AMENDMENT TO SUBORDINATION AGREEMENT
Exhibit 10.44
AMENDMENT TO SUBORDINATION AGREEMENT
THIS AMENDMENT TO SUBORDINATION AGREEMENT (this “Amendment”) is made and entered into this
22nd day of August, 2005, by and between VIRBAC S. A., a business organized under the laws of the
Republic of France (the “Subordinating Creditor”) and FIRST BANK, a national banking association
(the “Bank”).
WITNESSETH
WHEREAS, the Subordinating Creditor has heretofore executed in favor of Bank that certain
Subordination Agreement dated April 9, 2004 (the “Subordination Agreement”) relating to certain
indebtedness and obligations of Virbac Corporation, a Delaware corporation (“Virbac”), PM
Resources, Inc., a Missouri corporation (“PM Resources”), St. XXX Laboratories, Inc., a California
corporation (“St. XXX”), Francodex Laboratories, Inc., a Kansas corporation (“Francodex”), Virbac
AH, Inc., a Delaware corporation (“Virbac AH,”), and Delmarva Laboratories, Inc., a Virginia
corporation (“Delmarva,” and collectively with Virbac, PM Resources, St. XXX, Francodex and Virbac
AH referred to herein as the “Borrowers”); and
WHEREAS, the Borrowers have requested certain amendments and revisions to their Credit
Agreement dated as of September 7, 1999 made with Bank, as amended from time to time (as so
amended, the “Senior Loan Agreement”); and
WHEREAS, in connection with such amendments to the Senior Loan Agreement, the Subordinating
Creditor and Bank have agreed to amend the Subordination Agreement in the manner 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, Subordinating Creditor
and Bank hereby agree as follows:
1. Paragraph 1 of the Subordination Agreement shall be deleted in its entirety, and in its
place shall be substituted the following:
1. To induce FIRST BANK (“Lender”), to now or hereafter lend or advance monies,
issue letters of credit and/or otherwise extend credit to or for the account of
VIRBAC CORPORATION, a Delaware corporation (“Virbac”), PM RESOURCES, INC., a
Missouri corporation (“PM Resources”), ST. XXX LABORATORIES, INC., a California
corporation (“St. XXX”), FRANCODEX LABORATORIES, INC., a Kansas corporation
(“Francodex”), VIRBAC AH, INC., a Delaware corporation (“Virbac AH,”), and DELMARVA
LABORATORIES, INC., a Virginia corporation (“Delmarva,” and collectively with
Virbac, PM Resources, St. XXX, Francodex and Virbac AH referred to herein as the
“Borrowers”), and to better secure Lender in respect thereof, the undersigned,
VIRBAC S. A., a business organized under the laws of the Republic of France (the
“Subordinating Creditor”), agrees to and hereby subordinates the payment and
performance of any and all indebtedness (principal, interest (including, without
limitation, interest accruing after the commencement of a bankruptcy or insolvency
proceeding by or against Borrowers, or any of them, whether or not allowed in such
proceeding), fees, collection costs and expenses and other amounts), liabilities and
obligations (including, without limitation, guaranty obligations and indemnity
obligations) which Borrowers, or any of them, may now or at any time or times
hereafter owe to the Subordinating Creditor, including, without limitation, the
present and future indebtedness (principal, interest (including, without limitation,
interest accruing after the commencement of a bankruptcy or insolvency proceeding by
or against Borrowers, or any of them, whether or not allowed in such proceeding),
fees, collection costs and expenses and other amounts), liabilities and obligations
of Borrowers, or any of them, to the
Subordinating Creditor evidenced by or arising under or in respect of: (i) that
certain Secured Subordinated Promissory Note of Borrowers dated April 9, 2004 and
payable to the order of the Subordinating Creditor in the original principal amount
of $3,000,000.00 (the “$3,000,000.00 Subordinated Note”), (ii) that certain Secured
Subordinated Promissory Note of Borrowers dated April 29, 2004 and payable to the
order of the Subordinating Creditor in the original principal amount of
$4,000,000.00 (the “$4,000,000.00 Subordinated Note”), and (iii) that certain
Secured Subordinated Promissory Note of Borrowers dated June 3, 2004 and payable to
the order of the Subordinating Creditor in the original principal amount of
$2,000,000.00 (the “$2,000,000.00 Subordinated Note,” and collectively with the
$3,000,000.00 Subordinated Note, the $4,000,000.00 Subordinated Note and any other
promissory notes now or hereafter issued by any or all of the Borrowers payable to
the Subordinating Creditor are referred to herein as the “Subordinated Notes”), as
the same may from time to time be amended, modified, extended, renewed or restated
(hereinafter collectively referred to as the “Subordinated Indebtedness”) together
with any and all guaranties, collateral and other security, if any, for the payment
of any of the Subordinated Indebtedness, to any and all indebtedness (principal,
interest (including, without limitation, interest accruing after the commencement of
a bankruptcy or insolvency proceeding by or against Borrowers, or any of them,
whether or not allowed in such proceeding), fees, collection costs and expenses and
other amounts), liabilities and obligations (including, without limitation, guaranty
obligations, letter of credit reimbursement obligations and indemnity obligations)
which Borrowers, or any of them, may now or at any time or times hereafter owe to
Lender, including, without limitation, the present and future indebtedness
(principal, interest (including, without limitation, interest accruing after the
commencement of a bankruptcy or insolvency proceeding by or against Borrowers, or
any of them, whether or not allowed in such proceeding), fees, collection costs and
expenses and other amounts), liabilities and obligations (including, without
limitation, guaranty obligations, letter of credit reimbursement obligations and
indemnity obligations) of Borrowers to Lender evidenced by or arising under or in
respect of (a) that certain Credit Agreement dated as of September 7, 1999 made by
and among Borrowers and Lender, as previously amended and as the same may from time
to time be further amended, modified, extended, renewed or restated (the “Senior
Loan Agreement”; all capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings ascribed to them in the Senior Loan
Agreement), (b) that certain Revolving Credit Note dated August 22, 2005 in the
original principal amount of up to Fifteen Million Dollars ($15,000,000.00) made by
Borrowers payable to the order of Lender as therein set forth, as previously amended
and as the same may from time to time be further amended, modified, extended,
renewed or restated (the “Note”), and/or (c) any of the other Transaction Documents
(hereinafter collectively referred to as the “Senior Indebtedness”).
All references in the Subordination Agreement to the “Subordinated Note” (other than references
which specifically refer to either the $2,000,000.00 Subordinated Note, the $3,000,000.00
Subordinated Note, or the $4,000,000.00 Subordinated Note only) shall hereafter be amended and
deemed to refer to each of the Subordinated Notes.
2. Paragraph 3 of the Subordination Agreement shall be deleted in its entirety, and in its
place shall be substituted the following:
3. So long as no Default or Event of Default under or within the meaning of the
Senior Loan Agreement has occurred and is continuing or would be
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created by or result from such payment, Borrowers may pay to the Subordinating
Creditor, and the Subordinating Creditor may accept from Borrowers:
(i) regularly scheduled payments of interest only, when due, on the
Subordinated Notes and past due payments of interest on the Subordinated Notes
(which shall not include any payments due or past due as a result of any
acceleration of any of the Subordinated Notes),
(ii) in the event an equity offering is made by Virbac Corporation, the net
proceeds received by Virbac from such equity offering by Virbac may be used to repay
the principal of the Subordinated Indebtedness, and
(iii) other payments of the outstanding principal balance of the $2,000,000.00
Subordinated Note provided that each of the following conditions are satisfied: (A)
if such principal payment is made prior to April 9, 2006, such principal payment
shall not repay in full the outstanding principal balance of the $2,000,000.00
Subordinated Note, (B) immediately following such principal payment, Borrowers will
have (and project that they will have over each of the next 30 days) unused
availability (calculated on each day as the difference between: (1) the lesser of
the Borrowing Base of Borrowers or the Bank’s Commitment of $15,000,000.00 as of
such day, minus (2) the outstanding principal amount of the Senior
Indebtedness plus the face amount of any issued and outstanding letters of credit
issued by Bank for the account of any of the Borrowers) of at least $1,000,000.00,
and (C) Borrower’s ratio of Consolidated EBITDA to Consolidated Debt Service (as
determined in accordance with Section 7.1(i)(ii) of the Senior Loan Agreement) as of
Borrowers’ most recent fiscal quarter-end would remain greater than or equal to 1.15
to 1.0 if such ratio of Consolidated EBITDA to Consolidated Debt Service was
recalculated to include the principal amount to be repaid on the $2,000,000.00
Subordinated Note under this paragraph as part of the Consolidated Debt Service
included in the denominator of such ratio,
(collectively (i), (ii) and (iii) are referred to herein as the “Permitted
Payments”). Any payment made by Borrowers which is not a Permitted Payment shall
constitute an Event of Default under the Senior Loan Agreement. The Subordinating
Creditor hereby acknowledges and agrees that (a) the Subordinated Notes may not be
modified or amended without the prior written consent of Lender, (b) payments of
principal on the Subordinated Notes shall not be Permitted Payments except upon the
conditions set forth in clauses (ii) and (iii) above, (c) prepayments of the
Subordinated Notes shall not be Permitted Payments except upon the conditions set
forth in clauses (ii) and (iii) above, and (d) payments pursuant to any acceleration
of the Subordinated Notes shall not be Permitted Payments. Notwithstanding the
foregoing, the Subordinating Creditor shall have no right to enforce payment of any
of the Permitted Payments against any of the Borrowers, or to otherwise take any
action against any of the Borrowers or any property or assets of any of the
Borrowers (including, without limitation, any property or assets of any Borrower
pledged as collateral to secure any of the Senior Indebtedness), unless and until
(a) all of the Senior Indebtedness has been fully, finally and indefeasibly paid in
cash, (b) all financing arrangements and commitments between Lender and Borrowers
relating to the creation and/or incurrence of any of the Senior Indebtedness have
been terminated, (c) no letters of credit issued by Lender for the account of and/or
upon the application of any of the Borrowers remain outstanding and (d) the Senior
Loan Agreement has expired or been terminated in accordance with its terms.
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3. The Subordinating Creditor hereby consents to the terms, provisions and conditions
contained in that certain Eighth Amendment to Credit Agreement dated as of the date hereof made by
and among Borrowers and Bank (the “Eighth Amendment”). The Subordinating Creditor acknowledges and
agrees that (i) the execution and delivery of the Eighth Amendment by Borrowers with and to the
Bank will not adversely affect or impair any of Subordinating Creditor’s obligations to the Bank
under, or any of the terms, provisions or conditions contained in, the Subordination Agreement and
(ii) all of the “Borrowers’ Obligations” (as defined in the Loan Agreement and as amended by the
Eighth Amendment) shall continue to constitute “Senior Indebtedness” under and within the meaning
of the Subordination Agreement.
4. All references in the Subordination Agreement to this “Subordination Agreement,” this
“Agreement” and any other references of similar import shall henceforth mean the Subordination
Agreement as amended by this Amendment. All capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Subordination Agreement as
amended by this Amendment.
5. Except to the extent specifically amended by this Amendment, all of the terms, provisions,
conditions, covenants, representations and warranties contained in the Subordination Agreement
shall be and remain in full force and effect and the same are hereby ratified and confirmed.
6. This Amendment shall be binding upon and inure to the benefit of each of the Subordinating
Creditor and Bank and their respective successors and assigns.
7. This Amendment shall be governed by and construed in accordance with the internal laws of
the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Subordination Agreement
this 22nd day of August, 2005.
| VIRBAC S. A. | ||||
| By: | /s/ Xxxx Xxxxx | |||
| Name: Xxxx Xxxxx | ||||
| Title: Chairman of the Board of Management | ||||
| FIRST BANK | ||||
| By: | /s/ Xxxxx Xxxxxx | |||
| Xxxxx Xxxxxx, Vice President | ||||
ASSENT OF BORROWERS
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Each of the Borrowers hereby assents to the foregoing Amendment and agrees in all respects to
be bound by and to keep, observe and perform the several matters and things in the Subordination
Agreement, as amended by the Amendment, intended of any of the Borrowers to be done, and
particularly Borrowers agree not to make any payment contrary to the Subordination Agreement, as
amended by the Amendment. Any breach by Borrowers, or any of them, of any of the terms, provisions
or conditions contained in the Subordination Agreement, as amended by the Amendment, shall
constitute an “Event of Default” (as defined therein) under and within the meaning of the Senior
Loan Agreement (as defined in the Subordination Agreement).
Executed this 22nd day of August, 2005.
| “BORROWERS” | ||||
| VIRBAC CORPORATION | ||||
| PM RESOURCES, INC. | ||||
| ST. XXX LABORATORIES, INC. | ||||
| VIRBAC AH, INC. | ||||
| FRANCODEX LABORATORIES, INC. | ||||
| DELMARVA LABORATORIES, INC. | ||||
| By: | /s/ Xxxx X. Xxxxxx | |||
| Xxxx X. Xxxxxx, Executive Vice President and | ||||
| Chief Financial Officer | ||||
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