GLOBAL EMPLOYMENT HOLDINGS, INC. FIRST AMENDMENT TO SENIOR SECURED CONVERTIBLE NOTES
Exhibit 10.10
THIS FIRST AMENDMENT TO SENIOR SECURED CONVERTIBLE NOTES (this “Amendment”), dated as
of February 28, 2007, is made by and among Global Employment Holdings, Inc., a Delaware
corporation (the “Company”), and the noteholders listed on the signature pages hereto
(individually, a “Noteholder” and collectively, the “Noteholders”). Capitalized terms used
but not defined herein shall have the meanings set forth in the Company’s Senior Secured
Convertible Notes, dated as of March 31, 2006 (the “Notes”).
WHEREAS:
A. The Company and the Noteholders are parties to the Notes Securities Purchase Agreement,
dated March 31, 2006, as amended, pursuant to which the Company issued and the Noteholders
purchased the Notes.
B. The debt evidenced by the Notes is subordinated to the Senior Indebtedness.
C. The Company’s subsidiary Global Employment Solutions, Inc. has proposed a senior debt
refinancing (the “Refinancing”) whereby the Credit Facility will be terminated and the Senior
Indebtedness will be paid in full to ▇▇▇▇▇ Fargo Bank, N.A. and a new credit agreement will be
entered into with CapitalSource Finance LLC (“CapitalSource”) and other lenders (the “New Senior
Lenders”) to permit borrowings of up to $30,000,000 (the “New Credit Agreement”).
D. The consent of the holders of 66-2/3% of the aggregate principal amount of the Notes is
required for the Refinancing and for the amendment of three defined terms in the Notes to reflect
the Refinancing.
NOW, THEREFORE, the Company and the Noteholders hereby agree as follows:
1. Amendment
to Section 2. The following sentence is added to the end of Section 2 of the Notes:
“In addition, the Interest Rate shall be increased from 8.0% to 9.5% for the
period beginning on February 28, 2007 and ending on the date on which the Company
has issued at least $5,000,000 of Common Stock for cash (or, if such Common Stock
has not previously been issued, the date on which an aggregate of $3,000,000 of
Common Stock has been issued to ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, in
accordance with the terms of the letter agreement dated February 28, 2007 between
those individuals and the Company).”
2. Amendment
of Section 28. The following sub-sections of Section 28 of the Notes are amended to
read in their entireties as follows:
“(h) ‘Consolidated EBITDA’ means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period, plus (i) without
duplication, the sum of the following amounts of such Person and its Subsidiaries for such period
and to the extent deducted in determining Consolidated Net Income of such Person for such period:
(A) Consolidated Net Interest Expense, (B) income tax expense, (C) depreciation expense, (D)
amortization expense, including amortization of identifiable intangibles, (E) expense recorded
pursuant to Statements of Financial Accounting Standards (“SFAS”) No.123(r): Share-Based Payments,
(F) non cash costs to terminate operating leases recorded pursuant to SFAS No. 146: Accounting for
Costs Associated with Exit or Disposal Activities, (G) any indirect and general expenses related to
business combinations expensed pursuant to SFAS No. 141: Business Combinations, (H) the valuation
of the exercise and conversion features contained in the Note, the Warrants and the Company’s
Series A convertible preferred stock pursuant to SFAS No. 133: Accounting for Derivative
Instruments and Hedging Activities and EITF 00-19, Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock and related standards, and (I) any
gain or loss recorded related to the extinguishment of debt pursuant to the applicable standards;
plus, (ii) when calculated with respect to the Company for any period in fiscal year 2005, without
duplication, the sum of the following amounts for such period to the extent deducted in determining
Consolidated Net Income of the Company for such period: (I) any non-material change in the balance
of the accrued liability related to the worker’s compensation insurance program in place prior to
August 2002, as more fully explained in Notes A and N to the Company’s 2004 annual report, (II) the
annual management fee to KRG Capital Partners, LLC incurred prior to Closing, (III) charges related
to employee terminations in the first Fiscal Quarter of 2005, (IV) fees and expenses related to the
transactions contemplated by the Securities Purchase Agreement not to exceed $6 million, (V)
accounting treatment of the transactions contemplated by the Securities Purchase Agreement with
respect to outstanding management equity plan shares and preferred shares and (VI) retention
payments made to members of the Company’s management in connection with the transactions
contemplated by the Securities Purchase Agreement; plus, (iii) when calculated with respect to the
Company for any period in fiscal year 2006, without duplication, the sum of the amounts in clauses
(ii) (II), (IV), (V) and (VI) above for such period to the extent deducted in determining
Consolidated Net Income of the Company for such period, and plus, (iv) after the effective date of
a merger or acquisition, the “pro-forma” EBITDA of the acquired entity on a basis as if the merger
or acquisition had been effective for the Company’s previous four consecutive fiscal quarters,
adjusted for non-recurring expenses. Each subsequent fiscal quarter, pro-forma fiscal quarters
would be replaced by actual results. The intent is to provide credit for pro-forma
EBITDA on a rolling basis only for those quarters in which actual consolidated results are not
available.”
“(m) ‘Credit Facility’ means the Credit Agreement, dated as of February 28, 2007, by and among
the Company, certain subsidiaries of the Company, and CapitalSource Finance LLC (as the same may be
amended from time to time) and all other Loan Documents (as defined therein), each as has been
amended and may be amended from time to time, or any refunding or replacement thereof.”
“(mm) ‘Senior Indebtedness’ means the principal of (and premium, if any), interest on, and all
fees and other amounts (including, without limitation, any reasonable out-of-pocket costs),
enforcement expenses (including reasonable out-of-pocket legal fees and
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disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating thereto) payable by
the Company under or in connection with the Credit Facility; provided, however,
that (i) the aggregate amount of the outstanding amount of the Revolving Advances (as defined in
the Credit Facility) made pursuant to the Credit Facility, the outstanding Term Loan (as defined in
the Credit Facility) and the outstanding Letter of Credit Usage (as defined in the Credit Facility)
will not at any time exceed $30,000,000 as such amount is reduced from time to time by principal
payments of the portion of the Senior Indebtedness constituting term loans and permanent reductions
of the revolving commitments under the Credit Facility and (ii) such Senior Indebtedness
affirmatively provides that the interest per annum (excluding commitment and similar per annum
fees, but not in a default period) will be: (1) with respect to the Prime Rate Portion of the
Principal Balance of each Revolving Advance, an annual rate equal to the sum of the Prime Rate in
effect from time to time, plus 2.25%, (2) with respect to each portion of the Principal
Balance of each Revolving Advance consisting of a LIBOR Rate Loan, an annual rate equal to the sum
of the applicable LIBOR Rate in effect from time to time, plus 3.50%, (3) with respect to
the Prime Rate Portion of the Principal Balance of the Term Loan, an annual rate equal to the sum
of the Prime Rate in effect from time to time, plus 3.75%, and (4) with respect to each
portion of the Principal Balance of the Term Loan consisting of a LIBOR Rate Loan, an annual rate
equal to the sum of the applicable LIBOR Rate in effect from time to time, plus 5.00%.”
3. No Other Changes. Except as explicitly set forth in this Amendment, all of the terms and
conditions of the Notes remain in full force and effect.
4. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Amendment and the
consummation of the transactions contemplated hereby.
5. Facsimile Signatures; Counterparts. This Amendment may be executed via facsimile signature. This
Amendment may be executed in two or more identical counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.
[Signature Pages Follow]
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IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be executed
and delivered as of the date first written above.
| THE COMPANY: | ||||
| GLOBAL EMPLOYMENT HOLDINGS, INC. | ||||
By: |
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Name: ▇▇▇▇▇▇ ▇▇▇▇▇ | ||||
| Title: President and Chief Executive Officer | ||||
| THE NOTEHOLDERS: | ||||||||||||||
| CONTEXT ADVANTAGE MASTER FUND, LP, on behalf of itself, Context Advantage Fund, LP, f/k/a Context Convertible Arbitrage Fund, L.P., and Context Offshore Advantage Fund, Ltd., f/k/a Context Convertible Arbitrage Offshore, Ltd. | CONTEXT OPPORTUNISTIC MASTER FUND, L.P. | |||||||||||||
| By: | Context Capital Management LLC, its
General Partner and Investment Advisor |
By: | Context Capital Management LLC, its General Partner | |||||||||||
By:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||||||||||
| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇ | Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||||||||||
| Title: | Managing Member | Title: | Managing Member | |||||||||||
| RADCLIFFE SPC, LTD., for and on behalf of the Class A Convertible Crossover Segregated Portfolio | MAGNETAR CAPITAL MASTER FUND, LTD. | |||||||||||||
| By: | Magnetar Financial LLC, its Investment Manager |
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| By: | RG Capital Management, L.P. | |||||||||||||
| By: | RGC Management Company, L.L.C. | |||||||||||||
By:
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | By: | /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||||||||||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ | Name | ▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||||||||||
| Title: | Managing Director | Its: | Counsel | |||||||||||
| GUGGENHEIM PORTFOLIO XXXI, LLC | PANDORA SELECT PARTNERS, LP | |||||||||||||
| By: | Guggenheim Advisors, LLC | By: | Pandora Select Advisors LLC | |||||||||||
| By: | Whitebox Advisors LLC | |||||||||||||
By:
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇ | By: | /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇ | |||||||||||
| Name: | ▇▇▇▇▇▇▇▇ ▇▇▇▇ | Name: | ▇▇▇▇▇▇▇▇ | ▇▇▇▇ | ||||||||||
| Title: | Director, CFO | Title: | Director, | CFO | ||||||||||
| WHITEBOX CONVERTIBLE ARBITRAGE PARTNERS, LP, as a Subordinated Creditor and as Collateral Agent | WHITEBOX INTERMARKET PARTNERS, LP | |||||||||||||
| By: | Whitebox Convertible Arbitrage Advisors LLC |
By: | Whitebox Intermarket Advisors LLC By: Whitebox Advisors LLC |
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| By: | Whitebox Advisors LLC | |||||||||||||
By:
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇ | By: | /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇ | |||||||||||
| Name: | ▇▇▇▇▇▇▇▇ ▇▇▇▇ | Name: | ▇▇▇▇▇▇▇▇ ▇▇▇▇ | |||||||||||
| Title: | Director, CFO | Title: | Director, CFO | |||||||||||
| CAPITAL RESOURCES GROWTH, INC. | GWIRTSMAN FAMILY PARTNERS, LLC | |||||||||||||
By:
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| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||||||||||
| Title: | President | Title: | President | |||||||||||
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