Exhibit 10.1
THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING
CREDIT AND SECURITY AGREEMENT
     THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY
AGREEMENT, dated as of October 31, 2006 (this “Third Amendment”), is entered
into by and between AMERICA SERVICE GROUP INC. (“ASG”) a Delaware corporation,
PRISON HEALTH SERVICES, INC. (“PHS”), a Delaware corporation, EMSA LIMITED
PARTNERSHIP (“EMSA LP”), a Florida limited partnership, PRISON HEALTH SERVICES
OF INDIANA, L.L.C. (“PHS Indiana”), an Indiana limited liability company, SECURE
PHARMACY PLUS, LLC (“SPP”), a Tennessee limited liability company, and
CORRECTIONAL HEALTH SERVICES, LLC, (“CHS”) a New Jersey limited liability
company (ASG, PHS, EMSA LP, PHS Indiana, SPP and CHS) are hereinafter referred
to, individually and collectively as the “Borrower”), CAPITALSOURCE FINANCE LLC,
a Delaware limited liability company (“CapitalSource”), as administrative agent
and collateral agent for Lenders (in such capacities, the “Agent”), and the
Lenders party hereto.
RECITALS
     A. Pursuant to that certain Amended and Restated Revolving Credit and
Security Agreement dated as of October 31, 2005, (as amended, and as further
amended, supplemented, or otherwise modified from time to time, the “Loan
Agreement”) and subject to the terms and conditions set forth therein, Lender
has agreed to make available to Borrower the Revolving Facility.
     B. The parties hereto desire to enter into this Third Amendment 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 Third
Amendment, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound, Lender and
Borrower 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.
     Section 2. Amendments to Loan Agreement. The sections, definitions, annexes
and exhibits of and to the Loan Agreement referenced and set forth on Annex A to
this Third Amendment hereby are amended, or amended and restated, as applicable,
to read as set forth on such Annex A, which annex is incorporated herein and
made a part hereof and of the Loan Agreement.
Section 3. Representations and Warranties.
          (a) Notwithstanding any other provision of this Third Amendment, 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 and this Third Amendment as of the date hereof and as
of the Effective Date and confirms that they are true and correct,
(ii) represents and warrants that they are Affiliates of each other, and
(iii) specifically represents and warrants to 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).
          (b) Each Borrower individually hereby represents and warrants as of
the date of this Third Amendment and as of the Effective Date as follows: (i) it
is duly incorporated or organized, validly

 

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existing and in good standing under the laws of its jurisdiction of
organization; (ii) the execution, delivery and performance by it of this Third
Amendment 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 Third
Amendment by or against it; (iv) this Third Amendment has been duly executed and
delivered by it; (v) this Third Amendment 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
giving effect to this Third Amendment it is not in default under the Loan
Agreement and no Default or Event of Default exists, has occurred or is
continuing.
     Section 4. Expenses. Borrower shall pay all costs and expenses incurred by
Lender or any of its Affiliates, including, without limitation, documentation
and diligence fees and expenses, all search, audit, appraisal, recording,
professional and filing fees and expenses and all other out-of-pocket charges
and expenses (including, without limitation, UCC and judgment and tax lien
searches and UCC filings and fees for post-Closing UCC and judgment and tax lien
searches) and reasonable attorneys’ fees and expenses, in connection with
entering into, negotiating, preparing, reviewing and executing this Third
Amendment contemplated hereby and all related agreements, documents and
instruments, including, without limitation, the UCC Financing Statements and
searches required hereunder and under the Loan Agreement, and all of the same
may be charged to Borrower’s account and shall be part of the Obligations. If
Lender or any of its 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 Lender or such Affiliate in its
sole discretion for the work performed.
     Section 5. Effect on the Loan Agreement. Upon the effectiveness of this
Third Amendment, (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 Third Amendment, and
(ii) each reference in any other Loan Document to the “Loan Agreement” shall
mean and be a reference to the Loan Agreement as amended by this Third
Amendment. Each reference herein to the Loan Agreement shall be deemed to mean
the Loan Agreement as amended by this Third Amendment. 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 Third Amendment 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 Third Amendment as though such terms
and conditions were set forth herein in full. The execution, delivery and
effectiveness of this Third Amendment shall not, except as expressly provided in
this Third Amendment, 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 6 . Governing Law and Jury Trial. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT 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

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SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE LOAN AGREEMENT.
     Section 7. Headings and Counterparts. The captions in this Third Amendment
are intended for convenience and reference only and do not constitute and shall
not be interpreted as part of this Third Amendment and shall not affect the
meaning or interpretation of this Third Amendment. This Third Amendment may be
executed in one or more counterparts, all of which taken together shall
constitute but one and the same instrument. This Third Amendment may be executed
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts for all purposes, and each party to this Third
Amendment agrees that it will be bound by its own facsimile signature and that
it accepts the facsimile signature of each other party to this Third Amendment.
     Section 8. Entire Agreement. This Third Amendment, 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
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. This Third Amendment 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 the written agreement of Lender and Borrower. This Third Amendment shall be
considered part of the Loan Agreement for all purposes under the Loan Agreement.
     Section 9. 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 Third Amendment shall inure to the benefit of Lender, all future holders of
any note, any of the Obligations or any of the Collateral and all Transferees,
and each of their respective successors and permitted assigns. Borrower may not
assign, delegate or transfer this Third Amendment or any of its rights or
obligations under this Third Amendment without the prior written consent of
Lender. No rights are intended to be created under this Third Amendment for the
benefit of any third party donee, creditor or incidental beneficiary of
Borrower. Nothing contained in this Third Amendment shall be construed as a
delegation to Lender of Borrower’s duty of performance, including, without
limitation, any duties under any account or contract in which Lender has a
security interest or Lien. This Third Amendment shall be binding upon Borrower
and its successors and assigns.
     Section 10. Release. Each Borrower, its officers, directors,
representatives, employees, predecessors, successors, agents and assigns, and
each Guarantor, his agents, representatives, predecessors, successors and
assigns (collectively, “Releasing Parties”) each hereby release, remise and
forever discharge Lender, and its officers, directors, employees, predecessors,
successors, agents and assigns (collectively, “Released Parties”), from any and
all claims, demands, actions, cause or causes of action heretofore arising out
of, or connected with or incidental to the Loan Agreement or any Loan Documents.
This general release is intended to be a full and complete release of any such
claims, demands, actions, cause or causes of action connected in any way to the
Loan Agreement and which have heretofore arisen. Releasing Parties each
acknowledge and agree that they are aware that they may hereafter discover
claims presently unknown or unsuspected, or facts in addition to or different
from those which they now know or believe to be true. Nevertheless, it is the
intention of the Releasing Parties, and each of them, through this Third
Amendment, to fully, finally and forever release all such matters and claims
relative thereto, which do now exist, may exist, or heretofore have existed.
     Section 11. Effective Date. Notwithstanding the date of execution or
delivery of this Third Amendment or any other date set forth herein, the
effectiveness of this Third Amendment and the

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agreement of Lender set forth herein are subject to the satisfaction of the
following conditions precedent (the date on which such conditions shall have
been satisfied, the “Effective Date”), all in form and substance satisfactory to
Lender in its sole discretion: (a) the due execution and delivery to Lender of
this Third Amendment by Borrower; (b) the representations and warranties
contained herein, in the Loan Agreement and the other Loan Documents, as amended
hereby, shall be true and correct as of such date, as if made on such date,
except for such representations and warranties as are by their express terms
limited to a specific date and remain true and correct as of such date; (c) upon
giving effect to this Third Amendment no Default or Event of Default shall have
occurred and be continuing; and (d) all corporate proceedings necessary in
connection with the transactions contemplated by this Third Amendment shall have
been taken and all documents, instruments and other legal matters incident
thereto shall be satisfactory to Lender.
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     IN WITNESS WHEREOF, the parties have caused this Third Amendment to Amended
and Restated Revolving Credit and Security Agreement to be executed by their
respective officers thereunto duly authorized as of the date first written
above.

          AGENT AND LENDER: CAPITALSOURCE FINANCE LLC
      By:   /s/ J. Anthony Romero         Name:   J. Anthony Romero       
Title:   Chief Operating Officer - HSB     

          BORROWER: AMERICA SERVICE GROUP INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Chief Financial Officer     

            PRISON HEALTH SERVICES, INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Senior Vice President     

            EMSA LIMITED PARTNERSHIP,
By its General Partner, PRISON HEALTH SERVICES, INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Senior Vice President   

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            PRISON HEALTH SERVICES OF INDIANA, LLC
By its General Manager, PRISON HEALTH SERVICES, INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Senior Vice President     

            CORRECTIONAL HEALTH SERVICES, LLC
By its Managing Member, PRISON HEALTH SERVICES, INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Senior Vice President     

            SECURE PHARMACY PLUS, LLC
By its Managing Member, PRISON HEALTH SERVICES, INC.
      By:   /s/ Michael W. Taylor         Name:   Mr. Michael Taylor       
Title:   Senior Vice President   

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ANNEX A
TO
THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT
AND SECURITY AGREEMENT
     Effective as of the Effective Date, the Loan Agreement is hereby amended as
follows:
     1. Amendments of Annex I (Financial Covenants) of the Loan Agreement.
          (a) Amendment and Restatement of Section 1, “Minimum EBITDA” Financial
Covenant. The Minimum EBITDA financial covenant set forth in Section 1 of Annex
I of the Loan Agreement is hereby amended and restated in its entirety to read
as follows:
     1) Minimum EBITDA
     As of the end of each calendar month, commencing with the calendar month
ending March 31, 2006 through the calendar month ending August 31, 2006, at no
time shall ASG (on a consolidated basis) permit its EBITDA for the Test Period
ending on the date of such determination to be less than $3,000,000. As of the
end of each calendar month, commencing with the calendar month ending
September 30, 2006 through the calendar month ending November 30, 2006, at no
time shall ASG (on a consolidated basis) permit its EBITDA for the Test Period
ending on the date of such determination to be less than $2,250,000. As of the
end of each calendar month, commencing with the calendar month ending
December 31, 2006, at no time shall ASG (on a consolidated basis) permit its
EBITDA for the Test Period ending on the date of such determination to be less
than $3,000,000.