Exhibit 10.5
[EXECUTION COPY]
AMENDMENT No. 2 TO CREDIT AGREEMENT
AMENDMENT No. 1 TO MASTER AGREEMENT
AMENDMENT, dated as of August 9, 2001, among the following:
(a) CORNELL COMPANIES, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the "COMPANY");
(b) each of the Subsidiaries of the Company identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto
(collectively, the "Subsidiary Guarantors" and, together with the
Company, the "OBLIGORS");
(c) each of the lenders that is a signatory hereto identified
under the caption "CREDIT AGREEMENT LENDERS" on the signature pages
hereto (collectively, the "CREDIT AGREEMENT LENDERS");
(d) each of the lenders that is a signatory hereto identified
under the caption "MASTER AGREEMENT LENDERS" on the signature pages
hereto (collectively, the "MASTER AGREEMENT LENDERS");
(e) ATLANTIC FINANCIAL GROUP, LTD., a Texas limited
partnership (the "Lessor" and, together with the Master Agreement
Lenders, collectively, the "MASTER AGREEMENT FUNDING PARTIES");
(f) ING (U.S.) CAPITAL LLC, a Delaware limited liability
company, as Administrative Agent under the Master Agreement (in such
capacity, the "MASTER AGREEMENT ADMINISTRATIVE AGENT");
(g) BANK OF AMERICA, N.A., a national banking association, as
Syndication Agent under the Master Agreement (in such capacity, the
"MASTER AGREEMENT SYNDICATION AGENT");
(h) SUNTRUST EQUITABLE SECURITIES CORPORATION, a Tennessee
corporation, as documentation agent under the Master Agreement (in such
capacity, the "MASTER AGREEMENT DOCUMENTATION AGENT"); and
(i) ING (U.S.) CAPITAL LLC, a Delaware limited liability
company, as agent for the Credit Agreement Lenders (in such capacity,
the "Credit Agreement Agent").
The Obligors, the Credit Agreement Lenders and the Credit Agreement
Agent are parties to a Fourth Amended and Restated Credit Agreement, dated as
of July 21, 2000 (as amended through the date hereof, the "CREDIT
AGREEMENT"), providing, subject to the terms and conditions thereof, for
extensions of credit to be made by the Credit Agreement Lenders to the
Company. The Obligors, the Master Agreement Lenders, the Lessor, the Master
Agreement Administrative Agent, the Master Agreement Syndication Agent and
the Master Agreement Documentation Agent are parties to an Amended and
Restated Master Agreement dated as of July 21, 2000 (as amended through the
date hereof, the "MASTER AGREEMENT"), providing, subject to the terms and
conditions thereof, for extensions of credit to made by the Master Agreement
Lenders to the Company, and for certain investments to be made by the Lessor.
The Obligors, the Lenders and the Agent wish to modify the Credit Agreement
and the Master Agreement in certain respects and, accordingly, the parties
hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment,
terms defined in the Credit Agreement or the Master Agreement have the
respective meanings given to them therein.
Section 2. APPROVAL OF MUNICIPAL TRANSACTION. Subject to the satisfaction
of the conditions precedent set forth in Section 5 below, as contemplated by
clause (ii) of the definition of "Municipal Transaction" in Section 1.01 of the
Credit Agreement and by clause (ii) of the definition of "Municipal Transaction"
in Appendix A to the Master Agreement, each of the Credit Agreement Lenders and
each of the Master Agreement Lenders hereby approves the Municipal Transaction
described on Schedule I hereto (the "2001 MUNICIPAL TRANSACTION").
Section 3. AMENDMENTS TO THE CREDIT AGREEMENT AND THE MASTER AGREEMENT.
Subject to the satisfaction of the conditions precedent specified in Section 5
below, but effective as of the date hereof, the Credit Agreement and the Master
Agreement shall be amended as follows:
3.01 PREPAYMENT OF THE 1998 SENIOR NOTES. Each of the Credit Agreement
Lenders hereby waives the requirement set forth in Section 2.09(f)(y) of the
Credit Agreement that the proceeds of the 2001 Municipal Transaction not be
used to repay in full the 1998 Senior Notes during any period during which
Letter of Credit Liabilities or Synthetic Lease Loans are outstanding.
3.02 DEFINITION OF "APPLICABLE MARGIN." The definitions of "Applicable
Margin" in Section 1.01 of the Credit Agreement, and in Appendix A to the
Master Agreement, shall each be amended by deleting the proviso thereto.
3.03 DEFINITION OF "EBITDAR." The definitions of "EBITDAR" in Section
1.01 of the Credit Agreement, and in Appendix A to the Master Agreement,
shall each be amended by adding the word "plus" at the end of clause (l)
thereof, and by adding the following new clauses (m) and (n):
"(m) rent expense in respect of the Municipal Transaction
(determined in accordance with GAAP) for such period, MINUS
(n) the aggregate amount of cash rent payments made by the
Obligors during such period in respect of the Municipal Transaction;"
3.04 DEFINITION OF "EBITDAR RATIO I." The definitions of "EBITDAR Ratio
I" in Section 1.01 of the Credit Agreement, and in Appendix A to the Master
Agreement, shall each be amended by inserting the following at the end of
clause (a) thereof:
"MINUS the aggregate credit balance of the Restricted Account on
such date,"
3.05 DEFINITION OF "EBITDAR RATIO II." The definitions of "EBITDAR
Ratio II" in Section 1.01 of the Credit Agreement, and in Appendix A to the
Master Agreement, shall each be amended by inserting the following at the end
of clause (a) thereof:
"MINUS the aggregate credit balance of the Restricted Account on such
date,"
3.06 DEFINITION OF "FIXED CHARGES RATIO." The definitions of "Fixed
Charges Ratio" in Section 1.01 of the Credit Agreement, and in Appendix A to
the Master Agreement, shall each be amended in its entirety to read as
follows:
"`FIXED CHARGES RATIO' shall mean, as at any date, the ratio of:
(a) the sum of the following:
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(i) EBITDAR for the period of 12 consecutive months ending
on, or most recently ended prior to, such date, PLUS
(ii) the aggregate amount of cash rent payments made by the
Obligors in respect of the Municipal Transaction during such period
(to the extent deducted in determining EBITDAR for such period),
MINUS
(iii) Capital Expenditures made by the Company and its
Subsidiaries during such period pursuant to Section 9.15(a) hereof,
MINUS
(iv) taxes paid in cash during such period (other than any
Municipal Transaction Taxes paid with proceeds in the Restricted
Account), TO
(b) the sum of (i) Debt Service for such period, PLUS (ii) the
aggregate amount of cash rent payments made by the Obligors in respect of
the Municipal Transaction during such period."
3.07 DEFINITION OF "INTEREST EXPENSE." The definition of "Interest
Expense in Section 1.01 of the Credit Agreement shall be amended by adding
the following clause (e):
"MINUS (e) the aggregate amount of interest income in respect of
the Restricted Account accrued during such period."
3.08 DEFINITION OF "MUNICIPAL TRANSACTION TAXES." The following new
definition of "Municipal Transaction Taxes" shall be added to Section 1.01 of
the Credit Agreement in the appropriate alphabetical location:
"'Municipal Transaction Taxes' shall mean cash income taxes paid by
the Company during 2001, in an aggregate amount not to exceed $5,000,000,
in respect of gains as a result of the consummation of the 2001 Municipal
Transaction."
3.09 DEFINITION OF "RESTRICTED ACCOUNT." The definition of "Restricted
Account" in Section 1.01 of the Credit Agreement shall be amended by deleting
the phrase "2.09(g)" and replacing it with the phrase "2.09(f)".
3.10 PAYMENT OF MUNICIPAL TRANSACTION TAXES FROM THE RESTRICTED
ACCOUNT. Section 2.09(f) of the Credit Agreement shall be amended by
adding the following new clauses (v) and (w) immediately before clause (x)
therein:
"(v) Upon request of the Company, amounts in the
Restricted Account may be released to be used by the Company for
working capital purposes, provided that the aggregate amount so
released shall not exceed $10,000,000.
(w) Upon request of the Company, amounts in the Restricted
Account may be released for the purpose of paying Municipal
Transaction Taxes, so long as at the time of such release no
Default shall be continuing."
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3.11 EBITDAR RATIO I. The table in Section 9.10 of the Credit
Agreement shall be replaced with the following table:
"Period Ratio
------- -----
August 1, 2001 through 2.75 to 1
and including June 30,
2003
July 1, 2003 through and 2.50 to 1
including June 30, 2004
July 1, 200 4 and all 2.25 to 1"
times thereafter
3.12 EBITDAR RATIO II. Section 9.11 of the Credit Agreement shall be
amended in its entirety to read as follows:
"9.11 EBITDAR Ratio II. The Company will not permit the EBITDAR
Ratio II to be exceed 3.25 to 1 at any time ."
3.13 INTEREST COVERAGE RATIO. The table in Section 9.13 of the Credit
Agreement shall be replaced with the following table:
"Period Ratio
------ -----
August 1, 2001 through 1.70 to 1
and including March 31,
2003
April 1, 2003 through 2.00 to 1
and including December
31, 2004
January 1, 2005 and at 2.50 to 1"
all times thereafter
3.14 FIXED CHARGES RATIO. The table in Section 9.14 of the Credit
Agreement shall be replaced with the following table:
"Period Ratio
------ -----
August 1, 2001 through 1.35 to 1
and including September
30, 2001
October 1, 2001 through 1.13 to 1
and including December
31, 2001
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January 1, 2002 through 1.05 to 1
and including March 31,
2003
April 1, 2003 and at all 1.10 to 1"
times thereafter
3.15 CHANGES OF COMMITMENTS. The Changes of Commitments table in
Section 2.03 of the Credit Agreement shall be deleted in its entirety and
the following table is hereby substituted in lieu thereof:
"Revolving Credit Commitment Reduction Revolving Credit Commitments Reduced to the
------------------------------------- -------------------------------------------
Date Falling on or Nearest to Following Amounts
----------------------------- -----------------
July 24, 2002 $43,392,857.30
October 24, 2002 $41,785,714.60
January 24, 2003 $40,178,571.90
April 24, 2003 $38,571,429.20
July 24, 2003 $36,964,286.50
October 24, 2003 $35,357,143.80
January 24, 2004 $33,750,001.10
April 24, 2004 $32,142,858.40
July 24, 2004 $30,535,715.70
October 24, 2004 $28,928,573.00
January 24, 2005 $27,321,430.30
April 24, 2005 $25,714,287.60"
3.16 ELIGIBLE ACQUISITIONS/NEW CONTRACTS. The number "$20,000,000" in
Section 7.02(b)(i) (approval of Eligible Acquisitions) of the Credit
Agreement and the number $15,000,000 in Section 7.02(c)(ii) (approval for
Eligible Contracts) of the Credit Agreement, shall each be replaced with the
number "$5,000,000".
Section 4. REPRESENTATIONS AND WARRANTIES. Each of the Obligors
represents and warrants to the Credit Agreement Lenders, the Master Agreement
Lenders and the Lessor that the representations and warranties set forth in
Section 8 of the Credit Agreement, and in Section 4.1 of the Master
Agreement, are true and complete on the date hereof, as if made on and as of
the date hereof (or, if such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date), and as if
each reference in said Section 8 to "this Agreement" included reference to
this Amendment, and as if each reference in said Section 4.1 to "this Master
Agreement" included reference to this Amendment.
Section 5. CONDITIONS PRECEDENT. As provided in Sections 2 and 3 above,
approval set forth in said Section 2, and the amendments to the Credit Agreement
and the Master Agreement set forth in said Section, shall become effective, as
of the date hereof, subject to the satisfaction of the following conditions
precedent:
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5.01 AMENDMENT FEE. Receipt by each Credit Agreement Lender, and each
Master Agreement Lender, of a fee in an amount equal to 1/4 of 1% of the
aggregate amount of such Credit Agreement Lender's outstanding Loans,
Commitments and Letters of Credit Interest (as those terms are defined in the
Credit Agreement), and such Master Agreement Lender's Loans and Commitments
(as those terms are defined in the Master Agreement).
5.02 MUNICIPAL TRANSACTION DOCUMENTATION. The Administrative Agent
shall have received copies of the documentation for the 2001 Municipal
Transaction, which documentation shall be in form and substance satisfactory
to the Administrative Agent. Such documentation shall in any event provide
that the aggregate amount of payments that the Company shall be required to
make to the SPV as security deposits in connection with the Municipal
Transaction shall not exceed 35% of the maximum base rent payable in any
remaining year.
5.03 REDUCTION IN REVOLVING CREDIT COMMITMENTS. The Administrative
Agent shall have received a notice from the Company, given pursuant to Section
2.03 of the Credit Agreement, reducing the aggregate amount of the Revolving
Credit Commitments to $45,000,000. In addition, concurrently with the
consummation of the 2001 Municipal Transaction, the Revolving Credit Loans,
together with accrued interest thereon, shall be paid in full.
5.04 AMENDMENTS TO 2000 SUBORDINATED NOTES. The Administrative Agent
shall have received copies of the Amendments to the 2000 Subordinated Notes
Documentation amending the financial covenants therein, in a manner
acceptable to the Administrative Agent, to reflect the modifications to the
financial covenants in the Credit Agreement provided for in this Amendment.
Section 6. MISCELLANEOUS. Except as herein provided, the Credit
Agreement and the Master Agreement shall remain unchanged and in full force
and effect. This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment by
signing any such counterpart. This Amendment shall be governed by, and
construed in accordance with, the internal laws of the State of
New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
CORNELL COMPANIES, INC.
By _________________________
Title:
SUBSIDIARY GUARANTORS
---------------------
CORNELL ABRAXAS GROUP, INC.
By _________________________
Title:
CORNELL COMPANIES, INC.
By_________________________
Title:
CORNELL CORRECTIONS MANAGEMENT,
INC.
By_________________________
Title:
CORNELL CORRECTIONS OF ALASKA,
INC.
By_________________________
Title:
CORNELL CORRECTIONS OF
RHODE ISLAND, INC.
By__________________________
Title:
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THE XXXXXXX XXX GROUP, L.P.
By CORNELL CORRECTIONS OF
NORTH AMERICA, INC.
By_________________________
Title:
CORNELL CORRECTIONS OF
NORTH AMERICA, INC.
By__________________________
Title:
CORNELL CORRECTIONS OF TEXAS, INC.
By__________________________
Title:
CORNELL CORRECTIONS OF CALIFORNIA,
INC.
By___________________________
Title:
INTERNATIONAL SELF-HELP SERVICES,
INC.
By___________________________
Title:
WBP LEASING, INC.
By___________________________
Title:
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XXXXXXX XXXXXXXXXXX XX XXXXXXXX,
INC.
By___________________________
Title:
CREDIT AGREEMENT LENDERS
------------------------
ING (U.S.) CAPITAL LLC
By _________________________
Title:
BANK OF AMERICA, N.A.
By _________________________
Title:
SUNTRUST BANKS, INC.
By _________________________
Title:
COMERICA BANK
By _________________________
Title:
GUARANTY FEDERAL BANK, F.S.B.
By _________________________
Title:
FIRSTAR BANK, N.A.
By _________________________
Title:
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BHF (USA) CAPITAL CORPORATION
By _________________________
Title:
SOUTHTRUST BANK
By _________________________
Title:
FLEET NATIONAL BANK
By _________________________
Title:
MASTER AGREEMENT LENDERS
------------------------
SUNTRUST BANKS, INC.
By _________________________
Title:
ING (U.S.) CAPITAL LLC
By _________________________
Title:
BANK OF AMERICA, N.A.
By _________________________
Title:
BHF (USA) CAPITAL CORPORATION
By _________________________
Title:
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XXXXXXXX XXXXXXX XXXX, F.S.B.
By _________________________
Title:
FLEET NATIONAL BANK
By _________________________
Title:
COMERICA BANK
By _________________________
Title:
FIRSTAR BANK, N.A.
By _________________________
Title:
SOUTHTRUST BANK
By _________________________
Title:
LESSOR
ATLANTIC FINANCIAL GROUP, LTD.
By ATLANTIC FINANCIAL MANAGERS, INC.,
its General Partner
By _________________________
Title:
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MASTER AGREEMENT SYNDICATION AGENT
----------------------------------
BANK OF AMERICA, N.A.
as Master Agreement Syndication Agent
By _________________________
Title:
MASTER AGREEMENT DOCUMENTATION AGENT
------------------------------------
SUN TRUST BANKS, INC.,
as Master Agreement Documentation Agent
By _________________________
Title:
CREDIT AGREEMENT AGENT
----------------------
ING (U.S.) CAPITAL LLC,
as Credit Agreement Agent
By _________________________
Title:
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SCHEDULE I
[Summary of 2001 Municipal Transaction]
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