FORBEARANCE AGREEMENT
---------------------
THIS FORBEARANCE AGREEMENT (the "Agreement"), dated as of December 14,
1998, is among DARLING INTERNATIONAL INC. ("Borrower"), the banks or other
lending institutions which are a signatory hereto (individually, a "Bank" and,
collectively, the "Banks"), COMERICA BANK, CREDIT LYONNAIS NEW YORK BRANCH and
XXXXX FARGO BANK (TEXAS), NATIONAL ASSOCIATION, each individually as a Bank and
as a co-agent and BANKBOSTON, N.A., individually as a Bank and as agent for
itself and the other Banks (in its capacity as agent, together with its
successors in such capacity, the "Agent").
RECITALS:
Borrower, the Banks and the Agent have entered into that certain Credit
Agreement dated as of June 5, 1997 (as amended by that certain First Amendment
to Pledge Agreement and Credit Agreement dated November 10, 1997 between the
Borrower and the Agent, that certain Second Amendment to Pledge Agreement and
Credit Agreement dated March 6, 1998, among the Borrower, the Banks and the
Agent, that certain Third Amendment to Credit Agreement dated June 30, 1998
among the Borrower, the Banks and the Agent, and that certain Fourth Amendment
to Credit Agreement dated as of October 2, 1998 (as the same has been modified,
the "Fourth Amendment") among the Borrower, the Banks and the Agent, and as the
same may hereafter be amended or otherwise modified, the "Credit Agreement").
Pursuant to the Fourth Amendment (as modified by that certain First
Modification to Fourth Amendment to Credit Agreement dated as of November 2,
1998 among the Borrower, the Banks and the Agent), the Agent and the Banks
agreed to the forbear from exercising their rights and remedies arising from the
Existing Defaults (as defined therein) until December 14, 1998.
By letter dated December 1, 1998 from Agent to the Borrower, the Agent
notified the Borrower that the Borrower had violated the Fixed Charge Coverage
Ratio covenant contained in Section 11.3 of the Credit Agreement as of the end
of the third Fiscal Quarter of the Borrower's 1998 Fiscal Year resulting in the
occurrence of an Event of Default under Section 12.1(c) of the Credit Agreement
(the "3Q Fixed Charge Default"). The Agent alleged that the 3Q Fixed Charge
Default was not an "Existing Default" as defined in the Fourth Amendment and
therefor the Banks were entitled to terminate the forbearance and exercise their
other remedies arising as a result thereof. By letter dated December 3, 1998
from counsel to the Borrower, the Borrower advised the Agent that it disputed
the assertion that an Event of Default occurred that was not such an "Existing
Default".
The Borrower has requested that the Agent and the Banks forbear from
exercising their rights and remedies, if any, arising as a result of the alleged
3Q Fixed Charge Default and as a result of the Existing Defaults (as defined in
the Fourth Amendment and such Existing Defaults and the 3Q Fixed Charge Default,
herein collectively referred to as the "Continuing Defaults") in order to allow
Borrower, the Banks and the Agent additional time to attempt to reach an
agreement on a restructure of the terms of the Loan Documents on a basis
satisfactory to all parties (the "Restructure"). The Agent and the Banks are
willing to forbear as requested by Borrower on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
FORBEARANCE AGREEMENT - Page 1
follows effective as of the date hereof and conditioned upon (i) the execution
of this Agreement by Borrower, each Obligated Party and all the Banks on or
prior to December 15, 1998 and (ii), if all the Banks execute this Agreement on
or prior to December 15, 1998, the payment to the Agent for the benefit of the
Banks of a forbearance fee in an aggregate amount equal to Seventy Thousand
Dollars ($70,000) on or prior to December 15, 1998 (the Agent agrees to
distribute to each Bank that has signed this Agreement its pro rata share of any
such fee so received calculated based on the Commitment Percentages in
accordance with Section 5.5 of the Credit Agreement).
ARTICLE 1
Definitions
-----------
Section 1.1 Definitions. Capitalized terms used in this Agreement, to
the extent not otherwise defined herein, shall have the same meanings as in the
Credit Agreement.
ARTICLE 2
Forbearance
-----------
Section 2.1 Forbearance; Obligations to Extend Credit. Subject to the
terms and provisions of this Agreement, Agent and each Bank agrees, until
January 15, 1999, (i) to forbear from exercising any of their rights and
remedies arising under the Loan Documents or otherwise as a result of the
Continuing Defaults (hereinafter the "Forbearance") and (ii) to continue to
extend credit to Borrower (with any Revolving Loans made only as Base Rate
Accounts) notwithstanding the fact that pursuant to subsection 7.2(a) of the
Credit Agreement the Banks have no obligation to do so as a result of the
Continuing Defaults. Notwithstanding the Forbearance, as a result of the
Continuing Defaults (i) Borrower shall not be permitted to request Libor
Accounts, Continue Libor Accounts, or Convert Base Rate Accounts to Libor
Accounts and (ii) neither Borrower nor any Subsidiary shall be allowed to enter
into any of the transactions permitted by the exceptions set forth in Sections
10.3 or 10.4(i) of the Credit Agreement which are conditioned on no Default
existing. However, Borrower and the Subsidiaries shall be allowed to enter into
the transactions permitted by the exceptions set forth in Section 10.8 of the
Credit Agreement which are conditioned on no Default existing notwithstanding
the Continuing Defaults until January 15, 1999.
Section 2.2 Termination of Forbearance. This Agreement does not
constitute a waiver or forbearance with respect to any Default other than the
Continuing Defaults. In the event that prior to January 15, 1999 any further
Defaults occur under the Credit Agreement (i.e., other than the Continuing
Defaults), then the Agent and the Banks shall have the right and option, in
their discretion and without notice to Borrower or any Obligated Party, to (i)
terminate the Forbearance, (ii) refuse to extend additional credit to Borrower
under the Loan Documents, (iii) prohibit Borrower from Converting and Continuing
Accounts, and (iv) exercise any and all of the rights and remedies under the
Loan Documents or otherwise arising as a result of such Continuing Defaults (the
earlier of January 15, 1999 or the date of the termination of the Forbearance
under this Section 2.2 being referred to hereinafter as the "Forbearance
Termination Date").
FORBEARANCE AGREEMENT - Page 2
Section 2.3 No Waivers; Potential Restructure Terms. Borrower and each
Obligated Party (by its execution of this Agreement below) agree that by
entering into this Agreement, neither Agent nor any Bank in any way waives,
beyond the Forbearance Termination Date, any rights and remedies it may have
with respect to the Continuing Defaults it being agreed that the Forbearance is
only to provide Borrower with an opportunity to reach an agreement with the
Agent and the Banks relating to the Restructure and that the Continuing Defaults
may be asserted after the Forbearance Termination Date if an agreement relating
to the Restructure is not reached by such date. After the Forbearance
Termination Date, Agent and the Banks may pursue all rights and remedies arising
as a result of the Continuing Defaults (including, without limitation, the right
to stop making additional extensions of credit available to the Borrower under
the Credit Agreement) without notice of any kind to the Borrower or any
Obligated Party. The parties hereto acknowledge that the current discussions
contemplate that the Restructure would include the following major provisions
and certain other provisions subject to continuing discussions:
(a) an agreement by the Borrower and the Obligated Parties to grant to
the Agent for the benefit of the Banks, Liens on substantially all
their respective properties, both real and personal;
(b) an agreement by the Agent and the Banks to permanently waive the
Continuing Defaults; and
(c) a modification of the financial and negative covenants in the
Credit Agreement in a manner satisfactory to all parties.
Notwithstanding the foregoing acknowledgment, the terms of a Restructure have
not been and may not be agreed upon. This Agreement shall not bind any party to
enter into a Restructure on the terms listed in items (a) through (c) above or
on any other terms. Any binding Restructure must be evidenced by an agreement
providing therefor, signed by all the Banks, the Agent, the Borrower and the
Obligated Parties.
Section 2.4 Tolling. All periods of limitations specified by statutes
and all defenses of laches or waiver as to the Continuing Defaults will be
tolled and otherwise suspended during the period from the date hereof through
the date which is ninety (90) days after the Forbearance Termination Date.
ARTICLE 3
Miscellaneous
-------------
Section 3.1 Ratifications. The terms and provisions set forth in this
Agreement shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and except as expressly modified and superseded by
this Agreement, the terms and provisions of the Credit Agreement and the other
FORBEARANCE AGREEMENT - Page 3
Loan Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, Agent, and each Bank agree that the Credit Agreement and the
other Loan Documents shall continue to be legal, valid, binding, and enforceable
in accordance with their respective terms. The provisions of Article 2 hereof
supersede and replace the provisions of Article 3 of the Fourth Amendment.
Section 3.2 Representations and Warranties. Borrower hereby represents
and warrants to Agent and each Bank that (i) the execution, delivery, and
performance of this Agreement has been authorized by all requisite action on the
part of Borrower and each Obligated Party, (ii) except for the existence of the
Continuing Defaults and any matters disclosed to the Banks and the Agent in that
certain spiral bound booklet entitled "Bank Meeting, Thursday September 17,
1998," the representations and warranties contained in the Loan Documents are
true and correct in all material respects on and as of the date hereof as though
made on and as of the date hereof (except with respect to any representations or
warranties limited by their terms to a specific date), (iii) except for the
Continuing Defaults, no Default has occurred and is continuing and no event or
condition has occurred that with the giving of notice or lapse of time or both
would be a Default, (iv) except for the Continuing Defaults, Borrower and each
Obligated Party are in full compliance with all covenants and agreements
contained in the Loan Documents, and (v) as of the date hereof, there are no
claims or offsets against or defenses or counterclaims to the obligations of
Borrower or any Obligated Party under the Loan Documents. TO INDUCE THE AGENT
AND THE BANKS TO ENTER INTO THIS AGREEMENT, THE BORROWER AND EACH OBLIGATED
PARTY (by its execution of this Agreement) WAIVE ANY AND ALL SUCH CLAIMS,
OFFSETS, DEFENSES, OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO
THE DATE HEREOF AND AGREE TO STRICTLY COMPLY WITH THE TERMS OF THE LOAN
DOCUMENTS.
Section 3.3 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Agent or any Bank or any closing shall affect the
representations and warranties or the right of Agent or any Bank to rely upon
them.
Section 3.4 Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 3.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 3.6 Successors and Assigns. This Agreement is binding upon and
shall inure to the benefit of Agent, the Banks, and Borrower and their
respective successors and assigns, except Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
the Banks.
FORBEARANCE AGREEMENT - Page 4
Section 3.7 Counterparts. This Agreement may be executed in one or more
counterparts and on telecopy counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 3.8 Effect of Waiver. No consent or waiver, express or
implied, by Agent or any Bank to or for any breach of or deviation from any
covenant, condition, or duty by Borrower or any Obligated Party shall be deemed
a consent or waiver to or of any other breach of the same or any other covenant,
condition, or duty.
Section 3.9 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 3.10 Entire Agreement. THIS AGREEMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER:
--------
DARLING INTERNATIONAL INC.
By: /s/
------------------------------
Xxxx Xxxxxxxx, Treasurer
AGENT:
-----
BANKBOSTON, N.A., individually as a
Bank and as the Agent
By: /s/
-----------------------------
Xxxxx Xxxxx, Vice President
FORBEARANCE AGREEMENT - Page 5
CO-AGENTS:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
COMERICA BANK
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
XXXXX FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
OTHER BANKS:
-----------
XXXXXX TRUST AND SAVINGS BANK
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
HIBERNIA NATIONAL BANK
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
FORBEARANCE AGREEMENT - Page 6
THE SUMITOMO BANK, LIMITED
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
SUNTRUST BANK, ATLANTA
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
CREDIT AGRICOLE INDOSUEZ
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
THE FUJI BANK, LIMITED - HOUSTON
AGENCY
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
THE BANK OF NOVA SCOTIA
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
FORBEARANCE AGREEMENT - Page 0
XXXX XXX, XXXXX, N.A.
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
NATIONSBANK, N.A. (successor in
interest by merger to NationsBank
of Texas, N.A.)
By: /s/
--------------------------
Name:
--------------------
Title:
-------------------
Each of the undersigned Obligated Parties consents and agrees to this
Agreement (including, without limitation, Sections 2.3 and 3.2) and agrees that
the Guaranty to which it is a party shall remain in full force and effect and
shall continue to be its legal, valid, and binding obligation enforceable
against it in accordance with its terms.
Obligated Parties:
-----------------
International Processing Corporation
International Transportation Service, Inc.
The Standard Tallow Corporation
Darling Restaurant Services Inc.
Esteem Products Inc.
By: /s/
--------------------------------------
Xxxx Xxxxxxxx, Treasurer of each
Obligated Party
FORBEARANCE AGREEMENT - Page 8
