Exhibit 10.1

 

STANDSTILL AGREEMENT

 

THIS STANDSTILL AGREEMENT, dated as of August 5, 2013 (this “Agreement”), is
made by and among JTH HOLDING, INC., a Delaware corporation (the “Borrower”),
SUNTRUST BANK, in its capacity as administrative agent (the “Administrative
Agent”) for the Lenders (as defined in the Credit Agreement defined below) and
as issuing bank (the “Issuing Bank”) and swingline lender (the “Swingline
Lender”), the Lenders party hereto, JTH TAX, INC., a Delaware corporation
(“JTH”), LTS PROPERTIES, LLC, a Virginia limited liability company
(“Properties”), LTS SOFTWARE INC., a Virginia corporation (“Software”), WEFILE
INC., a Virginia corporation (“Wefile”), JTH FINANCIAL, LLC, a Virginia limited
liability company (“JTH Financial”), and JTH PROPERTIES 1632, LLC, a Virginia
limited liability company (“1632,” and together with JTH, Properties, Software,
Wefile and JTH Financial, collectively, the “Subsidiary Loan Parties,” and
together with the Borrower, collectively, the “Loan Parties,” and individually,
a “Loan Party”).

 

RECITALS:

 

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to
the Revolving Credit and Term Loan Agreement, dated as of April 30, 2012, as
amended by the Waiver and Amendment to Revolving Credit and Term Loan Agreement,
dated as of December 19, 2012, as amended by the Supplement and Joinder
Agreement, dated as of December 28, 2012, as amended by the Waiver to Revolving
Credit and Term Loan Agreement, dated as of March 8, 2013 (as further amended,
supplemented, amended and restated or otherwise modified through the date
hereof, the “Credit Agreement”).  Capitalized terms defined in the Credit
Agreement and undefined herein shall have the same defined meanings when such
terms are used in this Agreement;

 

WHEREAS, the Borrower has been in discussions with the staff (the “Staff”) of
the Securities and Exchange Commission’s Division of Corporation Finance
regarding comment letters and oral comments Borrower received from the Staff,
relating to the Borrower’s Form 10-K for the fiscal year ended April 30, 2012
and Form 10-Q for the quarterly period ended January 31, 2013;

 

WHERAS, the Staff’s inquiry has predominately focused on the Borrower’s
accounting policies related to the timing of the Borrower’s recognition of
franchise fee revenue for both territory and area developer sales;

 

WHEREAS, in connection with the Staff’s inquiry, the Borrower and its
independent accountants are reviewing the Borrower’s revenue recognition
policies, the Borrower and its accountants are engaged in a dialogue with the
Staff regarding the policies and the resolution of the Staff’s comments, and the
Borrower has engaged additional accounting experts to assist it in resolving the
Staff’s comments;

 

WHEREAS, both the amount of time that may be required for the Borrower and its
accountants to complete the accounting policy review and resolve the Staff’s
comments, and

 

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the potential outcome of that review and resolution (including possible
prospective and retroactive changes in the Borrower’s revenue recognition
policies), could cause the Borrower to be and to have been noncompliant with one
or more provisions of the Credit Agreement relating to (a) the Borrower’s
obligation to timely deliver financial reports and information to the
Administrative Agent and the Lenders and to file financial reports with
Governmental Authorities, and (b) the accuracy and compliance with GAAP of
financial information previously provided by the Borrower to the Administrative
Agent and the Lenders under the Credit Agreement (and the accuracy of financial
calculations and certifications based upon such financial information)
(collectively, the “Potential Financial Noncompliance Matters”); and

 

WHEREAS, in order for the Borrower to maintain certainty with respect to its
ongoing business operations during the financial review and resolution process,
and with respect to its ability to comply with any Securities and Exchange
Commission directives, the Borrower and the other Loan Parties have requested
certain temporary indulgences from the Administrative Agent and the Lenders.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged), the
parties hereto hereby agree as follows:

 

1.             Incorporation of Recitals.  The foregoing recitals to this
Agreement are incorporated in and made a part of this Agreement to the same
extent and the same effect as if fully set forth herein.

 

2.             Standstill Period.  Subject to the terms and conditions of this
Agreement, each of the Lenders and the Administrative Agent hereby agrees that
during the period commencing on the date hereof and ending on August 31, 2013
(the “Standstill Period”):

 

(a)           if the Potential Financial Noncompliance Matters constitute one or
more Defaults or Events of Default (including without limitation, as a result of
a failure by the Borrower to timely deliver its annual financial statements for
Fiscal Year 2013 in accordance with Section 5.1(a) of the Credit Agreement or to
file that information and related reports with Governmental Authorities on a
timely basis), it shall take no action to declare a Default or Event of Default
as a result of the Potential Financial Noncompliance Matters; and

 

(b)           so long as no other Default or Event of Default (existing not as a
result of the Potential Financial Noncompliance Matters) has not occurred and is
continuing, the Borrower shall continue to be entitled to borrow, prepay and
reborrow Revolving Loans in accordance with the terms and conditions of the
Credit Agreement, provided that the aggregate principal amount of Revolving
Loans outstanding during the Standstill Period shall not exceed the budgeted
borrowing amount for such period set forth in the consolidated budget for the
fiscal year that commenced on May 1, 2013 delivered by the Borrower pursuant to
Section 5.1(d) of the Credit Agreement, notwithstanding the existence of the
Potential Financial Noncompliance Matters, and the terms and conditions of the
Credit Agreement that provide that the Borrower may not borrow or reborrow
should there exist a Default or Event of Default or should any of the conditions
set forth in Section 3.2 not be satisfied or waived shall be deemed waived
during the Standstill

 

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Period only, and solely with respect to the Potential Financial Noncompliance
Matters (and in the applicable Notice of Borrowing, the Borrower may note this
waiver).

 

3.             No Implied Waivers.  Each of the Borrower and each other Loan
Party acknowledges and agrees that the Administrative Agent’s and Lenders’
agreements set forth in Section 2 above shall not constitute a waiver, express
or implied, of any other Default, Event of Default, covenant, term or provision
of the Credit Agreement or any of the other Loan Documents (other than the
limited waiver solely with respect to the Potential Financial Noncompliance
Matters described in Section 2(b) above, which waiver shall apply only during
the Standstill Period), nor shall it create any obligation, express or implied,
on the part of the Administrative Agent or any Lender to waive, or to consent to
any amendment of, any existing or future Default, Event of Default or violation
of any covenant, term or provision of the Credit Agreement or any of the other
Loan Documents.  Other than as provided in Section 2 and 3, the Administrative
Agent and the Lenders shall be entitled to require strict compliance by the
Borrower and the other Loan Parties with the Credit Agreement and each of the
other Loan Documents, notwithstanding the the Administrative Agent’s and
Lenders’ agreements set forth in Section 2 above, and nothing herein shall be
deemed to establish a course of action or a course of dealing with respect to
requests by the Borrower or any other Loan Party for waivers or amendments of
any Default, Event of Default, covenant, term or provision of the Credit
Agreement or any of the other Loan Documents.

 

4.             Conditions to Effectiveness of this Agreement.  This Agreement
and the limited waiver contained herein shall become effective on the date (the
“Agreement Effective Date”) when each of the conditions set forth below shall
have been fulfilled to the satisfaction of the Administrative Agent:

 

(a)           The Administrative Agent shall have received counterparts of this
Agreement, duly executed and delivered on behalf of the Borrower and the other
Loan Parties.

 

(b)           Other than the Potential Financial Noncompliance Matters, no event
shall have occurred and be continuing that constitutes an Event of Default, or
that would constitute an Event of Default but for the requirement that notice be
given or that a period of time elapse, or both.

 

(c)           All representations and warranties of the Borrower contained in
the Credit Agreement, and all representations and warranties of each other Loan
Party in each Loan Document to which it is a party, shall be true and correct in
all material respects at the Agreement Effective Date as if made on and as of
such Agreement Effective Date, except that (a) any representation or warranty
relating to any financial statements shall be deemed to be applicable to the
financial statements most recently delivered to the Administrative Agent in
accordance with the provisions of the Loan Documents, (b) each other
representation or warranty expressly stated to be made as of the Closing Date
shall not be deemed to have been repeated as of any date other than the Closing
Date, and (c) any representation or warranty relating to any financial
statements shall be deemed to be qualified by the existence of the Potential
Financial Noncompliance Matters.

 

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(d)           The Borrower shall have delivered to the Administrative Agent
(1) certified copies of evidence of all corporate and company actions taken by
the Borrower and the other Loan Parties to authorize the execution and delivery
of this Agreement, (2) certified copies of any amendments to the articles or
certificate of incorporation, bylaws, partnership certificate or operating
agreement of the Borrower and each other Loan Party since the date of the Credit
Agreement, (3) a certificate of incumbency for the officers or other authorized
agents or partners of the Borrower and each other Loan Party executing this
Agreement and (4) such additional supporting documents as the Administrative
Agent or counsel for the Administrative Agent reasonably may request.

 

(e)           All documents delivered pursuant to this Agreement must be of form
and substance satisfactory to the Administrative Agent and its counsel, and all
legal matters incident to this Agreement must be satisfactory to the
Administrative Agent’s counsel.

 

5.             Amendment Only; No Novation; Modification of Loan Documents. 
Each of the Borrower and each other Loan Party acknowledges and agrees that this
Agreement only amends the terms of the Credit Agreement and the other Loan
Documents and does not constitute a novation, and each of the Borrower and each
other Loan Party ratifies and confirms the terms and provisions of, and its
obligations under, the Credit Agreement and the other Loan Documents in all
respects.  Each of the Borrower and each other Loan Party acknowledges and
agrees that each reference in the Loan Documents to any particular Loan Document
shall be deemed to be a reference to such Loan Document as amended by this
Agreement.  To the extent of a conflict between the terms of any Loan Document
and the terms of this Agreement, the terms of this Agreement shall control.

 

6.             Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Borrower, the other Loan Parties, the Lenders and
the Administrative Agent and their respective successors and assigns.

 

7.             No Further Amendments.  Nothing in this Agreement or any prior
amendment to the Loan Documents shall require the Administrative Agent or any
Lender to grant any further amendments to the terms of the Loan Documents.  Each
of the Borrower and each other Loan Party acknowledges and agrees that there are
no defenses, counterclaims or setoffs against any of their respective
obligations under the Loan Documents.

 

8.             Representations and Warranties.  Each of the Borrower and each
other Loan Party represents and warrants that this Agreement has been duly
authorized, executed and delivered by it in accordance with resolutions adopted
by its board of directors or comparable managing body.  All other
representations and warranties made by the Borrower and each other Loan Party in
the Loan Documents are incorporated by reference in this Agreement and are
deemed to have been repeated as of the date of this Agreement with the same
force and effect as if set forth in this Agreement, except that (a) any
representation or warranty relating to any financial statements shall be deemed
to be applicable to the financial statements most recently delivered to the
Administrative Agent in accordance with the provisions of the Loan Documents,
(b) each other representation or warranty expressly stated to be made as of the
Closing Date shall not be deemed to have been repeated as of any date other than
the Closing Date, and (c) any

 

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representation or warranty relating to any financial statements shall be deemed
to be qualified by the existence of the Potential Financial Noncompliance
Matters.

 

9.             Confirmation of Lien.  Each of the Borrower and each other Loan
Party hereby acknowledges and agrees that the Collateral is and shall remain in
all respects subject to the lien, charge and encumbrance of the Credit Agreement
and the other Loan Documents and nothing herein contained, and nothing done
pursuant hereto, shall adversely affect or be construed to adversely affect the
lien, charge or encumbrance of, or conveyance effected by the Loans or the
priority thereof over other liens, charges, encumbrances or conveyances.

 

10.          Ratification.  The terms of the Credit Agreement and the other Loan
Documents shall remain in full force and effect and are ratified and affirmed by
the Borrower and each other Loan Party.

 

11.          Fees and Expenses.  The Borrower agrees to pay all out-of-pocket
costs and expenses of the Administrative Agent and its Affiliates, including the
fees, charges and disbursements of counsel for the Administrative Agent and its
Affiliates, in connection with the preparation and administration of this
Agreement.

 

12.          Severability.  Any provision of this Agreement held to be illegal,
invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity or unenforceability
without affecting the legality, validity or enforceability of the remaining
provisions hereof; and the illegality, invalidity or unenforceability of a
particular provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

13.          Governing Law.  This Agreement shall be construed in accordance
with and be governed by the law (without giving effect to the conflict of law
principles thereof) of the Commonwealth of Virginia.  THIS WAIVER WILL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.

 

14.          Counterparts.  This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.  It shall not be necessary that the
signature of, or on behalf of, each party, or that the signatures of the persons
required to bind any party, appear on more than one counterpart.

 

[SIGNATURES ON FOLLOWING PAGES]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed by their respective duly authorized representatives all as of the day
and year first above written.

 

 

BORROWER:

 

 

 

 

JTH HOLDING, INC., a Delaware corporation

 

 

 

 

By:

/s/Mark F. Baumgartner

 

Name:

Mark F. Baumgartner

 

Title:

Vice President and Chief Financial Officer

 

 

 

 

SUBSIDIARY LOAN PARTIES:

 

 

 

 

JTH TAX, INC., a Delaware corporation

 

 

 

 

By:

/s/Mark F. Baumgartner

 

Name:

Mark F. Baumgartner

 

Title:

Vice President and Chief Financial Officer

 

 

 

 

LTS PROPERTIES, LLC, a Virginia limited liability company

 

 

 

 

By:  JTH TAX, INC., a Delaware corporation

 

 

 

 

 

By:

/s/Mark F. Baumgartner

 

 

 

Mark F. Baumgartner

 

 

 

Vice President and Chief Financial Officer

 

 

 

 

LTS SOFTWARE INC., a Virginia corporation

 

 

 

 

By:

/s/Mark F. Baumgartner

 

Name:

Mark F. Baumgartner

 

Title:

Chief Financial Officer

 

 

 

 

WEFILE INC., a Virginia corporation

 

 

 

 

By:

/s/Kathleen Curry

 

Name:

Kathleen Curry

 

Title:

President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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JTH FINANCIAL, LLC, a Virginia limited liability company

 

 

 

By:  JTH HOLDING, INC., a Delaware corporation

 

 

 

 

 

By:

/s/Mark F. Baumgartner

 

 

 

Mark F. Baumgartner

 

 

 

Vice President and Chief Financial Officer

 

 

 

 

 

JTH PROPERTIES 1632, LLC, a Virginia limited liability company

 

 

 

By:  JTH FINANCIAL, LLC, a Virginia limited liability company, Manager

 

 

 

 

 

By:  JTH HOLDING, INC., a Delaware corporation

 

 

 

 

 

By:

/s/Mark F. Baumgartner

 

 

 

Mark F. Baumgartner

 

 

 

Vice President and Chief Financial Officer

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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ADMINISTRATIVE AGENT:

 

 

 

SUNTRUST BANK

 

as Administrative Agent, as Issuing Bank and as Swingline Lender

 

 

 

 

By:

/s/David Bennett

 

Name:

David Bennett

 

Title:

Director

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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LENDERS:

 

 

 

SUNTRUST BANK, as Lender

 

 

 

By:

/s/David Bennett

 

Name:

David Bennett

 

Title:

Director

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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CITIZENS BANK OF PENNSYLVANIA, as Lender

 

 

 

By:

/s/Tracy Van Riper

 

Name:

Tracy Van Riper

 

Title:

Senior Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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BANK OF AMERICA, N.A., as Lender

 

 

 

By:

/s/Jundie Cadiena

 

Name:

Jundie Cadiena

 

Title:

Senior Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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BRANCH BANKING AND TRUST COMPANY, as Lender

 

 

 

By:

/s/S. Hearst Vann

 

Name:

S. Hearst Vann

 

Title:

Senior Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as Lender

 

 

 

By:

/s/Duncan S. Owen III

 

Name:

Duncan S. Owen III

 

Title:

Senior Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

 

 

 

By:

/s/Paula Smith

 

Name:

Paula Smith

 

Title:

Senior Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

 

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CAPITAL ONE, NATIONAL ASSOCIATION, as Lender

 

 

 

By:

/s/ Tavis B. Maxwell

 

Name:

Tavis B. Maxwell

 

Title:

Vice President

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

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BMO HARRIS FINANCING, INC., as a Lender

 

 

 

By:

/s/Elizabeth Armstrong

 

Name:

Elizabeth Armstrong

 

Title:

Director

 

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