Exhibit 10.72
FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT is made as of the 28th day of
March, 2002 by and among CORRECTIONAL SERVICES CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"); each of the Subsidiaries of the Company that is a signatory hereto
-------
or that, pursuant to Section 9.1.20(b) of the Credit Agreement (as hereinafter
defined), shall become a party hereto (individually, a "Subsidiary Guarantor"
--------------------
and, collectively, the "Subsidiary Guarantors"; and the Subsidiary Guarantors,
---------------------
collectively with the Company, are sometimes hereinafter referred to as the
"Obligors"); each of the lenders that is a signatory hereto or that, pursuant to
--------
Section 12.6(b) of the Credit Agreement, shall become a "Lender" hereunder
------
(individually, a "Lender" and, collectively, the "Lenders"); and FLEET NATIONAL
------ -------
BANK, a national banking association and successor by merger to Summit Bank, as
syndication agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Syndication Agent").
-----------------
W I T N E S S E T H:
-------------------
WHEREAS, the Company, the Subsidiary Guarantors, the Lenders and the
Syndication Agent entered into a Credit Agreement dated August 31, 1999, as
amended by a first amendment thereto dated as of November 10, 2000, a second
amendment thereto dated in or about August, 2001, a third amendment thereto
dated in or about November, 2001, and a fourth amendment thereto dated as of
November 28, 2001 (collectively, the "Credit Agreement"); and
WHEREAS, the Company has requested the Syndication Agent and the
Lenders to make certain amendments to the Credit Agreement as more fully
described herein, and the Syndication Agent and the Lenders have agreed to do
so, subject to and in accordance with the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Except as otherwise indicated herein, all
-------------
words and terms defined in the Credit Agreement shall have the same meanings
when used herein.
2. Amendments to Credit Agreement.
------------------------------
(a) The following definitions are hereby added to, and
inserted alphabetically in, Section 1.1 of the Credit Agreement:
"EBIT" shall mean, for any period, the income from
----
operations of the Company and its Subsidiaries for such
period, determined on a consolidated basis without duplication
in accordance with GAAP.
"Restructuring Charges" shall mean the cash payments
---------------------
made by the Company and its Subsidiaries during any fiscal
quarter relating to restructuring and impairment charges
reflected in the consolidated statement of operations for the
Company and its Subsidiaries for the quarter ending September
30, 2001.
(b) The following definitions appearing in Section 1.1 of the
Credit Agreement are hereby amended to read in their entirety as follows:
"Applicable Commitment Fee Rate" shall mean a rate
------------------------------
per annum equal to .50%.
"Applicable Margin" shall mean, with reference to
-----------------
Revolving Credit Loans (i) that are Base Rate Loans, an amount
in excess of the Base Rate, equal to 3.50%, and (ii) that are
LIBOR Loans, an amount in excess of the LIBOR Rate, equal to
5.00%; provided, however, in the event that (A) the Company
-------- -------
consummates the sale of its facility located in Phoenix,
Arizona, in accordance with Section 9.1.26 hereof, and the net
proceeds from such sale result in a reduction of (x) the
outstanding principal amount of the Revolving Credit Loans by
at least $8,000,000 and (y) the Revolving Credit Commitments
by at least $4,000,000, or (B) the facility leased by the
Company in Salinas, Puerto Rico, is sold to a third party in
accordance with Article XIV of the Lease and (1) the total
purchase price for such sale equals or exceeds the Lease
Balance (as such term is defined in the Master Agreement) as
of the closing date for such sale and (2) the down payment
from such sale which is applied to reduce the aggregate
principal amount of the Loans (as such term is defined in the
Master Agreement) equals or exceeds $7,500,000, then the
Applicable Margin for Revolving Credit Loans (a) that are Base
Rate Loans shall mean an amount in excess of the Base Rate
equal to 2.50%, and (b) that are LIBOR Loans shall mean an
amount in excess of the LIBOR Rate equal to 4.00%.
Notwithstanding the foregoing, the Applicable Margin shall not
be reduced at any time during which an Event of Default shall
have occurred and be continuing.
"Available Excess Cash Flow" - [Deleted]
--------------------------
2
"Consolidated Interest Expense" shall mean, for any
-----------------------------
period, for the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with
GAAP), the sum or difference of (a) all interest in respect of
Indebtedness (including, without limitation, the interest
component of any payments under Capital Leases) accrued or
capitalized during such period (whether or not actually paid
during such period), plus (b) the net amount payable (or minus
----
the net amount receivable) under Interest Rate Protection
Agreements during such period (whether or not actually paid or
received during such period).
"EBITDA" shall mean, for any period, the sum of (a)
------
the income from operations of the Company and its Subsidiaries
for such period, determined on a consolidated basis without
duplication in accordance with GAAP, plus (b) depreciation and
----
amortization expenses deducted in the determination of the
Consolidated Net Income of the Company and its Subsidiaries
for such period, minus (c) the Restructuring Charges paid
-----
during such period, plus (d) non-cash expenses incurred by the
----
Company and its Subsidiaries during such period, if and to the
extent approved by the Syndication Agent and the Lenders.
"Permitted Investments" shall mean (a) direct
---------------------
obligations of the United States of America, or of any agency
thereof, or obligations guaranteed as to principal and
interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from
the date of acquisition thereof; (b) certificates of deposit
issued by any Lender or by any bank or trust company organized
under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of
at least $500,000,000, maturing not more than 90 days from the
date of acquisition thereof; (c) commercial paper rated A-1 or
better or P-1 by Standard & Poor's Corporation or Xxxxx'x
Investors Services, Inc., respectively, maturing not more than
six months from the date of acquisition thereof; (d)
commercial paper of any Lender (or any Affiliate thereof
located in the United States of America) that is rated A-1 or
better or P-1 by Standard and Poor's Corporation or Xxxxx'x
Investors Services, Inc., respectively, maturing not more than
six months from the date of acquisition thereof; (e)
repurchase agreements entered into with any Lender or with any
bank or trust company satisfying the conditions of clause (b)
hereof that are secured by any obligation of the type
described in clauses (a) through (d) of this definition; and
(f) money market funds acceptable to the Required Lenders.
"Permitted Stock Repurchases" - [Deleted]
---------------------------
3
"Revolving Credit Commitment" shall mean, for each
---------------------------
Lender, the obligation of such Lender to make Loans in an
aggregate principal amount at any one time outstanding up to
but not exceeding the amount set forth opposite the name of
such Lender on Schedule 1 under the caption "Amount of
Commitment for Revolving Credit Loan" (as the same may be
reduced from time to time pursuant to Section 2.3 hereof and
as the same may be reduced pursuant to Section 9.1.26 hereof).
As of March 28, 2002, the aggregate principal amount of the
Revolving Credit Commitments is $21,000,000.
(c) Section 9.1.1 of the Credit Agreement is hereby amended by
adding the following subsection 9.1.1(v) immediately after subsection 9.1.1(u):
(v) on the first day of each month, consolidated
cash flow projections for the Company and its Subsidiaries
for the 90-day period commencing on the required delivery date
of the projections; provided, that, in the event the
--------
Syndication Agent is not satisfied with the form or
presentation of such projections, or the assumptions
underlying the same, the Company shall, at its sole cost and
expense, engage an independent consultant (acceptable to the
Syndication Agent in its sole discretion) to assist the
Company in modeling for, and the preparation of, revised cash
flow projections. The Company shall cause the consultant to
commence work in assisting with the modeling and the revised
projections within 15 Business Days after the Company's
receipt of the Syndication Agent's request therefor.
(d) Section 9.1.9 of the Credit Agreement is hereby
amended to read in its entirety as follows:
9.1.9 Dividend Payments.
-----------------
The Company will not, nor will it permit any of its
Subsidiaries to, declare or make any Dividend Payment at any
time, except a Dividend Payment from a Subsidiary to the
Company in order to fund the mandatory prepayment required
under Section 2.1.10 hereof upon the occurrence of a Capital
Event involving such Subsidiary.
(e) Section 9.1.10 of the Credit Agreement is hereby
amended to read in its entirety as follows:
9.1.10. Total Funded Debt to Adjusted EBITDA Ratio.
------------------------------------------
[Deleted
(f) Section 9.1.12 of the Credit Agreement is hereby
amended to read in its entirety as follows:
9.1.12 Consolidated Net Worth. [Deleted]
----------------------
4
(g) Section 9.1.13 of the Credit Agreement is hereby
amended to read in its entirety as follows:
9.1.13 Consolidated Total Funded Debt to Net Worth
-------------------------------------------
Ratio. [Deleted]
-----
(h) Section 9.1.14 of the Credit Agreement is hereby
amended to read in its entirety as follows:
9.1.14 Minimum Fixed Charge Coverage Ratio.
-----------------------------------
[Deleted]
(i) Section 9.1.23 of the Credit Agreement is hereby
amended to read in its entirety as follows (changes from the Credit Agreement
are indicated in bold face type):
9.1.23 Capital Expenditures; Unfunded Capital
--------------------------------------
Expenditures.
------------
The Company will not, and will not permit any of its
Subsidiaries to, make any Capital Expenditures at any time,
except for the following: (i) Capital Expenditures in an
aggregate amount not to exceed $5,000,000 in any fiscal
quarter; and (ii) Capital Expenditures made in connection with
acquisitions permitted under Section 9 hereof. Notwithstanding
the foregoing, at no time during any fiscal year of the
Company and its Subsidiaries shall their unfunded Capital
Expenditures exceed the amount of depreciation and
amortization expenses of the Company and its Subsidiaries,
both calculated on a cumulative year-to-date basis for each
fiscal year of the Company and its Subsidiaries commencing on
January 1, 2002.
(j) Section 9.1 of the Credit Agreement is hereby amended by
adding the following Sections 9.1.27 through 9.1.31 immediately after Section
9.1.26 thereof:
9.1.27 Minimum Consolidated Net Income.
-------------------------------
The Company shall not cause, suffer or
permit its Consolidated Net Income (i) during any two
consecutive month period from March, 2002 through
July, 2002, to be less than $150,000, and (ii) to be
less than the following amounts as measured for or at
the following times:
Quarter Ending Minimum Consolidated Net Income
-------------- -------------------------------
March 31, 2002 $150,000
June 30, 2002 $300,000
5
9.1.28 Minimum EBITDA.
--------------
The Company shall not cause, suffer or
permit its EBITDA (i) during any two consecutive
month period from March, 2002 through July, 2002, to
be less than $800,000, and (ii) to be less than the
following amounts as measured for or at the following
times:
Quarter Ending Minimum EBITDA
-------------- --------------
March 31, 2002 $1,250,000
June 30, 2002 $1,750,000
Section 9.1.29 EBIT to Consolidated Interest
------------------------------
Expense Ratio.
--------------
The Company will not permit the ratio of (i) EBIT to
(ii) Consolidated Interest Expense to be less than 1.05 for
each fiscal quarter ending March 31, 2002 and June 30, 2002.
Section 9.1.30 Evidence of Refinancing.
-----------------------
By no later than April 30, 2002, the Company shall
provide to the Syndication Agent a letter evidencing the
Company's request to refinance with a third-party lender all
of the obligations of the Company and its Subsidiaries under
the Basic Documents and the Operative Documents.
Section 9.1.31 Newport News Deed of Trust.
--------------------------
By no later than April 30, 2002, Youth Services
International, Inc. shall provide to the Syndication Agent a
fully-executed deed of trust encumbering its Newport News,
Virginia, property in form and substance satisfactory to the
Syndication Agent, together with such other documents,
instruments, opinions, title commitments and certificates as
the Syndication Agent may require in connection therewith, and
otherwise comply with its obligations under Section 9.1.25 of
this Agreement.
(k) Part 1 of Schedule 1 to the Credit Agreement is hereby
----------
deleted and replaced with Part 1 of Schedule 1 attached to this Agreement.
----------
3. Amendment Fees. Concurrently herewith and in consideration for
--------------
the Syndication Agent and the Lenders entering into this Agreement, the Company
is paying the Syndication Agent (i) an amendment fee in the amount of $125,000
for the ratable benefit of the Lenders, and (ii) an amendment fee in the amount
of $38,604 for the sole benefit of the Syndication Agent. The foregoing fees are
earned in full on the date hereof and not subject to rebate or reduction.
6
4. Substitute Notes. To evidence the decrease in the aggregate
----------------
principal amount of the Revolving Credit Commitment from $25,000,000 to
$21,000,000, the Company is, concurrently herewith, executing and delivering to
each of the Revolving Credit Lenders a substitute Revolving Credit Note (each a
"Substitute Note") in substitution for, but not replacement of, the Revolving
Credit Note (each a "Prior Note") heretofore issued to each such Revolving
Credit Lender. The parties acknowledge and agree that the execution and delivery
of the Substitute Notes shall not constitute a repayment, refinancing, accord
and satisfaction or novation of the Prior Notes or the indebtedness evidenced
thereby.
5. Guaranty Reaffirmation. The Subsidiary Guarantors hereby acknowledge
----------------------
and agree to the amendments to the Credit Agreement effected by this Agreement.
Each of the Subsidiary Guarantors hereby reaffirms all of the terms and
conditions of the guaranty set forth in Section 6 of the Credit Agreement and
agrees that such guaranty is applicable to all of the Guaranteed Obligations, as
amended by this Agreement. The Subsidiary Guarantors hereby acknowledge and
agree that they have no defenses, offsets or counterclaims with respect to the
Guaranteed Obligations and hereby waive and release all claims against the
Syndication Agent and the Lenders with respect thereto.
6. Representations, Warranties and Other Covenants. In order to induce
-----------------------------------------------
the Syndication Agent and the Lenders to enter into this Agreement and amend the
Credit Agreement as provided herein, each Obligor hereby represents and warrants
to the Syndication Agent and the Lenders that:
(a) All of the representations and warranties of the Obligors
set forth in the Credit Agreement are true, complete and correct in all material
respects on and as of the date hereof with the same force and effect as if made
on and as of the date hereof and as if set forth at length herein.
(b) After giving effect to this Agreement, no Default or Event
of Default presently exists and is continuing on and as of the date hereof.
(c) Since the date of the Obligors' most recent financial
statements delivered to the Syndication Agent, no Material Adverse Effect has
occurred, and no event has occurred or failed to occur which has had or is
likely to have a Material Adverse Effect.
(d) Each Obligor has full power and authority to execute,
deliver and perform any action or step which may be necessary to carry out the
terms of this Agreement and all other agreements, documents and instruments, if
any, executed and delivered by the Obligors to the Syndication Agent and the
Lenders concurrently herewith or in connection herewith (collectively, the
"Amendment Documents"); each Amendment Document to which any of the Obligors is
-------------------
a party has been duly executed and delivered by such Obligors and is the legal,
valid and binding obligation of such Obligor enforceable in accordance with its
terms, subject to any applicable bankruptcy, insolvency, general equity
principles or other similar laws affecting the enforcement of creditors' rights
generally.
7
(e) The execution, delivery and performance of the Amendment
Documents will not (i) violate any provision of any existing law, statute, rule,
regulation or ordinance binding upon the Obligors, (ii) conflict with, result in
a breach of, or constitute a default under (A) the certificate of incorporation
or by-laws or other equivalent formation documents of any Obligor, (B) any
order, judgment, award or decree of any court, governmental authority, bureau or
agency, or (C) any mortgage, indenture, material lease, contract or other
material agreement or undertaking to which any Obligor is a party or by which
any Obligor or its properties or assets may be bound, or (iii) result in the
creation or imposition of any lien or other encumbrance upon or with respect to
any property or asset now owned or hereafter acquired by any Obligor, other than
liens in favor of the Syndication Agent for the ratable benefit of the Lenders.
(f) No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with
any Person is required in connection with the execution, delivery, performance
by the Obligors of the Amendment Documents or the transactions contemplated
thereby.
7. Waiver of Financial Covenant Default. The Syndication Agent and the
------------------------------------
Lenders hereby waive compliance by the Company and its Subsidiaries with the
December 31, 2001 financial covenants contained in Sections 9.1.11 and 9.1.14 of
the Credit Agreement; provided, however, that the Company hereby acknowledges
-------- -------
and agrees that such waiver and the agreement by the Syndication Agent and the
Lenders to enter into this Agreement and to amend the Credit Agreement as
provided herein shall in no way be deemed to be a waiver by the Syndication
Agent or the Lenders of any other Defaults or Events of Default nor preclude the
Syndication Agent and the Lenders from declaring an Event of Default or
exercising any other remedies under the Credit Agreement as a result of such
other Events of Default or upon the occurrence at a later date of any other
Events of Default under the Credit Agreement. The Syndication Agent and the
Lenders reserve the right to enforce all terms and provisions of the Credit
Agreement and the other Basic Documents at any time or from time to time.
8. Syndication Agent's Costs. (a) Concurrently herewith, the Company is
-------------------------
paying to the Syndication Agent all of its out-of-pocket costs, including legal
fees and expenses, incurred by the Syndication Agent in connection with this
Agreement, the transactions referenced herein and the administration of the
facilities described in the Credit Agreement. The Company hereby authorizes the
Syndication Agent to charge the Company's account(s) with the Syndication Agent
(or its affiliate) in the amount of such out-of-pocket costs.
(b) The Company acknowledges and agrees that the Syndication
Agent and the Lenders have the right to retain an independent consultant to
investigate and advise them regarding the business and management of the Company
and its Subsidiaries and that the fees and expenses of such consultant shall
constitute out-of-pocket costs and expenses for which the Company is obligated
to reimburse the Syndication Agent pursuant to Section 12.3 of the Credit
Agreement.
8
9. No Change. Except as expressly set forth herein or modified
---------
hereby, all of the terms and provisions of the Credit Agreement and the other
Basic Documents are hereby reaffirmed in their entirety and shall continue in
full force and effect.
10. Counterparts; Effectiveness. This Agreement may be executed
------------ -------------
in any number of counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument. This Agreement shall not
be binding upon any party until all parties hereto have executed this Agreement
and delivered it to the Syndication Agent.
11. No Defenses. The Company hereby acknowledges and agrees that
-----------
it has no defenses, offsets or counterclaims with respect to its obligations
under the Credit Agreement, the Notes, the other Basic Documents and the
Operative Documents and hereby waives and releases all claims against the
Syndication Agent and the Lenders with respect thereto.
9
12. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
representatives to execute and deliver this Agreement as of the day and year
first above written.
CORRECTIONAL SERVICES CORPORATION,
a Delaware corporation
By:
----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL, INC.
a Maryland corporation
By:
----------------------------------
Name:
Title:
FF&E, INC., a New Jersey corporation
By:
----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
OF NORTHERN IOWA, INC., an
Iowa corporation
By:
----------------------------------
Name:
Title:
(Signatures continued on next page)
10
YOUTH SERVICES INTERNATIONAL
HOLDINGS, INC., a Delaware corporation
By:
-----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
REAL PROPERTY PARTNERSHIP, LLP,
a Maryland limited liability
partnership
By:
-----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
OF ILLINOIS, INC., a Maryland
corporation
By:
-----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
OF SOUTH DAKOTA, INC., a South Dakota
corporation
By:
-----------------------------------
Name:
Title:
(Signatures continued on next page)
11
YOUTH SERVICES INTERNATIONAL
OF TEXAS, INC., a Texas corporation
By:
-----------------------------------
Name:
Title:
YSI OF CENTRAL IOWA, INC.,
an Iowa corporation
By:
-----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
OF IOWA, INC., a Maryland
corporation
By:
-----------------------------------
Name:
Title:
YOUTH SERVICES INTERNATIONAL
OF MICHIGAN, INC., a Michigan
corporation
By:
-----------------------------------
Name:
Title:
(Signatures continued on next page)
12
YOUTH SERVICES INTERNATIONAL
OF MISSOURI, INC., a Missouri
corporation
By:
-----------------------------------
Name:
Title:
CSC MANAGEMENT DE PUERTO RICO, INC.,
a Puerto Rico corporation
By:
-----------------------------------
Name:
Title:
FLEET NATIONAL BANK,
as the Syndication Agent and a Lender
By:
-----------------------------------
Name:
Title:
SUNTRUST BANK, NASHVILLE, N.A.,
as a Lender
By:
-----------------------------------
Name:
Title:
BANCO POPULAR NORTH AMERICA,
as a Lender
By:
-----------------------------------
Name:
Title:
13
5th amendment to credit agreement.doc Exhibit 10.72.5
SCHEDULE 1
Commitment of Lenders and Addresses for Notices
Part 1-Commitment of Lenders and Address for Notices to Lenders
---------------------------------------------------------------
Amount of Commitment
For Revolving Credit Amount of Commitment Total
Lender Loans for DD Loans Commitment
------ -------------------- ---------------------- ----------
Fleet National Bank $13,939,343 $0 $13,939,343
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Heal
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
SunTrust Bank, Nashville, N.A. $2,860,657 $0 $2,860,657
000 0xx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Banco Popular North America $4,200,000 $0 $4,200,000
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Ms. Xxxxx Xxxxxxxx
Senior Vice President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
