Document:

Amendment to Loan and Security Agreement

 Exhibit 10.74.3 
  
 June 27, 2003 
  
 BY FACSIMILE 
 Correctional Services Corporation 
 1819 Main Street, Suite 1000 
 Sarasota, Florida 34236 
 Attn.: Bernard A. Wagner 
   Senior VP and CFO

  

	 	Re:	 	Loan and Security Agreement dated as of October 30, 2002 (as amended, the “Loan Agreement”) by and between Correctional Services Corporation, a Delaware
corporation, CSC Management de Puerto Rico Inc., a Puerto Rico corporation, Youth Services International Holdings, Inc., a Delaware corporation, Youth Services Real Property Partnership, a Maryland limited liability partnership, Youth Services
International, Inc., a Maryland corporation, Youth Services International of Northern Iowa, Inc., an Iowa corporation, Youth Services International of South Dakota, Inc., a South Dakota corporation, Youth Services International of Missouri, Inc., a
Missouri corporation, Youth Services International of Texas, Inc., a Texas corporation, Youth Services International of Illinois, Inc., a Maryland corporation, and Youth Services International of Michigan, Inc., a Michigan corporation (collectively,
“Borrower”), and General Electric Capital Corporation, a Delaware corporation (“Lender”); capitalized terms not otherwise defined herein shall have the meanings given in the Loan Agreement 

 
 Dear Skip: 
  
 Pursuant to the Loan Agreement, Borrower is restricted under Section 2.6 (Use of Proceeds), Section 7.7 (Loans), Section 7.9
(Subsidiaries) and Section 7.12 (Transactions with Affiliates) from, among other things, using proceeds of the Loan for certain expenditures, forming subsidiaries, making loans to subsidiaries and entering certain transactions with its Affiliates.
For convenience of reference, these provisions are set forth on Schedule 1 attached hereto. 
  
 You have requested our consent under the Loan Agreement to form a new subsidiary named CSC of Tacoma, LLC (“CSC Tacoma”) and to make a
loan in an amount not to exceed $8,000,000 (the “CSC Tacoma Loan”) from Correctional Services Corporation (“CSC”) to CSC Tacoma for the purpose of financing capital expenditures in connection with the development of
a new jail facility (the “New Facility”) to be constructed in Tacoma, Washington. The CSC Tacoma Loan will be 
  

 Correctional Services Corporation 
 June         , 2003 
 Page 2 of 7 
  
 evidenced by a note (the “CSC Tacoma Note”) substantially in the form attached hereto as Exhibit A. 
  
 You have also requested that capital expenditures up to an aggregate amount
of $8,000,000 be financed with the proceeds of the CSC Tacoma Loan (including any such expenditures made directly by CSC prior to the delivery of the CSC Tacoma Note) be excluded from the calculation of Cash Flow under Section 6.33(b)(ii) of the
Loan Agreement. 
  
 Lender hereby consents to (i) the formation of
CSC Tacoma, (ii) to the making of the CSC Tacoma Loan out of proceeds of the Loan in an aggregate amount not to exceed $8,000,000 and upon substantially the same terms set forth on Exhibit A hereto, and (iii) to the use of proceeds of the CSC
Tacoma Loan to fund capital expenditures in connection with the New Facility. Lender agrees that capital expenditures in an amount not to exceed $8,000,000 which are financed with the proceeds of the CSC Tacoma Loan (including any such expenditures
made directly by CSC prior to the delivery of the CSC Tacoma Note) may be excluded from the calculation of Cash Flow under Section 6.33(b)(ii) of the Loan Agreement. Lender’s consent and agreement are conditioned upon the following terms:

  
 (a)    Borrower shall pay a fee of
$20,000, which fee shall be added to the balance of the Revolving Credit Loan on the date hereof. 
  
 (b)    Borrower covenants with Lender that it will not assign the CSC Tacoma Note, and the face of the CSC Tacoma Note shall bear a
legend which clearly states that the CSC Tacoma Note may not be assigned by the payee thereof. 
  
 (c)    Borrower covenants that not more than an aggregate of $300,000 in proceeds of the Loan (not including proceeds of the Loan used
to fund the CSC Tacoma Loan) shall be used to fund training, start-up or other expenses incurred in connection with the New Facility. 
  
 (d)    Borrower covenants that it shall not be obligated on the bond financing to be obtained by CSC Tacoma to finance the New
Facility, and the marketing documents circulated in connection with the bond financing of the New Facility shall clearly state that such bonds are in no way or part an obligation of CSC. 
  
 (e)    Borrower represents and warrants that all information provided by Borrower in connection with the
financing and operation of the New Facility is true, complete and correct, in all material respects. 
  
 Additionally, Lender agrees that, effective on the date hereof, the reserve (the “Reserve”) established pursuant to that certain letter
agreement dated January 15, 2003 (the “Prior Letter Agreement”) between Lender and Borrower shall be lowered to $1,000,000. Lender agrees that the 
  

 2 

 Correctional Services Corporation 
 June         , 2003 
 Page 3 of 7 
  
 Reserve will be released in full on the earliest date on which (i) the New Facility generates monthly EBITDA, over a three month period, of
at least the monthly amounts set forth on Schedule 2 attached hereto and (ii) no default or Event of Default is then in effect under the Loan Agreement. 
  
 The execution, delivery and effectiveness of this letter agreement shall not, except as expressly provided in this letter
agreement, operate as a waiver of any right, power or remedy of Lender or a consent to any other action or proposed action by Borrower, nor constitute a waiver of any provision of the Loan Agreement or any other documents, instruments and agreements
executed or delivered in connection with the Loan Agreement. 
  
 The parties agree that this letter agreement shall be a “Loan Document”, as such term is used in the Loan Agreement and that any default under the terms of this letter agreement shall give rise to an immediate Event of Default
under the Loan Agreement. 
  
 [REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK] 
  

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 Correctional Services Corporation 
 June         , 2003 
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 Please indicate your acceptance of the terms of this letter by signing below and returning the same to Alicia Cook,
General Electric Capital Corporation, Two Bethesda Metro Center, Suite 600, Bethesda, Maryland 20814. 
  

	 Very truly yours,
  
 GENERAL ELECTRIC CAPITAL
     CORPORATION
 a Delaware corporation

		
	 By:
	 	

	 Name:
 Title:
	 	 

  
 ACCEPTED AND AGREED TO:

  
 CORRECTIONAL SERVICES CORPORATION 
 CSC MANAGEMENT DE PUERTO RICO INC. 
 YOUTH SERVICES INTERNATIONAL
HOLDINGS, INC. 
 YOUTH SERVICES REAL PROPERTY PARTNERSHIP 
 YOUTH SERVICES INTERNATIONAL, INC. 
 YOUTH SERVICES INTERNATIONAL OF NORTHERN IOWA, INC. 
 YOUTH SERVICES INTERNATIONAL OF SOUTH DAKOTA, INC. 
 YOUTH SERVICES
INTERNATIONAL OF MISSOURI, INC. 
 YOUTH SERVICES INTERNATIONAL OF TEXAS, INC. 
 YOUTH SERVICES INTERNATIONAL OF ILLINOIS, INC. 
 YOUTH SERVICES INTERNATIONAL OF MICHIGAN, INC. 
  
 By: /s/    Bernard A.
Wagner             
 Name: Bernard A. Wagner 
 Title: Sr. Vice President and Chief Financial Officer 
  

	

  
  

 4 

 EXHIBIT A 
  
 [Form of CSC Tacoma Note] 

	

  
  

 SCHEDULE 1 
  
 Selected Provisions of Loan Agreement 
  
 Section 2.6.    Use of Proceeds.    The proceeds of Lender’s
advances under the Loans shall be used solely to defease Borrower’s existing indebtedness owed to Fleet Bank, for working capital, for acquisition or refinancing of the Real Property, and for other costs of Borrower arising in the ordinary
course of Borrower’s business. On the date of Closing, Lender, on Borrower’s behalf, will forward a portion of the proceeds of the Loans to Chicago Title Insurance Company for the purpose of purchasing all rights in an existing mortgage
note secured by Borrower’s Salinas, Puerto Rico facility. Lender will hold such note and all rights thereto, in escrow for Borrower. 
  
 . . . 
  
 Section 7.7.    Loans.    Borrower will not make loans or advances to any Person, other than (a) trade credit extended in the ordinary course of its
business, (b) loans to a joint venture entity which are subject to the limit set forth in Section 7.2 hereof, (c) advances for business travel and similar temporary advances made in the ordinary course of business to officers, stockholders,
directors, and employees and (d) loans or advances by Correctional Services Corporation to its subsidiaries which are “Borrowers” under this Agreement. 
  
 . . . 
  
 Section 7.9.    Subsidiaries.    Borrower will not form any subsidiary, or make any
investment in or any loan in the nature of an investment to, any other Person, except for loans permitted pursuant to Section 7.7 hereof. 
  
 . . . 
  
 Section 7.12.    Transactions with Affiliates.    Borrower will not enter into any transactions with any Affiliates, including without limitation the purchase,
sale, or exchange of property, or the loaning or giving of funds to any Affiliate, except in the ordinary course of business and pursuant to the reasonable requirements of Borrower’s business and upon terms substantially the same and no less
favorable to Borrower as it would obtain in a comparable arm’s length transaction with any Person not an Affiliate, and so long as the transaction is not otherwise prohibited under this Agreement. 
  
  

 SCHEDULE 2 
  
 EBITDA Covenant 
  
  

	 Month of Operation of New Facility

	 	 EBITDA Target

	1	 	$0
	2	 	$0
	3	 	$0
	Thereafter	 	To be determinedAmendment to 2000 Employee Stock Purchase Plan

   EXHIBIT 10.1
 SONIC INNOVATIONS, INC.
 AMENDMENT TO 2000  EMPLOYEE STOCK PURCHASE PLAN
  Amendment to Offering Period for ESPP
            2(k)          “Offering Periods” shall mean the periods of approximately twenty-four (24) months during
which an option granted pursuant to the Plan may be exercised, commenting on the first Trading Day on or after May 1st and November 1st of each year and terminating on the last Trading Day in the periods ending twenty-four months later;
provided, however, that on the first Offering Period commencing after May 1, 2003 shall commence on the first Trading Day on or after December 1, 2003 and end on the last Trading Day on or before November 30, 2005; and provided, further, that each
Offering Period thereafter shall commence on the first Trading Day on or after June 1st and December 1st each year, or on such other date as the Board shall determine.  The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
           4.              Offering
Period.  The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1st and November 1st each year; provided, however, that the
first Offering Period commencing after May 1, 2003 shall commence on the first Trading Day on or after December 1, 2003 and end on the last Trading Day on or before November 30, 2005; and provided further, that each Offering Period thereafter shall
commence on the first Trading Day on or after June 1st and December 1st each year, or on such other date as the Board shall determine.  The Board shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter.

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