EXHIBIT 10.1

 

SECOND AMENDMENT TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT
 
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
("Amendment"), dated effective as of November 10, 2010, is made and entered into
by and among WALCO INTERNATIONAL, INC., a Delaware corporation (the "US
Borrower"), KANE VETERINARY SUPPLIES LTD. (the "Canadian Borrower"), an Alberta
corporation, THE UNDERSIGNED GUARANTORS WHICH ARE PARTIES TO THE CREDIT
AGREEMENT (as hereinafter defined), as amended by this Amendment (each a
"Guarantor" and collectively, the "Guarantors"), THE UNDERSIGNED GRANTOR WHICH
IS A PARTY TO THE CREDIT AGREEMENT (the "Grantor"), THE UNDERSIGNED FINANCIAL
INSTITUTIONS WHICH ARE PARTIES TO THE CREDIT AGREEMENT (each, together with its
successors and assigns, a "Lender" and collectively, the "Lenders"), JPMORGAN
CHASE BANK, N.A., a national banking association, as the administrative agent
for the US Lenders (in such capacity, the "US Administrative Agent"), and
JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as the administrative agent for the
Canadian Lenders (in such capacity, the "Canadian Administrative Agent").  The
US Borrower and the Canadian Borrower shall sometimes hereinafter be
collectively referred to as the "Borrowers"), and the US Administrative Agent
and the Canadian Administrative Agent shall sometimes hereinafter be
collectively referred to as the "Administrative Agents".
 
RECITALS:
 
WHEREAS, the US Borrower, KVSL Acquisition, Ltd. (predecessor in interest to the
Canadian Borrower), the Guarantors, the Grantor, the Administrative Agents and
the Lenders are parties to a Second Amended and Restated Credit Agreement dated
as of October 15, 2007, as previously amended pursuant to that terms of that
certain First Amendment to Second Amended and Restated Credit Agreement dated as
of May 5, 2009, by and among the US Borrower, the Canadian Borrower, the
Guarantors, the Grantor, the Administrative Agents and the
Lenders  (collectively the "Credit Agreement"); and

WHEREAS, the Borrowers, the Guarantors, the Grantor, the Administrative Agents
and the Lenders have agreed, on the terms and conditions herein set forth, that
the Credit Agreement be further amended in certain respects.

AGREEMENTS:
 
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and warranties herein set forth, and for other good and valuable
consideration, the receipt and sufficiency which are hereby acknowledged and
confessed, the Borrowers, the Guarantors, the Grantor, the Administrative Agents
and the Lenders do hereby agree as follows:

Section 1.   General Definitions.  Capitalized terms used herein which are
defined in the Credit Agreement shall have the same meanings when used herein.

Section 2.   Modification of Applicable Margin Definition.   The term
“Applicable Margin” contained in Section 1.1 of the Credit Agreement is hereby
amended and restated in its entirety to hereafter be and read as follows:

Applicable Margin shall mean, a rate per annum of 3.00% for LIBOR Borrowings and
CDOR Rate Borrowings and a rate per annum of 0.50% for CB Floating Rate
Borrowings, Canadian Prime Rate Borrowings and US Base Rate (Canada) Borrowings;
provided, however, that as of the end of each fiscal quarter of the US Borrower
(commencing with the period ending December 31, 2010), the Applicable Margin
shall be adjusted upward or downward, as applicable, to the respective amounts
shown in the schedule below based on the Leverage Ratio for the Credit Parties
and their Subsidiaries, on a Consolidated basis, tested as of the end of the
applicable fiscal quarter of the Credit Parties.  For purposes hereof, any such
adjustment in the respective amounts of the Applicable Margin, whether upward or
downward, shall be effective ten (10) Business Days after the applicable Annual
Audited Financial Statements of the Credit Parties or the Monthly Unaudited
Financial Statements of the Credit Parties for the applicable fiscal quarter, as
the case may be, have been delivered to and received by the Administrative Agent
in accordance with the terms of Sections 6.3(a) and 6.3(b) hereof; provided,
however, if any such financial statements are not delivered in a timely manner
as required under the terms of Sections 6.3(a) and 6.3(b) hereof, the Applicable
Margin from the date such financial statements were due until ten (10) Business
Days after the Administrative Agent and Lenders receive the same will be the
highest level set forth below for the Applicable Margin.
 
 
 

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Leverage Ratio
 
Per Annum Percentage for LIBOR Borrowings & CDOR Rate Borrowings
 
Per Annum Percentage for CB Floating Rate Borrowings, Canadian Prime Rate
Borrowings & US Base Rate (Canada) Borrowings
 
Greater than or equal to 4.50x
 
3.00%
 
0.50%
 
Less than 4.50x, but greater than or equal to 3.75x
 
2.75%
0.25%
 
Less than 3.75x, but greater than or equal to 3.25x
 
2.50%
0.00%
 
Less than 3.25x
 
2.25%
0.00%

 
Section 3.   Modification of EBITDA Definition.  The “EBITDA” definition
contained in Section 1.1 of the Credit Agreement is hereby amended and restated
in its entirety to hereafter be and read as follows:

EBITDA shall mean, with respect to the Credit Parties for any period, Net Income
for such period plus (a) without duplication and to only the extent deducted in
determining Net Income for such period, the sum of (i) Interest Expense, (ii)
federal, state and local income or franchise taxes, (iii) all amounts
attributable to depreciation and amortization expense, (iv) any extraordinary
charges, (v) customary and reasonable director’s fees and board expenses for
board of directors of the Credit Parties not to exceed $550,000 in the aggregate
during any fiscal year of the Credit Parties, and (vi) any other non-cash
charges (including without limitation, (A) the issuance of restricted stock or
stock options, (B) equity losses of Affiliates that are not a Subsidiary of any
Credit Party, and (C) all charges attributable to the use of the purchase
accounting method), but excluding any non-cash charge in respect of an item that
was included in Net Income in a prior period and any non-cash charge that
relates to the write-down or write-off of Inventory, minus (b) without
duplication and to the extent included in Net Income, (i) any cash payments made
during such period in respect of non-cash charges described in clause (a)(vi)
taken in a prior period and (ii) any extraordinary gains and any non-cash items
of income, in each case of such Person for such period, computed and calculated,
without duplication, on a Consolidated basis and in accordance with GAAP,
consistently applied.

Section 4.   Modification of Eligible Accounts Definition.  Subparagraph (b) of
the “Eligible Accounts” definition contained in Section 1.1 of the Credit
Agreement is hereby amended and restated in its entirety to hereafter be and
read as follows:
 
 
(b)
the Account has payment terms of 30 days or less, or if the Account has payment
terms of 31 to 120 days, such Accounts having payment terms of 31 to 120 days
shall not constitute more than twenty percent (20%) of the total Eligible
Accounts or $15,000,000 in the aggregate, whichever is less.

 
 
Section 5.   Modification of Fixed Charge Coverage Ratio Definition.  The term
“Fixed Charge Coverage Ratio” contained in Section 1.1 of the Credit Agreement
is hereby amended and restated in its entirety to hereafter be and read as
follows:

Fixed Charge Coverage Ratio shall mean, with respect to the Credit Parties and
their Subsidiaries for any period, the ratio of (a) EBITDA less (i) Unfinanced
Capital Expenditures less (ii) cash payments of federal, state and local income
or franchise taxes to (b) the sum of (i) Debt Service Expense (excluding any
mandatory principal payments of the Term Loan Debt based upon Excess Cash Flow
(as defined in the Term Loan Debt Agreement)), (ii) cash Interest Expense, and
(iii) Unfinanced Cash Dividends, in each case of such Person for the applicable
period, computed and calculated on a Consolidated basis in accordance with GAAP,
consistently applied and without duplication.  All components of the Fixed
Charge Coverage Ratio shall be determined (1) on a Consolidated basis for the
twelve (12) most recent consecutive calendar months ending on or prior to the
date of determination and (2) in accordance with GAAP, consistently applied.

 
 

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Section 6.   Modification of Intercreditor Agreement Definition.   The term
“Intercreditor Agreement” contained in Section 1.1 of the Credit Agreement is
hereby amended and restated in its entirety to hereafter be and read as follows:

Intercreditor Agreement shall mean the Intercreditor and Collateral Agency
Agreement dated effective as of November  10, 2010, by and among the US
Borrower, certain of the other Credit Parties, the Administrative Agent, as the
representative of the holders of the Obligations, the US Collateral Agent, as
the representative of the holders of the US Obligations and the Term Loan Debt,
and JPMorgan Chase Bank, N.A., as the representative of the holders of the Term
Loan Debt, as the same may be amended, modified, supplemented, renewed, restated
or replaced from time to time in accordance with the terms of this Agreement.

Section 7.   Modification of Issuing Bank Definition.   The term “Issuing Bank”
contained in Section 1.1 of the Credit Agreement is hereby amended and restated
in its entirety to hereafter be and read as follows:

Issuing Bank shall mean (a) with respect to Letters of Credit issued for the
account of the US Borrower, either JPMorgan or U.S. Bank National Association,
in its respective capacity as an issuer of US Letters of Credit hereunder, (b)
with respect to Letters of Credit issued for the account of the Canadian
Borrower, either JPMorgan Canada or U.S. Bank National Association, Canadian
Branch, in its respective capacity as an issuer of Canadian Letters of Credit
hereunder, and (c) any other lender, if any, designated in writing by the
applicable Borrower and the Administrative Agent as an Issuing Bank hereunder,
so long as such other Lender accepts in writing such designation as an Issuing
Bank.  An Issuing Bank may, in its discretion, arrange for one or more Letters
of Credit to be issued by Affiliates of the Issuing Bank, in which case the term
“Issuing Bank” shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.

Section 8.   Deletion of Permitted Management Fee Definition.   The definition
for “Permitted Management Fee” in Section 1.01 of the Credit Agreement is hereby
deleted from the Credit Agreement in its entirety, and each and every reference
to the term “Permitted Management Fee” in any other provision of the Credit
Agreement shall hereafter be of no further force or effect.

Section 9.   New Definitions for Net Proceeds, Non-Excluded Taxes, Non-US
Lender, Other Taxes and Prepayment Event.   New definitions for “Net Proceeds,”
“Non-Excluded Taxes,” “Non-US Lender,” “Other Taxes” and “Prepayment Event” are
hereby added to Section 1.1 of the Credit Agreement to hereafter be and read as
follows:

Net Proceeds shall mean, with respect to any event, (a) the cash proceeds
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but excluding any interest payments),
but only as and when received, (ii) in the case of a casualty, insurance
proceeds and (iii) in the case of a condemnation or similar event, condemnation
awards and similar payments, net of (b) the sum of (i) all reasonable fees,
commissions and out-of-pocket expenses paid to third parties (other than
Affiliates) in connection with such event, (ii) in the case of a sale, transfer
or other disposition of an asset (including pursuant to a sale and leaseback
transaction or a casualty or a condemnation or similar proceeding), the amount
of all payments required to be made as a result of such event to repay
Indebtedness (other than Revolving Loans) secured by such asset or otherwise
subject to mandatory prepayment as a result of such event and (iii) the amount
of all taxes paid and the amount of any reserves established to fund contingent
liabilities reasonably estimated to be payable, in each case during the year
that such event occurred or the next succeeding year and that are directly
attributable to such event (as determined reasonably and in good faith by a
financial officer).
 
Non-Excluded Taxes shall have the meaning specified in Section 10.17(a) hereof.
 
Non-U.S. Lender shall have the meaning specified in Section 10.17(d) hereof
 
Other Taxes  shall mean any and all present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies arising from
any payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement or any other Loan Document.
 
 
 

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Prepayment Event means:
 
(a)           any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any Property of any US Credit Party, other
than dispositions of Inventory or collection of Accounts (including license
royalties, rebates and carbon offsets) in the ordinary course of business; or
 
(b)           any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of, any Property or
asset of any US Credit Party; or
 
(c)           the incurrence by any US Credit Party of any Indebtedness, other
than Indebtedness permitted under Section 7.1 or permitted by the Required
Lenders pursuant to Section 10.11.
 
Section 10.   Extension of Revolving Credit Termination Date.  The term
“Revolving Credit Termination Date” contained in Section 1.1 of the Credit
Agreement is hereby amended and restated in its entirety to hereafter be and
read as follows:

Revolving Credit Termination Date shall mean the earlier of (a) August 10, 2015,
(b) any date that the Commitments are terminated in full pursuant to Section 2.4
hereof, and (c) any date the Revolving Credit Termination Date is accelerated by
the Administrative Agent pursuant to Section 8.1 hereof.
 
 
Section 11.   Modification of Mortgages and Security Document Definitions.   The
terms “Mortgages” and “Security Documents” contained in Section 1.1 of the
Credit Agreement are hereby amended and restated in their entirety to hereafter
be and read as follows:

Mortgages shall mean any mortgage, deed of trust or other agreement which
conveys or evidences a Lien in favor of the US Collateral Agent, for the ratable
benefit of the US Lenders, on real property (including the Real Estate, other
than Excluded Real Estate) of any US Credit Party, including any amendment,
modification or supplement thereto (including any amendment, modification or
supplement required to cause the Real Estate, other than Excluded Real Estate,
to secure the Term Loan Debt if refinanced in accordance with terms not less
favorable than the pricing and other terms set forth in that certain Term Sheet
attached hereto as Schedule 1.1(c)).

Security Documents shall mean the Security Agreements, the Mortgages, all
related financing statements and any and all other agreements, mortgages, deeds
of trust, chattel mortgages, security agreements, pledges, guaranties,
assignments of income, assignments of contract rights, assignments or pledges of
stock or partnership interests, standby agreements, subordination agreements,
undertakings and other instruments and financing statements now or hereafter
executed and delivered as security for the payment and performance of the
Obligations, as any of them may from time to time be amended, modified, restated
or supplemented.  

Section 12.   Modification of US Borrowing Base Definition.   The term “US
Borrowing Base” contained in Section 1.1 of the Credit Agreement is hereby
amended and restated in its entirety to hereafter be and read as follows:

US Borrowing Base shall mean, as of any date, the amount of the then most recent
computation of the US Borrowing Base, determined by calculating the amount equal
to the following:

 
(a)
85% of Eligible Accounts of the US Borrower and the Domestic Subsidiaries; plus

 
(b)
the lesser of (i) 65% of Eligible Inventory of the US Borrower and the Domestic
Subsidiaries (valued, in each case, at the lower of cost or fair market value on
a first-in, first-out basis), and (ii) 85% of the Net Recovery Rate of Eligible
Inventory of the US Borrower and the Domestic Subsidiaries; provided, however,
that during the period commencing on April 1 and ending on September 30 of each
calendar year, the 65% advance rate for Eligible Inventory of the US Borrower
and the Domestic Subsidiaries contained in clause (i) above shall, at the
election of the Administrative Agent, but only with the approval of all but one
of the US Lenders (or if only two (2) US Lenders are then parties to this
Agreement, only with the approval of both of such US Lenders), be increased to
up to 75% and the 85% advance rate for the Net Recovery Rate of Eligible
Inventory of the US Borrower and the Domestic Subsidiaries contained in clause
(ii) above shall, at the election of the Administrative Agent, but only with the
approval of all but one of the US Lenders (or if only two (2) US Lenders are
then parties to this Agreement, only with the approval of both of such US
Lenders), be increased to up to 100%; less

 
(c)
all Reserves against the US Borrowing Base established by the Administrative
Agent from time to time in its Permitted Discretion.

 
 

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Notwithstanding anything to the contrary set forth in the immediately preceding
sentence, the Administrative Agent reserves the right to adjust downward, to a
level acceptable to the Administrative Agent in its Permitted Discretion, the
advance rates set forth above for Eligible Accounts of the US Borrower and the
Domestic Subsidiaries if the average dilution percentage for all Accounts of the
US Borrower and the Domestic Subsidiaries ever exceeds five percent (5%).  For
purposes hereof, “average dilution percentage” shall mean for each dollar of
gross sales by the US Borrower and the Domestic Subsidiaries, the average
percentage of such dollar of gross sales that is not collected by the US
Borrower and the Domestic Subsidiaries for any reason, including without
limitation, any credits, rebates, refunds, returns, discounts or any other
reason.  The US Borrowing Base may be computed by the Administrative Agent on as
frequent as a daily basis (based on all information reasonably available to the
Administrative Agent, including without limitation, the periodic reports and
listings delivered to the Administrative Agent in accordance with Sections
6.3(e), (f) and (g) hereof).

Section 13.   New Mandatory Prepayment Requirement.  New Sections 2.5(f) and
2.5(g) are added to the Credit Agreement to hereafter be and read as follows:

(f)           In the event and on each occasion that any Net Proceeds are
received by or on behalf of any US Credit Party in respect of any Prepayment
Event (excluding, nevertheless, Net Proceeds in an aggregate amount up to
$3,000,000 received during the period from the Closing Date through the
Revolving Credit Maturity Date), the Borrower shall, immediately after such Net
Proceeds are received by any US Credit Party, prepay the Term Loan Debt and/or
the Obligations as set forth in Section 2.f(g) below in an aggregate amount
equal to 100% of such Net Proceeds; provided that, in the case of any event
described in clause (a) or (b) of the definition of "Prepayment Event" with
respect to any asset that is not Inventory or Receivables (excluding,
nevertheless, Net Proceeds in an aggregate amount up to $3,000,000 received
during the period from the Closing Date through the Revolving Credit Maturity
Date), if the Borrower shall deliver to the Administrative Agent a certificate
of a Responsible Officer to the effect that the applicable US Credit Party
intends to apply the Net Proceeds from such event (or a portion thereof
specified in such certificate), within 180 days after receipt of such Net
Proceeds, to acquire (or replace or rebuild) real Property, Equipment or other
tangible assets (excluding Inventory) to be used in the business of the
applicable US Credit Party, and certifying that no Event of Default has occurred
and is continuing, and the Net Proceeds specified in such certificate are
deposited in a cash collateral account under the dominion and control of the
Collateral Agent, then such funds shall be made available to the applicable US
Credit Party only for reinvestment purposes in the absence of a continuing Event
of Default and upon written request by the applicable US Credit Party to the
Collateral Agent (with a copy to the Administrative Agent) for a release from
the cash collateral account specifying that the requested amount is to be used
for reinvestment purposes pursuant to this Section 2.3(f); provided further that
(x) to the extent any such Net Proceeds therefrom have not been so applied
towards such reinvestment purposes by the end of such 180-day period, or (y) an
Event of Default shall have occurred and be continuing for a period of at least
20 consecutive days, a prepayment of the Term Loan Debt and/or the Obligations
as set forth in Section 2.5(g) below shall be required in an amount equal to
such Net Proceeds that have not previously been applied towards such
reinvestment purposes.
 
(g)           All such Net Proceeds received pursuant to Section 2.5(f) as a
result of a Prepayment Event (1) that are not reinvested in accordance with the
provisions of Section 2.5(f) or (2) with respect to any Inventory or
Receivables, shall be applied as follows:
 
(i)           subject to Section 2.5(g)(iii) below, if the amounts are received
as a result of a Prepayment Event described in clause (a) or (b) of the
definition thereof with respect to any Inventory or Receivables, such amounts
shall be applied (A) first, to any Obligations without a corresponding reduction
to the Commitments and if an Event of Default has occurred and is continuing to
cash collateralize outstanding US Letters of Credit, and (B) second, to the Term
Loan Debt;
 
(ii)           subject to Section 2.5(g)(iii) below, if the amounts are received
as a result of any Prepayment Event (other than a Prepayment Event described in
sub-clause (i) above), such amounts shall be applied (A) first, to the Term Loan
Debt, and (B) second, to any Obligations without a corresponding reduction to
the Commitments and if an Event of Default has occurred and is continuing to
cash collateralize outstanding US Letters of Credit; and
 
(iii)            if amounts are received as a result of a Prepayment Event that
includes both (A) Inventory and/or Receivables and (B) other assets, such
amounts shall be applied as follows: (1) an amount equal to the aggregate book
value of such Inventory and Receivables subject to such Prepayment Event shall
be applied to any Obligations without a corresponding reduction to the
Commitments and, if an Event of Default has occurred and is continuing, to cash
collateralize outstanding US Letters of Credit and (2) the remaining proceeds
shall be applied as follows: (a) first, to the Term Loan Debt, and (b) second,
to any Obligations without a corresponding reduction to the Commitments and if
an Event of Default has occurred and is continuing to cash collateralize
outstanding US Letters of Credit.
 
 
 

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Section 14.   Increase of “Accordion Feature” Maximum Amount.  Section 2.15(f)
of the Credit Agreement is hereby amended and restated in its entirety to
hereafter be and read as follows:

(f)           Notwithstanding anything to the contrary in this Section 2.15, (i)
no US Lender shall have any obligation to increase its US Revolving Credit
Commitment under this Section 2.15 unless it agrees in writing to do so in its
sole discretion, (ii) no US Lender shall have any right to decrease the amount
of its US Revolving Credit Commitment as a result of any requested increase of
the US Total Revolving Credit Commitment pursuant to this Section 2.15, (iii)
the Administrative Agent shall have no obligation to find or locate any New US
Lender to participate in any unsubscribed portion of any increase in the US
Total Revolving Credit Commitment requested by the US Borrower, (iv) each
increase in the US Total Revolving Credit Commitment requested by the US
Borrower shall not be less than $10,000,000, (v) after giving effect to any
increase in the US Total Revolving Credit Commitment pursuant to this Section
2.15, the US Total Revolving Credit Commitment shall not exceed $175,000,000,
and (vi) in the event the US Borrower reduces the US Total Revolving Credit
Commitment pursuant to Section 2.4 or any other provision of this Agreement, the
ability of the US Borrower to request increases in the US Total Revolving Credit
Commitment pursuant to this Section 2.15 shall automatically terminate.
 
Section 15.   Modification of Permitted Acquisition Covenant.  Section 7.4(e)(9)
of the Credit Agreement is hereby amended and restated in its entirety to
hereafter be and read as follows:

(9)           any Borrower and/or any other Credit Party may purchase or
otherwise acquire, directly or indirectly, in a single transaction or a series
of related transactions, all or a substantial portion of the assets of any
Person or all or a majority of issued and outstanding shares of Equity Interests
of, or similar interest in, any Person, so long as (a) immediately after giving
effect to the applicable purchase or acquisition, no Default or Event of Default
exists (including without limitation, the Credit Parties are in compliance with
(i) the Fixed Charge Coverage Ratio requirements of Section 7.12 hereof, and
(ii) the Leverage Ratio (as defined in the Term Loan Debt Agreement), if a
Leverage Ratio financial covenant is then in effect under the Term Loan Debt
Agreement, as both are tested on a pro forma basis assuming that such purchase
or acquisition had occurred at the beginning of the four (4) most recent
consecutive fiscal quarters of the Credit Parties ending on or immediately prior
to the date of such purchase or acquisition), (b) average Aggregate Availability
at all times for the ninety (90)-day period prior to such purchase or
acquisition, as well as average Aggregate Availability immediately after giving
effect to the applicable purchase or acquisition, is $20,000,000 or greater, (c)
the aggregate purchase price paid (including without limitation, any
Indebtedness permitted to be assumed, acquired or incurred by any Borrower
and/or any of its Subsidiaries in connection therewith under Section 7.1(m)) for
all such purchases and acquisitions does not exceed $60,000,000 in the aggregate
during the period from November 10, 2010 through the Revolving Credit
Termination Date for all such other purchases and acquisitions by the Borrowers,
and (d) if the purchase price paid (including without limitation, any
Indebtedness permitted to be assumed, acquired or incurred by the applicable
Borrower and/or any of its Subsidiaries in connection therewith under Section
7.1(m)) for the applicable purchase or acquisition exceeds $15,000,000 in the
aggregate, the Required Lenders shall have consented in writing to such purchase
or acquisition.

Section 16.   Modification of Permitted Investment Covenant.  Section 7.7(h) of
the Credit Agreement is hereby amended and restated in its entirety to hereafter
be and read as follows:

(h)           Other Investments, including joint venture interests in
non-Subsidiary entities, in the aggregate amount not to exceed $5,000,000,
provided that such Investments have been approved by the Administrative Agent,
such approval not to be unreasonably withheld if (1) the aggregate amount of
such Investments does not exceed $5,000,000 in the aggregate during the period
from November 10, 2010 through the Revolving Credit Termination Date, and (2)
Aggregate Availability is $15,000,000 or greater at all times for the 90-day
period prior to such Investment and immediately after giving effect to such
Investment.

 
 

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Section 17.   Modification of Permitted Principal Prepayments of Term Loan Debt
Covenant.   Section 7.11(f) of the Credit Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:

(f)           Redeem (whether as a result of mandatory or optional redemption
obligations or rights), purchase, defease or retire for value, or make any
principal payment or prepayment on, the Term Loan Debt or any Subordinated
Indebtedness prior to the Revolving Credit Termination Date; provided that (i)
regularly scheduled payments of accrued and unpaid interest (including such
payments prohibited from being paid because of the existence of a Default or
Event of Default when the same were otherwise due and payable) may be made on
the Term Loan Debt, so long as no Default or Event of Default shall have
occurred and be continuing or would otherwise occur as a result of any such
payment of accrued and unpaid interest, (ii) regularly scheduled principal
installments (including such payments prohibited from being paid because of the
existence of a Default or Event of Default when the same were otherwise due and
payable) may be made on the Term Loan Debt, so long as no Default or Event of
Default shall have occurred and be continuing or would otherwise occur as a
result of any such payment of regularly scheduled principal installments, (iii)
annual mandatory prepayments may be made in an amount equal to (x) the lesser of
$4,000,000 or 50% of the Credit Parties’ Excess Cash Flow for each fiscal year
of the Credit Parties when the Leverage Ratio of the Credit Parties and their
Subsidiaries, on a Consolidated basis, is greater than 3.00 to 1.0 as of the end
of such fiscal year, and (y) the lesser of $4,000,000 or 25% of the Credit
Parties’ Excess Cash Flow for each fiscal year of the Credit Parties when the
Leverage Ratio of the Credit Parties and their Subsidiaries, on a Consolidated
basis, is equal to or less than 3.00 to 1.0 as of the end of such fiscal year,
so long as (A) immediately after giving effect to the applicable prepayment, no
Default or Event of Default exists, and (B) average Aggregate Availability at
all times for the sixty (60)-day period prior to such prepayment, as well as
Aggregate Availability immediately after giving effect to the applicable
prepayment, is $15,000,000 or greater; (iv) mandatory prepayments of the Term
Loan Debt made in accordance with the terms of Sections 2.5(f) and 2.5(g)
hereof; and (v) voluntary prepayments of the Term Loan Debt, in whole or in
part, shall be permitted so long as (A) immediately after giving effect to the
applicable prepayment, no Default or Event of Default exists, and (B) any
prepayments do not require or result in any prepayment fee or premium being paid
(it being agreed that any of the foregoing conditions requiring that no Default
or Event of Default exists or would otherwise occur as a result of the
applicable payment shall include the requirement that the Credit Parties are in
compliance with (x) the Fixed Charge Coverage Ratio requirements of Section 7.12
hereof and (y) the Leverage Ratio (as defined in the Term Loan Debt Agreement),
if a Leverage Ratio financial covenant is then in effect under the Term Loan
Debt Agreement, as both are tested on a pro forma basis assuming that the
applicable payment had occurred at the beginning of the twelve (12) most recent
consecutive calendar months ending on or immediately prior to the date of such
payment).
 
Section 18.   Deletion of Permitted Dividends and Distributions Provision.   The
proviso paragraph following Section 7.11(f) of the Credit Agreement is hereby
deleted in its entirety.

Section 19.   Confirmation of Annual Threshold for Capital Expenditure
Covenant.   Section 7.13 of the Credit Agreement is hereby amended and restated
in its entirety to hereafter be and read as follows:

           7.13           Capital Expenditures.  Permit the Credit Parties and
their Subsidiaries, on a Consolidated basis, to make or incur Capital
Expenditures (not including in the definition of Capital Expenditures for this
purpose any Capital Expenditures included in any future acquisition permitted
under Section 7.4(e)(9)) in excess of $5,000,000 in the aggregate during any
fiscal year.
 
Section 20.   Modification of Requirements of Law and Taxes
Provisions.   Sections 10.16 and 10.17 of the Credit Agreement are hereby
amended and restated in their entirety to hereafter be and read as follows:

                      10.16           Requirements of Law.
 
(a)           If the adoption of or any change in any Legal Requirement or in
the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
 
(i)  shall subject any Lender to any tax of any kind whatsoever with respect to
this Agreement or any Revolving Loan made by it and/or participations by such
Lender in any Letters of Credit, or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered by Section
10.17 and changes in the rate of tax on the overall net income of such Lender);
 
(ii)  shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender that
is not otherwise included in the determination of the Eurodollar Rate; or
 
(iii)    shall impose on such Lender any other condition;
 
 
 

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and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining its Revolving Loans and/or participations by such
Lender in any Letters of Credit, or to reduce any amount receivable hereunder in
respect thereof, then, in any such case, the applicable Borrower shall promptly
pay such Lender, upon its demand, any additional amounts necessary to compensate
such Lender for such increased cost or reduced amount receivable.  If any Lender
becomes entitled to claim any additional amounts pursuant to this paragraph, it
shall promptly notify the applicable Borrower (with a copy to the Administrative
Agent) of the event by reason of which it has become so entitled.
 
(b)           If any Lender shall have determined that the adoption of or any
change in any Legal Requirement regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender’s or such corporation’s capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s or such corporation’s
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to the
applicable Borrower (with a copy to the Administrative Agent) of a written
request therefor, such Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender or such corporation for such
reduction.
 
(c)           A certificate as to any amounts payable pursuant to this Section
10.16 submitted by any Lender to any Borrower (with a copy to the Administrative
Agent) shall be conclusive in the absence of manifest error. The applicable
Borrower shall pay such Lender the amount shown as due on any such certificate
within five days after such Lender delivers such certificate.  In preparing such
certificate, such Lender may employ such assumptions and allocations of costs
and expenses as it shall in good faith deem reasonable and may use any
reasonable averaging and attribution method.   Notwithstanding anything to the
contrary in this Section, no Borrower shall be required to compensate a Lender
pursuant to this Section for any amounts incurred more than nine months prior to
the date that such Lender notifies the applicable Borrower of such Lender’s
intention to claim compensation therefor; provided that, if the circumstances
giving rise to such claim have a retroactive effect, then such nine-month period
shall be extended to include the period of such retroactive effect.  The
obligations of each Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Obligations.
 
                      10.17           Taxes.
 
(a) All payments made by any Borrower under this Agreement shall be made free
and clear of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on any Agent or any Lender as a result of a present or former connection between
such Agent or such Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from such Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any other Loan Document).  If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (“Non-Excluded Taxes”) or Other Taxes are required to be withheld
from any amounts payable to any Agent or any Lender hereunder, the amounts so
payable to such Agent or such Lender shall be increased to the extent necessary
to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes
and Other Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement, provided, however, that no
Borrower shall be required to increase any such amounts payable to any Lender
with respect to any Non-Excluded Taxes (i) that are attributable to such
Lender’s failure to comply with the requirements of paragraph (d) or (e) of this
Section or (ii) that are United States withholding taxes imposed on amounts
payable to such Lender at the time such Lender becomes a party to this
Agreement, except to the extent that such Lender’s assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from any
Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.
 
(b) In addition, the applicable Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
 
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by any Borrower,
as promptly as possible thereafter the applicable Borrower shall send to the
applicable Agent for its own account or for the account of the relevant Lender,
as the case may be, a certified copy of an original official receipt received by
such Borrower showing payment thereof.  If any Borrower fails to pay any
Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority
or fails to remit to the applicable Agent the required receipts or other
required documentary evidence, such Borrower shall indemnify the Agents and the
Lenders for any incremental taxes, interest or penalties that may become payable
by any Agent or any Lender as a result of any such failure.
 
 
 

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(d) Each Lender (or Transferee) that is not a “U.S. Person” as defined in
Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or,
in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest” and a Form W-8BEN, or any subsequent versions
thereof or successors thereto, properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the US Borrower under this Agreement
and the other Loan Documents.  Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of any participant in any Loan, on or before the date such participant
purchases the related participation).  In addition, each Non-U.S. Lender shall
deliver such forms promptly upon the obsolescence or invalidity of any form
previously delivered by such Non-U.S. Lender.  Each Non-U.S. Lender shall
promptly notify the US Borrower at any time it determines that it is no longer
in a position to provide any previously delivered certificate to the US Borrower
(or any other form of certification adopted by the U.S. taxing authorities for
such purpose).  Notwithstanding any other provision of this paragraph, a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
paragraph that such Non-U.S. Lender is not legally able to deliver.
 
(e) A Lender that is entitled to an exemption from or reduction of non-U.S.
withholding tax under the law of the jurisdiction in which the applicable
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to such Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by such Borrower, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate, provided that such Lender
is legally entitled to complete, execute and deliver such documentation and in
such Lender’s judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
 
(f) If any Agent or any Lender determines, in its sole discretion, that it has
received a refund of any Non-Excluded Taxes or Other Taxes as to which it has
been indemnified by any Borrower or with respect to which any Borrower has paid
additional amounts pursuant to this Section 10.17, it shall pay over such refund
to the applicable Borrower (but only to the extent of indemnity payments made,
or additional amounts paid, by such Borrower under this Section 10.17 with
respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of such Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the applicable Borrower, upon the
request of such Agent or such Lender, agrees to repay the amount paid over to
such Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to such Agent or such Lender in the event such
Agent or such Lender is required to repay such refund to such Governmental
Authority. This paragraph shall not be construed to require any Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to any Borrower or any other Person.
 
Section 21.   Replacement of Real Estate Schedule.  Schedule 1.1(a) attached to
the Credit Agreement is hereby deleted in its entirety, and such Schedule 1.1(a)
is hereby replaced by the form of Schedule 1.1(a) attached hereto and hereby
made a part hereof for all purposes.

Section 22.   Replacement of Subsidiaries Schedule.  Schedule 5.8 attached to
the Credit Agreement is hereby deleted in its entirety, and such Schedule 5.8 is
hereby replaced by the form of Schedule 5.8 attached hereto and hereby made a
part hereof for all purposes.

Section 23.   Replacement of Intellectual Property Schedule.  Schedule 5.23
attached to the Credit Agreement is hereby deleted in its entirety, and such
Schedule 5.23 is hereby replaced by the form of Schedule 5.23 attached hereto
and hereby made a part hereof for all purposes.

Section 24.   Contemplated New Inventory Appraisal.   The parties hereto
acknowledge that a new appraisal of the Inventory of the Credit Parties has been
commissioned by the Administrative Agent and is expected to be received within
thirty (30) days after the effective date of this Amendment.  The Credit Parties
agree that upon receipt of such new Inventory appraisal, the Administrative
Agent may, in its Permitted Discretion, reduce the existing advance rates for
Inventory in the Canadian Borrowing Base and/or the US Borrowing Base, as
applicable, based upon the results of such new Inventory appraisal.
 
Section 25.   Conditions Precedent to Effectiveness of
Amendment.  Notwithstanding any provisions to the contrary set forth in this
Amendment, the effectiveness of this Amendment, is expressly conditioned upon
the receipt by the Administrative Agent of the following:

(a)           this Agreement executed by each of the undersigned parties;
 
        (b)           certificates from the Secretary of State of the State of
Delaware as to the continued existence and good standing of the US Borrower in
the State of Delaware, and certificates from the appropriate public official of
the Province of Alberta as to the continued existence and good standing of the
Canadian Borrower in the Province of Alberta;
 
 

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(c)           certificates from the Secretary of State or other appropriate
public official as to the continued existence and good standing of each of the
Guarantors in its applicable State or Province of formation;

(d)           after giving effect to all Loans, if any, to be made on the
effective date of this Amendment and the issuance of any Letters of Credit, if
any, on the  effective date of this Amendment and payment of all fees and
expenses due hereunder, the US Availability shall not be less than $20,000,000;

(e)           Payment by the US Borrower to the Administrative Agent for the
ratable benefit of the US Lenders of an amendment fee in the aggregate amount of
$325,000, with the applicable pro rata portions said amendment fee to be
promptly remitted to the US Lenders by the Administrative Agent upon its receipt
of the same;

(f)           payment by the applicable Borrower to the applicable Lenders, the
Administrative Agent and the Administrative Agent’s applicable Affiliates of all
fees required to be paid under the Loan Documents in connection with this
Amendment and any separate fee letter with the Administrative Agent and the
Administrative Agent’s applicable Affiliates, and all expenses required to be
paid under the Loan Documents for which invoices have been presented.

Section 26.   Representations and Warranties.  The Borrowers, the Grantor and
the Guarantors represent and warrant to the Administrative Agents and the
Lenders that the representations and warranties contained in Article V of the
Credit Agreement and in all of the other Loan Documents are true and correct in
all material respects on and as of the effective date hereof as though made on
and as of such effective date, except to the extent any such representation or
warranty is stated to relate solely to an earlier date. The Borrowers, the
Grantor and the Guarantors hereby certify that no event has occurred and is
continuing which constitutes a Default or an Event of Default under the Credit
Agreement.  Additionally, the Borrowers, the Grantor and the Guarantors hereby
represent and warrant to the Administrative Agents and the Lenders that the
resolutions or authorizations of the Board of Directors of the Borrowers, the
Grantor and each of the Guarantors previously delivered to the Administrative
Agents by the Borrowers, the Grantor and the Guarantors in connection with the
execution and delivery of the Credit Agreement by the Borrowers, the Grantor and
the Guarantors remain in full force and effect as of the effective date hereof
and have not been modified, amended, superseded or revoked.

Section 27.   Limitations.  The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) except as expressly set forth herein,
prejudice any right or rights which the Lenders may now have or may have in the
future under or in connection with the Credit Agreement, the Loan Documents or
any of the other documents referred to therein.  Except as expressly modified
hereby or by express written amendments thereof, the terms and provisions of the
Credit Agreement, the Notes and any other Loan Documents or any other documents
or instruments executed in connection with any of the foregoing are and shall
remain in full force and effect.  In the event of a conflict between this
Amendment and any of the foregoing documents, the terms of this Amendment shall
be controlling.

Section 28.   Payment of Expenses.  The Borrowers and the Guarantors agree,
whether or not the transactions hereby contemplated shall be consummated, to
jointly and severally reimburse and save the Administrative Agents and each of
the Lenders harmless from and against liability for the payment of all
reasonable substantiated out-of-pocket costs and expenses arising in connection
with the preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this Amendment,
including, without limitation, the reasonable substantiated fees and expenses of
counsel for the Administrative Agents.  The provisions of this Section shall
survive the termination of the Credit Agreement and the repayment of the
Obligations.

Section 29.   Descriptive Headings, etc.  The descriptive headings of the
several Sections of this Amendment are inserted for convenience only and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.

Section 30.   Entire Agreement.  This Amendment and the documents referred to
herein represent the entire understanding of the parties hereto regarding the
subject matter hereof and supersede all prior and contemporaneous oral and
written agreements of the parties hereto with respect to the subject matter
hereof, including, without limitation, any commitment letters regarding the
transactions contemplated by this Amendment.

Section 31.   Counterparts.  This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts and all of such
counterparts shall together constitute one and the same instrument.  Complete
sets of counterparts shall be lodged with the Borrowers and the Administrative
Agents.

Section 32.   References to Credit Agreement.  As used in the Credit Agreement
(including all Exhibits thereto) and all other Loan Documents, on and subsequent
to the effective date hereof, the term "Agreement" shall mean the Credit
Agreement, as amended by this Amendment.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective duly authorized officers as of the
date first above written.

NOTICE PURSUANT TO TEX. BUS. & COMM. CODE §26.02

THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF TOGETHER
CONSTITUTE A WRITTEN CREDIT AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRA­DICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREE­MENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL
AGREE­MENTS BETWEEN THE PARTIES.

WALCO INTERNATIONAL, INC.,
a Delaware corporation, as US Borrower

By:  /s/ William
F. Lacey                                                                         
Name: William
F. Lacey                                                                          
Title: Sr. Vice President and Chief Financial Officer
 

KANE VETERINARY SUPPLIES LTD.,
an Alberta corporation, as Canadian Borrower

By:  /s/ Jeff
Hyde                                                                         
Name: Jeff
Hyde                                                                          
Title:   Treasurer                                                                        

 

JPMORGAN CHASE BANK, N.A.,
a national banking association, as a US Lender, as Administrative Agent, as US
Administrative Agent, as US Collateral Agent, as an Issuing Bank and as
Swingline Lender

By:    /s/ Kevin D.
Padgett                                                                       
Name:     Kevin D.
Padgett                                                                      
Title:       Vice
President                                                                    

JPMORGAN CHASE BANK, N.A.,
TORONTO BRANCH,
a national banking association, as a Canadian Lender, as Canadian Administrative
Agent, as Canadian Collateral Agent, and as an Issuing Bank

By:      /s/ Agostino A.
Marchetti                                                                     
Name:       Agostino A.
Marchetti                                                                    
Title:         Senior Vice
President                                                                  

 
 

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WELLS FARGO CAPITAL FINANCE, LLC,
a Delaware corporation, as a US Lender

By:        /s/ Michael P.
Baranowski                                                                   
Name:         Michael P.
Baranowski                                                                  
Title:            Vice
President                                                               

WELLS FARGO FOOTHILL CANADA ULC,
an Alberta corporation, as a Canadian Lender

By:        /s/ Michael P.
Baranowski                                                                   
Name:         Michael P.
Baranowski                                                                  
Title:            Vice
President                                                                

SUNTRUST BANK,
a Georgia banking corporation, as a US Lender

By:          /s/ B. Earl
Garris                                                                 
Name:     B. Earl
Garris                                                                      
Title:       Director,
ABL                                                                    

U.S. BANK NATIONAL ASSOCIATION,
a national banking association, as a US Lender, as Documentation Agent, and as
an Issuing Bank

By:           /s/ Daryl
Hagstrom                                                                
Name:            Daryl
Hagstrom                                                               
Title:            Senior Vice
President                                                               

U.S. BANK NATIONAL ASSOCIATION, CANADA BRANCH, a national banking association,
as a Canadian Lender and as an Issuing Bank

By:             /s/ Marcelle
Dadoun                                                              
Name:        Marcelle Dadoun, on behalf of Paul Rodgers, Principal
Officer                                                                   
Title:          Compliance
Officer                                                                 

 
 

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ANIMAL HEALTH INTERNATIONAL, INC.,
a Delaware corporation, as Grantor

By:   /s/ Damian Olthoff                                                                        
Name:   Damian
Olthoff                                                                          
Title:     General Counsel and
Secretary                                                                        

AMERICAN LIVESTOCK AND PET SUPPLY, INC., a Delaware corporation, as a Guarantor

By:   /s/ Damian
Olthoff                                                                        
Name:  Damian
Olthoff                                                                         
Title:   Secretary                                                                        

HAWAII MEGA-COR., INC.,
a Hawaii corporation, as a Guarantor

By:   /s/ Damian
Olthoff                                                                        
Name:  Damian
Olthoff                                                                         
Title:   Secretary                                                                        

WALCO TEXAS ANIMAL HEALTH, LLC,
a Texas limited liability company, as a Guarantor

By:   Walco International, Inc.
          Sole Member

By: /s/ William F. Lacey
Name:  William F. Lacey
Title:  Sr. Vice President and Chief Financial Officer