EXHIBIT 4.2
EXECUTION COPY
AMENDMENT NO. 1 TO FORBEARANCE AGREEMENT
AMENDMENT NO. 1 TO
FORBEARANCE AGREEMENT , dated as of June 3, 2008 (this
“ Amendment ”), among (a) Home Solutions of
America, Inc., a Delaware corporation (the “ Borrower
”), (b) each of the lenders party hereto (individually,
together with its successors and assigns, a “ Lender
” and collectively, the “ Lenders ”),
(c) each of the Debtors set forth in the Pledge and Security
Agreement dated as of November 1, 2006 (collectively, the
“ Debtors ” or each, a “ Debtor
”), (d) the Guarantors (as such term is defined in the
Credit Agreement) (collectively, with the Debtors and the Borrower,
the “ Credit Parties ” and each, individually, a
“ Credit Party ”) and (e) Texas Capital Bank,
National Association, as Lender, Administrative Agent, Arranger and
Sole Bookrunner (the “ Agent ”).
WITNESSETH :
WHEREAS,
on or about November 1, 2006, the Borrower, the Agent, and the
Lenders party thereto entered into the Credit Agreement dated as of
November 1, 2006 (as it may be amended from time to time, the
“ Credit Agreement ”). 1
WHEREAS,
on or about February 6, 2008, the Borrower, the Agent, the
Lenders, the Debtors, and the Credit Parties entered into a
Forbearance Agreement (the “ Forbearance Agreement
”) pursuant to which the Lenders agreed to forbear, during
the Forbearance Period (as such term is defined in the Forbearance
Agreement), from exercising their rights and remedies under the
Loan Documents with respect to certain then-existing Events of
Default (the “ Existing Events of Default
”).
WHEREAS,
certain defaults exist and are continuing under the Forbearance
Agreement (collectively, the “ Existing Forbearance Events
of Default ”).
WHEREAS,
notwithstanding the existence of the Existing Forbearance Events of
Default, the Borrower has requested, and the Lenders have agreed,
to amend the Forbearance Agreement as set forth below.
NOW,
THEREFORE, in consideration of the premises and the agreements
hereinafter contained, and for other good and valuable
consideration, notwithstanding any provisions of the Credit
Agreement or the Forbearance Agreement to the contrary, the parties
hereto hereby agree as follows:
1.
Extension of Forbearance Period. Notwithstanding anything to
the contrary in Paragraph 1 of the Forbearance Agreement, the
Lenders agree to extend the Forbearance Period (as defined in the
Forbearance Agreement) to August 1, 2008, provided that
the Credit Parties shall continue to comply with the conditions and
requirements set forth in this Amendment. If the Credit Parties
fail to comply with any of the conditions or requirements of this
Amendment, the Forbearance Period shall terminate without any
further notification by the Lenders to the Borrower.
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Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement. |
2.
Collection and Delivery of Accounts Receivable. The Credit
Parties shall continue to deliver to the Agent for the benefit of
the Lenders, as and when collected, 100% of all amounts directly or
indirectly collected in respect of their respective accounts
receivable, which amounts shall be applied by the Agent to the
outstanding obligations under the Loan Documents as provided in the
Forbearance Agreement and in the following order: (i) first,
to the payment of any outstanding fees and/or expenses then due and
owing under Section 12.1 of the Credit Agreement,
(ii) second, to the payment of any outstanding due and unpaid
interest on the Obligations, and (iii) third, to the reduction
of any outstanding and unpaid principal amount of the
Borrower’s Obligations under the Credit Agreement. From and
after the Closing Date until the date all Pay-Off Conditions have
been satisfied, the Borrower shall deliver to the Agent daily
reports of the Credit Parties’ previous day’s
collections of accounts receivable.
3.
Satisfaction and Treatment of Obligations Under the Credit
Agreement. Upon the occurrence of all of the following
conditions ((a), (b), (c), and (d) collectively, the “
Pay-Off Conditions ”) and the satisfaction of the
condition for release of collateral provided in Paragraph 9
below, (i) the obligation of the Credit Parties to pay to the
Agent the portion of the net recoveries resulting from the Marshall
Claims as provided in Paragraph 5 below will be treated as a
non-recourse obligation of the Credit Parties secured by
(x) any claims, demands, suits or causes of action of any
kind, whether presently asserted or not, whether fixed or
contingent, of the Borrower or its Subsidiaries (collectively, the
“ Marshall Claims ”), against Mr. Brian
Marshall and/or any entities related to, or affiliated with,
Mr. Marshall or by which Mr. Marshall was employed in any
capacity (collectively, “ Marshall ”) and
(y) any claims against Marshall which currently may be pursued
by the Lenders and which subsequently are treated as property of a
Credit Party’s bankruptcy estate by reason of such Credit
Party becoming a debtor under title 11 of the United States Code
(the “ Bankruptcy Code ”) and (ii) all
other obligations of the Credit Parties under the Loan Documents
will be deemed satisfied:
(a)
Notwithstanding anything to the contrary in Paragraphs 10, 11 and
12 of the Forbearance Agreement, during the period commencing on
May 19, 2008 and ending on August 1, 2008 (the “
Pay-Off Period ”), the Borrower shall have made to the
Agent for the benefit of the Lenders payments, whether from the
collection of accounts receivable or otherwise and after taking
into account the order of application set forth in Paragraph 2
above, that result in the reduction of the principal amount of the
Borrower’s Obligations under the Credit Agreement in the
aggregate amount of $10,500,000 (the “ Pay-Off Amount
”), including minimum interim aggregate reductions of
principal of $1,150,000 within twenty-four (24) hours of the
execution of this Amendment; $3,500,000 by June 15, 2008;
$5,450,000 by July 1, 2008; $6,950,000 by July 15, 2008;
and $10,500,000 by August 1, 2008 (each, a “ Minimum
Interim Reduction ”). If any such payments are funded
with the proceeds of a disposition of an asset other than accounts
receivable, and the Lenders have granted prior written consent of
such disposition, the Agent shall release its lien on such asset,
contemporaneously with its receipt of 100% of the proceeds of such
disposition in readily available funds.
(b)
The Borrower shall have remitted to the Agent all fees and expenses
owing pursuant to Section 12.1 of the Credit Agreement.
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(c)
On or before August 1, 2008, the Borrower shall have canceled,
replaced, or provided cash collateral in form satisfactory to the
Agent to cover the Letters of Credit described in Paragraph 4
below.
(d)
The Borrower shall have issued the Lenders’ Warrants (as
defined below) as described in Paragraph 7 below.
Notwithstanding anything contained in this Paragraph to the
contrary, until the Pay-Off Conditions are satisfied, all
Obligations under the Loan Documents shall remain valid, binding
and enforceable, and the Borrower shall continue to pay interest on
the unpaid principal amount of the Revolving Credit Advances and
the unpaid principal amount of the Term Loan in accordance with
Paragraphs 11 and 12 of the Forbearance Agreement, respectively
(collectively, the “ Continued Interest Payments
”); provided, however, that, notwithstanding anything
in Paragraphs 11 and 12 of the Forbearance Agreement, the Continued
Interest Payments shall be payable on the following dates:
June 1, 2008, June 15, 2008, July 1, 2008,
July 15, 2008
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