CONSENT, WAIVER AND FIFTH AMENDMENT TO CREDIT AGREEMENT
This Consent, Waiver and Fifth Amendment, dated as of July 14, 2000 (this
"Amendment") is entered into by and among Policy Management Systems Corporation,
a South Carolina corporation (the "Borrower"), the Subsidiaries of the Borrower
parties hereto (the "Guarantors"), the financial institutions parties to this
Agreement (collectively, the "Banks"; individually, a "Bank") and Bank of
America, N.A. (formerly known as Bank of America National Trust and Savings
Association), as Agent (the "Agent").
RECITALS
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The Borrower, the Guarantors, the Agent and the Banks are parties to a
Credit Agreement dated as of August 8, 1997, as amended by a First Amendment to
Credit Agreement dated as of November 5, 1999, a Second Amendment to Credit
Agreement dated as of February 10, 2000, a Third Amendment to Credit Agreement
dated as of March 30, 2000 and a Fourth Amendment to Credit Agreement dated as
of April 24, 2000 (the "Credit Agreement") pursuant to which the Banks extended
a revolving facility. Capitalized terms used and not otherwise defined or
amended in this Amendment shall have the meanings respectively assigned to them
in the Credit Agreement.
The Borrower has requested that the Bank (i) provide a consent and waiver under
the Credit Agreement and (ii) modify certain provisions of the Credit Agreement.
The Banks have agreed to do so upon the terms and provisions and subject to the
conditions hereinafter set forth.
AGREEMENT
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In consideration of the foregoing and the mutual covenants and agreement
hereinafter set forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
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1. Amendment of Section 1.1. The following definitions set forth in
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Section 1.1 are hereby amended and restated as follows:
(a) "Borrowing Base" means, as of any day, 85% of Accounts Receivable
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plus 62.5% of Eligible PP&E plus 40% of Capitalized Software, all as set forth
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in the applicable Borrowing Base Certificate delivered to the Agent and the
Lenders in accordance with the terms of Section 5.1(l).
(b) "Eligible PP&E" means, as of any date of determination and without
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duplication, the aggregate net book value of all real estate, machinery,
equipment and computer hardware with supporting software ("PP&E") owned by the
Borrower or any of its Subsidiaries but excluding in any event (i) PP&E which is
(a) not subject to a perfected, first priority Lien in favor of the Agent to
secure the Obligations or (b) subject to any other Lien that is not permitted
under Section 5.3, (ii) PP&E which is not in good condition or fails to meet
standards for sale or use imposed by governmental agencies,
departments or divisions having regulatory authority over such PP&E, (iii) PP&E
which is not useable or salable at prices approximating its depreciated value in
the ordinary course of the business, (iv) PP&E located outside of the United
States, (v) PP&E that are leasehold improvements and (vi) PP&E which is leased
or on consignment.
(c) "Ineligible Accounts Receivable" means, as of any date of
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determination, any Accounts Receivable:
(a) not subject to a perfected, first priority Lien in favor of
the Agent to secure the Obligations and the obligations of the Guarantors or
subject to any other Lien that is not a permitted Lien;
(b) with respect to which more than 90 days have elapsed since the
date of the original invoice therefor or which is more than 60 days past due;
(c) if fifty percent (50%) or more of the aggregate dollar amount
of outstanding Accounts Receivable owed at such time by the account debtor
thereon is classified as ineligible under clause (b) above;
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(d) with respect to which any of the representations, warranties,
covenants, and agreements contained in this Agreement, the Term Loan, the
Security Agreement, the Pledge Agreement, the Mortgage Instrument or any other
related document, are not or have ceased to be complete and correct or have been
breached;
(e) with respect to which such Account Receivable evidenced by
notes, chattel paper or other instruments, unless such notes, chattel paper or
instruments have been delivered to and are in the possession of the Agent;
(f) which arises out of a sale not made in the ordinary course of
business of the Borrower or its Subsidiaries or not under customary terms;
(g) which represents a progress billing; for the purposes hereof,
"progress billing" means any invoice for goods sold or leased or services
rendered under a contract or agreement pursuant to which the account debtor's
obligation to pay such invoice is specifically conditioned upon the completion
of any further performance under the contract or agreement by the Borrower or
any of its Subsidiaries;
(h) owed by an account debtor which, to the best knowledge of the
Borrower, is not solvent or is subject to any bankruptcy or insolvency
proceeding of any kind;
(i) owed by an account debtor located outside of the United States
(unless payment for the goods shipped is secured by an irrevocable letter of
credit in a form and from an institution acceptable to the Agent);
(j) owed by an account debtor which is a Subsidiary, affiliate or
employee of the Borrower or any of its Subsidiaries;
(k) with respect to which are currently contingent or currently
subject to offset, deduction, counterclaim, dispute or other defense to payment,
in each case to the extent of such offset, deduction, counterclaim, dispute
or other defense;
(l) owed by the government of the United States of America, or any
department, agency, public corporation, or other instrumentality thereof, unless
the Federal Assignment of Claims Act and any other steps necessary to perfect
the Agent's Lien therein, have been complied with to the Agent's satisfaction
with respect to such Account Receivable;
(m) owed by any state, municipality, or other political
subdivision of the United States of America, or any department, agency, public
corporation, or other instrumentality thereof and as to which the Agent
determines that its Lien therein is not or cannot be perfected; and
(n) which fail to meet such other specifications and requirements
may from time to time be established by the Agent in its reasonable discretion.
2. Amendment of Section 1.1. Section 2.11 is hereby amended by adding
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the following new definitions:
"Capitalized Software" means the amount identified on the
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consolidated balance sheet of the Borrower as "Capitalized software costs, net".
3. Amendment of Section 5.1. Section 5.1(l) is hereby amended and
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restated in its entirety to read as follows:
"(l) to the extent the Borrowing Base is then applicable pursuant to
the terms of Section 5.20 hereof, initially, on or before July 17, 2000 and
thereafter, on or before the fifteenth Business Day of each month, the Borrower
shall submit, substantially in the form of the certificate attached hereto as
Exhibit K, a Borrowing Base Certificate as of the last day of the prior month."
4. Form of Borrowing Base Certificate. Annex A attached hereto shall
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be added to the Credit Agreement as Exhibit K.
B. CONSENT AND WAIVER
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1. Pursuant to (i) a Consent and Waiver dated as of June 19, 2000, the
Banks consented to and waived any Default or Event of Default under Section
2.11(c) of the Credit Agreement arising from the Borrower's incurrence of
subordinate indebtedness to CSC (as defined herein) in an aggregate principal
amount of up to $24,000,000 (the "Subordinated Fee
Loan") and the Borrower's use of the proceeds of such Subordinated Fee Loan to
pay the fee (together with related expenses of both Politic Acquisition Corp.
and Welsh Xxxxxx Xxxxxxxx & Xxxxx VIII) to Welsh Xxxxxx Xxxxxxxx & Xxxxx, X.X.
or Politic Acquisition Corp. (or its designated beneficiary) (collectively,
"WCAS") as required under the Amended and Restated Agreement and Plan of Merger
between Politic Acquisition Corp. and the Borrower and (ii) a Consent and
Waiver dated as of June 20, 2000, the Banks also consented to and waived any
Default or Event of Default under Section 2.11(c) of the Credit Agreement
arising from (a) the Borrower's possible incurrence of additional subordinated
indebtedness to CSC (as defined herein) in the form of a working capital
revolving line of credit established by Computer Sciences Corporation ("CSC") in
connection with the merger agreement between CSC and the Borrower for an
aggregate amount of up to $30,000,000, which is subordinate to the indebtedness
owing under the Credit Agreement and the Term Loan on terms similar to those of
the Subordinated Fee Loan and in all respects acceptable to the Agent (the
"Subordinated Working Capital Loan") and (b) the possible future issuance of
additional subordinated indebtedness by the Borrower to a prospective buyer (the
"Replacement Subordinated Loans"), which Replacement Subordinated Loans would
refinance and replace the Subordinated Fee Loan and the Subordinated Working
Capital Loan in full.
2. The Borrower has requested that the Banks consent to (i) the
incurrence by the Borrower of additional indebtedness in an aggregate principal
amount of up to $29,000,000 ("New Subordinated Debt") the proceeds of which will
be used to pay (A) the fee to CSC (or its designated beneficiary) in connection
with the termination by the Borrower of the merger agreement with CSC, (B) the
related expenses of CSC in connection with the termination by the Borrower of
the merger agreement with CSC and (C) the related expenses of WCAS in connection
with the termination by the Borrower of the merger agreement with WCAS (such
amounts hereinafter collectively referred to as the "Break up Fee") and (ii) the
incurrence by the Borrower of additional subordinated indebtedness in an
aggregate principal amount of up to $30,000,000 ("New Subordinated Working
Capital Loan") the proceeds of which will be used (A) to the extent outstanding,
to refinance the Subordinated Working Capital Loan in full and/or (B) for
general working capital purposes.
3. As the use of the proceeds of the New Subordinated Debt to pay the
Break-up Fee and the New Subordinated Working Capital Loan to refinance the
Subordinated Working Capital Loan and/or for general working capital purposes
would otherwise violate the provisions of Section 2.11(c) of the Credit
Agreement, which requires that the Borrower apply 100% of the net cash proceeds
of any issuance of debt securities for cash to prepay the Term Loan until the
Term Loan is repaid in full, and, to the extent of any excess, to repay any
outstanding Loans, the Banks, effective as of the date hereof, hereby (i)
consent to the use of proceeds of the New Subordinated Debt to pay the Break up
Fee and consent to the use of proceeds of the New Subordinated Working Capital
Loan (A) to the extent outstanding, to refinance the Subordinated Working
Capital Loan and/or (B) for general working capital purposes and (ii) grant a
limited one-time waiver of any Default or Event of Default that, at such time,
otherwise arise pursuant to Section 2.11(c) as a result of the non-prepayment of
the Term Loan and/or the Loans; provided that such New Subordinated Debt and
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such New Subordinated Working Capital Loan shall be subordinated to the
indebtedness owing under the Credit Agreement and the Term Loan on terms and
conditions and pursuant to documentation satisfactory in all respects to the
Agent.
C. REPRESENTATIONS AND WARRANTIES
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Each of the Borrower and the Guarantors hereby represents and warrants to
the Agent and Banks that:
1. After giving effect to this Amendment, no Event of Default specified
in the Credit Agreement and no event which with notice or lapse of time or both
would become such an Event of Default has occurred and is continuing;
2. After giving effect to this Amendment, the representations and
warranties of the Borrower and the Guarantors pursuant to the Credit Agreement
are true on and as of the date hereof as if made on and as of said date; and
3. The making and performance by the Borrower and the Guarantors of
this Amendment have been duly authorized by all necessary corporate action.
D. MISCELLANEOUS
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1. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with same effect as if the signatures thereto and
hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants and
provisions of the Credit Agreement shall remain in full force and effect and
shall be performed by the parties hereto according to its terms and provisions
and all references therein or in the Exhibits shall henceforth refer to the
Credit Agreement as amended by this Amendment.
3. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
4. The parties hereto agree that Policy Management Systems Investments,
Inc. shall execute this Amendment by or on August 2, 2000 and the failure by
them to so execute this Amendment by such date shall be an Event of Default
under the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first written.
BORROWER: POLICY MANAGEMENT SYSTEMS
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CORPORATION
By:/S/ G. Xxxxx Xxxxxx
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Title: Chief Executive Officer
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GUARANTORS: MYND CORPORATION F/K/A CYBERTEK
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CORPORATION
MYND INTERNATIONAL, LTD.
MYND PARTNERS, L.P. F/K/A CYBERTEK
SOLUTIONS, L.P.
By: POLICY MANAGEMENT
SYSTEMS CORPORATION, its General
Partner
MYND CORPORATION F/K/A XXXX
TECHNOLOGY GROUP, INC.
MYND CORPORATION F/K/A THE LEVERAGE
GROUP, INC.
SOFTWARE SERVICES HOLDING, INC.
By: /S/ G. Xxxxx Xxxxxx
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Title: Director
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POLICY MANGEMENT SYSTEMS
INVESTMENT, INC.
By: /S/ Xxxxxxxxx X. Xxxxxx
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Title: President
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BANKS: BANK OF AMERICA, N.A.
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By: /S/ Xxxx X. Xxxxxxxx
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Title: Managing Director
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WACHOVIA BANK, N.A.
By:/S/ Xxxx X. Xxxxxx
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Title: Assistant Vice President
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FIRST UNION NATIONAL BANK
By:_/S/ Xxxxxxxx X. Xxxxxxxxx
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Title: _Senior Vice President
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DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By:_____________________________
Title: ________________________
By:_____________________________
Title: ________________________
DAI-ICHI KANGYO BANK, LTD.
By: /S/ Xxxxxx X. Xxxxx
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Title: _Assistant Vice President
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THE FUJI BANK, LIMITED
By:_____________________________
Title: ________________________
ANNEX A
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EXHIBIT K
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POLICY MANAGEMENT SYSTEMS CORPORATION
BORROWING BASE CERTIFICATE
The undersigned Authorized Representative of the Borrowers, hereby certifies as
follows:
ACCOUNTS RECEIVABLE $__________
Less Ineligible Accounts Receivable:
(i,a) Not subject to a perfected, first priority Lien in favor
of the Agent
(i,b) Subject to any other Lien not permitted under Section
5.3 of Credit Agreement $ -
(ii) More than 60 days past due or 90 days past invoice date $ -
(iii) Cross-aged receivables; 50% or more 90 days past invoice date' $ -
(iv) Representations in the loan documents are not true and correct $ -
(v) Evidenced by notes, chattel paper, or other instruments $ -
(vi) Not in ordinary course of business or containing customary terms$ -
(vii) Progress Billing $ -
(viii) Owed by an insolvent account debtor $ -
(ix) Owed by an account debtor outside the U.S.
(unless secured by an LC) $ -
(x) Direct or indirect Subsidiary or Affiliate is the debtor $ -
(xi) Contingent to defense to payment $ -
(xii) Owed by U.S government, department, or agency $ -
(xiii) Owed by any state, municipality, or other political
subdivision of the U.S. $ -
(xiv) Other $ -
NET ACCOUNTS RECEIVABLE $ _________
Advance Rate 85%
TOTAL BORROWING BASE ACCOUNTS RECEIVABLE $ _________
PROPERTY, PLANT, & EQUIPMENT $ _________
Less Ineligible PP&E:
(i,a) Not subjected to a perfected, first priority Lien in favor of
the Agent $ -
(i,b) Subject to any other Lien not permitted under Section 5.3 of
Credit Agreement $ -
(ii) Not in good condition or fails to meet governmental standards
for sale or use $ -
(iii) Not usable or saleable at prices approximating its depreciated
value $ -
(iv) Located outside the U.S. $ -
(v) PP&E that are leasehold improvements $ -
(vi) Leased or on consignment $ -
NET PP&E $ ________
Advance Rate 62.5%
TOTAL BORROWING BASE PP&E $ ________
CAPITALIZED SOFTWARE $ _________
Advance Rate 40%
TOTAL BORROWING BASE CAPITALIZED SOFTWARE $ _________
BORROWING BASE (FROM ABOVE)
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Accounts Receivable $ _________
PP&E $ _________
Capitalized Software $ _________
TOTAL Borrowing BASE $ _________
TOTAL Outstanding ON FACILITY $ _________
CUSHION (Remaining AVAILABILITY UNDER $180MM REVOLVER) $ _________
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate as of the ___ day of _______, 20___.
POLICY MANAGEMENT SYSTEMS
CORPORATION
By:________________________
Title:
