SIXTH AMENDMENT TO CREDIT AGREEMENT
Exhibit 10.8
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and entered
into as of November 18, 2009, by and between XXXXXXX INTERNATIONAL, INC., a Nevada corporation (the
“Borrower”). WACHOVIA BANK,
NATIONAL ASSOCIATION, a national banking association with its principal office in Charlotte, North
Carolina (the “Bank”) and the other Persons party hereto for the purposes set forth herein.
BACKGROUND STATEMENT
A. The Borrower and the Bank are parties to a Credit Agreement, dated as of November 14,
2005, as amended by that certain First Amendment to Credit Agreement dated as of April 26, 2006, by
that certain Second Amendment and Waiver to Credit Agreement dated as of September 8, 2006, by that
certain Third Amendment and Waiver to Credit Agreement dated as of March 21, 2008, by that certain
Fourth Amendment and Waiver to Credit Agreement dated as of June 25, 2008, and by that certain
Fifth Amendment and Waiver to Credit Agreement dated as of June 30, 2009 (as further amended,
modified, supplemented, or restated from time to time, the “Credit Agreement”), pursuant to
which the Bank has made available to the Borrower a revolving credit facility in the aggregate
principal amount of $10,000,000. Capitalized terms used in this Amendment that are not otherwise
defined herein shall have the meanings given to such terms in the Credit Agreement.
B. The Borrower has requested that certain amendments be made to the Credit Agreement. The
Bank has agreed to amend the Credit Agreement as requested by the Borrower as set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower
and the Bank hereby agree as follows:
ARTICLE I
AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendment to Section 1.1. Section 1.1 of the Credit Agreement is
hereby amended as follows:
(a) The following defined terms are hereby added in proper alphabetical order:
“Consolidated Effective Tangible Net Worth” means, as of
any date of determination for any Person, the (i) total assets
of such Person and its Subsidiaries as of such date, other than
Affiliate
Note Receivables and assets which would be treated as intangible
assets for balance sheet presentation purposes under GAAP, including
without limitation goodwill, trademarks, tradenames, copyrights, patents
and technologies, and unamortized debt discount and expense, minus (ii)
total liabilities of such Person and its Subsidiaries as of such date
(other than Indebtedness of such Person that is expressly subordinated in
right of payment and performance to the Obligations on terms reasonably
satisfactory to the Bank), in each case determined on a consolidated
basis in accordance with GAAP.
“Sixth Amendment Date” means November 18, 2009.
(b) The definition of “Applicable Margin” is hereby amended and restated in its
entirety as follows:
“Applicable Margin” shall mean 2.35%; provided, however,
that, if (i) the Borrower fails to deliver company prepared financial
statements for the Fiscal Year ending December 31, 2009, (with such
financial statements being prepared in the same manner and containing the
same information that is required of the financial statements delivered
pursuant to Section 5.1(a)) and a worksheet demonstrating projected
compliance for such Fiscal Year with the financial covenants in Article
VI hereof, to the Bank within sixty days after the end of such Fiscal
Year, or (ii) such financial statements and worksheet referenced in
clause (i) of this definition are delivered and show Consolidated EBITDA
for the Borrower and HB Service for the period of the four consecutive
Fiscal Quarters ending December 31, 2009 is less than $3,000,000.00, then
“Applicable Margin” shall mean 2.85%, and shall be effective as
of March 1, 2010.
(c) The definition of “Applicable Percentage” is hereby amended and restated in its
entirety as follows:
“Applicable Percentage” shall, at all times, equal the
Applicable Margin.
(d) The definition of “Consolidated EBITDA” is hereby amended and restated in its
entirety as follows:
“Consolidated EBITDA” shall mean, of any Person for any period,
the aggregate of (i) Consolidated Net Income of such Person for such
period plus (ii) the sum of depreciation, amortization of
intangible assets, interest expense, and income tax expense for such
period plus (iii) for the calculation of Consolidated EBITDA of
the Borrower and HB Service on a combined basis for the three
2
Fiscal Quarters ending September 30, 2009 and the four Fiscal Quarters
ending December 31, 2009, for purposes of determining compliance with
Section 6.3 only, an amount, not to exceed $300,000, equal to the
consolidated cumulative expenses incurred by the Borrower, HB Service
and their respective Subsidiaries within the last two Fiscal Quarters of
such Fiscal Year, as applicable, related to the National Account Program
and contract acquisition costs relating to new contracts, including
installation costs and sales commission expenses, provided that
detail of such expenses satisfactory to the Bank is delivered to the Bank
with the Compliance Certificate for such periods.
(e) The definition of “Consolidated Net Worth” is hereby deleted in its entirety.
(f) The definition of “Revolving Credit Termination Date” is hereby amended and
restated in its entirety as follows:
“Revolving Credit Termination Date” shall mean the date of the
earliest to occur of the following: (i) January 1, 2011; (ii) the date on
which the Bank makes demand for payment of the Revolving Loans in
accordance with Article VIII; (iii) such date of termination as is
mutually agreed upon by the Bank and the Borrower; and (iv) the date
after all Obligations have been paid in full and the Bank is no longer
obligated to make Revolving Loans hereunder.
(g) The definition of “Shareholder Guaranty” is hereby amended and restated in its
entirety as follows:
“Shareholder Guaranty” shall mean the amended and restated
unconditional guaranty, dated as of November 18, 2009, made by H.
Xxxxx Xxxxxxxx in favor of the Bank, as amended, modified, restated
or supplemented from time to time, guaranteeing the Obligations of
the Borrower to the Bank in an amount equal to $5,000,000.
1.2 Amendment to Section 5.1 (Financial and Business Information).
Section 5.1(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
(b) Within one hundred twenty (120) days after the close of each
Fiscal Year of the Borrower and HB Service (including the Fiscal Year
ending December 31, 2009, except with respect to HB Service and its
Subsidiaries), an audited consolidated balance sheet of each of the
Borrower and its Subsidiaries, and HB Service and its Subsidiaries,
separately (and an unaudited consolidated balance sheet of such entities
on a combined basis), in each case as of the close of such Fiscal Year
and audited consolidated statements of
3
income and cash flows for each of the Borrower and its
Subsidiaries and HB Service and its Subsidiaries, separately (and
unaudited consolidated statements of income and cash flows of such
entities on a combined basis), in each case for the Fiscal Year then
ended, including the notes to each, all in reasonable detail setting
forth in comparative form the corresponding figures for the preceding
Fiscal Year, each prepared by an independent certified public
accountant reasonably acceptable to the Bank, in accordance with GAAP
applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting
principles and practices during the year, and each accompanied by a
report thereon by such certified public accountant containing an
opinion that is not qualified with respect to scope limitations
imposed by the Borrower or HB Service, as the case may be, or its
respective Subsidiaries or with respect to accounting principles
followed by such entity or its Subsidiaries not in accordance with
GAAP;
1.3 Amendment to Article VI of the Credit Agreement (Financial Covenants).
Article VI of the Credit Agreement is hereby deleted in its entirety and replaced with the
following:
ARTICLE VI
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until payment in
full of all Obligations of the Borrower to the Bank the Borrower will
not:
6.1
Minimum Consolidated Effective Tangible Net Worth. Permit the Consolidated Effective Tangible Net Worth of the
Borrower as of any date to be less than $8,500,000.
6.2 Consolidated EBITDA of the Borrower. Permit the
Consolidated EBITDA of the Borrower (i) for the period of the three
consecutive Fiscal Quarters ending on September 30, 2009, to be less
than $1,300,000, (ii) for the period of the four consecutive Fiscal
Quarters ending as of any Fiscal Quarter to be less than the amount
set forth below opposite such Fiscal Quarter (or opposite the period
that includes such Fiscal Quarter):
| Minimum Consolidated | ||
| Period | EBITDA | |
| 4th Fiscal Quarter of 2009 | $1,750,000 |
4
| Minimum Consolidated | ||
| Period | EBITDA | |
| 1st Fiscal Quarter of 2010 and thereafter | $2,000,000 |
6.3 Consolidated EBITDA of the Borrower and HB
Service. Permit the Consolidated EBITDA of the Borrower and HB
Service on a combined basis (i) for the period of the three
consecutive Fiscal Quarters ending on September 30, 2009, to be less
than $2,000,000, (ii) for the period of the four consecutive Fiscal
Quarters ending as of any Fiscal Quarter to be less than the amount
set forth below opposite such Fiscal Quarter (or opposite the period
that includes such Fiscal Quarter):
| Minimum Consolidated | ||
| Period | EBITDA | |
| 4th Fiscal Quarter of 2009 | $3,000,000 | |
| 1st Fiscal Quarter of 2010 | $4,000,000 | |
| 2nd Fiscal Quarter of 2010 and thereafter | $5,000,000 |
The Consolidated EBITDA of the Borrower and HB Service on a
combined basis shall be calculated on the basis of the combined
financial statements of the Borrower and HB Service and shall reflect
all eliminations appropriate for the calculation of such EBITDA.
1.4 Amendment to Section 7.2 (Indebtedness). Section 7.2(v) of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:
(v) Indebtedness of HB Service and its Subsidiaries consisting
of seller notes on franchise and other acquisitions (including any
such Indebtedness incurred pursuant to the Secured Promissory Notes,
dated May 1, 2009, executed by Service South, LLC in favor of MI-Jenn
Ventures, Inc. and Xxxxxx and Xxxx Xxxxxx), with all such
Indebtedness of HB Service and its Subsidiaries existing as of the
Sixth Amendment Date set forth on Schedule 7.2(v) hereof, which
schedule shall identify the principal amount, lender, interest rate,
maturity date and principal repayment schedule of such Indebtedness;
provided that all such Indebtedness existing at any time
shall not exceed $12,7000,000; and provided
5
further that Borrower shall deliver to the Bank an
updated Schedule 7.2(v) with the financial statements required
to be delivered by Sections 5.1(a) and 5.1(b) identifying all
such Indebtedness existing as of such date;
1.5 Amendment to Section 8.1 (Events of Default). Section 8.1(g) of the Credit
Agreement is hereby amended by deleting, in its entirety, the proviso at the end of such section
that reads “provided that the termination of the Shareholder Guaranty pursuant to a
Performance Termination (as defined in the Shareholder Guaranty) shall not constitute an Event of
Default”.
1.6 Amendment to Exhibits. Exhibit C (Form of Compliance Certificate) of the Credit
Agreement is hereby deleted in its entirety and replaced with the Exhibit C (Form of Compliance
Certificate) attached to this Amendment.
1.7 Updated Schedule 7.2(v). Attached to this Amendment is the updated Schedule
7.2(v) to the Credit Agreement as of the Sixth Amendment Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
2.1 Representations in Credit Agreement. The representations and warranties of the
Borrower set forth in the Credit Agreement are true and correct in all material respects as of the
date hereof, except to the extent such representations and warranties relate solely to or are
specifically expressed as of a particular date or period.
2.2 Compliance with Credit Agreement. After giving effect to this Amendment, the
Borrower is in compliance with all covenants, terms and provisions set forth in the Credit
Agreement to be observed or performed by it.
2.3 Due Authorization. This Amendment has been duly authorized, validly executed and
delivered by one or more authorized officers of the Borrower and each of this Amendment, and the
Credit Agreement, constitutes the legal, valid and binding obligation of the Borrower, enforceable
against it in accordance with its terms and each of the other Credit Documents constitutes the
legal, valid and binding obligation of the Borrower enforceable against it in accordance with its
terms.
2.4 No Event of Default. No Default or Event of Default under any of the Credit
Documents has occurred or is continuing.
2.5 Continuing Security Interests. All obligations of the Borrower, the Subsidiary
Guarantors and HB Service and its Subsidiaries under the Credit Agreement and the other Credit
Documents continue to be or will be secured by the Bank’s security interests in all of the
collateral granted under the Credit Agreement and the Security Documents, and nothing herein will
affect the validity, enforceability, perfection or priority of such security interests.
6
2.6 No Defenses. The Borrower does not have any right of setoff, counterclaim, or
defense to payment of its respective liabilities or obligations under the Credit Agreement. The
Bank hereby expressly reserves all rights and remedies it may have against the Borrower and all
other Persons who may be or may hereafter become secondarily liable for the repayment of the
obligations under the Credit Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective as of the date hereof upon the satisfaction of each
of the following conditions precedent:
(a) The Bank shall have received a duly executed counterpart of this Amendment from each of
the Borrower, the Subsidiary Guarantors, HB Service and each of its Subsidiaries and H. Xxxxx
Xxxxxxxx (collectively, the “Amendment Parties”);
(b) The Bank shall have received a duly executed counterpart of the Shareholder Guaranty;
(c) The Borrower shall have paid to the Bank an amendment fee in the amount of $5,000.00;
(d) The Borrower shall have paid all reasonable out-of-pocket costs and expenses of the Bank
in connection with the preparation, negotiation, execution and delivery of this Amendment
(including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Bank with respect thereto); and
(e) The Bank shall have received such other documents, certificates, opinions, instruments and
other evidence as the Bank may reasonably request, all in a form and substance satisfactory to the
Bank and its counsel.
ARTICLE IV
ACKNOWLEDGEMENTS; REPRESENTATIONS
4.1 Amendment Parties. Each of the Amendment Parties hereby approves and
consents to the transactions contemplated by this Amendment, confirms and agrees that, after giving
effect to this Amendment, each of the Credit Agreement and the other Credit Documents to which it
is a party remains in full force and effect and enforceable against it in accordance with its terms
and shall not be discharged, diminished, limited or otherwise affected in any respect, and
represents and warrants to the Bank that it has no knowledge of any claims, counterclaims, offsets,
or defenses to or with respect to its obligations under the Credit Documents, or if it has any such
claims, counterclaims, offsets, or defenses to the Credit Documents or any transaction related to
the Credit Documents, the same are hereby waived, relinquished, and released in consideration of
the execution of this Amendment. This acknowledgement and confirmation by each of the Amendment
Parties is made and delivered to
7
induce the Bank to enter into this Amendment and continue to extend credit to the Borrower under
the Credit Documents, and each of the Amendment Parties acknowledges that the Bank would not enter
into this Amendment and continue to extend such credit in the absence of the acknowledgement and
confirmation contained herein.
4.2 Xxxxxxx Guarantors. Each of the Subsidiary Guarantors, HB Service and each
of its Subsidiaries and H. Xxxxx Xxxxxxxx (collectively, the “Xxxxxxx Guarantors”) further
represents that it has knowledge of the Borrower’s and the other Amendment Parties’ financial
condition and affairs and that it has adequate means to obtain from the Borrower and the other
Amendment Parties on an ongoing basis information relating thereto and to the Borrower’s and the
other Amendment Parties’ ability to pay and perform the their respective obligations under the
Credit Documents, and agrees to assume the responsibility for keeping, and to keep, so informed for
so long as the guaranty of each such Xxxxxxx Guarantor remains in effect. Each Xxxxxxx Guarantor
agrees that the Bank shall have no obligation to investigate the financial condition or affairs of
the Borrower or any of the Amendment Parties for the benefit of any Xxxxxxx Guarantor nor to advise
any Xxxxxxx Guarantor of any fact respecting, or any change in, the financial condition or affairs
of the Borrower or any of the Amendment Parties that might become known to the Bank at any time,
whether or not the Bank knows or believes or has reason to know or believe that any such fact or
change is unknown to any Xxxxxxx Guarantor, or might (or does) materially increase the risk of any
Xxxxxxx Guarantor as guarantor, or might (or would) affect the willingness of any Xxxxxxx Guarantor
to continue as a guarantor of the obligations of the Borrower under the Credit Documents. These
representations and agreements by each of the Xxxxxxx Guarantors are made and delivered to induce
the Bank to enter into this Amendment and continue to extend credit to the Borrower under the
Credit Documents, and each of the Xxxxxxx Guarantors acknowledges that the Bank would not enter
into this Amendment and continue to extend such credit in the absence of the representations and
agreements contained herein.
ARTICLE V
GENERAL
5.1 Full Force and Effect. This Amendment is limited as specified and, except as
specifically set forth herein, shall not constitute a modification, acceptance or waiver of any
other provision of any of the Credit Documents. The Credit Agreement, as amended by this Amendment,
shall continue to be in full force and effect in accordance with the provisions thereof on the date
hereof. From and after the date hereof, any reference to the Credit Agreement in any of the
Security Documents or other Credit Documents shall mean the Credit Agreement as amended by the
Amendment and as may be further amended, modified, restated, or supplemented from time to time.
This Amendment shall be a Credit Document under the Credit Agreement.
5.2 Applicable Law. This Amendment shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of North Carolina.
5.3
Counterparts; Execution. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when taken together
8
shall constitute but one instrument. The exchange of copies of this Amendment and of signature
pages by facsimile transmission shall constitute effective execution and delivery of this Amendment
and such copies may be used in lieu of the original Amendment for all purposes. Delivery of an
executed counterpart of a signature page of this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Amendment.
5.4 Expenses. The Borrower agrees to pay on demand all reasonable out-of-pocket
expenses incurred by the Bank in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, all reasonable attorneys’ fees.
5.5 Further Assurances. Each of the Amendment Parties shall execute and deliver to the
Bank such documents, certificates, and opinions as the Bank may reasonably request to effect the
amendments contemplated by this Amendment and to continue the existence, perfection and first
priority of the Bank’s security interests in the collateral securing the obligations under the
Credit Documents.
5.6 Headings. The headings of this Amendment are for the purposes of reference
only and shall not affect the construction of this Amendment.
[The remainder of this page is left blank intentionally.]
9
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to Credit
Agreement to be executed and delivered by their duly authorized officers all as of the date first
above written.
| XXXXXXX INTERNATIONAL, INC. | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
[Signature Pages Continued on the Following Page]
Signature Page to Sixth Amendment to Credit Agreement
| WACHOVIA BANK, NATIONAL ASSOCIATION |
||||
| By: | /s/ Cavan X. Xxxxxx | |||
| Cavan X. Xxxxxx | ||||
| Senior Vice President | ||||
[Signature Pages Continued on the Following Page]
Signature Page to Sixth Amendment to Credit Agreement
| SUBSIDIARY GUARANTORS: | ||||||
| (For purposes of Articles IV and V only) | ||||||
| XXXXXXX HYGIENE FRANCHISE CORP. | ||||||
| XXXXXXX PEST CONTROL CORP. | ||||||
| XXXXXXX MAIDS, INC. | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
| SHFC BUFFALO, LLC | ||||||
| SHFC MINNEAPOLIS, LLC | ||||||
| SHFC OKLAHOMA, LLC | ||||||
| SHFC OPERATIONS, LLC | ||||||
| SHFC ARIZONA, LLC | ||||||
| SHFC TEXAS, LLC | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
[Signature Pages Continued on the Following Page]
Signature Page to Sixth Amendment to Credit Agreement
| HB SERVICE AND ITS SUBSIDIARIES: | ||||||
| (For purposes of Articles IV and V only) | ||||||
| HB SERVICE, LLC | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
| SERVICE BALTIMORE, LLC | ||||||
| SERVICE XXXXXXX HILLS, LLC | ||||||
| SERVICE BIRMINGHAM, LLC | ||||||
| SERVICE CALIFORNIA, LLC | ||||||
| SERVICE CAROLINA, LLC | ||||||
| SERVICE CENTRAL FL, LLC | ||||||
| SERVICE CHARLOTTE LLC | ||||||
| SERVICE CHATTANOOGA, LLC | ||||||
| SERVICE CINCINNATI, LLC | ||||||
| SERVICE COLUMBIA, LLC | ||||||
| SERVICE COLUMBUS, LLC | ||||||
| SERVICE DC, LLC | ||||||
| SERVICE DENVER, LLC | ||||||
| SERVICE FCS, LLC | ||||||
| SERVICE FLORIDA, LLC | ||||||
| SERVICE FRESNO, LLC | ||||||
| SERVICE GAINESVILLE, LLC | ||||||
| SERVICE GOLD COAST, LLC | ||||||
| SERVICE GREENSBORO, LLC | ||||||
| SERVICE GREENVILLE, LLC | ||||||
| SERVICE GULF COAST, LLC | ||||||
| SERVICE HOUSTON, LLC | ||||||
| SERVICE INDIANAPOLIS, LLC | ||||||
| SERVICE LAS VEGAS, LLC | ||||||
| SERVICE LOUISVILLE, LLC | ||||||
| SERVICE MEMPHIS, LLC | ||||||
| SERVICE MIDATLANTIC, LLC | ||||||
| SERVICE MIDWEST, LLC | ||||||
| SERVICE NASHVILLE, LLC | ||||||
| SERVICE NEW ORLEANS, LLC | ||||||
| SERVICE NEW YORK, LLC | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
Signature Page to Sixth Amendment to Credit Agreement
| SERVICE NORTH, LLC | ||||||
| SERVICE NORTH-CENTRAL, LLC | ||||||
| SERVICE OKLAHOMA CITY, LLC | ||||||
| SERVICE PHILADELPHIA, LLC | ||||||
| SERVICE PHOENIX, LLC | ||||||
| SERVICE RALEIGH, LLC | ||||||
| SERVICE SALT LAKE CITY, LLC | ||||||
| SERVICE SEATTLE, LLC | ||||||
| SERVICE SOUTH, LLC | ||||||
| SERVICE ST. LOUIS, LLC | ||||||
| SERVICE TALLAHASSEE, LLC | ||||||
| SERVICE TAMPA, LLC | ||||||
| SERVICE TRI-CITIES, LLC | ||||||
| SERVICE VIRGINIA, LLC | ||||||
| SERVICE WEST COAST, LLC | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
[Signature Pages Continued on the Following Page]
Signature Page to Sixth Amendment to Credit Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to Credit
Agreement to be executed and delivered by their duly authorized officers all as of the date first
above written.
| XXXXXXX INTERNATIONAL, INC. | ||||||
| By: | /s/ Xxxx X. Xxxxxx
|
|||||
| Name: | Xxxx X. Xxxxxx | |||||
| Title: | Chief Financial Officer | |||||
[Signature Pages Continued on the Following Page]
Signature Page to Sixth Amendment to Credit Agreement
| /s/ H. Xxxxx Xxxxxxxx | ||||
| H. XXXXX XXXXXXXX | ||||
| (For purposes of Articles IV and V only) | ||||
Signature Page to Sixth Amendment to Credit Agreement
