AMENDMENT NO. 1 AND WAIVER TO REVOLVING CREDIT AND SECURITY AGREEMENT
Exhibit 10.1
AMENDMENT NO. 1 AND WAIVER TO REVOLVING CREDIT AND SECURITY
AGREEMENT
AGREEMENT
THIS AMENDMENT NO. 1 AND WAIVER TO REVOLVING CREDIT AND SECURITY AGREEMENT (this “Amendment
No. 1”), dated as of March 2, 2010, is entered into by and among AMERICA SERVICE GROUP INC., a
Delaware corporation (“ASG”), PRISON HEALTH SERVICES, INC., a Delaware corporation (“PHS”), PRISON
HEALTH SERVICES OF INDIANA, L.L.C., an Indiana limited liability company (“PHS Indiana”),
CORRECTIONAL HEALTH SERVICES, LLC, a New Jersey limited liability company (“CHS”), and SECURE
PHARMACY PLUS, LLC, a Tennessee limited liability company (“SPP” and together with ASG, PHS, PHS
Indiana, and CHS individually and collectively, “Borrower”), and CAPITALSOURCE BANK, a California
industrial bank (“CapitalSource”), as administrative agent and collateral agent for Lenders (in
such capacities, “Agent”), and the Lenders party hereto.
RECITALS
A. Pursuant to that certain Revolving Credit and Security Agreement dated as of July 28, 2009,
by and between Borrower, CapitalSource and Lenders (as amended, supplemented, modified and restated
from time to time, collectively, the “Loan Agreement”), Lenders agreed to make available to
Borrower the Loans and other credit facilities contemplated thereby.
B. The parties hereto desire to enter into this Amendment No. 1 to amend the Loan Agreement in
certain respects as provided herein.
NOW, THEREFORE, in consideration of the foregoing, the terms and conditions, premises and
other mutual covenants set forth in this Amendment No. 1, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound, Borrower, Agent and Lenders hereby agree as follows:
Section 1. Definitions. Unless otherwise defined herein, all capitalized terms used
and not defined herein shall have the meanings assigned to such terms in the Loan Agreement (as
amended hereby).
Section 2. Waiver of Designated Event of Default. Borrower hereby acknowledges that
an Event of Default has occurred and is continuing as a result of Borrower’s failure to comply
under Section 7.1 of the Loan Agreement with the Adjusted Fixed Charge Ratio set forth in
clause (2) of Annex I of the Loan Agreement for the calendar quarter ending December 31,
2009 (the “Designated Event of Default”). As of the First Amendment Effective Date (as defined
below), Agent and Lenders shall be deemed to have waived the Designated Event of Default. Except
as expressly set forth herein, (a) this Amendment No. 1 shall not be deemed to be a waiver of any
other Default or Event of Default, all of which are expressly reserved by Lender; and (b) the Loan
Agreement and the other Loan Documents shall continue in full force and effect, except as amended
by this Amendment No. 1. The waiver set forth in this Section 2 shall not preclude the
exercise now or at any time in the future of any right, power, or privilege available to Agent
and/or Lenders whether under the Loan Agreement, the other Loan Documents or otherwise, including
without limitation in respect of the Designated Event of Default which shall not be waived by Agent
or Lenders absent the occurrence of the First Amendment Effective Date.
Section 3. Amendments to Loan Agreement.
(a) The first Whereas clause of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
“WHEREAS, Borrower has requested that Lenders make available to Borrower a
revolving credit facility (the “Revolving Facility”) in a maximum principal
amount at any time outstanding of up to Twenty Million Dollars ($20,000,000)
(the “Closing Date Facility Cap”) plus up to an additional Twenty Million
Dollars ($20,000,000) if all Additional Tranches (as defined herein) are
activated in accordance with the terms hereof, plus and within the Current
Facility Cap, a sublimit of Fifteen Million Dollars ($15,000,000) (the “L/C
Sublimit”), the proceeds of such Revolving Facility shall be used by
Borrower for general corporate matters and purposes, and working capital
needs in connection with its provision of medical and related services to
correctional facilities;”
(b) Section 2.1(a) of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
“(a) Subject to the provisions of this Agreement, each Lender agrees to make
available its Pro Rata Share of Advances, including Advances in connection
with the issuance or collateralization of Letters of Credit, to Borrower
under the Revolving Facility from time to time during the Term;
provided, that (i) the Pro Rata Share of the Advances of any Lender
shall not at any time exceed its separate Commitment, and (ii) the aggregate
amount of all Advances at any time outstanding under the Revolving Facility,
together with the then aggregate amount of L/C Exposure, shall not exceed
the lesser of (A) the Current Facility Cap and (B) the Availability. After
the Closing Date, so long as no Default or Event of Default exists and
subject to the terms of this Agreement, with the prior written consent of
Agent and Lenders in their sole discretion, the Closing Date Facility Cap
may be increased upon the written request of Borrower (which such request
shall be made at least fifteen (15) days prior to the proposed effective
date of such Additional Tranche) to Agent and Lenders to activate up to four
(4) Additional Tranches; provided that Borrower shall not make more
than four (4) such requests during the term hereof and provided further that
neither Agent nor Lenders shall have any obligation to consent to any
requested activation of an Additional Tranche. The obligations of Lenders
hereunder shall be several and not joint up to the amount of the
Commitments. The Revolving Facility is a revolving credit facility, which
may be drawn, repaid and redrawn, from time to time as permitted under this
Agreement. Any determination as to whether there is availability within the
Borrowing Base for Advances shall be made by Agent in its Permitted
Discretion and is final and binding upon Borrower. Unless otherwise
permitted by Agent, each Advance shall be in an amount of at least $100,000.
Subject to the provisions of this Agreement, Borrower may request Advances
under the Revolving Facility up to and including the value, in Dollars, of
85% of the Borrowing Base (such calculated amount being referred to herein
as the “Availability”). Advances under the Revolving Facility automatically
shall be made for the payment of interest on the Loans and other Obligations
on the date when due to the extent available and as provided for herein.
(c) Section 2.7 of the Loan Agreement is hereby amended by deleting the words
“Facility Cap” set forth therein and inserting in lieu thereof the words “Current Facility Cap”.
(d) Section 2.12(a) of the Loan Agreement is hereby amended by deleting the words
“Facility Cap” set forth therein and inserting in lieu thereof the words “Current Facility Cap”.
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(e) Section 3.1 of the Loan Agreement is hereby amended by deleting the words
“Facility Cap” set forth therein and inserting in lieu thereof the words “Current Facility Cap”.
(f) Section 4.2(c) of the Loan Agreement is hereby amended by deleting the words
“Facility Cap” set forth therein and inserting in lieu thereof the words “Current Facility Cap”.
(g) Section 9.1(a)(viii) is hereby amended by deleting the words “Facility Cap”
set forth therein and inserting in lieu thereof the words “Current Facility Cap”.
(h) The definition of “EBITDA” set forth in Annex I of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
“EBITDA” shall mean, for any Test Period, the sum, without
duplication, of the following for Borrower, on a consolidated basis: Net
Income determined in accordance with GAAP, plus, (a) Interest
Expense, (b) any provision for taxes based on income or profit that was
deducted in computing Net Income, (c) depreciation expense, (d) amortization
expense, (e) all other non-cash, non-recurring charges and expenses,
excluding accruals for cash expenses made in the ordinary course of
business, (f) loss from any sale of assets, other than sales in the ordinary
course of business, all of the foregoing determined in accordance with GAAP,
and (g) charges incurred and that are arising out of the SPP investigation
after July 1, 2009 including, without limitation, all expenses associated
with the SPP investigation including any fines, penalties, credits or
refunds to customers and expenses or charges incurred in the associated
shareholder securities suit provided such charges shall in no event exceed
$4,500,000 in the aggregate during the course of the Term, minus (a)
gains from any sale of assets, other than sales in the ordinary course of
business and (b) other extraordinary or non-recurring gains.
(i) The following definitions are hereby inserted in appropriate alphabetical order in
Appendix A to the Loan Agreement:
(i) “Additional Tranche” shall mean an increase in the maximum
amount of the Revolving Facility equal to $5,000,000 (it being acknowledged
that four (4) Additional Tranches are permitted, subject to compliance with
Section 2.1(a), for a total of up to Twenty Million Dollars
($20,000,000) in Additional Tranches).
(ii) “Closing Date Facility Cap” shall have the meaning set forth in
the Recitals hereto.
(iii) “Current Facility Cap” shall mean, as of the date of
determination, the Closing Date Facility Cap plus the aggregate amount of
all Additional Tranches that have been activated with the consent of Agent
and Lenders in accordance with Section 2.1(a). For the avoidance of
doubt, the Current Facility Cap shall at no time exceed $40,000,000.
(iv) “SPP Investigation” shall mean that certain investigation of
the Audit Committee of the Board of Directors of ASG into matters directly
related to SPP business and accounting activities and practices described in
the press release issued by ASG on October 24, 2005.
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(j) The following definition set forth in Appendix A to the Loan Agreement is
hereby amended and restated in its entirety as follows:
“Termination Fee” shall mean (for the time period indicated) the
amount equal to (i) $800,000, if the date of such Revolver Termination is on
or after October 31, 2009 but prior to October 31, 2010 and (ii) $400,000,
if the date of such Revolver Termination is on or after October 31, 2010 but
prior to July 31, 2011.
Section 4. Representations and Warranties.
(a) Notwithstanding any other provision of this Amendment No. 1, each Borrower individually
hereby (i) confirms and makes all of the representations and warranties set forth in the Loan
Agreement and other Loan Documents with respect to such Borrower as of the date hereof and as of
the First Amendment Effective Date and confirms that they are true and correct, (ii) represents and
warrants to each Lender that it has good and marketable title to all of its respective Collateral,
free and clear of any Lien or security interest in favor of any other Person (other than Permitted
Liens), and (iii) represents and warrants that since the date of the last financial statements of
the Borrower provided to Agent there has been no material adverse change in the business,
operations, results of operations, assets, liabilities or financial condition of Borrower.
(b) Each Borrower individually hereby represents and warrants as of the date of this Amendment
No. 1 and as of the First Amendment Effective Date as follows: (i) it is duly incorporated or
organized, validly existing and in good standing under the laws of its jurisdiction of
organization; (ii) the execution, delivery and performance by it of this Amendment No. 1 are within
its powers, have been duly authorized, and do not contravene (A) its articles of organization,
operating agreement, or other organizational documents, or (B) any applicable law; (iii) no
consent, license, permit, approval or authorization of, or registration, filing or declaration with
any Governmental Authority or other Person, is required in connection with the execution, delivery,
performance, validity or enforceability of this Amendment No. 1 by or against it; (iv) this
Amendment No. 1 has been duly executed and delivered by it; (v) this Amendment No. 1 constitutes
its legal, valid and binding obligations enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights generally or by general
principles of equity; and (vi) upon the First Amendment Effective Date, it is not in default under
the Loan Agreement and no Default or Event of Default exists, has occurred or is continuing.
Section 5. Expenses. Borrower shall pay all costs and expenses incurred by Agent,
Lenders or any of their respective Affiliates, including, without limitation, documentation and
diligence fees and expenses, and all other out-of-pocket charges and expenses and reasonable
attorneys’ fees and expenses and allocated costs of in-house counsel, in connection with entering
into, negotiating, preparing, reviewing and executing this Amendment No. 1 and all related
agreements, documents and instruments, and all of the same, to the extent incurred and not promptly
reimbursed by Borrower, may be charged to Borrower’s account as an Advance and shall be part of the
Obligations. If Agent, any Lender or any of Agent or Lender’s Affiliates uses in-house counsel for
any of the purposes set forth above Borrower expressly agrees that its Obligations include
reasonable charges for such work commensurate with the fees that would otherwise be charged by
outside legal counsel selected by such Agent or Lender or such Affiliate in its sole discretion for
the work performed.
Section 6. Reference to the Effect on the Loan Agreement. Upon the effectiveness of
this Amendment No. 1, (i) each reference in the Loan Agreement to “this Agreement,” “hereunder,”
“hereof,” “herein” or words of similar import shall mean and be a reference to the Loan Agreement
as amended by this Amendment No. 1, and (ii) each reference in any other Loan Document to the “Loan
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Agreement” shall mean and be a reference to the Loan Agreement as amended by this Amendment No. 1.
Each reference herein to the Loan Agreement shall be deemed to mean the Loan Agreement as amended
by this Amendment No. 1. Except as specifically amended hereby, the Loan Agreement and all other
Loan Documents shall remain in full force and effect and the terms thereof are expressly
incorporated herein and are ratified and confirmed in all respects. This Amendment No. 1 is not
intended to be or to create, nor shall it be construed as or constitute, a novation or an accord
and satisfaction but shall constitute an amendment of the Loan Agreement. The parties hereto agree
to be bound by the terms and conditions of the Loan Agreement as amended by this Amendment No. 1 as
though such terms and conditions were set forth herein in full. The execution, delivery and
effectiveness of this Amendment No. 1 shall not, except as expressly provided in this Amendment No.
1, operate as a waiver of any right, power or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement or any other Loan Document or any other documents, instruments and
agreements executed or delivered in connection therewith or of any Default or Event of Default
under any of the foregoing whether arising before or after the Effective Date or as a result of
performance hereunder.
Section 7. Governing Law and Jury Trial. THIS AMENDMENT NO. 1 AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT NO. 1 SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE LOAN AGREEMENT AND
SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE LOAN AGREEMENT.
Section 8. Headings and Counterparts. The captions in this Amendment No. 1 are
intended for convenience and reference only and do not constitute and shall not be interpreted as
part of this Amendment No. 1 and shall not affect the meaning or interpretation of this Amendment
No. 1. This Amendment No. 1 may be executed in one or more counterparts, all of which taken
together shall constitute but one and the same instrument. This Amendment No. 1 may be executed by
facsimile transmission, which facsimile signatures shall be considered original executed
counterparts for all purposes, and each party to this Amendment No. 1 agrees that it will be bound
by its own facsimile signature and that it accepts the facsimile signature of each other party to
this Amendment No. 1.
Section 9. Amendments. This Amendment No. 1 may not be changed, modified, amended,
restated, waived, supplemented, discharged, canceled or terminated orally or by any course of
dealing or in any other manner other than by written agreement in accordance with Section
10.5 of the Loan Agreement. This Amendment No. 1 shall be considered part of the Loan
Agreement for all purposes under the Loan Agreement.
Section 10. Entire Agreement. This Amendment No. 1, the Loan Agreement, and the other
Loan Documents constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersedes all prior discussions, representations, agreements and
understandings, if any, relating to the subject matter hereof and thereof and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements between the
parties. There are no unwritten oral agreements between the parties.
Section 11. Miscellaneous. Whenever the context and construction so require, all
words used in the singular number herein shall be deemed to have been used in the plural, and vice
versa, and the masculine gender shall include the feminine and neuter and the neuter shall include
the masculine and feminine. This Amendment No. 1 shall inure to the benefit of Agent, Lenders, all
future holders of any Note, any of the Obligations or any of the Collateral and all Transferees and
Participants, and each of their respective successors and permitted assigns. No Borrower may
assign, delegate or transfer this Amendment No. 1 or any of its rights or obligations under this
Amendment No. 1 unless otherwise
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permitted by the Loan Documents. No rights are intended to be created under this Amendment
No. 1 for the benefit of any third party donee, creditor or incidental beneficiary of Borrower or
any Guarantor. Nothing contained in this Amendment No. 1 shall be construed as a delegation to
Agent or any Lender of any Borrower’s or any Guarantor’s duty of performance, including, without
limitation, any duties under any account or contract in which Lender has a security interest or
Lien. This Amendment No. 1 shall be binding upon Borrowers and their respective successors and
assigns.
Section 12. Effective Date. The effectiveness of this Amendment No. 1 and the
agreements of Agent and Lenders set forth herein, are subject to the satisfaction of the following
conditions precedent (the date on which such conditions shall have been satisfied, the “First
Amendment Effective Date”), all in form and substance satisfactory to Agent in its sole
discretion:
(a) Agent shall have received each of the following, each in form and substance satisfactory
to Agent in its sole discretion, and, where applicable, each duly executed by each party thereto:
| (i) | This Amendment No. 1, duly executed by an authorized officer of each Borrower and each Lender; and | ||
| (ii) | All other documents Agent may reasonably request with respect to any matter relevant to this Amendment No. 1 or the transactions contemplated hereby; |
(b) The representations and warranties contained herein, in the Loan Agreement and the other
Loan Documents, as each is amended hereby, shall be true and correct as of the date hereof, as if
made on the date hereof, except for such representations and warranties as are by their express
terms limited to a specific date;
(c) No Default or Event of Default shall have occurred and be continuing; and
(d) All corporate proceedings taken in connection with the transactions contemplated by this
Amendment No. 1 and all documents, instruments and other legal matters incident thereto shall be
satisfactory to Agent.
Section 13. Release by Borrower. BY EXECUTION OF THIS AMENDMENT NO. 1, EACH
BORROWER ACKNOWLEDGES AND CONFIRMS, ON A JOINT AND SEVERAL BASIS, THAT SUCH BORROWER PARTY DOES NOT
HAVE ANY OFFSETS, DEFENSES OR CLAIMS AGAINST AGENT OR ANY LENDER, OR ANY OF THEIR RESPECTIVE
PRESENT OR FORMER SUBSIDIARIES, AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS,
REPRESENTATIVES, ATTORNEYS, PREDECESSORS, SUCCESSORS OR ASSIGNS WHETHER ASSERTED OR UNASSERTED. TO
THE EXTENT THAT ANY BORROWER MAY HAVE SUCH OFFSETS, DEFENSES OR CLAIMS, EACH BORROWER AND EACH OF
ITS SUCCESSORS, ASSIGNS, PARENTS, SUBSIDIARIES, AFFILIATES, PREDECESSORS, EMPLOYEES, AGENTS, HEIRS,
EXECUTORS, AS APPLICABLE, JOINTLY AND SEVERALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES,
RELEASES AND FOREVER DISCHARGES AGENT, EACH LENDER, AND THEIR RESPECTIVE SUBSIDIARIES, AFFILIATES,
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, ATTORNEYS, PREDECESSORS, SUCCESSORS AND
ASSIGNS, BOTH PRESENT AND FORMER (COLLECTIVELY THE “LENDER AFFILIATES”) OF AND FROM ANY AND
ALL ACTUAL OR POTENTIAL CLAIMS, DEMANDS, DAMAGES, ACTIONS, REQUESTS FOR SANCTIONS AND CAUSES OF
ACTION, TORTS, OBLIGATIONS, SUITS, DEBTS, CONTROVERSIES, DAMAGES,
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JUDGMENTS, EXECUTIONS, CLAIMS AND DEMANDS WHATSOEVER, ALL OTHER LIABILITIES WHETHER KNOWN OR
UNKNOWN, MATURED OR UNMATURED, CONTINGENT OR ABSOLUTE, OF ANY KIND OR DESCRIPTION WHATSOEVER,
EITHER IN LAW OR IN EQUITY, INCLUDING WITHOUT LIMITATION UNDER THE UNITED STATES BANKRUPTCY CODE OR
OTHERWISE, ASSERTED OR UNASSERTED WHICH AGAINST AGENT, ANY LENDER AND/OR LENDER AFFILIATES ANY
BORROWER EVER HAD, NOW HAVE, CLAIM TO HAVE OR MAY LATER HAVE OR WHICH ANY OF ANY BORROWER’S
SUCCESSORS, ASSIGNS, PARENTS, SUBSIDIARIES, AFFILIATES, PREDECESSORS, EMPLOYEES, AGENTS, HEIRS,
EXECUTORS, AS APPLICABLE, BOTH PRESENT AND FORMER EVER HAD, NOW HAS, CLAIM TO HAVE OR MAY LATER
HAVE, UPON OR BY REASON OF ANY MANNER, CAUSE, CAUSES OR THING WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, ANY PRESENTLY EXISTING CLAIM OR DEFENSE WHETHER OR NOT PRESENTLY SUSPECTED,
CONTEMPLATED OR ANTICIPATED, AND EACH BORROWER HEREBY AGREES THAT SUCH BORROWER IS COLLATERALLY
ESTOPPED FROM ASSERTING ANY CLAIMS AGAINST AGENT, LENDER OR ANY OF THE LENDER AFFILIATES RELATING
TO THE FOREGOING.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 and Waiver to Revolving
Credit and Security Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
| BORROWER: | AMERICA SERVICE GROUP INC. |
|||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President & CFO | |||
| PRISON HEALTH SERVICES, INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President & CFO | |||
| PRISON HEALTH SERVICES OF INDIANA, LLC |
||||
| By: | PRISON HEALTH SERVICES, INC., its General Manager | |||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President & CFO | |||
| CORRECTIONAL HEALTH SERVICES, LLC |
||||
| By: | PRISON HEALTH SERVICES, INC., its Managing Member |
|||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President & CFO | |||
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| SECURE PHARMACY PLUS, LLC, |
||||
| By: | PRISON HEALTH SERVICES, INC., its | |||
| Managing Member | ||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Executive Vice President & CFO | |||
| AGENT AND LENDER: | CAPITALSOURCE BANK |
|||
| By: | /s/ Xxxxxxxx Xxxxxx | |||
| Name: | Xxxxxxxx Xxxxxx | |||
| Title: | Bank Officer | |||
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