its internal
systems, its supply chain or from customer product migration issues, or that
such costs and/or interruptions will not have a material adverse effect on the
Company's consolidated results of operations.
<PAGE>
PART II - OTHER INFORMATION PAGE 18
Item 6. Exhibits and Reports on Form 8-K.
10.27 Credit Agreement
27 Financial Data Schedule
b. Reports of Form 8-K.
No reports on Form 8-K were filed during the three-month period ended
September 30, 1999.
Signature
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 thereunto duly authorized.
VIRBAC CORPORATION (formerly Agri-Nutrition Group Limited)
/s/ Henry B. Haley
Henry B. Haley
Vice President and Chief Financial Officer
November 15, 1999
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and entered
into this _____ day of September, 1999, 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"), and VIRBAC AH,
INC., a Delaware corporation ("Virbac AH," and collectively with Virbac, PM
Resources, St. JON and Francodex referred to herein as the "Borrowers"), and
FIRST BANK, a Missouri state banking corporation ("Bank").
WITNESSETH:
WHEREAS, Virbac (formerly known as Agri-Nutrition Group
Limited), PM Resources and St. JON, presently have a joint and several revolving
credit loan from Bank in a present aggregate maximum principal amount of up to
Seven Million Dollars ($7,000,000.00), for a period of time up to and including
July 31, 2000, as extended thereafter in Bank's discretion for subsequent one
year periods and subject to certain periodic reductions of the reducing portion
thereof, Four Million Five Hundred Thousand Dollars ($4,500,000.00) of which is
subject to a Borrowing Base and the remaining Two Million Five Hundred Thousand
Dollars ($2,500,000.00) of which is a reducing revolving credit line from Bank;
and
WHEREAS, Virbac AH and Francodex have guaranteed all of the
indebtedness, liabilities and obligations of Virbac, PM Resources and St. JON to
Bank pursuant to their respective unlimited continuing Guaranties; and
WHEREAS, Borrowers have requested that Virbac AH and Francodex
be added as parties to the credit facilities and that the aggregate amount
thereof be increased to Ten Million Dollars ($10,000,000.00) and extended and
otherwise amended on the terms and conditions set forth herein, of which joint
and several loan facility from Bank Seven Million Dollars ($7,000,000.00) shall
be subject to a Borrowing Base (as set forth herein) ("Facility A"), and the
remaining Three Million Dollars ($3,000,000.00) shall be a reducing revolving
credit line from Bank ("Facility B"), that on November 30, 1999 the maximum
principal amount of such loan facility and Facility B shall reduce automatically
as set forth in Section 3.1(b) herein, and reducing thereafter pursuant to
Section 3.1(b) herein during the period of time from December 1, 1999 up to and
including July 31, 2002; and
WHEREAS, Bank is willing to make said revolving credit loans
to Borrowers upon, and subject to, the terms, provisions and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby mutually promise and agree as follows:
SECTION 1. TERM.
The "Term" of this Agreement shall commence on the date hereof
and shall end on July 31, 2002, unless earlier terminated upon the occurrence of
an Event of Default under this Agreement, or unless subsequently extended by
Bank, in its sole discretion and without obligation to do so, pursuant to the
terms of Section 3.16 herein.
SECTION 2. DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement
or in any Exhibit or Schedule hereto, when used in this Agreement, the following
terms shall have the following meanings (such meanings shall be equally
applicable to the singular and plural forms of the terms used, as the context
requires):
Account Debtor shall mean any Person who is and/or may become
obligated to any of the Borrowers under or on account of Accounts.
Accounts shall mean all trade accounts receivable of any of
the Borrowers which have been invoiced by such Borrower.
Amendment shall mean that certain Seventh Amendment to Deed of
Trust and Security Agreement dated as of the date hereof executed by PM
Resources and delivered to Bank pursuant to Section 4.1(c), as the same may be
from time to time amended.
Attorneys' Fees shall mean the reasonable value of the
services (and costs, charges and expenses related thereto) of the attorneys (and
all paralegals, secretaries, accountants and other staff employed by such
attorneys) employed by Bank (including, without limitation, attorneys and
paralegals who are employees of Bank) from time to time (i) in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of this Agreement and/or any of the other Transaction Documents,
(ii) to represent Bank in any litigation, contest, dispute, suit or proceeding,
or to commence, defend or intervene in any litigation, contest, dispute, suit or
proceeding, or to file any petition, complaint, answer, motion or other pleading
or to take any other action in or with respect to any litigation, contest,
dispute, suit or proceeding (whether instituted by Bank, any of the Borrowers or
any other Person and whether in bankruptcy or otherwise) in any way or respect
relating to any of the Collateral, any Third Party Collateral, this Agreement or
any of the other Transaction Documents, any of the Borrowers, any Subsidiary of
any of the Borrowers or any other Obligor, (iii) to protect, collect, lease,
sell, take possession of or liquidate any of the Collateral or any Third Party
Collateral, (iv) to attempt to enforce any security interest in or other Lien
upon any of the Collateral or any Third Party Collateral or to give any advice
with respect to such enforcement and (v) to enforce any of Bank's rights to
collect any of Borrowers' Obligations.
Bank's Commitment shall mean the sum of Bank's Facility A
Commitment plus Bank's Facility B Commitment.
Bank's Facility A Commitment shall have the meaning ascribed
thereto in Section 3.1(a).
Bank's Facility B Commitment shall have the meaning ascribed
thereto in Section 3.1(b).
Borrowers' Obligations shall mean any and all indebtedness
(principal, interest, fees and other amounts), liabilities and obligations of
any of the Borrowers to Bank evidenced by or arising under the Note, this
Agreement, the Security Agreements, the Letter of Credit Applications, any of
the other Transaction Documents or any other agreement, document or instrument
heretofore, now or hereafter executed and delivered by any of the Borrowers to
Bank, in each case whether now existing or hereafter arising, absolute or
contingent, joint and/or several, secured or unsecured, direct or indirect,
expressed or implied in law, contractual or tortious, liquidated or
unliquidated, at law or in equity, or otherwise, and whether created directly or
acquired by Bank by assignment or otherwise, and any and all costs of collection
and/or Attorneys' Fees incurred or to be incurred in connection therewith.
Borrowing Base shall have the meaning ascribed thereto in
Section 3.1(c).
Borrowing Base Certificate shall have the meaning ascribed
thereto in Section 3.1(d).
Borrowing Notice shall have the meaning ascribed thereto in
Section 3.2.
Business Day shall mean any day except a Saturday, Sunday or
legal holiday observed by Bank.
Capital Expenditure shall mean any expenditure which, in
accordance with Generally Accepted Accounting Principles consistently applied,
is or should be capitalized on the balance sheet of the Person making the same.
Capitalized Lease shall mean any lease which, in accordance
with Generally Accepted Accounting Principles consistently applied, is or should
be capitalized on the balance sheet of the lessee.
Code shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed to also refer to any successor sections.
Collateral shall mean any Property or assets of any of the
Borrowers which now or at any time hereafter secure the payment or performance
of any of Borrowers' Obligations.
Commitment Fee shall have the meaning ascribed thereto in
Section 3.15.
Consolidated EBITDA shall mean the sum of Virbac's and its
Consolidated Subsidiaries Consolidated Net Income, plus Consolidated Interest
Expense, plus Consolidated Tax Expense, plus depreciation and amortization of
Virbac and its Consolidated Subsidiaries, all determined in accordance with
Generally Accepted Accounting Principles consistently applied for the
twelve-month period (or such lesser period of calculation indicated in Section
7.1(i)(i)(A), (B) or (C) during the first year hereof) ending as of the date of
any such calculation.
Consolidated Debt Service shall mean the sum of all of
Virbac's and its Consolidated Subsidiaries' payments of principal scheduled on
all long term borrowed money Indebtedness within the twelve month period (or
such lesser period of calculation indicated in Section 7.1(i)(i)(A), (B) or (C)
during the first year hereof) following the date of any such calculation, plus
Consolidated Interest Expense during the twelve month period (or such lesser
period of calculation indicated in Section 7.1(i)(i)(A), (B) or (C) during the
first year hereof) preceding the date of any such calculation, all determined on
a consolidated basis and in accordance with Generally Accepted Accounting
Principles consistently applied.
Consolidated Interest Expense shall mean Virbac's and its
Consolidated Subsidiaries' interest expense, determined based upon the actual
amount of interest expense incurred by Virbac and its Consolidated Subsidiaries
during the period in question for any such calculation, as determined in
accordance with Generally Accepted Accounting Principles consistently applied.
Consolidated Net Income shall mean the net income (or loss) of
Virbac and its Consolidated Subsidiaries for the period in question on a
consolidated basis, after deducting all operating expenses, provisions for all
taxes and reserves (including reserves for deferred income taxes) and all other
proper deductions, all determined in accordance with Generally Accepted
Accounting Principles consistently applied, after eliminating all intercompany
items, but excluding from the definition of Consolidated Net Income any
extraordinary gains and/or losses and any gains and/or losses from the sale or
other disposition of assets other than in the ordinary course of business, all
determined in accordance with Generally Accepted Accounting Principles
consistently applied.
Consolidated Subsidiary shall mean with respect to any Person
at any date, any Subsidiary or other entity the assets and liabilities of which
are or should be consolidated with those of such Person in its consolidated
financial statements as of such date in accordance with Generally Accepted
Accounting Principles consistently applied.
Consolidated Tangible Net Worth shall mean, at any date, the
sum of the consolidated stockholders' equities of Virbac and its Consolidated
Subsidiaries plus all Subordinated Debt then outstanding, determined in
accordance with Generally Accepted Accounting Principles consistently applied,
less Virbac's and such Subsidiaries' Intangible Assets as of such date. For
purposes of this definition, "Intangible Assets" shall mean the amount (to the
extent reflected in determining such stockholders' equity) of (i) all write-ups
in the book value of any asset owned by Virbac or a Consolidated Subsidiary of
Virbac resulting from a revaluation thereof subsequent to the date of this
Agreement and (ii) goodwill, unamortized debt discount and expense, unamortized
deferred charges, patents, trademarks, service marks, trade names, copyrights,
organizational and developmental expenses and other similar intangible items and
assets, all determined in accordance with Generally Accepted Accounting
Principles consistently applied.
Consolidated Tax Expense shall mean Virbac's and its
Consolidated Subsidiaries' expenses for federal, state, local and foreign income
taxes, determined based upon the actual amount of tax expense incurred by Virbac
and its Consolidated Subsidiaries during the period in question for any such
calculation, as determined in accordance with Generally Accepted Accounting
Principles consistently applied.
Deed of Trust shall mean that certain Deed of Trust and
Security Agreement dated September 9, 1993 made by PM Resources in favor of
Katherine D. Knocke as trustee for Bank pursuant to Section 6, as amended by a
First Amendment to Deed of Trust and Security Agreement dated as of December 21,
1994, by a Second Amendment to Deed of Trust and Security Agreement dated as of
July 14, 1995, by a Third Amendment to Deed of Trust and Security Agreement
dated as of June 18, 1997, by a Fourth Amendment to Deed of Trust and Security
Agreement dated as of September 25, 1997, by a Fifth Amendment to Deed of Trust
and Security Agreement dated as of May 14, 1998, by a Sixth Amendment to Deed of
Trust and Security Agreement dated as of August 6, 1998 and by the Amendment,
and as the same may from time to time be further amended.
Default shall mean any event or condition the occurrence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default as defined in Section 8 hereof.
Distribution in respect of any corporation shall mean:
(a) dividends or other distributions on capital stock of the corporation; and
(b) the redemption, repurchase or other acquisition of such stock or of
warrants, rights or other options to purchase such stock (except when
solely in exchange for such stock).
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 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; (d)
Accounts with respect to which payment by the Account Debtor is or may be
conditional; (e) 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; (f) 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; (g) 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; (h) 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 not been
completed and accepted as satisfactory by the Account Debtor thereof; (i)
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; (j)
Accounts arising from a "sale on approval" or a "sale or return;" (k) 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; (l) 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; (m) 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); (n) Accounts which are not subject
to a first priority perfected security interest in favor of Bank; and (o)
Accounts which have been factored by any of the Borrowers.
Eligible Inventory shall mean all Inventory of any of the
Borrowers, valued at the lower of cost or current market value, which consists
of unprocessed raw materials and finished goods with respect to which no further
processing is necessary for the sale thereof, other than (a) any such Inventory
which is obsolete, (b) Inventory which is not in good condition or does not
comply with all standards imposed by any governmental authority having
regulatory authority over such goods or their manufacture, use or sale, or
Inventory which Bank has in good faith determined, in accordance with Bank's
customary business practices, is otherwise unacceptable due to age, type,
category and/or quantity, (c) Inventory which is held on consignment, consigned
to third parties, or consists of experimental products or products not yet
proven commercially viable by reason of a significant number of purchase orders,
or Inventory held for promotional purposes and as samples, or Inventory returned
due to defects or product warranty problems, (d) Inventory which is not
maintained at one of the places of business and/or locations provided in the
Security Agreements executed by Borrowers, (e) Inventory not either usable or
saleable, at prices not less than the standard cost, in the ordinary course of
Borrowers' businesses, or (f) Inventory which is not subject to a first priority
perfected security interest in favor of Bank.
Environmental Laws shall mean the Resource Conservation and
Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act and any other Federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Materials or
any other hazardous, toxic or dangerous waste, substance or constituent or other
substance, whether solid, liquid or gas, as now or at any time hereafter in
effect.
Environmental Lien shall have the meaning ascribed thereto in
Section 7.1(k)(vii).
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
ERISA Affiliate shall mean any corporation, trade or business
that is, along with any of the Borrowers, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
Sections 414(b) and 414(c), respectively, of the Code.
Eurodollar Business Day shall mean any Business Day upon which
Banks and other dealers in eurodollars are open for business on the London
Interbank Market.
Event of Default shall have the meaning ascribed thereto in
Section 8.
Facility A shall have the meaning ascribed thereto in the
recitals to this Agreement.
Facility A Loan shall have the meaning ascribed thereto in
Section 3.1(a).
Facility B shall have the meaning ascribed thereto in the
recitals to this Agreement.
Facility B Loan shall have the meaning ascribed thereto in
Section 3.1(b).
Floating Rate Margin shall mean Negative Three-Fourths of One
Percent (-0.75%) up to and including October 31, 1999, and thereafter,
commencing on the first day of the second month following each fiscal
quarter-end or fiscal year-end, the "Floating Rate Margin" shall (based upon
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service as of the end
of the immediately preceding quarter (or fiscal year) determined by reference to
Virbac's quarter-end (or fiscal year-end) financial statements for such
preceding fiscal quarter-end (or fiscal year-end)), (i.e., for the period
beginning November 1, 1999 by referencing Virbac's September 30, 1999 fiscal
quarter-end financial statements), mean the following:
(i) One-Fourth of One Percent (0.25%), if Virbac's
ratio of Consolidated EBITDA to Consolidated Debt Service shall be
greater than or equal to 1.25 to 1.0 but less than 1.50 to 1.0 as
determined pursuant to Section 7.1(i)(i) by reference to Virbac's most
recent quarter-end (or fiscal year-end) financial statements,
(ii) Zero Percent (0.00%), if Virbac's ratio of
Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 1.5 to 1.0 but less than 2.0 to 1.0 as determined pursuant
to Section 7.1(i)(i) by reference to Virbac's most recent quarter-end
(or fiscal year-end) financial statements, and
(iii) Negative One-Fourth of One Percent (-0.25%), if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 2.0 to 1.0 but less than 2.5 to 1.0
as determined pursuant to Section 7.1(i)(i) by reference to Virbac's
most recent quarter-end (or fiscal year-end) financial statements,
(iv) Negative One-Half of One Percent (-0.50%), if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 2.5 to 1.0 but less than 3.0 to 1.0
as determined pursuant to Section 7.1(i)(i) by reference to Virbac's
most recent quarter-end (or fiscal year-end) financial statements, or
(v) Negative Three-Fourths of One Percent (-0.75%),
if Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 3.0 to 1.0 as determined pursuant to
Section 7.1(i)(i) by reference to Virbac's most recent quarter-end (or
fiscal year-end) financial statements,
The interest rate on any Prime Loan shall be adjusted automatically on and as of
the effective date of any change in the Floating Rate Margin pursuant to this
definition.
Generally Accepted Accounting Principles shall mean such
accounting principles as, in the opinion of the national accounting firm
regularly retained by Borrowers, conform at the time to generally accepted
accounting principles consistently applied, except that with respect to the
financial statements and reports of each of the Borrowers, such financial
statements and reports shall not be required to separately report the accrual of
income taxes on each such Borrower's financial statements, and with respect to
the interim financial statements of any Borrower, such interim financial
statements need not include footnotes.
Guarantee by any Person shall mean any obligation, contingent
or otherwise, of such Person guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by agreement to keep-well, to purchase assets, goods, securities or
services, or to take-or-pay or otherwise); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "guarantee" used as a verb shall have a correlative
meaning.
Hazardous Materials shall mean any hazardous substance or
pollutant or contaminant defined as such in (or for the purposes of) any
Environmental Law and shall include, without limitation, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, without limitation, any source,
special nuclear or byproduct material as defined in 42 U.S.C. Section 2011 et
seq., as amended or hereafter amended, and asbestos in any form or condition.
Indebtedness of any Person shall mean and include, without
duplication, any and all indebtedness, liabilities and obligations of such
Person which in accordance with Generally Accepted Accounting Principles
consistently applied are or should be classified upon a balance sheet of such
Person as liabilities of such Person, and in any event shall include all (i)
obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of Property, (ii) obligations secured by any
Lien or other charge upon any Property owned by such Person, provided that if
such Person has not assumed or become liable for the payment of such
obligations, such obligations shall still be included in Indebtedness but the
determination of the amount of Indebtedness evidenced by such obligations shall
be limited to the book value of such Property, (iii) obligations created or
arising under any conditional sale or other title retention agreement with
respect to any Property acquired by such Person, provided that if the rights and
remedies of the seller, lender or lessor in the event of default under such
agreement are limited solely to repossession or sale of such Property, such
obligations shall still be included in Indebtedness but the determination of the
amount of Indebtedness evidenced by such obligations shall be limited to the
book value of such Property, (iv) all Guarantees and other contingent
indebtedness, liabilities and obligations of such Person, but only to the extent
any such contingent indebtedness, liabilities and obligations are, in accordance
with Generally Accepted Accounting Principles consistently applied, required to
be accrued as a liability on the balance sheet of such Person and (v) all
obligations of such Person as lessee under any Capitalized Lease.
For the purpose of computing the "Indebtedness" of any Person,
there shall be excluded any particular Indebtedness to the extent that, upon or
prior to the maturity thereof, there shall have been deposited with the proper
depositary in trust the necessary funds (or evidences of such Indebtedness) for
the payment, redemption or satisfaction of such Indebtedness; and thereafter
such funds and evidences of Indebtedness so deposited shall not be included in
any computation of the assets of such Person.
Interest Period shall mean with respect to each LIBOR Loan:
(i) initially, the period commencing on the date of
such Loan and ending 1, 2, 3 or 6 months thereafter as the Borrowers
may elect in the applicable Borrowing Notice; and
(ii) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such Loan and
ending 1, 2, 3 or 6 months thereafter as Borrowers may elect pursuant
to Section 3.2;
provided that:
(iii) subject to clauses (iv) and (v) below, if any
Interest Period would otherwise end on a day which is not a Eurodollar
Business Day, such Interest Period shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business Day
falls in another calendar month, in which case such Interest Period
shall end on the immediately next preceding Eurodollar Business Day;
(iv) subject to clause (v) below, if any Interest
Period which begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period), such
Interest Period shall end on the last Eurodollar Business Day of a
calendar month; and
(v) no Interest Period for a LIBOR Loan shall extend
beyond the last day of the Term hereof.
Inventory shall mean all inventory of each of the Borrowers
valued at the lower of cost or market.
Letter of Credit and Letters of Credit shall have the meanings
ascribed thereto in Section 3.3(a).
Letter of Credit Application shall mean an application and
agreement for irrevocable standby letter of credit in the form of Exhibit F
attached hereto and incorporated herein by reference, or an application and
reimbursement agreement for commercial letter of credit in the form of Exhibit G
attached hereto and incorporated herein by reference, in either case as executed
by a Borrower, as account party, and delivered to Bank pursuant to Section
3.3(a) as the same may from time to time be amended, modified, extended or
renewed.
Letter of Credit Commitment Fee Rate shall mean One and
One-Fourth Percent (1.25%) per annum for all Letters of Credit issued up to and
including October 31, 1999, and thereafter, commencing on the first day of the
second month following each fiscal quarter-end or fiscal year-end, the "Letter
of Credit Commitment Fee Rate" shall (based upon Virbac's ratio of Consolidated
EBITDA to Consolidated Debt Service as of the end of the immediately preceding
quarter (or fiscal year) determined by reference to Virbac's quarter-end (or
fiscal year-end) financial statements for such preceding fiscal quarter-end (or
fiscal year-end)), (i.e., for each Letter of Credit issued after the period
beginning November 1, 1999 by referencing Virbac's September 30, 1999 fiscal
quarter-end financial statements), mean the following:
(i) One and Three-Eighths Percent (1.375%), if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 1.25 to 1.0 but less than 1.50 to 1.0
as determined pursuant to Section 7.1(i)(i) by reference to Virbac's
most recent quarter-end (or fiscal year-end) financial statements,
(ii) One and One-Fourth of One Percent (1.25%), if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 1.50 to 1.0 but less than 2.50 to 1.0
as determined pursuant to Section 7.1(i)(i) by reference to Virbac's
most recent quarter-end (or fiscal year-end) financial statements, and
(iii) One Percent (1.00%), if Virbac's ratio of
Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 2.50 to 1.0 as determined pursuant to Section 7.1(i)(i) by
reference to Virbac's most recent quarter-end (or fiscal year-end)
financial statements.
The Letter of Credit Commitment Fee Rate shall be fixed for each Letter of
Credit issued by Bank hereunder in accordance with the foregoing on the date of
issuance of each such Letter of Credit.
LIBOR Base Rate means, with respect to any LIBOR Loan for the
Interest Period applicable thereto, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Bloomberg Page BBAM (or any
successor page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period; provided that if for any reason such rate is not available, or if Bank
elects to no longer use Bloomberg Page BBAM as a reference for interest rate on
LIBOR Loans under this Agreement, the term "LIBOR Base Rate" shall mean, with
respect to such LIBOR Loans for the Interest Period applicable thereto, the per
annum rate of interest determined by Bank, as of two (2) Eurodollar Business
Days prior to the first day of such Interest Period, from any interest rate
reporting service of recognized standing that Bank shall select, as of the
effective rate at which deposits in immediately available funds in United States
Dollars are being offered or quoted to major banks in the London Interbank
market for deposits for a comparable term to such Interest Period.
LIBOR Loan shall mean a portion of a Facility B Loan in an
original principal amount of not less than $500,000.00 which bears interest at
the applicable LIBOR Rate for an Interest Period applicable to such Facility B
Loan as selected by Borrowers in a Borrowing Notice.
LIBOR Margin shall mean Two Percent (2.00%) up to and
including October 31, 1999, and thereafter, commencing on the first day of the
second month following each fiscal quarter-end or fiscal year-end, the "LIBOR
Margin" shall, based upon Virbac's ratio of Consolidated EBITDA to Consolidated
Debt Service as of the end of the immediately preceding quarter (or fiscal year)
determined by reference to Virbac's quarter-end (or fiscal year-end) financial
statements for such preceding fiscal quarter-end or fiscal year-end, (i.e., for
the period beginning November 1, 1999 by referencing Virbac's September 30, 1999
fiscal quarter-end financial statements), mean the following:
(i) Three Percent (3.00%), if Virbac's ratio of
Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 1.25 to 1.0 but less than 1.50 to 1.0 as determined
pursuant to Section 7.1(i)(i) by reference to Virbac's most recent
quarter-end (or fiscal year-end) financial statements,
(ii) Two and Three-Fourths Percent (2.75%), if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service
shall be greater than or equal to 1.50 to 1.0 but less than 2.0 to 1.0
as determined pursuant to Section 7.1(i)(i) by reference to Virbac's
most recent quarter-end (or fiscal year-end) financial statements, and
(iii) Two and One-Half Percent (2.50%), if Virbac's
ratio of Consolidated EBITDA to Consolidated Debt Service shall be
greater than or equal to 2.0 to 1.0 but less than 2.5 to 1.0 as
determined pursuant to Section 7.1(i)(i) by reference to Virbac's most
recent quarter-end (or fiscal year-end) financial statements,
(iv) Two and One-Fourth Percent (2.25%), if Virbac's
ratio of Consolidated EBITDA to Consolidated Debt Service shall be
greater than or equal to 2.5 to 1.0 but less than 3.0 to 1.0 as
determined pursuant to Section 7.1(i)(i) by reference to Virbac's most
recent quarter-end (or fiscal year-end) financial statements, or
(v) Two Percent (2.00%), if Virbac's ratio of
Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 3.0 to 1.0 as determined pursuant to Section 7.1(i)(i) by
reference to Virbac's most recent quarter-end (or fiscal year-end)
financial statements,
The LIBOR Margin shall be determined for each LIBOR Loan for its Interest Period
as of the date two (2) Eurodollar Business Days prior to the beginning of such
Interest Period after the receipt by Bank of the Borrowing Notice required by
Section 3.2. All changes in the LIBOR Margin shall be effective from the date of
determination pursuant to this definition for any new LIBOR Loan or new Interest
Period commencing on or after such date and shall not be retroactively applied.
LIBOR Rate shall mean (a) the quotient of the (i) LIBOR Base
Rate divided by (ii) one minus the applicable LIBOR Reserve Percentage plus (b)
the LIBOR Margin.
LIBOR Reserve Percentage shall mean for any day the percentage
(including any supplemental percentage applied on a marginal basis or any other
reserve requirement having a similar effect), expressed as a decimal, which is
in effect on the first day of the applicable Interest Period, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) under
Regulation D (or any other then applicable regulation of the Board of Governors
(or any successor)) with respect to "Eurocurrency Liabilities." The LIBOR Rate
shall be adjusted automatically on and as of the effective date of any change in
the LIBOR Reserve Percentage.
Lien shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on common law, statute or contract,
including, without limitation, any security interest, mortgage, deed of trust,
pledge, hypothecation, judgment lien or other lien or encumbrance of any kind or
nature whatsoever, any conditional sale or trust receipt and any lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property.
Loan shall mean each Facility A Loan and Facility B Loan, and
Loans shall mean any or all of the foregoing, whether made as a Prime Loan or a
LIBOR Loan.
Multiemployer Plan shall mean a "multi-employer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for employees of any
of the Borrowers, any ERISA Affiliate or any Subsidiary of any of the Borrowers.
Note shall mean the Revolving Credit Note of Borrowers to be
executed and delivered to Bank pursuant to Section 3.2, as the same may from
time to time be amended, modified, extended, restated or renewed.
Obligor shall mean each of the Borrowers and each other Person
who is or shall at any time hereafter become primarily or secondarily liable on
any of Borrowers' Obligations or who grants Bank a Lien upon any of the Property
or assets of such Person as security for any of Borrowers' Obligations.
Occupational Safety and Health Laws shall mean the
Occupational Safety and Health Act of 1970, as amended, and any other Federal,
state or local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability or standards of conduct concerning
employee health and/or safety, as now or at any time hereafter in effect.
PBGC shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is
defined in Section 3(2) of ERISA, which is established or maintained by any of
the Borrowers, any ERISA Affiliate or any Subsidiary of any of the Borrowers,
other than a Multiemployer Plan.
Person shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity or government (whether national, Federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
Pledge Agreements shall mean (i) that certain Agreement of
Pledge executed by Virbac pursuant to which Virbac has pledged to Bank all of
the issued and outstanding shares of capital stock in PM Resources, St. JON and
Virbac AH, and (ii) that certain Agreement of Pledge executed by Virbac AH
pursuant to which Virbac AH has pledged to Bank all of the issued and
outstanding shares of capital stock in Francodex, each delivered to Bank
pursuant to Section 5.3, as the same may from time to time be amended.
Prime Loan shall mean any Loan bearing interest at the Prime
Rate plus Floating Rate Margin in effect on any day.
Prime Rate shall mean the interest rate announced from time to
time by Bank as its "prime rate" on commercial loans (which rate shall fluctuate
as and when said prime rate shall change).
Property shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible. Properties
shall mean the plural of Property. For purposes of this Agreement, each of the
Borrowers and each Subsidiary of any of the Borrowers shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, financing lease or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for security
purposes.
Related Party shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by or
is under common control with, any of the Borrowers or any Subsidiary of any of
the Borrowers, (ii) which beneficially owns or holds ten percent (10%) or more
of the equity interest of any of the Borrowers, (iii) ten percent (10%) or more
of the equity interest of which is beneficially owned or held by any of the
Borrowers or a Subsidiary of any of the Borrowers, or (iv) who is a director,
officer or employee of any of the Borrowers or a Subsidiary of any of the
Borrowers, but the term "Related Party" shall specifically exclude Durvet/PMR,
L.P. and its general partner, Durvet, Inc. The term "control" shall mean the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the capital stock of any Person or the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Reportable Event shall have the meaning given to such term in
ERISA.
Security Agreements shall mean the Security Agreement executed
by Virbac, the Security Agreement executed by PM Resources, the Security
Agreement executed by Virbac AH, the Security Agreement executed by Francodex
and the Security Agreement executed by St. JON, each delivered to Bank pursuant
to Section 5.1, as the same may from time to time be amended, and Security
Agreement shall mean any of them.
Subordinated Debt shall mean all borrowed money Indebtedness
of any of the Borrowers which has been duly subordinated by the lender thereof
to Borrowers' Indebtedness and obligations to Bank hereunder and under the other
Transaction Documents pursuant to a subordination agreement acceptable to Bank.
Subsidiary shall mean, with respect to any Person, any
corporation of which fifty percent (50%) or more of the issued and outstanding
capital stock entitled to vote for the election of directors (other than by
reason of default in the payment of dividends) is at the time owned directly or
indirectly by such Person.
Term shall have the meaning ascribed thereto in Section 1.
Third Party Collateral shall mean any Property or assets of
any Obligor other than a Borrower which now or at any time hereafter secure the
payment or performance of any of Borrowers' Obligations.
Transaction Documents shall mean this Agreement, the Note, the
Security Agreements, the Deed of Trust, the Pledge Agreements, any Letter of
Credit Application and all other agreements, documents and instruments
heretofore, now or hereafter delivered to Bank with respect to or in connection
with or pursuant to this Agreement, any Loans made hereunder or any other of
Borrowers' Obligations, and executed by or on behalf of any of the Borrowers,
all as the same may from time to time be amended, modified, extended or renewed.
SECTION 3. THE LOANS.
3.1 Commitment of Bank.
(a) Facility A. Subject to the terms and conditions hereof,
during the Term of this Agreement, Bank hereby agrees to make such loans
(individually, a "Facility A Loan" and collectively, the "Facility A 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 under this Facility A at any one time shall not
exceed the lesser of Seven Million Dollars ($7,000,000.00), or (ii) the
Borrowing Base (as hereinafter defined). This commitment of Bank is herein
sometimes referred to as the "Bank's Facility A Commitment." 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 Facility A Loans outstanding hereunder plus the face
amount of Letters of Credit issued and outstanding hereunder at any one time
shall not exceed Bank's Facility A Commitment.
(b) Facility B. Subject to the terms and conditions hereof,
during the Term of this Agreement, Bank hereby agrees to make such loans
(individually, a "Facility B Loan" and collectively, the "Facility B Loans") to
Borrowers, jointly and severally, as any of the Borrowers may from time to time
request pursuant to Section 3.2. The aggregate principal amount of Facility B
Loans which Bank, cumulatively, shall be required to have outstanding hereunder
at any one time shall not exceed Three Million Dollars ($3,000,000.00) from the
date hereof until November 29, 1999, which amount shall thereafter be reduced by
One Hundred Fifty Thousand Dollars ($150,000.00) on each February 28, May 31,
August 31 and November 30, commencing with the first such reduction on November
30, 1999. This commitment of Bank is herein sometimes referred to as the "Bank's
Facility B Commitment." 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 Facility B Loans
outstanding under Bank's Facility B Commitment at any one time shall not exceed
Bank's Facility B Commitment then available hereunder. Bank and Borrowers agree
that all Loans (but not including Letters of Credit which in all cases shall be
issued under Facility A) outstanding under this Agreement shall first be made
under Facility B up to the Bank's Facility B Commitment, and then shall be made
under Facility A, and all principal payments shall be applied, first to the
outstanding principal under Facility A until paid in full, and then to the
outstanding principal under Facility B. The Facility B Loans may be either (a) a
Prime Loan, (b) a LIBOR Loan or (c) any combination thereof, as determined by
the Borrowers and notified to the Bank in accordance with Section 3.2 herein,
provided, however, that the amount of any Loan under this Section 3.1(b) which
is a LIBOR Loan shall be for an aggregate principal amount of at least
$500,000.00 or any larger multiple of $100,000.00.
(c) Borrowing Base. For purposes of computing the amount of
the Bank's Facility A Commitment, the "Borrowing Base" shall mean the sum of:
(i) Seventy-Five Percent (75%) of the face amount of Eligible
Accounts of each of the Borrowers, plus
(ii) Forty Percent (40%) of the Eligible Inventory of
each of the Borrowers.
(d) Borrowing Base Certificate. Borrowers shall deliver to
Bank on the date of execution hereof (with respect to the month ended July 31,
1999) and on the twenty-eighth (28th) day of each month thereafter, commencing
in the month of September, 1999, a borrowing base certificate in the form of
Exhibit A attached hereto 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;
(ii) the aggregate principal amount of all
outstanding Facility A Loans and the aggregate face amount of all
issued and outstanding Letters of Credit;
(iii) the difference, if any, between the Borrowing
Base and the aggregate principal amount of all outstanding Facility A
Loans plus the aggregate face amount of all issued and outstanding
Letters of Credit; and
(iv) the maximum available principal amount and the
aggregate principal amount of all outstanding Facility B Loans.
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.
(e) Mandatory Repayments - Facility A. If at any time the
Borrowing Base as shown on the most recent Borrowing Base Certificate should be
less than the aggregate principal amount of all outstanding Facility A Loans
plus the aggregate face amount of all issued and outstanding Letters of Credit,
Borrowers shall be automatically required (without demand or notice of any kind
by Bank, all of which are hereby expressly waived by Borrowers) jointly and
severally to immediately repay the Facility A Loans in an amount sufficient to
reduce such aggregate principal amount of outstanding Facility A Loans plus the
outstanding face amount of Letters of Credit to the amount of the Borrowing
Base.
(f) Mandatory Repayments - Facility B. Commencing with the
first such principal reduction on November 30, 1999, on each February 28, May
31, August 31 and November 30 thereafter during the Term of this Agreement,
Borrowers shall jointly and severally pay to Bank in immediately available funds
an amount equal to the difference between Bank's Facility B Commitment (as
reduced on such date pursuant to the terms of Section 3.1(b) above) and the
aggregate principal amount of all Facility B Loans then outstanding. In the
event any such mandatory repayment shall be due on a day which is not a Business
Day, then such payment shall be due on the immediately preceding Business Day.
Such mandatory payments shall be applied first to the outstanding Facility B
Loans which are Prime Loans, and second to Facility B Loans which are LIBOR
Loans, provided, however, that any such repayment of LIBOR Loans made on any
date other than the last day of the applicable Interest Period for such LIBOR
Loan shall be subject to payment jointly and severally by Borrowers of the
amounts due under Section 3.8 below.
3.2 Procedure for Borrowing. Subject to the terms and
conditions hereof, Bank shall cause the Loans to be made to Borrowers, and shall
convert outstanding Prime Loans under Facility B to LIBOR Loans or vice versa or
shall continue any outstanding LIBOR Loan as a LIBOR Loan for a new Interest
Period, at any time and from time to time during the Term of this Agreement upon
timely prior oral or written notice ("Borrowing Notice") from any of the
Borrowers to Bank specifying:
(i) the desired amount of the Facility A Loan or
Facility B Loan requested which in the case of a LIBOR Loan under
Facility B shall be in a principal amount of at least Five Hundred
Thousand Dollars ($500,000.00);
(ii) whether such Loan shall be a new Loan under
Facility A or Facility B, or a conversion of all or a portion of any
presently outstanding Facility B Loan from the Prime Rate to the LIBOR
Rate, or vice versa, or a continuation of an expiring LIBOR Loan for a
new Interest Period;
(iii) if a new Loan under Facility B, whether such
Loan is to be a Prime Loan or a LIBOR Loan;
(iv) in the case of a LIBOR Loan, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period;
(v) the date on which the proceeds of any new Loan
are to be made available to any of the Borrowers or the date on which
the new interest rate is to take effect for any outstanding Facility B
Loan being converted or continued by Borrowers, which shall be a
Business Day;
(vi) that on the date of, and after giving effect to,
such Loan, no Default or Event of Default under this Agreement has
occurred and is continuing; and
(vii) that on the date of, and after giving effect
to, such Loan, all of the representations and warranties of Borrowers
contained in this Agreement are true and correct in all material
respects as if made on the date of such Loan.
A Borrowing Notice shall not be required in connection with a Prime Loan made to
cover any overdraft in Virbac's operating account on a day-to-day basis as set
forth herein. A Borrowing Notice, if in writing, shall be in the form of the
notice attached as Exhibit B hereto. Each Borrowing Notice must be received by
Bank not later than 10:00 a.m. (St. Louis time) on the Business Day on which a
Prime Loan is to be established, and not later than 10:00 a.m. (St. Louis time)
on the second Eurodollar Business Day prior to the date on which a LIBOR Loan is
to be established or continued, as the case may be; provided, however, that
notwithstanding the foregoing, in addition to and without limiting the rights
and remedies of the Bank under Section 8 hereof, so long as any Default or Event
of Default under this Agreement has occurred and is continuing, Borrowers shall
not be permitted to renew any LIBOR Loan as a LIBOR Loan or to convert any Prime
Loan into a LIBOR Loan. If the Bank does not receive a Borrowing Notice for the
continuation of an existing LIBOR Loan for a new subsequent Interest Period
pursuant to the preceding sentence within the applicable time limits specified
therein, Borrowers shall be deemed to have elected to convert such LIBOR Loan on
the last day of the current Interest Period with respect thereto to a Prime Loan
in the principal amount of such expiring LIBOR Loan on such date. All Loans
which bear interest at a particular LIBOR Rate for a particular Interest Period
shall constitute a single LIBOR Loan. Borrowers may not have outstanding and
Banks shall not be obligated to make more than three (3) LIBOR Loans at any one
time. A Borrowing Notice shall not be revocable by Borrowers. Subject to the
terms and conditions hereof, provided that Bank has received the Borrowing
Notice, Bank shall (unless Bank determines that any applicable condition
specified in Section 4 has not been satisfied) pay to Borrowers, or any of them,
the Loan proceeds of any new Loan in immediately available funds not later than
2:00 p.m. (St. Louis time) on the Business Day specified in said Borrowing
Notice. Each of the Borrowers hereby authorizes Bank to reasonably rely on
telephonic, telegraphic, telecopy, telex or written instructions of any person
identifying himself as a person authorized to request a Loan or make a repayment
hereunder, and on any signature which Bank believes to be genuine, and Borrowers
shall be bound thereby in the same manner as if such person were actually
authorized or such signature were genuine. Borrowers further request and
authorize Bank, in Bank's sole and absolute discretion, to make a Prime Loan to
Borrowers hereunder at the end of each day in which Borrowers shall have an
overdraft (negative ledger balance) in Virbac's operating account (Account No.
9800801785) with Bank after crediting all deposits received in immediately
available funds and debiting all withdrawals made and checks presented against
such account and honored by Bank as of such date and after funding any advances
to or receiving any collected balances on such day from the "zero balance"
operating accounts of PM Resources (Account No. 9800802535), St. JON (Account
No. 9800805419), Virbac AH (Account No. 9821908926) and Francodex (Account No.
____________) with Bank to cover withdrawals made and checks presented on such
date and after crediting all deposits received in immediately available funds on
such date, which Prime Loan shall be in the amount of such overdraft without any
other request or authorization therefor from Borrowers and without notice to
Borrowers. Similarly, Borrowers request that Bank apply any collected balances
(after funding advances to or receiving collections from the "zero balance"
accounts of PM Resources, St. JON, Virbac AH and Francodex) in excess of a
mutually predetermined amount remaining at the end of any day in Virbac's
operating account to the repayment of the principal balance of Borrowers'
Obligations outstanding as Prime Loans under the Note. Borrowers also hereby
agree jointly and severally to indemnify Bank and hold Bank harmless from and
against any and all claims, demands, damages, liabilities, losses, costs and
expenses (including, without limitation, Attorneys' Fees) relating to or arising
out of or in connection with the acceptance of instructions for making Loans or
repayments hereunder. Contemporaneously with the execution of this Agreement,
Borrowers shall execute and deliver to Bank a Note of Borrowers dated as of the
date hereof and payable jointly and severally to the order of Bank in the
original principal amount of Ten Million Dollars ($10,000,000.00) in the form
attached hereto as Exhibit C and incorporated herein by reference (as the same
may from time to time be amended, modified, extended or renewed, the "Note").
3.3 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
during the Term of this Agreement, and so long as no Default or Event of Default
under this Agreement has occurred and is continuing, Bank hereby agrees to issue
irrevocable standby letters of credit or commercial letters of credit for the
account of any of the Borrowers, or to cause other banks to issue irrevocable
standby letters of credit or commercial letters of credit for the account of any
of the Borrowers by indemnifying such other banks for Borrowers obligations
thereunder (each individually, a "Letter of Credit" and collectively, the
"Letters of Credit") in an amount and for the term specifically requested by any
of the Borrowers by application in writing to Bank (or such other bank) in the
form of Exhibit F attached hereto and incorporated herein by reference in the
case of a standby Letter of Credit, or in the form of Exhibit G attached hereto
and incorporated herein by reference in the case of a commercial Letter of
Credit (each a "Letter of Credit Application") at least three (3) Business Days
prior to the requested issuance thereof; provided, however, that:
(i) Borrowers, or any of them, shall have executed
and delivered to Bank a Letter of Credit Application with respect to
such Letter of Credit;
(ii) the term of any such Letter of Credit shall not
extend beyond the last day of the Term hereof;
(iii) the aggregate undrawn face amount of all
outstanding Letters of Credit plus the outstanding principal amount of
all Facility A Loans shall not at any one time exceed the lesser of (a)
the Borrowing Base or (b) the Bank's Facility A Commitment;
(iv) the aggregate undrawn face amount of all
outstanding Letters of Credit issued hereunder shall not at any one
time exceed One Million Dollars ($1,000,000.00); and
(v) the text of any such Letter of Credit is provided
to Bank no less than three (3) Business Days prior to the requested
issuance date, which text must be acceptable to Bank in its sole and
absolute discretion.
(b) The payment of drafts under each Letter of Credit shall be
made in accordance with the terms thereof and, in that connection, Bank (or any
other issuing bank thereof) shall be entitled to honor any drafts and accept any
documents presented to it by the beneficiary of such Letter of Credit in
accordance with the terms of such Letter of Credit and reasonably believed by
Bank (or such issuing bank) to be genuine. Bank (or such other issuing bank)
shall not have any duty to inquire as to the accuracy or authenticity of any
draft or other drawing document that may be presented to it other than the
duties contemplated by the applicable Letter of Credit Application. If Bank (or
such other issuing bank) shall have received documents that in its judgment
constitute all of the documents that are required to be presented before payment
or acceptance of a draft under a Letter of Credit, it shall be entitled to pay
such draft provided such documents conform on their face to the requirements of
such Letter of Credit.
(c) In the event of any payment by Bank of a draft presented
or accepted under a Letter of Credit, Borrowers jointly and severally agree to
pay to Bank in immediately available funds at the time of such drawing an amount
equal to the sum of such drawing plus Bank's customary negotiation, processing
and other fees related thereto. Borrowers hereby authorize Bank to charge or
cause to be charged to Borrowers' bank accounts at Bank to the extent there are
balances of immediately available funds therein, in an amount equal to the sum
of such drawing plus Bank's customary negotiation, processing and other fees
related thereto, and Borrowers jointly and severally agree to pay the amount of
any such drawing (and/or Bank's customary negotiation, processing and other fees
related thereto) not so charged prior to the close of business of Bank on the
day of such drawing. In the event any payment under a Letter of Credit is made
by Bank prior to receipt of payment from Borrowers, such payment by Bank shall
constitute a request by Borrowers for a Facility A Loan as a Prime Loan under
Section 3.1(a) above.
(d)(i) Borrowers shall also pay to Bank, with respect
to each standby Letter of Credit, all wire transfer fees, courier
charges and other out of pocket expenses incurred by Bank from time to
time, which amounts shall be due and payable on demand by Bank; and
(ii) Borrowers shall pay to Bank with respect to each
Letter of Credit for the period during which such Letter of Credit is
outstanding:
(1) in the case of any standby Letter of Credit, a
nonrefundable Letter of Credit commitment fee in an amount per
annum equal to the greater of (A) One Hundred Dollars
($100.00) or (B) the applicable Letter of Credit Commitment
Fee Rate in effect for the fiscal quarter in which such
standby Letter of Credit is issued (calculated on an actual
day, 360-day year basis) times the face amount (taking into
account any scheduled increases or decreases therein during
the fiscal quarter in question) of the standby Letter of
Credit then being issued hereunder; or
(2) such up-front fee in the case of each such
commercial Letter of Credit as shall be determined by Bank and
agreed to by Borrowers prior to the issuance thereof ;
("Letter of Credit Commitment Fee"), which Letter of Credit Commitment
Fee shall be due and payable in advance on the date of issuance of each
such Letter of Credit and on each renewal date of any such Letter of
Credit.
(e) Notwithstanding any provision contained in this Agreement
or any of the Letter of Credit Applications to the contrary, upon the occurrence
of any Event of Default under this Agreement, at Bank's option and without
demand or further notice to Borrowers, an amount equal to the aggregate undrawn
face amount of all Letter(s) of Credit then outstanding shall be deemed (as
between Bank and Borrowers) to have been paid or disbursed by Bank
(notwithstanding that such amounts may not in fact have been so paid or
disbursed by Bank), and which amount shall be immediately due and payable. In
lieu of the foregoing, at the election of Bank upon the occurrence of any Event
of Default under this Agreement, Borrowers shall, upon Bank's demand, deliver to
Bank cash, or other collateral acceptable to Bank in its sole and absolute
discretion, having a value, as determined by Bank, at least equal to the
aggregate undrawn face amount of all outstanding Letters of Credit. Any such
collateral and/or any amounts received by Bank for such Letters of Credit shall
be held by Bank in a separate account at Bank appropriately designated as a cash
collateral account in relation to this Agreement and the Letters of Credit and
retained by Bank as collateral security for the payment of Borrowers'
Obligations hereunder. Cash amounts delivered to Bank pursuant to the foregoing
requirements of this Section shall be invested, at the request and for the
account of any of the Borrowers, in investments of a type and nature and with a
term acceptable to Bank. Such amounts, including in the case of cash amounts
invested in the manner set forth above, any interest realized thereon, may be
applied to reimburse Bank for drawings or payments under or pursuant to the
Letters of Credit which Bank has paid, or if no such reimbursement is required
to the payment of such other of Borrowers' Obligations as Bank shall determine.
Any amounts remaining in any cash collateral account established pursuant to
this Section after the payment in full of all of Borrowers' Obligations and the
expiration or cancellation of all of the Letters of Credit shall be returned to
Borrowers, or any of them (after deduction of Bank's expenses, if any).
3.4 Interest Rates.
(a) Each Facility A Loan shall bear interest prior to maturity
at a rate per annum equal to the Prime Rate plus Floating Rate Margin, each in
effect from time to time during the period when such Loan is outstanding, with
changes in the interest rate taking effect on the date a change in the Floating
Rate Margin occurs pursuant to the definition thereof or the date a change in
the Prime Rate is made effective generally by Bank.
(b) Each Facility B Loan shall bear interest prior to maturity
at a rate per annum equal to such of the following as any of the Borrowers shall
select in the applicable Borrowing Notice to Bank:
(i) the Prime Rate plus Floating Rate Margin, each in
effect from time to time during the period when such Facility B Loan is
outstanding, with changes in the interest rate taking effect on the
date a change in the Floating Rate Margin occurs pursuant to the
definition thereof or the date a change in the Prime Rate is made
effective generally by Bank; or
(ii) the LIBOR Rate applicable for an Interest Period
selected by any Borrower for such Facility B Loan in the Borrowing
Notice applicable for such Facility B Loan.
(c) From and after the maturity of the Note, whether by reason
of acceleration or otherwise, the entire unpaid principal balance of each Loan
shall bear interest, payable upon demand, until paid at a rate per annum equal
to Three and One-Half Percent (3.50%) over and above the Prime Rate, fluctuating
as aforesaid.
(d) Interest shall be computed with respect to all
Loans on an actual day, 360-day year.
3.5 Prepayment. Borrowers shall be privileged to prepay all at
any time or any portion from time to time of the unpaid principal of any Prime
Loan prior to maturity, without penalty or premium, provided that such repayment
is made on a Business Day. Borrowers shall be privileged to repay, without
penalty or premium, the principal of any LIBOR Loan, in whole or in part, on the
last day of the Interest Period applicable thereto, provided that such repayment
is made on a Business Day. Borrowers shall not make any optional prepayment of
the principal of any LIBOR Loan before the last day of its applicable Interest
Period, and any payments of principal of any LIBOR Loan on any date other than
the last day of the applicable Interest Period shall be subject to payment of
the amounts required under Section 3.8 below. All prepayments shall be applied
solely to the payment of principal.
3.6 Interest Payments. Borrowers shall jointly and severally
pay Bank all interest which accrued on all Prime Loans during any month on the
fifteenth (15th) day of the month following the month in which such interest
accrued, commencing with the fifteenth (15th) day of the month following the
month in which any Prime Loan is made. Borrowers shall jointly and severally pay
Bank with respect to each LIBOR Loan (a) on the last day of the Interest Period
applicable to each such LIBOR Loan, and (b) if any such Interest Period is
longer than three months, then also on the date which is three months after the
commencement of such Interest Period, all then accrued and unpaid interest on
such LIBOR Loan. Notwithstanding any provision contained herein to the contrary,
all accrued and unpaid interest shall also be paid at the maturity of each of
the Note, whether by reason of acceleration or otherwise, and any interest
accruing after any such maturity shall be payable upon demand. In case any
installment of interest shall become due on a day which is not a Business Day,
interest shall be computed to, and payable on, the next succeeding Business Day,
except that in the case of LIBOR Loans such payment dates shall be subject to
the definition of Interest Period. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon, at the then
applicable rate, shall be payable for such extended time.
3.7 Place and Manner of Payment. Both principal and interest
on the Loans are payable to Bank in lawful currency of the United States in
Federal or other immediately available funds at Bank's banking office at 1281
Graham Road, Florissant, Missouri 63031, or at such other place as Bank shall
designate in writing to Borrowers.
3.8 Funding Losses. Notwithstanding any provision contained
herein to the contrary, if any of the Borrowers makes any payment of principal
with respect to any LIBOR Loan (pursuant to this Section 3, Section 8 or
otherwise) on any day other than the last day of an Interest Period applicable
thereto, or if any of the Borrowers fails to borrow or pay any LIBOR Loan after
notice has been given by Borrowers in accordance with Section 3.1(f), 3.2 or
3.6, Borrowers shall jointly and severally reimburse Bank on demand for any
resulting losses and expenses incurred by Bank, including, without limitation,
any losses incurred in obtaining, liquidating or employing deposits from third
parties, and including loss of margin for the period after any such payment is
made. A certificate of Bank demanding compensation under this paragraph and
setting forth the amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error.
3.9 Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period:
(a) Bank determines that deposits in dollars (in the
applicable amounts) are not being offered to Bank in the relevant market for
such Interest Period, or
(b) Bank determines that the LIBOR Rate as determined by Bank
will not adequately and fairly reflect the cost to Bank of maintaining or
funding its LIBOR Loans for such Interest Period, the Bank shall forthwith give
notice thereof to Borrowers, whereupon until Bank notifies Borrowers that the
circumstances giving rise to such suspension no longer exist, (a) the
obligations of the Bank to make LIBOR Loans shall be suspended, and (b)
Borrowers shall repay in full the then outstanding principal amount of each of
their LIBOR Loans together with all accrued and unpaid interest thereon, on the
last day of the then current Interest Period applicable to such Loan.
Concurrently with repaying each such LIBOR Loan of Bank pursuant to this
Section, Borrowers may borrow a Prime Loan in an equal principal amount from
Bank, and, if Borrowers so elect, Bank shall make such a Prime Loan to
Borrowers.
3.10 Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
or regulatory authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank with any request
or directive (whether or not having the force of law) of any such governmental
or regulatory authority, central bank or comparable agency shall make it
unlawful or impossible for Bank to make, maintain or fund its LIBOR Loans to
Borrowers, Bank shall forthwith give notice thereof to Borrowers. Upon receipt
of such notice, Borrowers shall repay in full the then outstanding principal
amount of each of their LIBOR Loans from Bank, together with all accrued and
unpaid interest thereon, on either (a) the last day of the then current Interest
Period applicable to such LIBOR Loan if Bank may lawfully continue to maintain
and fund such LIBOR Loan to such day or (b) immediately if Bank may not lawfully
continue to fund and maintain such LIBOR Loan to such day. Concurrently with
repaying each LIBOR Loan of Bank, Borrowers may borrow a Prime Loan in an equal
principal amount from Bank, and, if Borrowers so elect, Bank shall make such a
Prime Loan to Borrowers.
3.11 Increased Cost.
(a) If (i) Regulation D or (ii) after the date hereof, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
or regulatory authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank with any request
or directive (whether or not having the force of law) of any such governmental
or regulatory authority, central bank or comparable agency (a "Regulatory
Change"):
(A) shall subject Bank to any tax, duty or other
charge with respect to its LIBOR Loans, the Note or its obligation to
make LIBOR Loans hereunder, or shall change the basis of taxation of
payments to Bank of the principal of or interest on its LIBOR Loans or
any other amounts due under this Agreement in respect of its LIBOR
Loans or its obligation to make LIBOR Loans (except for taxes on or
changes in the rate of tax on the overall net income of Bank); or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by the
Board of Governors of the Federal Reserve System), special deposit,
capital or similar requirement against assets of, deposits with or for
the account of, or credit extended or committed to be extended by, Bank
or shall, with respect to Bank or the Interbank Eurodollar market,
impose, modify or deem applicable any other condition affecting its
LIBOR Loans, the Note or its obligation to make LIBOR Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D, to impose a cost on or increase the cost to) Bank of
making or maintaining any LIBOR Loan, or to reduce the amount of any sum
received or receivable by Bank under this Agreement or under its Note with
respect thereto, by an amount deemed by Bank to be material, and if Bank is not
otherwise fully compensated for such increase in cost or reduction in amount
received or receivable by virtue of the inclusion of the reference to "LIBOR
Reserve Percentage" in the calculation of the interest rate applicable to LIBOR
Loans, then, upon notice by Bank to Borrowers together with Bank's calculation
of the increased cost or reduction of any amount to be received by Bank,
Borrowers shall promptly pay to Bank as additional interest, such additional
amount or amounts as will compensate Bank for such increased cost or reduction.
Bank will promptly notify Borrower of any event of which it has knowledge,
occurring after the date hereof, which will entitle Bank to compensation
pursuant to this Section. The determination by Bank under this Section of the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount or amounts, Bank may
use any reasonable averaging and attribution methods.
(b) If Bank demands compensation under this Section, Borrowers
may at any time, upon at least two (2) Business Days' prior notice to Bank,
repay in full their then outstanding LIBOR Loans, together with all accrued and
unpaid interest thereon to the date of prepayment and any funding losses and
other amounts due under Section 3.8. Concurrently with repaying such LIBOR
Loans, Borrowers may borrow from Bank a Prime Loan in an amount equal to the
aggregate principal amount of such LIBOR Loans, and, if Borrowers so elect, Bank
shall make such a Prime Loan to Borrowers.
3.12 Prime Loans Substituted for Affected LIBOR Loans. If
notice has been given by Bank pursuant to Section 3.9 or 3.10 or by Borrowers
pursuant to Section 3.11(b) requiring LIBOR Loans to be repaid, then, unless and
until Bank notifies Borrowers that the circumstances giving rise to such
repayment no longer apply, all Loans which would otherwise be made by Bank to
Borrowers as LIBOR Loans shall be made instead as Prime Loans. Bank shall notify
Borrowers if and when the circumstances giving rise to such repayment no longer
apply.
3.13 Survival of Indemnities. All indemnities and all
provisions relating to reimbursement to Bank of amounts sufficient to protect
the yield to Bank with respect to the Loans, including, without limitation,
Sections 3.9, 3.10 and 3.11 hereof, shall survive the payment of the Note and
the termination of this Agreement.
3.14 Discretion of Bank as to Manner of Funding.
Notwithstanding any provision contained in this Agreement to the contrary, the
Bank shall be entitled to fund and maintain its funding of all or any part of
its LIBOR Loans in any manner it elects, it being understood, however, that for
purposes of this Agreement all determinations hereunder (including, without
limitation, the determination of Bank's funding losses and expenses under
Section 3.8) shall be made as if Bank had actually funded and maintained each
LIBOR Loan through the purchase of deposits having a maturity corresponding to
the maturity of the applicable Interest Period relating to the applicable LIBOR
Loan and bearing an interest rate equal to the applicable LIBOR Base Rate. Bank
may, at its option, elect to make, fund or maintain its Loans hereunder at any
of its branches or offices or at such other of its branches or offices as Bank
may from time to time elect, provided that the Borrowers shall not be required
to reimburse Bank under any of the provisions of Section 3.8 for any cost which
Bank would not have incurred but for changing its lending or funding branch
unless Borrowers consent to such change.
3.15 Commitment Fee. Borrowers shall jointly and severally pay
to Bank on the fifteenth (15th) day following the end of each January, April,
July and October during the Term of this Agreement and on the last day of the
Term hereof, a commitment fee (the "Commitment Fee") in an amount equal to:
(a) One-Eighth of One Percent (0.125%) per annum, if Virbac's
ratio of Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 2.5 to 1.0 as determined pursuant to Section 7.1(i)(i) by reference
to Virbac's most recent quarter-end (or fiscal year-end) financial statements,
(b) Three-Sixteenths of One Percent (0.1875%) per annum, if
Virbac's ratio of Consolidated EBITDA to Consolidated Debt Service shall be
greater than or equal to 2.0 to 1.0 but less than 2.5 to 1.0 as determined
pursuant to Section 7.1(i)(i) by reference to Virbac's most recent quarter-end
(or fiscal year-end) financial statements, and
(c) One-Fourth of One Percent (0.25%) per annum, if Virbac's
ratio of Consolidated EBITDA to Consolidated Debt Service shall be greater than
or equal to 1.25 to 1.0 but less than 2.0 to 1.0 as determined pursuant to
Section 7.1(i)(i) by reference to Virbac's most recent quarter-end (or fiscal
year-end) financial statements, calculated on the basis of the unused Bank's
Commitment during the preceding fiscal quarter of Borrowers ending as of the
last day of each January, April, July and October, which unused Bank's
Commitment shall be arrived at by dividing the aggregate of the daily unused
Bank's Commitment for each day of that quarter as of the close of each day by
ninety (90) (or by the actual number of days for any partial quarter). Payment
of the Commitment Fee is a condition precedent to Bank's obligations to make any
new Loans hereunder.
3.16 Maturity. All Loans not paid prior to July 31, 2002,
together with all accrued and unpaid interest thereon, shall be due and payable
on July 31, 2002 (as from time to time extended, if any, pursuant to this
Section, the "Maturity Date"); provided, however, that in the event Bank, in its
sole and absolute discretion, shall deliver to Borrowers a written notice signed
by Bank on or before the date one year prior to the then current Maturity Date
(and prior to any subsequent Maturity Date thereafter if extended under this
Section 3.16) of Bank's intention to extend the term of this Agreement for an
additional year, then the Maturity Date of this Agreement shall be extended for
a period of one additional year following the then current Maturity Date.
Following any such extension of the Maturity Date by Bank, all of the
outstanding principal and all accrued and unpaid interest, fees and other
amounts due under this Agreement and the Note shall be due and payable on such
new Maturity Date, unless it is again extended by Bank, in its sole and absolute
discretion, under the foregoing sentence.
SECTION 4. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.
4.1 Initial Loan or Letter of Credit. Notwithstanding any
provision contained herein to the contrary, Bank shall have no obligation to
make any Loan or to issue any Letter of Credit hereunder unless Bank shall have
first received:
(a) this Agreement and the Note, each executed by a duly
authorized officer of each of the Borrowers;
(b) the Security Agreements of Virbac AH and Francodex and the
Amendments to Security Agreements of Virbac, PM Resources and St. JON, and such
UCC financing statements and other documents as Bank may reasonably require
under Section 5.1, each duly executed by an authorized officer of each such
Borrower;
(c) the Amendment to the Deed of Trust, duly executed
by the authorized officer of PM Resources;
(d) the Agreements of Pledge and such other documents as Bank
may reasonably require under Section 5.3, duly executed by an authorized officer
of Virbac, by an authorized officer of St. JON, and by an authorized officer of
Virbac AH, as such documents require;
(e) a copy of resolutions of the Board of Directors of each of
the Borrowers, duly adopted, which authorize the execution, delivery and
performance of this Agreement and the Note, the Security Agreement or Amendment
to Security Agreement of such Borrower, as applicable, the Amendment to the Deed
of Trust by PM Resources, the Pledge Agreements of Virbac and Virbac AH, and the
other Transaction Documents, respectively certified by the Secretary of each
such Borrower;
(f) a Certificate of Corporate Good Standing of Virbac, issued
by the Secretary of State of the State of Delaware and by the Secretary of State
of Texas;
(g) a certificate of corporate good standing of PM Resources
issued by the Secretary of State of the State of Missouri;
(h) a Certificate of Corporate Good Standing of Virbac AH,
issued by the Secretary of State of the State of Delaware and by the Secretary
of State of Texas;
(i) a certificate of corporate good standing of Francodex
issued by the Secretary of State of the State of Kansas and by the Secretary of
State of Texas;
(j) certificates of corporate good standing of St. JON issued
by the Secretary of State of the State of California, the Secretary of State of
the State of Illinois and by the Secretary of State of the State of North
Carolina;
(k) an opinion of counsel of Dyer, Ellis & Joseph, independent
counsel to Borrowers, in the form of Exhibit D attached hereto and incorporated
herein by reference;
(l) the initial Borrowing Base Certificate required by Section
3.1(d);
(m) an acknowledgement and consent duly executed by Ramon A.
Mulholland in form and substance acceptable to Bank pursuant to which Ramon A.
Mulholland consents to the execution by Borrowers of this amended and restated
Agreement and the other Transaction Documents and acknowledges that all of
Borrowers' Obligations hereunder shall constitute Senior Indebtedness as defined
in that certain Subordination and Standby Agreement dated as of May 14, 1998
made by Ramon A. Mulholland in favor of Bank;
(n) the Borrowing Notice required by Section 3.2 and/or the
Letter of Credit Application required by Section 3.3; and
(o) such other agreements, documents, instruments and
certificates as Bank may reasonably request.
4.2 Subsequent Loans and Letters of Credit. Notwithstanding
any provision contained herein to the contrary, Bank shall have no obligation to
make any subsequent Loan hereunder, to issue any subsequent Letter of Credit
hereunder or to convert any Prime Loan to a LIBOR Loan unless:
(a) Bank shall have received a current Borrowing Base
Certificate as required by Section 3.1(d);
(b) Bank shall have received a Borrowing Notice for such Loan
as required by Section 3.2 or a Letter of Credit Application for such Letter of
Credit as required by Section 3.3;
(c) on the date of and immediately after such Loan or Letter
of Credit, no Default or Event of Default under this Agreement shall have
occurred and be continuing;
(d) on the date of and immediately after such Loan or Letter
of Credit, no material adverse change in the business, financial position or
results of operations of any of the Borrowers or any of their respective
Subsidiaries shall have occurred since the date of this Agreement and be
continuing; and
(e) all of the representations and warranties of each of the
Borrowers contained in this Agreement shall be true and correct on and as of the
date of such Loan or such Letter of Credit as if made on the date of such Loan
or such Letter of Credit.
Each request for a Loan or Letter of Credit by any of the
Borrowers hereunder shall be deemed to be a representation and warranty by each
of the Borrowers on the date of such Loan or Letter of Credit as to the facts
specified in clauses (c), (d) and (e) of this Section 4.2.
SECTION 5. SECURITY
5.1 Security Agreements. In order to secure the payment when
due of Borrowers' Obligations, each of the Borrowers has conveyed to Bank a
security interest in, among other things, all of such Borrower's accounts
receivable, inventory, machinery, equipment, fixtures and other tangible and
intangible personal property and all proceeds and products thereof, which
security interest is and shall be a first and prior interest in all such items
except for those Uniform Commercial Code security interests described on
Schedule 6.12 attached hereto. Said security interests are evidenced by a
Security Agreement dated as of May 14, 1998 and as amended on the date hereof by
an Amendment to Security Agreement dated as of the date hereof executed by
Virbac in favor of Bank, a Security Agreement dated as of May 14, 1998 and as
amended on the date hereof by an Amendment to Security Agreement dated as of the
date hereof executed by PM Resources in favor of Bank, a Security Agreement
dated as of the date hereof and executed by Virbac AH in favor of Bank, a
Security Agreement dated as of the date hereof and executed by Francodex in
favor of Bank and by a Security Agreement dated as of May 14, 1998 and as
amended on the date hereof by an Amendment to Security Agreement dated as of the
date hereof and executed by St. JON in favor of Bank (as the same may from time
to time be amended, the "Security Agreements"). Each of the Borrowers further
covenants and agrees to execute and deliver to Bank any and all financing
statements, continuation statements and such other documentation as may be
requested by Bank in order to create, perfect and continue said security
interests. Upon demand, Borrowers shall jointly and severally pay all appraisal
fees, legal and filing fees and expenses incurred by Bank in the preparation of
the foregoing documents and perfection of the security interest contemplated
thereby. Bank shall have no obligation to make any Loan hereunder unless and
until Borrowers have fully satisfied these requirements.
5.2 Deed of Trust. In order to further secure the payment when
due of Borrowers' Obligations, PM Resources has conveyed to Bank a security
interest in all of PM Resource's real property, fixtures and improvements as
more fully described in that certain Deed of Trust and Security Agreement made
by PM Resources to Katherine D. Knocke as trustee for Bank dated as of September
9, 1993 (as the same has been or may be amended from time to time, the "Deed of
Trust"), which Deed of Trust shall be a first and prior interest in such real
property and improvements. PM Resources further covenants and agrees to execute
and deliver to Bank any and all amendments, including, without limitation, the
Amendment, and such other documentation as may be requested by Bank from time to
time in order to create, perfect and continue said Deed of Trust as collateral
security for all of Borrowers' Obligations. Upon demand, Borrowers shall jointly
and severally pay all legal and filing fees and expenses, appraisal costs and
title insurance premiums incurred by Bank in connection with the Deed of Trust.
Bank shall have no obligation to make any Loan hereunder unless and until
Borrowers have fully satisfied these requirements.
5.3 Pledge Agreements. In order to further secure the payment
when due of Borrowers' Obligations, Virbac has pledged to Bank and granted to
Bank a first perfected security interest in all of the issued and outstanding
capital stock of PM Resources, Virbac AH and St. JON, as more fully described in
that certain Agreement of Pledge made by Virbac in favor of Bank dated as of the
date hereof, and Virbac AH has pledged to Bank and granted to Bank a first
perfected security interest in all of the issued and outstanding capital stock
of Francodex, as more fully described in that certain Agreement of Pledge made
by Virbac AH in favor of Bank dated as of the date hereof (collectively, as the
has been or may be amended from time to time, the "Pledge Agreements"), which
Pledge Agreements shall be a first and prior interest in all such capital stock.
Virbac and Virbac AH further agree to execute and deliver to Bank any and all
collateral schedules, stock powers, Reg. U-1 affidavits and other documents as
may be reasonably requested by Bank from time to time, together with all
original stock certificates evidencing any shares of capital stock in PM
Resources, St. JON, Virbac AH and/or Francodex. Upon demand, Borrowers shall
jointly and severally pay all legal and filing fees and other expenses incurred
by Bank in connection with the Pledge Agreements. Bank shall have no obligation
to make any Loan hereunder unless and until Borrowers have fully satisfied these
requirements.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Borrowers represent and warrant to Bank that:
6.1 Corporate Existence and Power. Each of the Borrowers and
each Subsidiary of each of the Borrowers: (a) is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate powers and all governmental and
regulatory licenses, authorizations, consents and approvals required to carry on
its business as now conducted; and (c) is duly qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would have a material
adverse effect on its business, financial condition or operations.
6.2 Corporate Authorization. The execution, delivery and
performance by Borrowers of this Agreement, the Note, the Amendment and the
other Transaction Documents are within the corporate powers of each of the
Borrowers and have been duly authorized by all necessary corporate action.
6.3 Binding Effect. This Agreement, the Note, the Security
Agreements, the Amendments to Security Agreement of Virbac, PM Resources and St.
JON, the Deed of Trust, the Amendment and the other Transaction Documents have
been duly executed and delivered by each of the Borrowers executing the same and
constitute the legal, valid and binding obligations of each such Borrower
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights in general.
6.4 Financial Statements. Borrowers have furnished Bank with
the following financial statements, identified by the principal financial
officers of each of the Borrowers: (1) consolidated balance sheet and statements
of income, retained earnings and cash flows of Virbac and its Consolidated
Subsidiaries as of December 31, 1998 and for the period then ended, all
certified by Virbac's independent certified public accountants, which financial
statements have been prepared in accordance with Generally Accepted Accounting
Principles consistently applied; (2) consolidated balance sheet and statements
of income, retained earnings and cash flows of Agri-Nutrition Group Limited, the
predecessor of Virbac, and its Consolidated Subsidiaries as of October 31, 1998
and for the period then ended, all certified by Agri-Nutrition Group Limited's
independent certified public accountants, which financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
consistently applied; and (3) unaudited consolidated balance sheet and
statements of income, retained earnings and cash flows of Virbac and its
Consolidated Subsidiaries as of June 30, 1999, certified by the principal
financial officer of Virbac as being true and correct to the best of his
knowledge and as being prepared in accordance with Virbac's normal accounting
procedures. Borrowers further represent and warrant to Bank that: (1) said
balance sheets and their accompanying notes fairly present the condition of
Virbac and its Consolidated Subsidiaries as of the dates thereof; (2) there has
been no material adverse change in the condition or operation, financial or
otherwise, of Virbac or any of its Consolidated Subsidiaries since June 30,
1999; and (3) neither Virbac nor any of its Consolidated Subsidiaries has any
direct or contingent liabilities which are not disclosed on said financial
statements in accordance with Generally Accepted Accounting Principles.
6.5 Litigation. Except as disclosed on Schedule 6.5 attached
hereto, there is no action or proceeding pending or, to the knowledge of
Borrowers, threatened against or affecting any of the Borrowers or any
Subsidiary of any of the Borrowers before any court, arbitrator or any
governmental, regulatory or administrative body, agency or official which could
result in any material adverse change in the condition or operation, financial
or otherwise, of any such Borrower or any Subsidiary of any of the Borrowers,
and none of the Borrowers nor any Subsidiary of any of the Borrowers is in
default with respect to any order, writ, injunction, decision or decree of any
court, arbitrator or any governmental, regulatory or administrative body, agency
or official, a default under which could have a material adverse effect on any
of the Borrowers or any Subsidiary of any of the Borrowers.
6.6 Pension and Welfare Plans. Each Pension Plan complies with
all applicable statutes and governmental rules and regulations; no Reportable
Event has occurred and is continuing with respect to any Pension Plan; none of
the Borrowers nor any ERISA Affiliate nor any Subsidiary of any of the Borrowers
has withdrawn from any Multiemployer Plan in a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 or 4205 of ERISA, respectively;
no steps have been instituted by any of the Borrowers, any ERISA Affiliate or
any Subsidiary of any of the Borrowers to terminate any Pension Plan; no
condition exists or event or transaction has occurred in connection with any
Pension Plan or Multiemployer Plan which could result in the incurrence by any
of the Borrowers, any ERISA Affiliate or any Subsidiary of any of the Borrowers
of any material liability, fine or penalty; and none of the Borrowers nor any
ERISA Affiliate nor any Subsidiary of any of the Borrowers is a "contributing
sponsor" as defined in Section 4001(a)(13) of ERISA of a "single-employer plan"
as defined in Section 4001(a)(15) of ERISA which has two or more contributing
sponsors at least two of whom are not under common control. Except as disclosed
on Schedule 6.6 attached hereto, none of the Borrowers nor any Subsidiary of any
of the Borrowers has any contingent liability with respect to any "employee
welfare benefit plan", as such term is defined in Section 3(a) of ERISA, which
covers retired employees and their beneficiaries.
6.7 Tax Returns and Payment. Each of the Borrowers and each
Subsidiary of each of the Borrowers has filed all Federal, state and local
income tax returns and all other tax returns which are required to be filed and
has paid all taxes due pursuant to such returns or pursuant to any assessment
received by any of the Borrowers or any Subsidiary of any of the Borrowers,
except for the filing of such returns, if any, in respect of which an extension
of time for filing is in effect and except for such taxes, if any, as are being
contested in good faith by appropriate proceedings being diligently conducted
and as to which adequate reserves in accordance with Generally Accepted
Accounting Principles consistently applied have been provided. The charges,
accruals and reserves on the books of each of the Borrowers and each Subsidiary
of any of the Borrowers in respect of any taxes or other governmental charges
are, in the opinion of Borrowers, adequate.
6.8 Subsidiaries. St. JON VRX Products Limited is the only
Subsidiary of St. JON as of the date hereof, Francodex is the only Subsidiary of
Virbac AH as of the date hereof, and St. JON, Virbac AH and PM Resources are the
only Subsidiaries of Virbac as of the date hereof.
6.9 Compliance With Other Instruments; None Burdensome. None
of the Borrowers nor any Subsidiary of any of the Borrowers is a party to any
contract or agreement or subject to any charter or other corporate restriction
which materially and adversely affects its business, Property or financial
condition and which is not disclosed on such Borrower's financial statements
heretofore submitted to Bank; none of the execution and delivery by Borrowers of
the Transaction Documents, the consummation of the transactions therein
contemplated or the compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
any of the Borrowers, or any of the provisions of any Borrower's Certificate or
Articles of Incorporation or Bylaws or any of the provisions of any indenture,
agreement, document, instrument or undertaking to which any of the Borrowers is
a party or subject, or by which it or its Property is bound, or conflict with or
constitute a default thereunder or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, agreement, document,
instrument or undertaking (other than in favor of Bank pursuant to the
Transaction Documents). No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental, regulatory, administrative or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, the execution, delivery or performance of, or the legality, validity,
binding effect or enforceability of, any of the Transaction Documents.
6.10 Other Loans and Guarantees. Except as disclosed on
Schedule 6.10 attached hereto, none of the Borrowers nor any Subsidiary of any
of the Borrowers is a party to any loan transaction or Guarantee.
6.11 Labor Matters. Except as disclosed on Schedule 6.11
attached hereto, (a) no labor contract to which any of the Borrowers or any
Subsidiary of any of the Borrowers is subject is scheduled to expire during the
Term of this Agreement and (b) on the date of this Agreement, (i) none of the
Borrowers nor any Subsidiary of any of the Borrowers is a party to any labor
dispute and (ii) there are no strikes or walkouts relating to any labor contract
to which any of the Borrowers or any Subsidiary of any of the Borrowers is
subject.
6.12 Title to Property. Each of the Borrowers and each
Subsidiary of any of the Borrowers is the sole and absolute owner of, or has the
legal right to use and occupy, all Property it claims to own or which is
necessary for such Borrower or such Subsidiary of any of the Borrowers to
conduct its business. None of the Borrowers nor any Subsidiary of any of the
Borrowers has signed any financing statements, security agreements or chattel
mortgages with respect to any of its Property, has granted or permitted any
Liens with respect to any of its Property or has any knowledge of any Liens with
respect to any of its Property, except as disclosed on Schedule 6.12 attached
hereto.
6.13 Regulation U. None of the Borrowers is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of The Board of Governors of the Federal Reserve System,
as amended) and no part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately (i)
to purchase or carry margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock, or to refund or repay indebtedness
originally incurred for such purpose or (ii) for any purpose which entails a
violation of, or which is inconsistent with, the provisions of any of the
Regulations of The Board of Governors of the Federal Reserve System, including,
without limitation, Regulations U, T or X thereof, as amended. If requested by
Bank, Borrowers shall furnish to Bank a statement or statements in conformity
with the requirements of Federal Reserve Form U-1 referred to in Regulation U.
6.14 Multi-Employer Pension Plan Amendments Act of 1980. None
of the Borrowers nor any Subsidiary of any of the Borrowers has any pension plan
or any liability for pension contributions pursuant to any plan subject to the
Multi-Employer Pension Plan Amendments Act of 1980, as amended ("MEPPAA").
6.15 Investment Company Act of 1940; Public Utility Holding
Company Act of 1935. None of the Borrowers is an "investment company" as that
term is defined in, or is otherwise subject to regulation under, the Investment
Company Act of 1940, as amended. None of the Borrowers is a "holding company" as
that term is defined in, or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended.
6.16 Patents, Licenses, Trademarks, Etc. Each Borrower and
each Subsidiary of any of the Borrowers possesses all necessary patents,
licenses, trademarks, trademark rights, trade names, trade name rights and
copyrights to conduct its business without conflict with any patent, license,
trademark, trade name or copyright of any other Person except as set forth on
Schedule 6.5 attached hereto.
6.17 Environmental and Safety and Health Matters. Except as
disclosed on Schedule 6.17 attached hereto: (i) the operations of each of the
Borrowers and each Subsidiary of any of the Borrowers comply with (A) all
applicable Environmental Laws and (B) all applicable Occupational Safety and
Health Laws; (ii) none of the operations of any of the Borrowers or any
Subsidiary of any of the Borrowers are subject to any judicial, governmental,
regulatory or administrative proceeding alleging the violation of any
Environmental Law or Occupational Safety and Health Law; (iii) none of the
operations of any of the Borrowers or any Subsidiary of any of the Borrowers is
the subject of any Federal or state investigation evaluating whether any
remedial action is needed to respond to (A) any spillage, disposal or release
into the environment of any Hazardous Material or any other hazardous, toxic or
dangerous waste, substance or constituent or other substance, or (B) any unsafe
or unhealthful condition at any premises of any of the Borrowers or such
Subsidiary of any of the Borrowers; (iv) none of the Borrowers nor any
Subsidiary of any of the Borrowers has filed any notice under any Environmental
Law or Occupational Safety and Health Law indicating or reporting (A) any past
or present spillage, disposal or release into the environment of, or treatment,
storage or disposal of, any Hazardous Material or any other hazardous, toxic or
dangerous waste, substance or constituent or other substance or (B) any unsafe
or unhealthful condition at any premises of any such Borrower or such Subsidiary
of any such Borrower; and (v) none of the Borrowers nor any Subsidiary of any of
the Borrowers has any known contingent liability in connection with (A) any
spillage, disposal or release into the environment of, or otherwise with respect
to, any Hazardous Material or any other hazardous, toxic or dangerous waste,
substance or constituent or other substance or (B) any unsafe or unhealthful
condition at any premises of any such Borrower or such Subsidiary of any such
Borrower.
SECTION 7. COVENANTS.
7.1 Affirmative Covenants of Borrowers. Borrowers covenant and
agree that, so long as Bank has any obligation to make any Loan or to issue any
Letter of Credit hereunder or any of Borrowers' Obligations remain unpaid:
(a) Information. Borrowers will deliver to Bank:
(i) As soon as available and in any event within
ninety (90) days after the end of each fiscal year of Borrowers, the
consolidated balance sheet of Virbac and its Consolidated Subsidiaries
as of the end of such fiscal year and the related consolidated
statements of income, retained earnings and cash flows for such fiscal
year, 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 independent
certified public accountants of nationally recognized standing selected
by Virbac and reasonably acceptable to Bank together with (i) a
certificate from such accountants to the effect that, in making the
examination necessary for the signing of such annual audit report, such
accountants have not become aware of any Default or Event of Default
that has occurred and is continuing, or, if such accountants have
become aware of any such event, describing it and the steps, if any,
being taken to cure it and (ii) the computations of such accountants
evidencing Borrowers' compliance with the financial covenants contained
in this Agreement;
(ii) As soon as available and in any event within
forty-five (45) days after the end of each of the first three (3)
fiscal quarters of each fiscal year of Virbac, the consolidated balance
sheets of Virbac and its Consolidated Subsidiaries as of the end of
each such fiscal quarter and the related consolidated statements of
income, retained earnings and cash flows for such fiscal quarter and
for the portion of Virbac's fiscal year ended at the end of such fiscal
quarter, all with consolidating disclosures and setting forth in each
case in comparative form, the figures for the corresponding fiscal
quarter and the corresponding portion of Virbac's previous fiscal year,
all certified (subject to normal year-end adjustments) as to fairness
of presentation, Generally Accepted Accounting Principles and
consistency by the principal financial officer or controller of Virbac;
(iii) As soon as available and in any event within
twenty-eight (28) days after the end of each month (which is not a
fiscal quarter-end covered under (ii) above), the balance sheets of
each of the Borrowers and its respective Consolidated Subsidiaries as
of the end of each such month and the related consolidated statements
of income, retained earnings and cash flows for such month and for the
portion of each such Borrower's fiscal year ended at the end of such
month, all except for such balance sheets) with consolidating
disclosures and setting forth in each case in comparative form, the
figures for the corresponding month and the corresponding portion of
each such Borrower's previous fiscal year, all certified (subject to
normal year-end adjustments) as to fairness of presentation, Generally
Accepted Accounting Principles and consistency by the principal
financial officer or controller of each such Borrower;
(iv) As soon as available and in any event within
twenty-eight (28) days after the end of each month, a certificate of
the principal financial officers or controllers of Borrowers in the
form attached hereto as Exhibit E and incorporated herein by reference,
accompanied by supporting financial work sheets where appropriate;
(v) Within twenty-eight (28) days after the end of
each month, the Borrowing Base Certificate dated as of the last day of
such preceding month-end, as required pursuant to Section 3.1(d)
hereof, together with an accounts receivable aging and inventory list
of each of the Borrowers if requested by Bank;
(vi) Promptly upon receipt thereof, any reports
submitted to any of the Borrowers or any Consolidated Subsidiary of any
of the Borrowers (other than reports previously delivered pursuant to
Sections 7.1(a)(i), (ii) and (iii) above) by independent accountants in
connection with any annual, interim or special audit made by them of
the books of any of the Borrowers or any Consolidated Subsidiary of any
of the Borrowers;
(vii) Promptly upon any filing thereof, and in any
event within ten (10) days after the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or interim reports which Virbac or any of the other Borrowers
shall file with the Securities and Exchange Commission;
(viii) Promptly upon the mailing thereof to the
shareholders of any of the Borrowers generally, and in any event within
ten (10) days after such mailing, copies of all financial statements,
reports, proxy statements and other material information so mailed; and
(ix) With reasonable promptness, such further
information regarding the business, affairs and financial condition of
any of the Borrowers or any Subsidiary of any of the Borrowers as Bank
may from time to time reasonably request.
Bank is hereby authorized to deliver a copy of any financial
statement or other information made available by any of the Borrowers to any
regulatory authority having jurisdiction over Bank, pursuant to any request
therefor.
(b) Payment of Indebtedness. Each of the Borrowers and each
Subsidiary of any of the Borrowers will (i) pay any and all Indebtedness payable
or guaranteed by such Borrower or such Subsidiary of such Borrower, as the case
may be, and any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in accordance
with the agreement, document or instrument relating to such Indebtedness or
Guarantee and (ii) faithfully perform, observe and discharge all covenants,
conditions and obligations which are imposed upon such Borrower or such
Subsidiary of such Borrower, as the case may be, by any and all agreements,
documents and instruments evidencing, securing or otherwise relating to such
Indebtedness or Guarantee.
(c) Consultations and Inspections. Each of the Borrowers will
permit, and will cause each Subsidiary of any such Borrower to permit, Bank (and
any Person appointed by Bank to whom Borrowers do not reasonably object) to
discuss the affairs, finances and accounts of Borrowers and each Subsidiary of
any of the Borrowers with the officers of each such Borrower and each Subsidiary
of any of the Borrowers, all at such reasonable times and as often as Bank may
reasonably request. Each of the Borrowers will also permit, and will cause each
Subsidiary of any such Borrower to permit, inspection of its Properties, books
and records by Bank during normal business hours or at other reasonable times.
(d) Payment of Taxes; Corporate Existence; Maintenance of
Properties; Insurance. Each of the Borrowers and each Subsidiary of any of the
Borrowers will:
(i) Duly file all Federal, state and local income tax
returns and all other tax returns and reports of such Borrower and each
Subsidiary of any such Borrower which are required to be filed and duly
pay and discharge promptly all taxes, assessments and other
governmental charges imposed upon it or any of its income, Property or
assets; provided, however, that none of the Borrowers nor any
Subsidiary of any of the Borrowers shall be required to pay any such
tax, assessment or other governmental charge the payment of which is
being contested in good faith and by appropriate proceedings diligently
conducted and for which adequate reserves in form and amount
satisfactory to Bank have been provided, except that Borrowers and each
Subsidiary of any of the Borrowers shall pay or cause to be paid all
such taxes, assessments and governmental charges forthwith upon the
commencement of proceedings to foreclose any Lien which is attached as
security therefor, unless such foreclosure is stayed by the filing of
an appropriate bond in a manner satisfactory to Bank;
(ii) Do all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchise and
to be duly qualified to do business in all jurisdictions where the
nature of its business requires such qualification;
(iii) Maintain and keep its Properties as a whole in
good repair, working order and condition; provided, however, that
nothing in this subsection (iii) shall prevent any abandonment of any
Property which is not disadvantageous in any material respect to Bank
and which, in the good faith opinion of the management of any Borrower,
is in the best interests of such Borrower or such Subsidiary of any
such Borrower, as the case may be; and
(iv) Insure with financially sound and reputable
insurers acceptable to Bank, all Property of Borrowers and each
Subsidiary of any of the Borrowers of the character usually insured by
corporations engaged in the same or similar businesses similarly
situated, against loss or damage of the kind customarily insured
against by such corporations, unless higher limits or coverage are
reasonably required in writing by Bank, and carry adequate liability
insurance and other insurance of a kind and in an amount generally
carried by corporations engaged in the same or similar businesses
similarly situated, unless higher limits or coverage are reasonably
required in writing by Bank. All such insurance may be subject to
reasonable deductible amounts. Promptly upon Bank's request therefor,
each of the Borrowers shall provide Bank with evidence that each such
Borrower maintains, and that each Subsidiary of any such Borrower
maintains, the insurance required under this Section 7.1(d)(iv), and
evidence of the payment of all premiums therefor.
(e) Accountant. Borrowers shall give Bank prompt notice of any
change of Borrowers' independent certified public accountants and a statement of
the reasons for such change. Borrowers shall at all times utilize independent
certified public accountants of nationally recognized standing reasonably
acceptable to Bank.
(f) ERISA Compliance. If any of the Borrowers or any
Subsidiary of any of the Borrowers shall have any Pension Plan, such Borrower
and/or such Subsidiary or Subsidiaries of any of the Borrowers shall comply with
all requirements of ERISA relating to such plan. Without limiting the generality
of the foregoing, none of the Borrowers nor any Subsidiary of any of the
Borrowers shall:
(i) permit any Pension Plan maintained by it to
engage in any nonexempt "prohibited transaction," as such term is
defined in Section 4975 of the Code;
(ii) permit any Pension Plan maintained by it to
incur any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, 29 U.S.C. ss. 1082, whether or not waived;
(iii) terminate any such Pension Plan in a manner
which could result in the imposition of a Lien on any Property of any
of the Borrowers or any Subsidiary of any of the Borrowers pursuant to
Section 4068 of ERISA, 29 U.S.C. ss.1368; or
(iv) take any action which would constitute a
complete or partial withdrawal from a Multiemployer Plan within the
meaning of Sections 4203 and 4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 7.1(f)
to the contrary, an act by any of the Borrowers or any Subsidiary of any of the
Borrowers shall not be deemed to constitute a violation of subparagraphs (i)
through (iv) hereof unless Bank determines in good faith that said action,
individually or cumulatively with other acts of any of the Borrowers and the
Subsidiaries of any of the Borrowers, does have or is likely to cause a
significant adverse financial effect upon any of the Borrowers or any Subsidiary
of any of the Borrowers.
Borrowers shall have the affirmative obligation hereunder to
report to Bank any of those acts identified in subparagraphs (i) through (iv)
hereof, regardless of whether said act does or is likely to cause a significant
adverse financial effect upon any of the Borrowers or any Subsidiary of any of
the Borrowers, and failure by Borrowers to report such act promptly upon any
such Borrower's becoming aware of the existence thereof shall constitute an
Event of Default hereunder.
(g) Maintenance of Books and Records. Each of the Borrowers
and each Subsidiary of any of the Borrowers will maintain its books and records
in accordance with Generally Accepted Accounting Principles consistently applied
and in which true, correct and complete entries will be made of all of its
dealings and transactions.
(h) Further Assurances. Each of the Borrowers will execute any
and all further agreements, documents and instruments, and take any and all
further actions which may be required under applicable law, or which Bank may
from time to time reasonably request, in order to effectuate the transactions
contemplated by this Agreement, the Note, the Security Agreements, the Deed of
Trust, the Letter of Credit Applications and the other Transaction Documents.
(i) Financial Covenants. Borrowers will:
(i) Maintain a ratio of Consolidated EBITDA minus
permitted purchases by Borrowers of any of the outstanding capital
stock of Virbac during any such period (determined on a consolidated
basis for Borrowers and their Consolidated Subsidiaries and in
accordance with Generally Accepted Accounting Principles consistently
applied, for the applicable period ending on the date of any such
calculation), to Consolidated Debt Service (which for any such
calculations prior to January 1, 2000 shall be determined using
Virbac's and its Consolidated Subsidiaries' actual principal reductions
made or required on all long term borrowed money Indebtedness during
the period included in any such calculation instead of scheduled
principal payments during the period of equal length following the date
of any such calculation) of at least (A) 1.25 to 1.0 for the two
quarter period ending June 30, 1999, (B) 1.25 to 1.0 for the seven
month period ending July 31, 1999, (C) 1.25 to 1.0 for the eight month
period ending August 31, 1999, (D) 1.50 to 1.0 for the three quarter
period ending September 30, 1999, (E) 1.50 to 1.0 for the ten month
period ending October 31, 1999, (F) 1.50 to 1.0 for the eleven month
period ending November 30, 1999, (G) 1.75 to 1.0 for the four quarter
period ending December 31, 1999, (H) 1.75 to 1.0 for the four quarter
period ending January 31, 2000, (I) 1.75 to 1.0 for the four quarter
period ending February 29, 2000, and (J) 2.00 to 1.0 for the four
quarter period ending at each month-end and fiscal year end thereafter
during the Term hereof;
(ii) Maintain a minimum Consolidated Tangible Net
Worth at all times during the Term hereof of not less than the sum of:
(A) Nineteen Million Dollars ($19,000,000.00) , plus (B) Seventy-Five
Percent (75%) of the Consolidated Net Income of Borrowers (with no
deductions for any consolidated losses for any such fiscal year) shown
on Borrowers' audited consolidated financial statements for each fiscal
year, commencing with the fiscal year ending December 31, 1999, such
required increases to be cumulative for each such fiscal year;
(iii) Deliver a certificate of the principal
financial officers of each of the Borrowers containing the financial
ratio calculations required in clauses (i) and (ii) above
simultaneously with the financial statements referred to in Sections
7.1(a)(i), (ii) and (iii).
(j) Compliance with Law. Each of the Borrowers will, and will
cause each Subsidiary of any of the Borrowers to, comply with any and all laws,
ordinances and governmental and regulatory rules and regulations to which it is
subject and obtain any and all licenses, permits, franchises and other
governmental and regulatory authorizations necessary to the ownership of its
Properties or to the conduct of its business, which violation or failure to
obtain might materially adversely affect the condition or operation, financial
or otherwise, of any of the Borrowers or any Subsidiary of any of the Borrowers.
(k) Notices. Each of the Borrowers will notify Bank in writing
of any of the following immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by the Person(s)
affected with respect thereto:
(i) Default. The occurrence of any Default or Event
of Default under this Agreement or any default or event of default by
any of the Borrowers, any other Obligor or any Subsidiary of any of the
Borrowers under any note, indenture, loan agreement, mortgage, deed of
trust, security agreement, lease or other similar agreement, document
or instrument to which any of the Borrowers, any other Obligor or any
Subsidiary of any of the Borrowers, as the case may be, is a party or
by which it is bound or to which it is subject;
(ii) Litigation. The institution of any litigation,
arbitration proceeding or governmental or regulatory proceeding
affecting any of the Borrowers, any other Obligor, any Subsidiary of
any of the Borrowers, any Collateral or any Third Party Collateral,
whether or not considered to be covered by insurance, provided that, if
such proceeding seeks money damages, the damages sought are in excess
of $100,000.00;
(iii) Judgment. The entry of any judgment or decree
against any of the Borrowers, any other Obligor or any Subsidiary of
any of the Borrowers in an amount of $100,000.00 or more;
(iv) Pension Plans. The occurrence of a Reportable
Event with respect to any Pension Plan; the filing of a notice of
intent to terminate a Pension Plan by any of the Borrowers, any ERISA
Affiliate or any Subsidiary of any of the Borrowers; the institution of
proceedings to terminate a Pension Plan by the PBGC or any other
Person; the withdrawal in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205, respectively, of
ERISA by any of the Borrowers, any ERISA Affiliate or any Subsidiary of
any of the Borrowers from any Multiemployer Plan; or the incurrence of
any material increase in the contingent liability of any of the
Borrowers or any Subsidiary of any of the Borrowers with respect to any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA
which covers retired employees and their beneficiaries;
(v) Change of Name. Any change in the name of any of
the Borrowers, any other Obligor or any Subsidiary of any of the
Borrowers at least fifteen (15) days prior to the effective date
thereof;
(vi) Change in Place(s) of Business. Any proposed
opening, closing or other change of any place of business of any of the
Borrowers or any Subsidiary of any of the Borrowers;
(vii) Environmental Matters. Receipt of any notice
that the operations of any of the Borrowers, any other Obligor or any
Subsidiary of any of the Borrowers are not in full compliance with any
of the requirements of any applicable Environmental Law or Occupational
Safety and Health Law; receipt of notice that any of the Borrowers, any
other Obligor or any Subsidiary of any of the Borrowers is subject to
any Federal, state or local investigation evaluating whether any
remedial action is needed to respond to the release of any Hazardous
Materials or any other hazardous or toxic waste, substance or
constituent or other substance into the environment; or receipt of
notice that any of the Properties or assets of any of the Borrowers,
any other Obligor or any Subsidiary of any of the Borrowers are subject
to an "Environmental Lien." For purposes of this Section 7.1(k)(vii),
"Environmental Lien" shall mean a Lien in favor of any governmental or
regulatory agency, entity, authority or official for (1) any liability
under Environmental Laws or (2) damages arising from or costs incurred
by any such governmental or regulatory agency, entity, authority or
official in response to a release of any Hazardous Materials or any
other hazardous or toxic waste, substance or constituent or other
substance into the environment;
(viii) Material Adverse Change. The occurrence of any material
adverse change in the business, operations or condition, financial or otherwise,
of any of the Borrowers, any other Obligor or any Subsidiary of any of the
Borrowers;
(ix) Change in Management or Line(s) of Business. Any
material change in the senior management of any of the Borrowers or any
Subsidiary of any of the Borrowers or any change in any Borrower's or
any Subsidiary of any of the Borrowers' line(s) of business; and
(x) Other Notices. Any notices required to be
provided pursuant to other provisions of this Agreement and notice of
the occurrence of such other events as Bank may from time to time
reasonably specify.
(l) Borrowers' Bank Accounts. Each Borrower will, and will
cause each Subsidiary of any of the Borrowers (other than St. JON VRX Products
Limited) to, maintain its primary checking, lockbox and operating accounts with
Bank and to use Bank's lockbox services for purposes of facilitating the
collection of each Borrower's or any such Subsidiary's accounts receivable from
its customers.
7.2 Negative Covenants of Borrowers. Borrowers covenant and
agree that, so long as Bank has any obligation to make any Loan or to issue any
Letter of Credit hereunder or any of Borrowers' Obligations remain unpaid,
unless the prior written consent of Bank is obtained:
(a) Limitation on Indebtedness. None of the Borrowers nor any
Subsidiary of any of the Borrowers will incur or be obligated on any
Indebtedness, either directly or indirectly, by way of Guarantee, suretyship or
otherwise, other than:
(i) Indebtedness evidenced by the Note;
(ii) Unsecured trade accounts payable incurred in the
ordinary course of business;
(iii) Indebtedness listed on Schedule 6.10 attached
hereto;
(iv) Indebtedness for Capitalized Leases permitted
under Section 7.2(i) in an amount not to exceed $200,000.00 in the
aggregate (for Borrowers and all Subsidiaries of any of the Borrowers)
at any one time outstanding;
(v) Indebtedness not otherwise permitted by this
Section 7.2(a) in an amount not to exceed $50,000.00 in the aggregate
at any one time outstanding for Borrowers and all Subsidiaries of any
of the Borrowers.
(b) Limitations on Liens. None of the Borrowers will
create, incur, assume or suffer to exist,
or will cause or permit any Subsidiary of any such Borrower to create, incur,
assume or suffer to exist, any Lien on any of its Property, assets or revenues
other than:
(i) Liens presently in existence which are described on
Schedule 6.12 attached hereto;
(ii) Pledges or deposits in connection with or to
secure workmen's compensation, unemployment insurance, pension or other
employee benefits;
(iii) Any Lien renewing, extending or refunding any
Lien permitted hereunder, provided that the principal amount of
Indebtedness secured by such Lien is not increased and such Lien is not
extended to cover any other Property or assets of any such Borrower or
any Subsidiary of any such Borrower; and
(iv) Subject to Section 7.1(d)(i), Liens for taxes,
assessments or governmental charges or levies on the income, Property
or assets of any of the Borrowers or any Subsidiary of any of the
Borrowers if the same are being contested in good faith and by
appropriate proceedings diligently conducted and for which adequate
reserves in form and amount satisfactory to Bank are provided.
(c) Sale of Property. None of the Borrowers nor any Subsidiary
of any of the Borrowers will sell, lease, transfer or otherwise dispose of any
Property or assets of any such Borrower or such Subsidiary of any of the
Borrowers, as the case may be, except in the ordinary course of business;
provided, however, that (i) the foregoing shall not preclude either PM Resources
or Virbac AH from selling and leasing back either the St. Louis, Missouri real
property owned by PM Resources or the Fort Worth, Texas real property owned by
Virbac AH (but not both) provided that if the St. Louis, Missouri real property
is sold by PM Resources then Virbac AH shall grant to Bank a first deed of trust
and security agreement on its Fort Worth, Texas real property and improvements
and shall provide a title commitment, appraisal and environmental phase I report
with respect to such real property and improvements all in form and substance
acceptable to Bank, (ii) St. JON may sell to any parent or affiliate of Virbac
all of the issued and outstanding shares of capital stock in St. JON VRX
Products Limited, (iii) this Section shall not preclude Virbac AH from selling
the Newcastle, Indiana real property owned by Virbac AH at its fair market value
(as determined by Borrowers), (iv) PM Resources may sell any portion of the
undeveloped St. Louis, Missouri real property owned by PM Resources provided
that the greater of (A) twenty-five percent (25%) of the net sales proceeds
therefrom or (B) $500,000.00 shall be paid to Bank in connection with any such
sale for application as a prepayment against the then outstanding principal
balance of the Facility B Loans and a corresponding reduction of the Bank's
Facility B Commitment, and (v) this Section shall not preclude any of the
Borrowers or any Subsidiary of any of the Borrowers from selling, leasing,
transferring or otherwise disposing of less than substantially all of its other
Property or assets so long as the purchase price for said Property or assets
shall be equal to or greater than the depreciated book value of said Property or
assets.
(d) Mergers and Consolidations. None of the Borrowers nor any
Subsidiary of any of the Borrowers will merge or consolidate with any other
Person or sell, transfer or convey all or a substantial part of its Property or
assets to any Person, except that Subsidiaries of any of the Borrowers may merge
with each other or into any of the Borrowers, and except that any of the
Borrowers or any Subsidiary of any of the Borrowers may merge with or
consolidate with any other Person provided that such Borrower or such Subsidiary
shall be the surviving entity and no Default or Event of Default shall exist
hereunder either prior to or immediately following any such merger or
consolidation, and provided further that Borrowers shall have given Bank prompt
written notice, but in no event less than twenty (20) days' prior written
notice, of any such merger or consolidation and such Borrower or such Subsidiary
shall execute UCC-1 financing statements or other documents reasonably deemed
necessary by Bank to perfect and continue Bank's security interests in the
Collateral acquired through any such merger or consolidation.
(e) Acquisitions. None of the Borrowers nor any Subsidiary of
any of the Borrowers will acquire all or substantially all of the stock or
assets of any Person, except that any Borrower or any such Subsidiary may
acquire all or substantially all of the stock or assets of any other Person upon
thirty (30) days' prior written notice to Bank provided that no Default or Event
of Default then exists hereunder or would be created as a result of any such
acquisition, and provided further that all of the accounts receivable,
Inventory, equipment, general intangibles and other assets of such acquired
Person shall be pledged as collateral to Bank for Borrowers' Obligations
hereunder in a manner satisfactory to Bank and if such acquired Person is to
become a new Subsidiary of a Borrower or its assets so acquired are to be held
in a new Subsidiary of a Borrower, such new Subsidiary shall guaranty all of
Borrowers' Obligations pursuant to an unlimited continuing guaranty in favor of
Bank. Any Borrower owning stock of any such new Subsidiary shall pledge such
stock to Bank pursuant to an Agreement of Pledge. Borrowers agree to execute and
to cause any such Subsidiary or other acquired Person to execute such security
agreements, pledge agreements, collateral assignments, UCC-1 financing
statements, guaranties and other agreements which Bank may reasonably request in
order to grant and perfect such security interests and to make such guaranty.
(f) Fiscal Year. None of the Borrowers nor any Subsidiary of
any of the Borrowers will change its fiscal year from a fiscal year ending
December 31, without the prior written consent of Bank.
(g) Stock Redemptions and Distributions. None of the Borrowers
will make or declare or incur any liability to make any Distribution in respect
of the capital stock of Virbac without the prior written consent of Bank,
provided that if (i) no Default or Event of Default otherwise then exists
hereunder, and (ii) Borrowers project that they shall remain in compliance with
each of the financial covenants contained in Section 7.1(i) herein after any
such contemplated Distribution, then Virbac may repurchase up to 500,000 shares
(less the number of shares repurchased between December 12, 1995 and September
7, 1999) of its capital stock on the open market pursuant to that certain share
repurchase program outlined to Bank in a letter from Virbac (formerly
Agri-Nutrition Group Limited) to Bank dated December 12, 1995. This Section
7.2(g) shall not prohibit Virbac from fulfilling its contingent obligation
pursuant to Section 8.2 of that Agreement and Plan of Merger among
Agri-Nutrition Group Limited, Virbac, S.A. and Virbac, Inc. dated October 16,
1998, as amended (the "Merger Agreement") to repurchase at $3.00 per share up to
$4,185,000 of shares of its issued and outstanding Common Stock upon the
occurrence of certain events described in the Merger Agreement, provided that
such repurchase of shares may only be funded by Virbac, S.A. through a capital
contribution to Virbac in exchange for a number of newly issued shares of Virbac
equal to such capital contribution divided by the repurchase price.
(h) Transactions with Related Parties. None of the Borrowers
nor any Subsidiary of any of the Borrowers will, directly or indirectly, engage
in any material transaction, in the ordinary course of business or otherwise,
with any Related Party unless such transaction is upon fair market terms, is not
disadvantageous in any material respect to Bank and has been approved by a
majority of the disinterested directors of such Borrower or such Subsidiary of
any of the Borrowers, as the case may be (or, if none of such directors are
disinterested, by a majority of the directors), as being in the best interests
of such Borrower or such Subsidiary of any such Borrower, as the case may be. In
addition, none of the Borrowers nor any Subsidiary of any of the Borrowers shall
(i) transfer any Property or assets to any Related Party for other than its fair
market value or (ii) purchase or sign any agreement to purchase any stock or
other securities of any Related Party (whether debt, equity or otherwise),
underwrite or Guarantee the same, or otherwise become obligated with respect
thereto. Nothing in this Section 7.2(h) shall prohibit any Borrower or any
Subsidiary from granting nonassignable, nonexclusive licenses of its patents and
trademarks at less than market value to any of the other Borrowers or other
Subsidiaries of any of the Borrowers hereunder.
(i) Loans and Investments. None of the Borrowers nor any
Subsidiary of any of the Borrowers will make any loans or advances or extensions
of credit to (other than extensions of credit in the ordinary course of
business), purchase any stocks, bonds, notes, debentures or other securities of,
make any expenditures on behalf of, or in any manner assume liability (direct,
contingent or otherwise) for the Indebtedness of any Person, except that
Borrowers and the Subsidiaries of any of the Borrowers may:
(i) Permit to remain outstanding those loans to employees of
Borrowers as disclosed on Schedule 6.10 attached hereto;
(ii) Acquire and own stock, obligations or securities received
in settlement of debts (created in the ordinary course of business) owing to any
such Borrower or any Subsidiary of any such Borrower;
(iii) Own, purchase or acquire (A) prime commercial paper and
certificates of deposit in United States commercial banks (having capital
resources in excess of $20,000,000.00), in each case due within one (1) year
from the date of purchase and payable in the United States in United States
dollars, (B) obligations of the United States government or any agency thereof,
(C) obligations guaranteed directly by the United States government or (D)
repurchase agreements of United States commercial banks (having capital
resources in excess of $20,000,000.00) for terms of less than one (1) year;
(iv) Make or permit to remain outstanding travel and other
like advances to officers and employees of any such Borrower or any Subsidiary
of any such Borrower in the ordinary course of business; and
(v) Make loans from time to time to or advances on behalf of
any of the other Borrowers.
(j) Dissolution or Liquidation. Borrowers shall not seek or
permit the dissolution or liquidation of any of the Borrowers in whole or in
part.
(k) Change in Nature of Business. None of the Borrowers nor
any Subsidiary of any of the Borrowers will make any material change in the
nature of its business.
(l) Pension Plans. None of the Borrowers nor any Subsidiary of
any of the Borrowers shall (a) permit any condition to exist in connection with
any Pension Plan which might constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan or (b) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by any of the Borrowers or any Subsidiary of any
of the Borrowers of any material liability, fine or penalty. None of the
Borrowers nor any Subsidiary of any of the Borrowers shall become obligated to
contribute to any Pension Plan or Multiemployer Plan other than any such plan or
plans in existence on the date hereof.
(m) Change in Ownership. At all times during the Term hereof,
ownership and voting control of at least 51% of Virbac's voting stock shall be
maintained by Virbac SA. At all times during the Term hereof, ownership of all
of Virbac AH's, PM Resources' and St. JON's voting stock shall be maintained by
Virbac and all of Francodex's voting stock shall be owned by Virbac AH, and
Virbac shall maintain voting control of all of the outstanding voting stock of
PM Resources, Virbac AH, Francodex and St. JON at all times during the Term
hereof.
7.3 Use of Proceeds. Borrowers agree that (i) the proceeds of
the Facility A Loans will be used solely to refinance existing indebtedness of
Borrowers and for Borrowers' working capital requirements; (ii) the proceeds of
the Facility B Loan will be used solely to refinance existing indebtedness of
Borrowers and for Borrowers' general corporate purposes; (iii) none of such
proceeds will be used in violation of any applicable law or regulation; and (iv)
none of the Borrowers will engage principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying "margin stock" within the meaning of Regulation U of The Board of
Governors of the Federal Reserve System, as amended.
SECTION 8. EVENTS OF DEFAULT.
If any of the following (each of the following herein
sometimes called an "Event of Default") shall occur and be continuing:
8.1 Any of the Borrowers shall fail to pay any of Borrowers'
Obligations as and when the same shall become due and payable, whether by reason
of demand, acceleration or otherwise;
8.2 Any representation or warranty of any of the Borrowers
made in this Agreement, in any other Transaction Document to which such Borrower
is a party or in any certificate, agreement, instrument or statement furnished
or made or delivered pursuant hereto or thereto or in connection herewith or
therewith, shall prove to have been untrue or incorrect in any material respect
when made or effected;
8.3 Any of the Borrowers shall fail to perform or observe any
term, covenant or provision contained in Section 7.1(a)(i), (ii), (iii), (vi),
(vii), (viii) or (ix), Section 7.1(i), Section 7.2 or Section 7.3;
8.4 Borrowers shall fail to timely deliver the Borrowing Base
Certificate required by Sections 3.1(d) and 7.1(a)(vi) or the financial
statements or compliance certificate required by Section 7.1(a)(iv) or (v),
unless prior to the date required for delivery of such financial statements,
compliance certificate or Borrowing Base Certificate, Borrowers shall notify the
Bank that they anticipate a delay in the delivery of such information, in which
case such default shall not constitute an Event of Default hereunder unless such
financial statement, compliance certificate or Borrowing Base Certificate is not
delivered within 10 days following such notice of delay;
8.5 Any of the Borrowers shall fail to perform or observe any
other term, covenant or provision contained in this Agreement and any such
failure shall remain unremedied for fifteen (15) days after written notice
thereof shall have been given to Borrowers by Bank;
8.6 This Agreement or any of the other Transaction Documents
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 thereof shall be contested or denied by any of the
Borrowers, or if the transactions completed hereunder or thereunder shall be
contested by any of the Borrowers or if any of the Borrowers shall deny that it
has any or further liability or obligation hereunder or thereunder;
8.7 Any of the Borrowers, any Subsidiary of any of the
Borrowers or any other Obligor shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United States Code or any
other Federal, state or foreign bankruptcy, insolvency, receivership,
liquidation or similar law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any such proceeding or the filing
of any such petition, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official of itself,
himself or herself or of a substantial part of its, his or her Property or
assets, (iv) file an answer admitting the material allegations of a petition
filed against itself, himself or herself in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, admit in
writing its, his or her inability or fail generally to pay its, his or her debts
as they become due or (vii) take any corporate or other action for the purpose
of effecting any of the foregoing;
8.8 An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of any of the Borrowers, any Subsidiary of any of the
Borrowers or any other Obligor, or of a substantial part of the Property or
assets of any of the Borrowers, any Subsidiary of any of the Borrowers or any
other Obligor, under Title 11 of the United States Code or any other Federal,
state or foreign bankruptcy, insolvency, receivership, liquidation or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or
similar official of any of the Borrowers, any Subsidiary of any of the Borrowers
or any other Obligor or of a substantial part of the Property or assets of any
of the Borrowers, any Subsidiary of any of the Borrowers or any other Obligor or
(iii) the winding-up or liquidation of any of the Borrowers, any Subsidiary of
any of the Borrowers or any other Obligor; and such proceeding or petition shall
continue undismissed for thirty (30) consecutive days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and in effect
for thirty (30) consecutive days;
8.9 Any "Event of Default" (as defined therein) shall occur
under or within the meaning of any of the Security Agreements;
8.10 Any "Event of Default" (as defined therein) shall occur
under or within the meaning of the Deed of Trust;
8.11 Any "Default" or "Event of Default" (as defined therein)
shall occur under or within the meaning of either of the Pledge Agreements, or
if either of the Pledge Agreements 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 thereof shall be
contested or denied by Virbac or Virbac AH, or if either Virbac or Virbac AH
shall deny that it has any further liability or obligation thereunder, or if
either Virbac or Virbac AH shall fail to comply with or observe any of the
terms, provisions or conditions contained in its Pledge Agreement;
8.12 Any default or event of default shall occur under the
terms of any Letter of Credit Application;
8.13 Any of the Borrowers, any Subsidiary of any of the
Borrowers or any other Obligor shall be declared by Bank to be in default on, or
pursuant to the terms of, (1) any other present or future obligation to Bank,
including, without limitation, any other loan, line of credit, revolving credit,
guaranty or letter of credit reimbursement obligation, or (2) any other present
or future agreement purporting to convey to Bank a Lien upon any Property or
assets of any of the Borrowers, such Subsidiary of any of the Borrowers or such
other Obligor, as the case may be;
8.14 Any of the Borrowers, any Subsidiary of any of the
Borrowers or any other Obligor shall fail (and such failure shall not have been
cured or waived) to perform or observe any term, provision or condition of, or
any other default or event of default shall occur under, any agreement, document
or instrument evidencing, securing or otherwise relating to any outstanding
Indebtedness of any of the Borrowers, such Subsidiary of any of the Borrowers or
such other Obligor, as the case may be, for borrowed money (other than
Borrowers' Obligations) in a principal amount in excess of Five Hundred Thousand
Dollars ($500,000.00), if the effect of such failure or default is to cause or
permit such Indebtedness to be declared to be due and payable or otherwise
accelerated, or to be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof;
8.15 Any of the Borrowers, any Subsidiary of any of the
Borrowers or any other Obligor shall have a judgment entered against it, him or
her in an amount of $100,000.00 or more by a court having jurisdiction in the
premises and such judgment shall not be appealed in good faith or satisfied by
such Borrower, such Subsidiary of any of the Borrowers or such other Obligor, as
the case may be, within thirty (30) days after the entry of such judgment;
8.16 The occurrence of a Reportable Event with respect to any
Pension Plan; the filing of a notice of intent to terminate a Pension Plan by
any of the Borrowers, any ERISA Affiliate or any Subsidiary of any of the
Borrowers; the institution of proceedings to terminate a Pension Plan by the
PBGC or any other Person; the withdrawal in a "complete withdrawal" or a
"partial withdrawal" as defined in Sections 4203 and 4205, respectively, of
ERISA by any of the Borrowers, any ERISA Affiliate or any Subsidiary of any of
the Borrowers from any Multiemployer Plan; or the incurrence of any material
increase in the contingent liability of any of the Borrowers or any Subsidiary
of any of the Borrowers with respect to any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which covers retired employees and their
beneficiaries; or
8.17 The institution by any of the Borrowers, any ERISA
Affiliate or any Subsidiary of any of the Borrowers of steps to terminate any
Pension Plan if, in order to effectuate such termination, any such Borrower,
such ERISA Affiliate or such Subsidiary of any of the Borrowers, as the case may
be, would be required to make a contribution to such Pension Plan, or would
incur a liability or obligation to such Pension Plan, in excess of One Hundred
Thousand Dollars ($100,000.00) or the institution by the PBGC of steps to
terminate any Pension Plan;
THEN, and in each such event (other than an event described in
Sections 8.7 or 8.8), Bank may declare that its obligation to make Loans under
this Agreement has terminated, whereupon such obligation of Bank shall be
immediately and forthwith terminated, and Bank may further declare the entire
outstanding principal balance of and all accrued and unpaid interest on the Note
and all of the other Borrowers' Obligations to be forthwith due and payable,
whereupon all of the unpaid principal balance of and all accrued and unpaid
interest on the Note and all such other Borrowers' Obligations shall become and
be immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by each of the
Borrowers, and Bank may exercise any and all other rights and remedies which it
may have under any of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event described in Sections
8.7 or 8.8, Bank's obligation to make Loans under this Agreement shall
automatically terminate and the entire outstanding principal balance of and all
accrued and unpaid interest on the Note and all of the other Borrowers'
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by each of the Borrowers, and Bank may exercise any and
all other rights and remedies which it may have under any of the other
Transaction Documents or under applicable law.
SECTION 9. GENERAL.
9.1 No Waiver. No failure or delay by Bank in exercising any
right, remedy, power or privilege hereunder or under any other Transaction
Document shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The remedies provided herein and
in the other Transaction Documents are cumulative and not exclusive of any
remedies provided by law. Nothing herein contained shall in any way affect the
right of Bank to exercise any statutory or common law right of banker's lien or
setoff.
9.2 Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time, without notice to Borrowers (any such notice being expressly
waived by each of the Borrowers) and to the fullest extent permitted by law, to
setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by Bank and any and all other
indebtedness at any time owing by Bank to or for the credit or account of any of
the Borrowers against any and all of Borrowers' Obligations irrespective of
whether or not Bank shall have made any demand hereunder or under any of the
other Transaction Documents and although such obligations may be contingent or
unmatured. Bank agrees to promptly notify Borrowers after any such setoff and
application made by Bank, provided, however, that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of Bank under this Section 9.2 are in addition to any other rights and remedies
(including, without limitation, other rights of setoff) which Bank may have.
Nothing contained in this Agreement or any other Transaction Document shall
impair the right of Bank to exercise any right of setoff or counterclaim it may
have against any of the Borrowers and to apply the amount subject to such
exercise to the payment of indebtedness of any of the Borrowers unrelated to
this Agreement or the other Transaction Documents.
9.3 Cost and Expenses. Borrowers jointly and severally agree,
whether or not any Loan is made hereunder, to pay Bank upon demand (i) all
out-of-pocket costs and expenses and all Attorneys' Fees of Bank in connection
with the preparation, documentation, negotiation, execution and administration
of this Agreement, the Note and the other Transaction Documents, (ii) all
recording, filing, title insurance, surveying and appraisal fees incurred in
connection with this Agreement and the other Transaction Documents, (iii) all
out-of-pocket costs and expenses and all Attorneys' Fees of Bank in connection
with the preparation of any waiver or consent hereunder or any amendment hereof
or any Event of Default or alleged Event of Default hereunder, (iv) if an Event
of Default occurs, all out-of-pocket costs and expenses and all Attorneys' Fees
incurred by Bank in connection with such Event of Default and collection and
other enforcement proceedings resulting therefrom and (v) all other Attorneys'
Fees incurred by Bank relating to or arising out of or in connection with this
Agreement or any of the other Transaction Documents. Borrowers further jointly
and severally agree to pay or reimburse Bank for any stamp or other taxes which
may be payable with respect to the execution, delivery, recording and/or filing
of this Agreement, the Note, the Security Agreements, the Deed of Trust or any
of the other Transaction Documents. All of the obligations of Borrowers under
this Section 9.3 shall survive the satisfaction and payment of Borrowers'
Obligations and the termination of this Agreement.
9.4 Environmental Indemnity. Borrowers hereby jointly and
severally agree to indemnify Bank and hold Bank harmless from and against any
and all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Bank for, with respect to or as a direct or
indirect result of the violation by any of the Borrowers or any Subsidiary of
any of the Borrowers of any Environmental Laws; or with respect to, or as a
direct or indirect result of the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, properties utilized by
any of the Borrowers and/or any Subsidiary of any of the Borrowers in the
conduct of their respective businesses into or upon any land, the atmosphere or
any watercourse, body of water or wetland, of any Hazardous Materials or any
other hazardous or toxic waste, substance or constituent or other substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental Laws); and
the provisions of and undertakings and indemnification set out in this Section
9.4 shall survive the satisfaction and payment of Borrowers' Obligations and the
termination of this Agreement.
9.5 General Indemnity. In addition to the payment of expenses
pursuant to Section 9.3, whether or not the transactions contemplated hereby
shall be consummated, Borrowers hereby jointly and severally agree to indemnify,
pay and hold Bank and any holder(s) of the Note, and the officers, directors,
employees, agents and affiliates of Bank and such holder(s) (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by or asserted
against the Indemnitees, in any manner relating to or arising out of this
Agreement, any of the other Transaction Documents or any other agreement,
document or instrument executed and delivered by any of the Borrowers or any
other Obligor in connection herewith or therewith, the statements contained in
any commitment letters delivered by Bank, Bank's agreement to make the Loans
hereunder or the use or intended use of the proceeds of any Loan hereunder
(collectively, the "indemnified liabilities"); provided that Borrowers shall
have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, each Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them. The provisions of the undertakings and indemnification set out in this
Section 9.5 shall survive satisfaction and payment of Borrowers' Obligations and
the termination of this Agreement.
9.6 Authority to Act. Bank shall be entitled to act on any
notices and instructions (telephonic or written) reasonably believed by Bank to
have been delivered by any person authorized to act on behalf of any of the
Borrowers pursuant hereto, regardless of whether such notice or instruction was
in fact delivered by a person authorized to act on behalf of any such Borrower,
and Borrowers hereby jointly and severally agree to indemnify Bank and hold Bank
harmless from and against any and all losses and expenses, if any, ensuing from
any such action.
9.7 Notices. Any notice, request, demand, consent,
confirmation or other communication hereunder shall be in writing and delivered
in person or sent by telegram, telex, telecopy or registered or certified mail,
return receipt requested and postage prepaid, if to Borrowers in care of Virbac
at 3200 Meacham Boulevard, Fort Worth, Texas 76137, Attention: Henry B. Haley,
or if to Bank at 135 North Meramec, St. Louis, Missouri 63105, Attention: Brenda
J. Laux, or at such other address as either party may designate as its address
for communications hereunder by notice so given. Such notices shall be deemed
effective on the day on which delivered or sent if delivered in person or sent
by telegram, telex or telecopy, or on the third (3rd) Business Day after the day
on which mailed, if sent by registered or certified mail.
9.8 CONSENT TO JURISDICTION; JURY TRIAL WAIVER. EACH OF THE
BORROWERS IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY MISSOURI
STATE COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN
DISTRICT OF MISSOURI, AS BANK MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
EACH OF THE BORROWERS HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO
SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH
COURTS. EACH OF THE BORROWERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH SUCH BORROWER MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, AND EACH OF THE BORROWERS FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE BORROWERS HEREBY EXPRESSLY WAIVES ALL RIGHTS OF
ANY OTHER JURISDICTION WHICH SUCH BORROWER MAY NOW OR HEREAFTER HAVE BY REASON
OF ITS PRESENT OR SUBSEQUENT DOMICILES. EACH OF THE BORROWERS AUTHORIZES THE
SERVICE OF PROCESS UPON SUCH BORROWER BY REGISTERED MAIL SENT TO BORROWERS AT
THEIR ADDRESS SET FORTH IN SECTION 9.7. EACH OF THE BORROWERS HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY LITIGATION BROUGHT IN ACCORDANCE WITH THIS
SECTION.
9.9 Bank's Books and Records. Bank's books and records showing
the account between Borrowers and Bank shall be admissible in evidence in any
action or proceeding and shall constitute prima facie proof thereof. Bank shall
record, and prior to any transfer of any of its Notes shall endorse on the
schedules forming a part thereof, appropriate notations to evidence (i) the date
and amount of each conversion of any portion of any Facility B Loan to a LIBOR
Loan and the principal amount, applicable LIBOR Rate, and the applicable
Interest Period with respect thereto, and (ii) the date and amount of each
payment of principal made by Borrowers with respect to each such Loan. Bank is
hereby irrevocably authorized by Borrowers so to endorse its Note and to attach
to and make a part of such Note a continuation of any such schedule as and when
required; provided, however that the joint and several obligations of Borrowers
to repay the Loans made by Bank hereunder shall be absolute and unconditional,
notwithstanding any failure of Bank to endorse or any mistake by Bank in
connection with endorsement on the schedules attached to its Note.
9.10 Governing Law; Amendments. This Agreement, the Note, the
Security Agreements and all of the other Transaction Documents shall be governed
by and construed in accordance with the internal laws of the State of Missouri,
and this Agreement and the other Transaction Documents may not be changed, nor
may any term, condition or Event of Default be waived, modified, or discharged
orally but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
9.11 References; Headings for Convenience. Unless otherwise
specified herein, all references herein to Section numbers refer to Section
numbers of this Agreement, all references herein to Exhibits A, B, C, D and E
refer to annexed Exhibits A, B, C, D and E which are hereby incorporated herein
by reference and all references herein to Schedules 6.5, 6.6, 6.10, 6.11, 6.12
and 6.17 refer to annexed Schedules 6.5, 6.6, 6.10, 6.11, 6.12 and 6.17 which
are hereby incorporated herein by reference. The Section headings are furnished
for the convenience of the parties and are not to be considered in the
construction or interpretation of this Agreement.
9.12 Subsidiary Reference. Any reference herein to a
Subsidiary or Consolidated Subsidiary of any of the Borrowers, and any financial
definition, ratio, restriction or other provision of this Agreement which is
stated to be applicable to any of the Borrowers and its Subsidiaries or
Consolidated Subsidiaries or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent any such Borrower has any
Subsidiaries or Consolidated Subsidiaries and, where applicable, to the extent
any such Subsidiaries are consolidated with such Borrower for financial
reporting purposes.
9.13 Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of each of the Borrowers and its successors and Bank
and its successors and assigns. None of the Borrowers may assign or delegate any
of its rights or obligations under this Agreement.
9.14 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWERS AND BANK FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS REACHED BY BORROWERS AND BANK COVERING SUCH MATTERS ARE CONTAINED IN
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS
BETWEEN BORROWERS AND BANK, EXCEPT AS BORROWERS AND BANK MAY LATER AGREE IN
WRITING TO MODIFY THEM. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDES ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS (ORAL OR WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF.
9.15 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
9.16 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.17 Resurrection of Borrowers' Obligations. To the extent
that Bank receives any payment on account of any of Borrowers' Obligations, and
any such payment(s) or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside, subordinated and/or required to be
repaid to a trustee, receiver or any other Person under any bankruptcy act,
state or Federal law, common law or equitable cause, then, to the extent of such
payment(s) received, Borrowers' Obligations or part thereof intended to be
satisfied and any and all Liens upon or pertaining to any Property or assets of
any of the Borrowers and theretofore created and/or existing in favor of Bank as
security for the payment of such Borrowers' Obligations shall be revived and
continue in full force and effect, as if such payment(s) had not been received
by Bank and applied on account of Borrowers' Obligations.
IN WITNESS WHEREOF, the parties have executed this Credit
Agreement this _____ day of September, 1999.
VIRBAC CORPORATION
By:
Bruce G. Baker, Executive Vice President
PM RESOURCES, INC.
By:
Bruce G. Baker, Executive Vice President
ST. JON LABORATORIES, INC.
By:
Bruce G. Baker, Executive Vice President
VIRBAC AH, INC.
By:
Bruce G. Baker, Executive Vice President
FRANCODEX LABORATORIES, INC.
By:
Bruce G. Baker, Executive Vice President
FIRST BANK
By:
Brenda J. Laux, Senior Vice President
<PAGE>
SCHEDULE 6.5
Litigation
1. In March 1998, a claim was filed against the Company and certain of its
subsidiaries alleging breach of an implied employment contract. The
amount of claims identified in the motion totaled approximately
$150,000, plus certain unspecified damages. Management and the
Company's counsel expect that final resolution of this action will not
have a material impact upon the Company's financial position or results
of operations.
2. In 1998, and Derivates Belgium (EDB) filed a claim against St. JON
Laboratories, Inc. alleging that St. JON breached the terms of a
license agreement between St. JON and EDB and infringed on EDB's
trademarks. The amount of claims identified total approximately
$500,000, plus certain unspecified damages. In addition, EDB is seeking
an injunction on the sale of Prozym canine toothpaste in France.
Management and the Company's counsel expect that final resolution of
this claim will not have a material impact upon the Company's financial
position or results of operations.
3. In April 1998, a claim was filed against PM Resources, Inc. for damages
alleged to have occurred related to a product recall in November 1995.
Prior claims related to this incident had been submitted to the Company's
insurance company and had been settled. The amount of claims identified in
this motion totaled approximately $38,000. Management and the Company's
counsel expect that final resolution of this action will be not have a
material impact upon the Company's financial position or results of
operations.
4. See Schedule 6.17 for a description of a Notice of Order to Abate
Violations and a Notice of Violations issued to PM Resources by the
Missouri Department of Natural Resources (MDNR) relating to alleged
violations of Missouri's hazardous waste laws and regulations.
5. In 1998 a claim was filed against Virbac and certain of its
subsidiaries alleging breach of an implied employment contract. The
amount of claims identified in the motion totaled approximately
$45,000.00, plus certain unspecified damages. Management and Borrowers'
counsel expect that final resolution of this action will not have a
material impact upon Virbac's financial position or results of
operations.
6. In 1996 a claim was filed against Virbac and certain of its
subsidiaries alleging breach of an employment contract. The amount of
claims identified in the motion totaled approximately $215,000.00, plus
certain unspecified damages. Management has reached an agreement with
the plaintiff to settle the case, with Virbac agreeing to pay the
plaintiff $185,000.00. This case is expected to be finalized in
September, 1999.
<PAGE>
SCHEDULE 6.6
Pension Plan Matters
None.
<PAGE>
SCHEDULE 6.10
Other Loans and Guaranties
1. In April 1995, Virbac Corporation purchased substantially all of the
net assets and business of Zema Corporation The purchase price includes
potential additional payments calculated as a percentage of cumulative
earnings before taxes and interest for the five year period ending
October 31, 1999 which are in excess of a specified base. As of the
date hereof, no such additional payments are due. Furthermore, based on
results to date, it is anticipated that no amounts will be due related
to this calculation in the future.
2. On an annual basis, the Company enters into certain agreements to
finance its annual insurance premiums. Such agreements have terms less
than one year. At April 30, 1998, approximately $240,000 was due under
such agreements.
3. In September 1997, Virbac Corporation acquired Mardel Laboratories,
Inc. In connection with the acquisition, Virbac issued a note payable
of $300,000 to the former owners of Mardel, $147,000 of which is
payable in cash and $153,000 of which is payable in Virbac stock over a
period of three years.
4. In conjunction with the acquisition of Mardel Laboratories, Inc., the
Company assumed a promissory note of $489,957 due to Ramon Mulholland,
of which approximately $400,000 is due as of the date hereof. Such
promissory note is subordinated to that of the Bank.
5. $1,700,000.00 remains outstanding under a line of credit with Societe
Generale. This amount will be repaid on September 7, 1999 using part of
the proceeds from this Agreement, and the line of credit will be
closed.
<PAGE>
SCHEDULE 6.11
Labor Matters
Sixty-one of the full-time employees located at PM Resources, Inc.'s facility
are represented by the International Longshoremen's Association, and eight are
represented by the International Brotherhood of Electrical Workers. Such
employees' wages and benefits are governed by bargaining agreements negotiated
with the unions, which expire on October 31, 2001.
<PAGE>
SCHEDULE 6.12
Permitted Liens
1. UCC-1 financing statements filed in favor of Matsushita Electric
Corporation of America on PM Resources' leased telephone equipment.
2. UCC-1 financing statement filed in favor of IBM Credit Corporation on PM
Resources' data processing equipment.
3. UCC-1 financing statement filed in favor of REFCO Investments, Inc. on
PM Resources' Great Lakes Semi-Auto Sleeve Wrapper.
4. UCC-1 financing statement filed in favor of Advanta Leasing Corp. on
St. JON's leased sprinkler and fire alarm equipment.
5. Numerous UCC-1 filings in favor of First Bank.
<PAGE>
SCHEDULE 6.17
Environmental and Health and Safety Matters
1. On November 27, 1994, the MDNR issued a Notice of Order to Abate Violations
to PM Resources relating to alleged violations of Missouri's laws and
regulations relating to the storage of hazardous waste at the Bridgeton
facility. The order alleges that PM Resources had not remedied certain
deficiencies relating to the storage of hazardous waste cited in
inspections by the MDNR in May 1993 and March 1994, and directs remedial
action.
2. On December 21, 1995, the MDNR issued a Notice of Violations to PM
Resources relating to contamination in the vicinity of an underground
collection system that was removed from the Bridgeton facility in 1994. The
notice alleges that the collection system should have been included in the
Company's hazardous waste storage permit, states that the collection system
was classified by the MDNR as a leaking underground storage tank, and
directs remedial action.
3. Virbac is currently in negotiations with the MDNR related to certain issues
raised in the November, 1994 Notice of Order to Abate Violations and the
December 1995 Notice of Violations issued by the MDNR. Management does not
believe that either of the matters pose a significant risk to human health
or the environment, or that the resolution of either of the claims made by
the MDNR will have a material adverse effect on Virbac's financial position
or results of operations.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 259,344
<SECURITIES> 0
<RECEIVABLES> 7,270,697
<ALLOWANCES> 0
<INVENTORY> 13,430,870
<CURRENT-ASSETS> 21,936,600
<PP&E> 12,731,892
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 6,725,371
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0
0
<COMMON> 219,757
<OTHER-SE> 27,485,959
<TOTAL-LIABILITY-AND-EQUITY> 42,678,134
<SALES> 34,980,231
<TOTAL-REVENUES> 34,980,231
<CGS> 20,272,064
<TOTAL-COSTS> 33,118,347
<OTHER-EXPENSES> 154,947
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<INCOME-CONTINUING> 1,310,898
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