1
SEVENTH MODIFICATION OF
AMENDED AND RESTATED CREDIT AGREEMENT
THIS MODIFICATION is made and entered into as of this 31st day of
December, 1996, among MEDAPHIS CORPORATION, a Delaware corporation (hereinafter
referred to as the "Borrower"), the banks and other lending institutions listed
on Annex I attached to the Credit Agreement described below (collectively, the
"Lenders") and banking corporation
in its capacity as the Agent for the Lenders
pursuant to Article X of such Credit Agreement (the "Agent").
STATEMENT OF FACTS
Pursuant to that certain Amended and Restated Credit Agreement, dated
as of August 13, 1993, among Borrower, the Lenders signatory thereto and the
Agent, as amended by the First Modification of Amended and Restated Credit
Agreement, dated as of July 1, 1994, among such parties, the Second
Modification of Amended and Restated Credit Agreement, dated as of November 23,
1994, among such parties, the Third Modification of Amended and Restated Credit
Agreement, dated as of March 17, 1995, among such parties, the Fourth
Modification of Amended and Restated Credit Agreement, dated as of January 31,
1996, among such parties, the Fifth Modification of Amended and Restated Credit
Agreement, dated as of October 10, 1996, among such parties, and the Sixth
Modification of Amended and Restated Credit Agreement, dated as of October 21,
1996, among such parties (collectively, the "Credit Agreement"), such Lenders
agreed to provide Borrower with certain credit facilities on the terms and set
forth in the Credit Agreement (all capitalized terms used in this Modification
which are not otherwise expressly defined herein shall have the respective
meanings given such terms in the Credit Agreement).
The parties are entering into this Modification in order to make
certain modifications of the Credit Agreement and to set forth certain other
agreements relating to the Credit Agreement, all in accordance with and subject
to the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein set forth, as well as for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Borrower, the Lenders and the Agent do hereby agree as follows:
2
STATEMENT OF TERMS
SECTION 1. MODIFICATIONS OF THE CREDIT AGREEMENT. Subject to
the terms and conditions of this Modification (including without limitation the
fulfillment of the conditions precedent to the effectiveness of this
Modification which are set forth in Section 3 below), the Borrower, the Lenders
and the Agent hereby agree to modify the Credit Agreement in the following
respects:
(A) Section 1.01 of the Credit Agreement shall be amended by
adding thereto the following new definition:
"Seventh Modification" shall mean the Seventh Modification of Amended
and Restated Credit Agreement, dated as of December 31, 1996, among
Borrower, the Lenders and the Agent.
(B) Section 1.01 of the Credit Agreement shall be amended by
deleting the definitions therein of the terms "Applicable Margin", "Cash
Management Loan Rate", "Consolidated EBIT" and "Consolidated Net Income (Loss)"
and by substituting in lieu thereof the following new respective definitions of
such terms:
"Applicable Margin" shall mean, from and after January 1, 1997, (i)
two and one-half percent (2.5%) per annum for Loans consisting of
LIBOR Advances and (ii) zero percent (0.0%) per annum for Loans
consisting of Base Rate Advances.
"Cash Management Loan Rate" shall mean the higher of (x) the rate
which the Cash Management Lender publicly announces from time to time
to be the Cash Management Lender's prime rate, prime lending rate or
base rate, as in effect from time to time and (y) the sum of the
Federal Funds Rate, as in effect from time to time plus one- half of
one percent (0.5%) per annum. The Cash Management Loan Rate is a
reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer.
"Consolidated EBIT" shall mean, for any fiscal period of the Borrower,
an amount equal to the sum of the Consolidated Net Income (Loss)
plus, to the extent subtracted in determining such Consolidated Net
Income (Loss), (i) provisions for taxes based on income, (ii)
Consolidated Interest Expense, (iii) restructuring charges, merger
costs and other one-time items totaling not more than $41,600,000
incurred in the nine month period ending September 30, 1996, and (iv)
solely for purposes of determining Borrower's compliance with the
financial covenant in Section 7.09(e) hereof for Borrower's fiscal
quarter ending December 31, 1996, actual non-cash charges relating to
asset write-downs and other non-cash restructuring charges incurred in
such quarter.
"Consolidated Net Income (Loss)" shall mean, for any fiscal period of
the Borrower, the net income (or loss) of the Consolidated Companies
on a consolidated basis for such period (taken as a single accounting
period) determined in conformity with GAAP, but
-2-
3
excluding therefrom (to the extent otherwise included therein)
(i) any gains or losses, together with any related provisions for
taxes, realized upon any sale of assets other than in the ordinary
course of business, and (ii) any income or loss of any Person acquired
prior to the date such Person becomes a Subsidiary of the Borrower or
is merged into or consolidated with the Borrower or any of its
Subsidiaries.
(C) Section 2.03 of the Credit Agreement shall be amended by
adding thereto the following new subsection (d):
(d) Notwithstanding anything in this Agreement to the
contrary, Borrower shall not be entitled to obtain any new LIBOR
Advances on or after the date of the Seventh Modification. In
addition, notwithstanding anything herein to the contrary, no
outstanding Borrowing may be converted into, or combined as, a
Borrowing consisting of LIBOR Advances on or after the date of the
Seventh Modification.
(D) Section 4.03(b) of the Credit Agreement shall be deleted in
its entirety and the following new Section 4.03(b) shall substituted in lieu
thereof:
(b) (i) In consideration of the Lenders making their
respective Revolving Loan Commitments hereunder available to the
Borrower, the Borrower agrees to pay to the Agent (for the account of
and distribution to the Lenders in accordance with their respective
pro rata shares of all of the Revolving Loan Commitments) in
immediately available funds a non-refundable Commitment Fee from the
date of the Seventh Modification to the date of the Credit Expiration
Date computed on the daily average unused portion of the Revolving
Loan Commitments in effect during the period from which such payment
is made (as such Revolving Loan Commitments may be reduced pursuant to
this Agreement), at a rate per annum equal to one-half of one percent
(0.50%), which Commitment Fee shall be payable by Borrower to the
Agent (for the account of the Lenders as aforesaid) quarterly in
arrears commencing on the first (1st) day of the first (1st) calendar
quarter following the date of the Seventh Modification and continuing
to be due on the first (1st) day of each calendar quarter thereafter
so long as the Revolving Loan Commitments are in effect as well as on
the Credit Expiration Date.
(ii) In consideration of the Cash Management Lender making
its Cash Management Loan Commitment hereunder available to the
Borrower, the Borrower agrees to pay to the Cash Management Lender in
immediately available funds a non-refundable Commitment Fee from the
date of the Seventh Modification to the date of the Credit Expiration
Date computed on the daily average unused portion of the Cash
Management Loan Commitment in effect during the period for which such
payment is made (as such Cash Management Loan Commitment may be
reduced pursuant to this Agreement) at a rate per annum equal to
one-half of one percent (0.50%), which Commitment Fee shall be
-3-
4
payable by Borrower to the Cash Management Lender quarterly in arrears
commencing on the first (1st) day of the first (1st) calendar quarter
following the date of the Seventh Modification and continuing to be
due on the first (1st) day of each calendar quarter thereafter so long
as the Cash Management Loan Commitment is in effect as well as on the
Credit Expiration Date.
(E) Section 7.01(a) of the Credit Agreement shall be deleted in
its entirety and the following new Section 7.01(a) shall be substituted in lieu
thereof (and any prior waiver of compliance with Section 7.01(a) of the Credit
Agreement expressly or impliedly granted by the Lenders or the Agent is hereby
rescinded and the requirement that Borrower comply with Section 7.01(a) as
amended by this Modification is hereby reinstated):
(a) Within thirty (30) days after the end of each month,
commencing with the month of November, 1996 (but the financial
statements for the month of November, 1996 shall not be due hereunder
until 45 days after the end of such month), a consolidated statement
of income and statement of cash flows of Borrower and its Subsidiaries
for such period and for the period from the beginning of such fiscal
year to the end of such period, and a consolidated balance sheet of
Borrower and its Subsidiaries as of the end of such period, setting
forth in the case of each monthly statement in comparative form
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail, prepared in accordance with GAAP (subject to
changes resulting from normal year-end adjustments) but not audited;
(F) Section 7.01 of the Credit Agreement shall be modified by
adding thereto the following new clause (t):
(t) On the last Business Day of each calendar week,
commencing with the calendar week in which the date of the Seventh
Modification occurs, bi-weekly cash flow projections for the following
two-week period in the form previously submitted by Borrower to the
Agent and the Required Lenders, which projections shall also include a
comparison of the prior two-week period's projections to actual
results.
(G) Section 7.09 of the Credit Agreement shall be amended by
adding the following new subsection (e) at the end thereof (and the period at
the end of subsection (d) thereof shall be deleted and replaced with a
semi-colon and the word "and"):
(e) Borrower's Consolidated EBITDA for its fiscal year
ending on December 31, 1996 shall be not less than $45,000,000
(but Borrower's failure to comply with this Section 7.09(e)
shall not constitute an Event of Default hereunder unless and
until the Agent notifies the Borrower in writing, within 10
days after Borrower delivers written notice of such failure to
all Lenders and the Agent, that the
-4-
5
Required Lenders have elected to declare such failure to be an
Event of Default hereunder).
(H) Section 8.05 of the Credit Agreement is hereby deleted in its
entirety and the following new Section 8.05 shall be substituted in lieu
thereof:
8.05. DIVIDENDS, ETC. Borrower shall not declare or pay any
cash dividend on its capital stock or make any cash payment to
purchase, redeem, retire, or acquire any of its Subordinated Debt or
capital stock or any option, warrant or other right to acquire such
Subordinated Debt or capital stock.
(I) Clause (v) in Section 8.06 of the Credit Agreement shall be
amended by adding the following parenthetical at the end thereof:
(notwithstanding anything to the contrary in this clause (v), Borrower
shall not, and shall not permit any Subsidiary, to make any
Acquisitions on or after the date of the Seventh Modification)
(J) Section 9.01 of the Credit Agreement shall be amended by adding
thereto the following new Section 9.01(xiv):
(xiv) David E. McDowell shall no longer continue to
serve as the chairman of Borrower's Board of Directors and as
Borrower's chief executive officer unless, in the event of his
resignation, discharge, retirement, disappearance, disability or
death, he is replaced by Borrower's Board of Directors with a chairman
and chief executive officer who is reasonably acceptable to the
Required Lenders.
(K) Section 11.05 is hereby amended by adding to the end thereof
the following new paragraph (i):
(i) Notwithstanding anything in this Section 11.05 or in
Exhibit H attached hereto to the contrary, from and after the date of
the Seventh Modification any Lender may from time to time assign all
or any portion of its rights and obligations under the Credit
Agreement and the other Credit Documents to another Person or grant
participation interests therein to participants of such Lender's
choosing without the consent of the Borrower, but each such assignment
or participation transaction must otherwise be in compliance with this
Section 11.05.
(L) Schedules 6.01(b), 6.01(c) and 6.03 to the Credit Agreement
shall be deleted and the new Schedules 6.01(b), 6.01(c) and 6.03 attached
hereto shall be substituted in lieu thereof, respectively.
-5-
6
SECTION 2. CERTAIN FINANCIAL COVENANT WAIVERS. Subject
to the terms and conditions of this Modification (including without limitation
the fulfillment of the conditions precedent to the effectiveness of this
Modification which are set forth in Section 3 below), the Lenders and the Agent
hereby waive Borrower's compliance with the financial covenants set forth in
Sections 7.09(a) through (d) of the Credit Agreement for its fiscal quarter
ending December 31, 1996. The aforesaid waivers relate solely to the specific
covenants and fiscal quarter described above and nothing herein is intended (or
shall be construed) to constitute a waiver by any of the Lenders or the Agent
of Borrower's compliance with any of the other covenants set forth in the
Credit Agreement or with any of the financial covenants set forth in Sections
7.09(a) through (d) of the Credit Agreement for any future fiscal period (and,
without limiting the generality of the foregoing, Borrower shall continue to be
required to comply with the financial covenants set forth in Sections 7.09(a)
through (d) of the Credit Agreement for each fiscal quarter of Borrower ending
on or after March 31, 1997).
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS. This
Modification shall become effective, from and after the date hereof, upon the
satisfaction of each and every one of the following conditions to such
effectiveness:
(A) The Agent shall have received the following documents in form
and substance reasonably satisfactory to the Agent (collectively, the
"Supplemental Credit Documents"):
(i) This Modification duly completed and executed by
Borrower, the Agent and the Lenders;
(ii) The written consent of each of the Guarantors to the
execution, delivery and performance of this Modification, which
consent shall be evidenced by such Guarantor's executing one or more
counterparts of this Modification in the appropriate space indicated
below;
(iii) The favorable opinion of the General Counsel of the
Borrower in the form of Attachment 1 attached hereto (subject to such
changes therein as may be acceptable to the Agent); and
(iv) A certificate of the Borrower in substantially the
form of Attachment 2 attached hereto, duly executed and appropriately
completed.
(B) Each and every representation and warranty of Borrower set
forth in Section 5 below shall be true and correct in all material respects as
of the date of and after giving effect to this Modification; and
(C) There shall not exist as of the date of and after giving
effect to this Modification any Default or Event of Default under the Credit
Agreement as amended by this Modification.
-6-
7
SECTION 4. MODIFICATION FEES. The Borrower hereby agrees to pay
the following modification fees:
(i) On January 2, 1997, Borrower shall pay to the Agent (for
ratable distribution by the Agent to the Lenders in accordance with
their respective pro rata shares of the Commitments as in effect on
this date) an initial modification fee in an amount equal to 0.15% of
the Commitments as in effect on this date, which fee shall be
non-refundable; and
(ii) If by January 31, 1997 (or by February 4, 1997 if the Required
Lenders elect to extend such deadline from January 31, 1997 to such
date), Borrower has not entered into, and satisfied the initial
closing conditions for, an amended and restated credit agreement with
the Agent and the Lenders participating therein which amends and
restates the Credit Agreement, all on terms and conditions which are
mutually satisfactory to the Borrower, the Agent and such Lenders, the
Borrower shall pay an additional non-refundable modification fee to
the Agent (for ratable distribution to all Lenders in accordance with
their respective pro rata shares of the Commitments as in effect on
such date) in an aggregate amount of up to $5,000,000, which deferred
modification fee shall be calculated and payable as follows: (x) On
February 14, 1997, Borrower shall transfer to the Agent (for ratable
distribution to all Lenders as aforesaid) shares of the common stock
of the Borrower (together with piggy-back registration rights
acceptable to the Required Lenders and the Agent) having an aggregate
value (based on the average closing price per share of such stock for
the last five trading days preceding such transfer date) of
$1,250,000, and (y) commencing on January 31, 1997 (or, if extended as
provided above, February 4, 1997) and continuing on the last day of
February, 1997 and each succeeding calendar month thereafter until the
earlier of the date (if any) that the aforesaid amended and restated
credit agreement may be entered into and initially closed or the date
that the total payments made under this clause (y) equals $3,750,000,
Borrower shall pay to the Agent (for ratable distribution to the
Lenders as aforesaid) an amount (in immediately available funds) equal
to 0.1667% of the aggregate amount of the Commitments on such date.
Any and all fees payable by the Borrower to the Agent under clause (y)
above on January 31, 1997 (or, if extended as provided above, February 4, 1997)
and February 28, 1997, to the extent paid, shall be credited against any
incremental fees payable by the Borrower for the aforesaid amended and restated
credit agreement if such agreement is entered into. The parties further
confirm that none of the Lenders, the Agent or the Borrower has offered,
committed or agreed to enter into the aforesaid amended and restated credit
agreement.
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to the Lenders and the Agent that (a) each of
Borrower and the Subsidiaries has all requisite corporate power and authority
to execute and deliver the Supplemental Credit Documents to which it is a party
and to perform its obligations under such Supplemental Credit Documents, and
the Supplemental Credit
-7-
8
Documents to which each such Credit Party is a party have been duly authorized
by all requisite corporate action on the part of such Credit Party, have been
duly executed and delivered by authorized officers of such Credit Party, and
constitute valid obligations of such Credit Party, legally binding upon and
enforceable against such Credit Party in accordance with their terms, except as
such enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity; and (b) after
giving effect to this Modification, (i) no Default or Event of Default is
existing under the Credit Agreement on and as of the date of this Modification
and (ii) the representations and warranties of the Borrower set forth in
Article VI of the Credit Agreement are true and correct in all material
respects on and as of the date of this Modification as if made on and as of
each of such date (except as to the extent that any of such representations or
warranties relates to a specific prior date or period).
SECTION 6. LENDERS' EXPENSES. Notwithstanding anything to the
contrary in Section 11.03 of the Credit Agreement, Borrower shall be
obligated to pay each Lender's reasonable attorney's fees (including, without
limitation, the allocated cost of in-house counsel), other adviser's fees and
other expenses incurred from and after December 11, 1996 with respect to the
Credit Agreement and all related transactions; provided, however, that so long
as no Default or Event of Default has occurred and is then continuing,
Borrower's liability for the attorney's fees (including, without limitation,
the allocated cost of in-house counsel), other adviser's fees and other
expenses incurred by any Lender in any one calendar month shall not exceed
$15,000; provided further, however, that such limitation shall not apply to
Borrower's liability for the Agent's attorney's fees, other adviser's fees and
other expenses under Section 11.03 of the Credit Agreement.
SECTION 7. MISCELLANEOUS.
(A) Except as herein provided, the Credit Agreement shall remain
unchanged and in full force and effect, and each reference to the Credit
Agreement in the Credit Agreement and the other Credit Documents shall be
deemed to be a reference to the Credit Agreement as hereby amended and as the
same may be further amended, supplemented or otherwise modified and in effect
from time to time hereafter.
(B) This Modification may be executed in any number of several
counterparts, each of which shall be identical and all of which when taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Modification by signing one or more of such
counterparts.
(C) This Modification shall be governed by, and construed in
accordance with, the internal laws of the State of Georgia (without giving
effect to its conflicts of law rules).
-8-
9
IN WITNESS WHEREOF, the parties hereto have caused this Modification
to be executed as of the day and year first above written and Borrower has
caused its seal to be hereunto affixed as of such date.
BORROWER:
(CORPORATE SEAL) MEDAPHIS CORPORATION
ATTEST:
By:
- ------------------------------- ------------------------------------------------
Secretary President
AGENT:
By:
------------------------------------------------
Title:
----------------------------------------
By:
------------------------------------------------
Title:
----------------------------------------
LENDERS:
AS A LENDER
By:
------------------------------------------------
Title:
----------------------------------------
By:
------------------------------------------------
Title:
----------------------------------------
(Signatures continued on following page)
-9-
10
(Signatures continued from preceding page)
AS A LENDER
By:
-------------------------------------------
Title:
-----------------------------------
AS A LENDER
By:
------------------------------------------
Title:
----------------------------------
By:
------------------------------------------
Title:
----------------------------------
AS A LENDER
By:
------------------------------------------
Title:
----------------------------------
AS A LENDER
By:
------------------------------------------
Title:
----------------------------------
AS A LENDER
By:
------------------------------------------
Title:
-----------------------------------
-10-
11
CONSENT OF GUARANTORS
Each of the undersigned Guarantors does hereby consent to the
execution, delivery and performance of the within and foregoing Seventh
Modification of Amended and Restated Credit Agreement and does hereby reaffirm
all of its obligations and agreements under any and all Credit Documents (as
such term is defined in the above-referenced Credit Agreement) executed by it
in connection with the above-referenced Credit Agreement and also hereby
consents to any prior action taken by Medaphis Corporation in connection with
the Credit Agreement.
IN WITNESS WHEREOF, each of the undersigned Guarantors has executed
this Consent under seal as of the day and year first set forth.
GUARANTORS:
(CORPORATE SEAL) ARTRAC CORPORATION
ATTEST:
By:
- ------------------------- ---------------------------------------
Secretary Title:
-------------------------------
(CORPORATE SEAL) ARTRAC HEALTHCARE RESOURCES, INC.
ATTEST:
By:
- ------------------------- ---------------------------------------
Secretary Title:
-------------------------------
(CORPORATE SEAL) ASSETCARE, INC.
ATTEST:
By:
- ------------------------- ---------------------------------------
Secretary Title:
-------------------------------
(Signatures continued on following page)
-11-
12
(Signatures continued from preceding page)
(CORPORATE SEAL) AUTOMATION ATWORK
ATTEST:
By:
- -------------------------------- ------------------------------------
Secretary Title:
----------------------------
(CORPORATE SEAL) BSG ALLIANCE/IT, INC.
ATTEST:
By:
- -------------------------------- ------------------------------------
Secretary Title:
----------------------------
(CORPORATE SEAL) BSG CORPORATION
ATTEST:
By:
- -------------------------------- ------------------------------------
Secretary Title:
----------------------------
(CORPORATE SEAL) CENTRAL HEALTHCARE SERVICES,
INC.
ATTEST:
By:
- -------------------------------- ------------------------------------
Secretary Title:
----------------------------
(CORPORATE SEAL) CONSORT TECHNOLOGIES, INC.
ATTEST:
By:
- -------------------------------- ------------------------------------
Secretary Title:
----------------------------
(Signatures continued on following page)
-12-
13
(Signatures continued from preceding page)
(CORPORATE SEAL) GOTTLIEB'S FINANCIAL SERVICES,
INC.
ATTEST:
By:
- ------------------------------ -----------------------------------
Secretary Title:
---------------------------
(CORPORATE SEAL) HEALTHCARE RECOVERIES, INC.
ATTEST:
By:
- ------------------------------ -----------------------------------
Secretary Title:
---------------------------
(CORPORATE SEAL) HEALTH DATA SCIENCES
CORPORATION
ATTEST:
By:
- ------------------------------ -----------------------------------
Secretary Title:
---------------------------
(CORPORATE SEAL) IMONICS CORPORATION
ATTEST:
By:
- ------------------------------ -----------------------------------
Secretary Title:
---------------------------
(CORPORATE SEAL) MEDAPHIS HOSPITAL SERVICES
CORPORATION
ATTEST:
By:
- ------------------------------ -----------------------------------
Secretary Title:
---------------------------
(Signatures continued on following page)
-13-
14
(Signatures continued from preceding page)
(CORPORATE SEAL) MEDAPHIS PHYSICIAN SERVICES
CORPORATION
ATTEST:
By:
- ----------------------------- ---------------------------------
Secretary Title:
-------------------------
(CORPORATE SEAL) MEDAPHIS SYSTEMS CORPORATION
ATTEST:
By:
- ----------------------------- ---------------------------------
Secretary Title:
-------------------------
(CORPORATE SEAL) MEDICAL MANAGEMENT SCIENCES, INC.
ATTEST:
By:
- --------------------------- ---------------------------------
Secretary Title:
-------------------------
(CORPORATE SEAL) RAPID SYSTEMS SOLUTIONS, INC.
ATTEST:
By:
- ----------------------------- ---------------------------------
Secretary Title:
-------------------------
-14-