EXHIBIT 10.22
FIRST AMENDMENT TO CREDIT AGREEMENT
     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of
May 14, 2007, is by and among SUNAIR SERVICES CORPORATION (f/k/a SUNAIR
ELECTRONICS, INC., a Florida corporation (the “Borrower”), each of those
subsidiaries of the Borrower party hereto (each a “Guarantor”, and collectively,
the “Guarantors”), the several banks and other financial institutions (the
“Lenders”) from time to time party to the Credit Agreement (defined below) and
WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders
(the “Agent”).
RECITALS
     A. The Borrower, the Guarantors, the Lenders and the Agent have entered
into that certain Credit Agreement, dated as of June 7, 2005, as amended,
supplemented or otherwise modified (the “Credit Agreement”).
     B. The Borrower, the Guarantors, the Lenders and the Agent have agreed to
modify the Credit Agreement as follows:
     NOW, THEREFORE, the parties hereto agree as follows:
     1. The Credit Agreement is hereby amended as follows:
     (a) Section 1.1 is hereby amended by amending in their entirety the
following definitions so that such definitions now read as follows:
     “Applicable Percentage” shall mean, for any day, the rate per annum set
forth below opposite the applicable Level then in effect:

                  Level   Leverage Ratio     Applicable Percentage  
I
    ³3.25x       4.00 %
II
  <3.25x but ³3.00x     3.50 %
    III
  <3.00x but ³2.50x     2.75 %
IV
    <2.50x       2.50 %

     The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date three (3) Business Days after the date on which the
Administrative Agent has received from the Borrower the quarterly financial
information and certifications required to be delivered to the Administrative
Agent and the Lenders in accordance with the provisions of Sections 5.1(a),
5.1(b) and 5.2(b) (each an “Interest Determination Date”). Such Applicable
Percentage shall be effective from

 

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such Interest Determination Date until the next such Interest Determination
Date. After the Closing Date, if the Borrower shall fail to provide the
financial information and certifications in accordance with the provisions of
Sections 5.1(a), 5.1(b) and 5.2(b) or an Event of Default shall have occurred
and be continuing, the Applicable Percentage shall, on the date three
(3) Business Days after the date by which the Borrower was so required to
provide such financial information and certifications to the Administrative
Agent and the Lenders, be based on Level I until such time as such information
and certifications are provided, whereupon the Level shall be determined by the
then current Leverage Ratio
     “Consolidated EBITDA” shall mean, for any applicable period of computation,
(a) Consolidated Net Income for such period plus (b) the sum of the following to
the extent deducted in calculating Consolidated Net Income: (i) Consolidated
Interest Expense for such period, (ii) the provision for Federal, state, local
and foreign income taxes payable by the Borrower and its Subsidiaries for such
period, (iii) depreciation and amortization expense for such period, (iv) other
non-cash expenses of the Borrower and its Subsidiaries, including, but not
limited to, stock based compensation, equity based compensation, bad debt
reserves, goodwill impairment and any other non-cash expenses reflected on the
Borrower’s financial statements and (v) solely for the fiscal quarter ended
March 31, 2007, the payment of the management fee (not to exceed $390,624) to
RPC Financial Advisors, LLC.
     “Reserves” shall mean (a) an amount equal to $500,000 which represents
approximately six (6) months’ rent under all real estate leases of the Acquired
Business (provided, however, if the Acquired Business obtains a lien waiver from
any landlord under any of such leases in form satisfactory to the Agent, such
amount shall be reduced by an amount equal to six (6) months’ rent with respect
to such lease as set forth on the schedule to be delivered to the Agent pursuant
to Section 5.2(f) hereof) and (b) an amount equal to $803,000 which represents
the approximate value of the assets of Percipia, Inc. and Percipia Networks,
Inc. (provided, however, such reserve will be eliminated upon the termination by
Bank One, N.A. of its UCC financing statements filed against Percipia, Inc. and
Percipia Networks, Inc.).
     “Revolving Commitment Termination Date” shall mean April 1, 2008.
     (b) Section 1.1 is hereby further amended by adding the following sentence
at the end of the definition of “Funded Debt”:
     For the avoidance of doubt, Funded Debt shall include any Letters of Credit
issued by the Agent on behalf of the Borrower or any of its Subsidiaries and any
promissory note issued by any Seller that is not

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     subordinated to the Indebtedness arising or existing under the Credit
Agreement and the other Credit Documents.
     (c) Section 2.1(a) is amended in its entirety so that such Section now
reads as follows:
     (a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (“Revolving Loans”) to the Borrower from time to time for the
purposes hereinafter set forth; provided, however, that (i) with regard to each
Lender individually, the sum of such Lender’s share of outstanding Revolving
Loans plus such Lender’s LOC Commitment Percentage of LOC Obligations shall not
exceed such Lender’s Revolving Commitment Percentage of the aggregate Revolving
Committed Amount, and (ii) with regard to the Lenders collectively, the sum of
the aggregate amount of outstanding Revolving Loans plus LOC Obligations shall
not exceed the aggregate Revolving Committed Amount then in effect. For purposes
hereof, the aggregate amount available hereunder shall be SIXTEEN MILLION
DOLLARS ($16,000,000) (as such aggregate maximum amount may be reduced from time
to time as provided in Section 2.4, the “Revolving Committed Amount”). Revolving
Loans may consist of Floating LIBOR Rate Loans or Fixed LIBOR Rate Loans, or a
combination thereof, as the Borrower may request, and may be repaid and
reborrowed in accordance with the provisions hereof; provided, however, the
Revolving Loans made on the Closing Date or on either of the two Business Days
immediately following the Closing Date may only consist of Floating LIBOR Rate
Loans. Fixed LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending
Office and Floating LIBOR Rate Loans at its Domestic Lending Office.
     (d) Section 2.4(b) is amended in its entirety so that such Section now
reads as follows:
     (b) Mandatory Reductions. The Revolving Commitment Amount shall be reduced
by $2,500,000 on June 30, 2007, unless certain legacy businesses of the Borrower
are sold prior to such date, in which case, no such reduction shall be required.
     (e) Section 5.9(a) is amended in its entirety so that such Section now
reads as follows:
     (a) Leverage Ratio. The Leverage Ratio shall be less than or equal to the
following amounts as of the last day of each fiscal quarter ending during the
following periods:

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      Period   Maximum Ratio
January 1, 2007 through March 31, 2007
  4.70 to 1.0
April 1, 2007 through June 30, 2007
  3.50 to 1.0
July 1, 2007 and thereafter
  3.25 to 1.0

     (f) Section 5.9(b) is amended in its entirety so that such Section now
reads as follows:
     (b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio shall be
greater than or equal to the following amounts as of the last day of each fiscal
quarter ending during the following periods:

      Period   Maximum Ratio
January 1, 2007 through March 31, 2007
  1.10 to 1.0
April 1, 2007 and thereafter
  1.25 to 1.0

     (g) Section 5.9(c) is amended in its entirety so that such Section now
reads as follows:
     (c) Consolidated EBITDA. Consolidated EBITDA shall be at least each of the
following amounts for each of the rolling four fiscal quarterly periods ending
as of the last day of each fiscal quarter ending during the following periods:

          Period   Minimum Amount  
January 1, 2007 through March 31, 2007
  $ 2,000,000  
April 1, 2007 through June 30, 2007
  $ 2,500,000  
July 1, 2007 and thereafter
  $ 3,000,000  

     2. The Agent shall have received an amendment fee in the amount of $15,000
on the date hereof.
     3. Borrowers will each execute such additional documents as are reasonably
requested by the Agent to reflect the terms and conditions of this Amendment and
will cause to be delivered such certificates, legal opinions and other documents
as are reasonably required by the Agent. In addition, the Borrower will pay all
costs and expenses in connection with the preparation, execution and delivery of
the documents

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executed in connection with this transaction, including, without limitation, the
reasonable fees and out-of-pocket expenses of special counsel to the Agent as
well as any and all filing and recording fees and stamp and other taxes with
respect thereto and to save the Agent harmless from any and all such costs,
expenses and liabilities.
     4. Except as expressly amended hereby, all of the provisions of the Credit
Agreement and the Credit Documents shall remain unchanged and shall continue to
be, and shall remain, in full force and effect in accordance with their
respective terms. The amendments set forth herein shall be limited precisely as
provided for herein to the provisions expressly amended herein and any waivers
of any provisions of the Credit Agreement or other Credit Documents granted
prior to the date hereof shall be limited to such waiver on the date waived and,
in each case, the amendments and the waivers shall not be deemed to be a waiver
of, an amendment to, consent to or modification of any other term or provision
of the Credit Agreement or any other Credit Document or of any transaction or
further or future action on the part of the Borrower which would require the
consent of the Lenders under the Credit Agreement or any of the Credit
Documents.
     5. This Amendment is a Credit Document executed pursuant to the Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Credit Agreement.
     6. At such time as this Amendment shall become effective, all references in
the Credit Documents to the “Credit Agreement” shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
     7. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
     8. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one counterpart.
     9. THIS AMENDMENT AND THE OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION HEREWITH (UNLESS SPECIFICALLY STIPULATED TO THE CONTRARY IN SUCH
DOCUMENT OR AGREEMENT), AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.

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     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to
be duly executed and delivered by its proper and duly authorized officers as of
the day and year first above written.

          BORROWER: SUNAIR SERVICES CORPORATION (f/k/a/ SUNAIR ELECTRONICS,
INC.)
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Interim Chief Financial Officer     

          GUARANTORS: SUNAIR INTERNATIONAL SALES CORP.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

            MIDDLETON PEST CONTROL, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

            PERCIPIA, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Vice President    

            PERCIPIA NETWORKS, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Vice President    

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            SUNAIR SOUTHEAST PEST HOLDINGS, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

            SUNAIR PEST HOLDINGS, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

            SUNAIR SERVICES CORPORATION
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Interim Chief Financial Officer     

            SUNAIR COMMUNICATIONS, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

            SUNAIR FLORIDA PEST HOLDINGS, INC.
      By:   /s/ Edward M. Carriero, Jr.         Name:   Edward M. Carriero, Jr. 
      Title:   Treasurer     

          ADMINISTRATIVE AGENT AND LENDERS: WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent and as a Lender
      By:   /s/ Karen Leikert         Name:   Karen Leikert        Title:  
Senior Vice President     

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