AMENDMENT NO. 5 TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 5, dated as of May 30, 2001 (this "Amendment"), to the
Existing Credit Agreement (as defined below), among EVERCOM, INC., a Delaware
corporation (the "Borrower"), each of the Borrower's Subsidiaries (the
"Consenting Obligors"), Canadian Imperial Bank of Commerce, as Administrative
Agent for the Lenders, and the Lenders party hereto (such capitalized term and
other capitalized terms used in this preamble and the recitals below to have the
meanings set forth in, or as defined by reference in, Article I).
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties
to the Second Amended and Restated Credit Agreement, dated as of December 19,
1997 (as heretofore modified, the "Existing Credit Agreement", and as modified
by this Amendment, the "Credit Agreement");
WHEREAS, the Borrower desires to amend the Existing Credit Agreement as set
forth herein; and
WHEREAS, the Required Lenders have agreed, subject to the terms and
conditions hereinafter set forth, to amend the Existing Credit Agreement in
certain respects as provided below;
NOW, THEREFORE, the parties hereto hereby agree as follows.
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. The following terms (whether or not
underscored) when used in this Amendment shall have the following meanings (such
meanings to be equally applicable to the singular and plural form thereof):
"Amendment" is defined in the preamble.
"Borrower" is defined in the preamble.
"Consenting Obligors" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Existing Credit Agreement" is defined in the first recital.
"Fifth Amendment Effective Date" is defined in Section 4.1.
SECTION 1.2. Other Definitions. Terms for which meanings are provided in
the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment with such meanings.
ARTICLE II
AMENDMENTS TO CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Fifth Amendment
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Article II; except as so expressly amended, the Existing Credit
Agreement shall continue in full force and effect.
SECTION 2.1. Amendments to Article I. Article I of the Existing Credit
Agreement is hereby amended as follows:
SECTION 2.1.1. Section 1.1 of the Existing Credit Agreement is hereby
amended by inserting the following definitions in such Section in the
appropriate alphabetical sequence:
"Amendment No. 5" means Amendment No. 5, dated as of May 30, 2001, to the
Second Amended and Restated Credit Agreement, among the Borrower, the
Administrative Agent and the Lenders party thereto, and consented to by the
Consenting Obligors listed therein.
"Fifth Amendment Effective Date" is defined in Section 4.1 of Amendment No.
5.
"FortuneLinx" means FortuneLinx, Inc., a California corporation.
"FortuneLinx Acquisition" means any acquisition of FortuneLinx or all or
substantially all of its assets by the Borrower or any of its Subsidiaries.
"New Equity Issuance" means the issuance and sale by the Borrower of its
common stock (which may include warrants) to the Investors in exchange for net
cash proceeds of at least $7,500,000 on terms and conditions set forth in the
Rights Offering Documents or other terms satisfactory to the Required Lenders.
"Rights Offering Documents" means the Subscription Agreement and each other
agreement delivered to consummate the transaction contemplated thereunder.
"Subscription Agreement" means a Subscription Agreement, sent to the
Subscribers (as defined therein) from time to time prior to the Fifth Amendment
Effective Date substantially in the form of the Subscription Agreement, dated as
of April 26, 2001, from the Borrower and sent to each Subscriber (as defined
therein).
SECTION 2.1.2. Section 1.1 of the Existing Credit Agreement is hereby
amended by (a) amending the definition of "Applicable Margin" appearing therein
by adding 0.50% to each of the percentages set forth therein, and adding a
proviso thereto stating that the Applicable Margin in effect on the Fifth
Amendment Effective Date, as adjusted by the 0.50% described above, shall remain
in effect until June 30, 2002, notwithstanding any decreases in the Total Debt
to EBITDA Ratio;
(b) amending and restating the definition of "EBITDA to Fixed Charges
Ratio" to read in its entirety as follows:
"EBITDA to Fixed Charges Ratio" means, as at the last day of any
Fiscal Quarter, the ratio of (a) EBITDA for the Rolling Period ended on the
last day of such Fiscal Quarter to (b) (i) Debt Service for the Rolling
Period ended on the last day of such Fiscal Quarter, plus (ii) Capital
Expenditures made during the Rolling Period ended on the last day of such
Fiscal Quarter, plus (iii) Taxes paid in cash or accrued during the Rolling
Period ended on the last day of such Fiscal Quarter, plus (iv) the amount
expended for Permitted Acquisitions for the Rolling Period ended on the
last day of such Fiscal Quarter; provided however, that for each Rolling
Period ending on or prior to December 31, 2001, clause (b) will be reduced
by the amount of proceeds received by the Borrower from the New Equity
Issuance.
and (c) amending the definition of "Permitted Acquisition" by deleting
the "and" at the end of clause (g) thereof, deleting the "." at the end of
clause (h) thereof and replacing it with "; and" and adding a new clause
(i) thereto to read as follows:
(i) in the case of the FortuneLinx Acquisition, the Borrower
shall not consummate the FortuneLinx Acquisition unless it has (x)
provided additional information satisfactory to the Administrative
Agent and theRequired Lenders relating to the FortuneLinx Acquisition,
including information on the structure of the FortuneLinx Acquisition,
on the cost of additional Capital Expenditures to be expended in
connection with the acquisition and on the added value to the
Borrower's existing business and (y) certified to the Administrative
Agent and the Lenders that it has received at least $8,500,000 in net
proceeds from the New Equity Issuance and applied such proceeds to
repay outstanding Revolving Loans.
SECTION 2.2. Amendments to Article III. Clause (f) of Section 3.1.1 of the
Existing Credit Agreement is hereby amended by deleting the "or" following
clause (i) and replacing it with a "," and inserting "or (iii) arise in
connection with the New Equity Issuance, no prepayment of the Term Loans shall
be required so long as the proceeds of the New Equity Issuance are used to repay
outstanding Revolving Loans" following clause (ii) thereof.
SECTION 2.3. Amendments to Article VII. Article VII of the Existing Credit
Agreement is hereby amended as follows:
SECTION 2.3.1. New Sections 7.1.13 and 7.1.14 are hereby added to the
Existing Credit Agreement, following Section 7.1.12, to read in their entireties
as follows:
SECTION 7.1.13 New Equity Issuance. The Borrower will, (a) prior to June 1,
2001, have received commitments from Investors sufficient to allow it to
consummate the New Equity Issuance, (b) on or prior to June 1, 2001, have issued
an irrevocable notice to its Investors participating in the New Equity Issuance
to fund the New Equity Issuance, (c) by June 4, 2001, receive the full proceeds
of the New Equity Issuance, (d) immediately upon receipt of the proceeds of the
New Equity Issuance, use such proceeds to repay outstanding Revolving Loans and
(e) on or within 5 Business Days after the date of the receipt of proceeds from
the New Equity Issuance, deliver (or cause to be delivered) to the
Administrative Agent supplements to
the Investor Pledge Agreement, duly executed and delivered by each Investor
pledging all additional common or preferred stock (and any warrants issued in
connection therewith) of the Borrower comprising the New Equity Issuance.
SECTION 7.1.14 Blocked Account Agreements. The Borrower will cause
customary blocked account agreements to be entered into among the Borrower, the
financial institutions where the Borrower or any of its Subsidiaries maintain
any accounts, and the Administrative Agent, all in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders as soon as
possible but no later than December 15, 2001; provided that such documentation
shall only become effective upon the occurrence and during the continuance of an
Event of Default; provided, further however, that upon the occurrence of any
Event of Default, if the Borrower has not entered into such blocked account
agreements, it will do so immediately.
SECTION 2.3.2. Clause (e) of Section 7.2.2 of the Existing Credit Agreement
is hereby amended by deleting the "$2,500,000" appearing therein and replacing
it with "$5,000,000".
SECTION 2.3.3. Clause (b) of Section 7.2.4 of the Existing Credit Agreement
is hereby amended and restated to read in its entirety as follows:
(b) the Senior Secured Debt to EBITDA Ratio at any time during any
period set forth below to be greater than the ratio set forth opposite such
period:
Period Senior Secured Debt
to EBITDA Ratio
12/31/00 to (and
including) 06/29/01 2.50:1
06/30/01 and thereafter 1.75:1
SECTION 2.3.4. Clause (e) of Section 7.2.4 of the Existing Credit Agreement
is hereby amended and restated to read in its entirety as follows:
(e) EBITDA for any period set forth below to be less than the amount set
forth opposite such period:
Period EBITDA
Rolling Period ended 06/30/01 38,456,000
Rolling Period ended 09/30/01 37,600,000
Rolling Period ended 12/31/01 39,514,000
Rolling Period ended 03/31/02 45,600,000
Rolling Period ended 06/30/02 48,000,000
Rolling Period ended 09/30/02 49,400,000
Rolling Period ended 12/31/02 50,800,000
SECTION 2.3.5. Clause (ii) of Section 7.2.16 of the Existing Credit
Agreement is hereby amended and restated to read in its entirety as follows:
(ii) the Carry-Forward Amount may be used in any Fiscal Quarter;
provided, however that no portion of any Carry-Forward Amount may be used
in any Fiscal Quarter until the entire amount of the Capital Expenditures
permitted to be made in such Fiscal Quarter as provided in clauses (a) and
(b) above shall have been used and no portion of the Carry-Forward Amount
may be carried over for more than the following Fiscal Year.
SECTION 2.4. Amendments to Article VIII. Section 8.1.3 of Article VIII of
the Existing Credit Agreement is hereby amended by inserting ", Section 7.1.13,
Section 7.1.14," immediately after "Section 7.1.11" therein.
ARTICLE III
LIMITED WAIVERS TO CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Fifth Amendment
Effective Date, the limited waivers set forth below shall be granted with
respect to the applicable provision of the Existing Credit Agreement; except as
so expressly waived, the Existing Credit Agreement shall continue in full force
and effect.
SECTION 3.1. Limited Waiver of Section 7.1.1(b). The Lenders hereby waive
the requirement that annual financial statements for the Borrower and its
Subsidiaries audited without Impermissible Qualification for the Fiscal Year
ended December 31, 2000 be delivered to the Administrative Agent and the Lenders
by March 31, 2001, provided that such annual financial statements shall have
been audited without Impermissible Qualification and delivered to the
Administrative Agent for the account of the Lenders (with sufficient copies for
each Lender) by June 1, 2001.
SECTION 3.2. Limited Waiver of Section 7.2.4. The Lenders hereby waive
compliance with clauses (d) and (e) of Section 7.2.4 of the Existing Credit
Agreement, in each case, for the Fiscal Quarter ending (and only for the Fiscal
Quarter ending) March 31, 2001.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
SECTION 4.1. Amendment Effective Date. This Amendment (and the amendments
and modifications contained herein) shall become effective, and shall thereafter
be referred to as "Amendment No. 5", on the date (the "Fifth Amendment Effective
Date") when all of the conditions set forth in this Section 4.1 have been
satisfied.
SECTION 4.1.1. Execution of Counterparts Representations; The
Administrative Agent shall have received counterparts of this Amendment, duly
executed and delivered on behalf of the Borrower, the Consenting Obligors and
the Required Lenders, and the representations and warranties set forth in
Section 5.2 shall be true and correct.
SECTION 4.1.2. Amendment Fee. The Administrative Agent shall have received
for the account of each Lender that delivers a copy of its signature page by
facsimile to Jason Kanner of Mayer, Brown & Platt (fax: 212-262-1910) prior to
2:30 p.m., New York time, on May 30, 2001, an amendment fee equal to 0.75% of
the sum of (i) the outstanding principal amount of Loans owing to such Lender on
such date plus (ii) such Lender's Percentage of the unused portion of the
Revolving Loan Commitment Amount on such date.
SECTION 4.1.3. Closing Fees, Expenses, etc. The Administrative Agent shall
have received for the account of each Lender, all fees, costs and expenses due
and payable pursuant to Sections 3.3 and 10.3 of the Credit Agreement or payable
hereunder, if then invoiced.
SECTION 4.1.4. Audit Opinion. The Administrative Agent for the account of
the Lenders (with sufficient copies for each Lender) and the Trustee for the
Senior Unsecured Notes shall have received an unqualified audit opinion for the
Borrower for the Fiscal Year ending December 31, 2000 by Deloitte & Touche,
accompanied by the relevant financial statements.
SECTION 4.1.5. 10-K. The Administrative Agent for the account of the
Lenders (with sufficient copies for each Lender) shall have received a copy of
the Borrower's annual report filed with the SEC on Form 10-K for the Fiscal Year
ending December 31, 2000.
SECTION 4.1.6. Legal Details, etc. All documents executed or submitted
pursuant hereto shall be satisfactory in form and substance to the
Administrative Agent and its counsel. The Administrative Agent and their counsel
shall have received all information and such counterpart originals or such
certified or other copies or such materials, as the Administrative Agent or its
counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the
Administrative Agent and its counsel.
ARTICLE V
AFFIRMATION AND CONSENT
SECTION 5.1. Acknowledgment and Reaffirmation. The Borrower and each
Consenting Obligor hereby reaffirms, as of the Fifth Amendment Effective Date,
(a) the covenants and agreements contained in each Loan Document to which it is
a party, including, in each case, as such covenants and agreements may be
modified by this Amendment and the transactions contemplated thereby, (b) its
guarantee of payment of the Obligations pursuant to the Subsidiary Guaranty and
(c) its obligations with respect to collateral security under each other Loan
Document to which it is a party.
SECTION 5.2. Representations and Warranties, etc. The Borrower and each
Consenting Obligor hereby represents, warrants and certifies, that, (a) as of
the of the Fifth Amendment Effective Date), the representations and warranties
made by it contained in the Loan Documents to which it is a party are true and
correct in all material respects with the same effect as if made on the date
hereof, except to the extent any such representation or warranty refers or
pertains solely to a date prior to the date hereof (in which case such
representation and warranty was true and correct in all material respects as of
such earlier date) and (b) the Borrower has caused to be delivered to the
Lenders a true and complete copy of the execution form of the Subscription
Agreement and each other Rights Offering Document, none of such documents have
been
amended, waived or otherwise modified in a material manner (other than the
Subscription Agreement Waiver, dated as of May 30, 2001, a true and complete
copy of the execution form of which has been delivered to the Lenders), and
concurrently with the effectiveness of this Amendment, (i) all of the conditions
precedent set forth in the Subscription Agreement have been met, (ii) the
Borrower has irrevocably accepted the subscription evidenced thereby for at
least $7,500,000 prior to the termination thereof and (iii) has notified the
Subscribers (as defined in the Subscription Agreement) that all conditions to
the ability of the Borrower to accept such subscription have been fulfilled and
that such acceptance has occurred.
SECTION 5.3. Loan Documents. The Borrower and each Consenting Obligor
further confirms that each Loan Document to which it is a party (a) is and shall
continue to be in full force and effect and the same are hereby ratified and
confirmed in all respects, except that upon the occurrence of the Fifth
Amendment Effective Date, all references in such Loan Documents to the "Credit
Agreement", "Loan Documents", "thereunder", "thereof", or words of similar
import shall mean the Credit Agreement and the Loan Documents, as the case may
be, in each case after giving effect to the amendments and other modifications
provided for in this Amendment, (b) if such Loan Document relates to collateral
security, such document shall also expressly and completely secure all
Obligations related thereto and (c) if such Loan Document relates to a
guarantee, such document shall also expressly and completely guarantee all
Obligations related thereto.
SECTION 5.4. Course of Dealing, etc. Each Consenting Obligor hereby
acknowledges and agrees that the acceptance by each Lender of this document
shall not be construed in any manner to establish any course of dealing on any
Lender's part, including the providing of any notice or the requesting of any
acknowledgment not otherwise expressly provided for in any Loan Document with
respect to any future amendment, waiver, supplement or other modification to any
Loan Document or any arrangement contemplated by any Loan Document.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Cross-References. References in this Amendment to any Article
or Section are, unless otherwise specified or otherwise required by the context,
to such Article or Section of this Amendment.
SECTION 6.2. Loan Document Pursuant to Credit Agreement. This Amendment is
a Loan Document executed pursuant to the Credit Agreement and shall be
construed, administered and applied in accordance with all of the terms and
provisions of the Credit Agreement.
SECTION 6.3. Successors and Assigns. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
SECTION 6.4. Counterparts. This Amendment may be executed by the parties
hereto in several counterparts, each of which when executed and delivered shall
be deemed to be an original and all of which shall constitute together but one
and the same agreement.
SECTION 6.5. Full Force and Effect; Limited Amendment. Except as expressly
modified hereby, all of the representations, warranties, terms, covenants,
conditions and other provisions
of the Existing Credit Agreement and the Loan Documents shall remain unchanged
and shall continue to be, and shall remain, in full force and effect in
accordance with their respective terms. The consents and modifications set forth
herein shall be limited precisely as provided for herein, and shall not be
deemed to be an amendment to, waiver of, consent to or modification of any other
term or provision of the Existing Credit Agreement, any other Loan Document
referred to therein or herein or of any transaction or further or future action
on the part of the Borrower or any Obligor which would require the consent of
the Lenders under the Existing Credit Agreement or any of the Loan Documents.
SECTION 6.6. Second Additional Term Loan. It is acknowledged and agreed by
the parties hereto that the commitment for the Second Additional Term Loan
expired pursuant to the terms thereof without draw on April 18, 2001 and has not
been and will not be reinstated.
SECTION 6.7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the signatories hereto have caused this Amendment and
Limited Waiver to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
EVERCOM, INC.
By:_/s/Keith Kelson
Title: Chief Financial Officer
EVERCOM SYSTEMS, INC.
By:_/s/Richard Falcone
Title: Chief Executive Officer
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
By: _/s/Laura Hom
Title: Executive Director
GENERAL ELECTRIC CAPITAL CORPORATION
By:_/s/Thomas E. Johnstone
Title:
IBJ WHITEHALL BANK & TRUST COMPANY
By:_/s/James Dunleavy
Title: Managing Director
BNP PARIBAS
By:_/s/Ola Anderssen
Title: Director
By:_/s/Gregg Berardi
Title: Director
AMERICAN NATIONAL BANK
By:_/s/Diane Zurich
Title: Commercial Banking Officer
ARES LEVERAGED INVESTMENT FUND L.P.
By: Ares Management L.P.
By:_/s/Jeff Moore
Title: Principal