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EXHIBIT 10.9
FIRST MODIFICATION OF SECOND
AMENDED AND RESTATED CREDIT AGREEMENT
THIS MODIFICATION is made and entered into as of this 18th day of
November, 1997, 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 SUNTRUST BANK, ATLANTA, a Georgia banking corporation, acting 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 Second Amended and Restated Credit Agreement,
dated as of February 4, 1997, among Borrower, the Lenders signatory thereto and
the Agent (the "Credit Agreement"), such Lenders agreed to provide Borrower with
certain credit facilities on the terms and conditions 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).
Pursuant to letter agreements dated September 18, 1997 and October 24,
1997 entered into among the Lenders, the Agent and the Borrower (collectively,
the "Waiver Letters"), the Lenders and the Agent granted certain waivers to the
Borrower subject to the requirement that, among other things, the Borrower
terminate the Revolving Loan Commitments and pay all outstanding Obligations
(subject to certain exceptions as stated therein) by January 31, 1998.
The parties are entering into this Modification in order to make certain
modifications of the Credit Agreement, to waive the refinancing deadline
referred to in the immediately preceding paragraph, and to set forth certain
other waivers and agreements relating to the Credit Agreement, all in accordance
with and subject to the terms and conditions hereinafter set forth in this
Modification.
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:
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STATEMENT OF TERMS
SECTION 1. WAIVERS OF REFINANCING DEADLINE AND CERTAIN OTHER MATTERS.
(A) 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 do hereby waive the requirement in the Waiver Letters
that the Borrower cause all of the Lenders' Revolving Loan Commitments to be
terminated and all Obligations owed to all Lenders for the payment of money
(other than (x) indemnity obligations not yet due and payable and (y) Cash
Management Services Obligations) to be paid in full by January 31, 1998;
provided, however, that this waiver relates solely to such refinancing deadline
and nothing in this Section 1(A) is intended, or shall be construed, to
constitute a waiver of or a consent to any departure from any of the other
provisions of the Waiver Letters.
(B) 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 do hereby waive any breach of the Borrower's
representations and warranties in Section 6.02 of the Credit Agreement and the
last unnumbered paragraph of Section 5.02 of the Credit Agreement and any
breaches of Borrower's covenants in Section 7.01(a), 7.01(b), 7.01(c) and 7.03
of the Credit Agreement (and any resultant failure on Borrower's part to satisfy
the conditions specified in Section 5.02 of the Credit Agreement and any
resultant Defaults or Events of Default) solely to the extent any such
representation, warranty and covenant breaches (and resultant failure or
Default or Event of Default) result from any restatement of Borrower's
consolidated financial statements for each or any of its fiscal years ending
December 31, 1994, December 31, 1995 and December 31, 1996 and its two fiscal
quarters ending June 30, 1997 but only so long as any downward restatement of
Borrower's consolidated revenues for its fiscal years ended December 31, 1994,
December 31, 1995 and December 31, 1996 and its two (2) fiscal quarters ending
June 30, 1997 does not exceed $41,000,000 in total for all of the
above-referenced periods (of which no more than $5,000,000 of any such
restatement may relate to downward adjustments of results for the 2-quarter
period ending June 30, 1997), and the Lenders and the Agent hereby further
confirm that any such restatement and the commencement of any investigation,
legal action or proceeding before or by any court or governmental or regulatory
authority as a result thereof will not result in a Material Adverse Effect;
provided, however, that (i) the aforesaid waiver relates solely to the specific
provisions, restatement and time periods described above and nothing in this
Section 1(b) is intended, or shall be construed, to constitute a waiver of or
a consent to a departure from any other provisions of the Credit Agreement; and
(ii) the aforesaid confirmation relates solely to the specific restatement
described above and the commencement of the aforesaid investigations, legal
actions or proceedings and nothing in this Section 1(B) is intended, or shall
be construed, to constitute the confirmation or agreement by any Lender or the
Agent that any other event that is or may be a direct or indirect result of
such restatement or that any subsequent development in
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any such investigation, legal action or proceedings (including without
limitation any adverse outcome therein) will not result in a Material Adverse
Effect.
(c) Also 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 do hereby waive any breach of Borrower's covenants
in Sections 7.01(c), 7.01(d) and 7.01(e) of the Credit Agreement (and any
resultant failure on Borrower's part to satisfy the conditions specified in
Section 5.02 of the Credit Agreement and any resultant Defaults or Events of
Default) solely to the extent any such covenant breach (and resultant failure
or Default or Event of Default) results from any withdrawal by Deloitte &
Touche of its opinions or reports on or certifications of the Borrower's annual
financial statements for its fiscal years ending December 31, 1994, December 31,
1995 and December 31, 1996, and the Lenders and the Agent hereby confirm that
any such withdrawal or the commencement of any investigation, legal action or
proceeding before or by any court or governmental or regulatory authority as a
result of such withdrawal will not result in a Material Adverse Effect;
provided, however, that (i) the aforesaid waiver relates solely to the specific
withdrawals described above and nothing in this Section 1(C) is intended, or
shall be construed, to constitute a waiver of or a consent to any departure from
any other provisions of the Credit Agreement; and (ii) the aforesaid
confirmation also relates solely to the specific events described above and
nothing in this Section 1(C) is intended, or shall be construed, to constitute
the confirmation or agreement by any Lender or the Agent that any other event
which is or may be a direct or indirect result of any such withdrawal,
commencement, a suspension or delisting or that any subsequent development in
any such investigation, legal action or proceeding (including without
limitation any adverse outcome therein) will not result in a Material Adverse
Effect.
SECTION 2. 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 Agrement in the following
respects:
(A) Section 1.01 of the Credit Agreement shall be amended by
adding the following new definition:
"First Modification" shall mean the First Modification of Second
Amended and Restated Credit Agreement, dated as of November 18, 1997, among
Borrower, the Lenders and the Agent.
(B) Section 1.01 of the Credit Agrement shall be further amended
by deleting the definition therein of the term "Consolidated EBIT" and by
substituting in lieu thereof the following new definition of such term:
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"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) and without duplication, (i) provisions for taxes based
on income, (ii) Consolidated Interest Expense (including any portion of
such expenses attributable to the discontinued operations), (iii)
restructuring charges, option-related charges and litigation settlement
charges taken by Borrower in its fiscal quarters ending June 30, 1997,
September 30, 1997 and December 31, 1997 (of which up to $12,000,000 in
total may be related to cash expenditures made in its fiscal year ending
December 31, 1997 and its two fiscal quarters ending June 30, 1998), (iv)
solely for purposes of computing Consolidated EBITDA for Borrower's
fiscal year ending December 31, 1997, any additional non-cash charges
in its fiscal quarter ending September 30, 1997 in an amount not to
exceed $19,500,000, and (v) the non-cash accounting treatments for or
amortization of any original issue discount arising as a result of the
Warrants or any shares of Borrower's stock issued thereunder.
(C) Section 1.01 of the Credit Agreement shall be further
amended by deleting the last sentence of the definition of the term
"Consolidated EBITDA" therein.
(D) The Credit Agreement shall be further amended by deleting
Section 2.06(a) thereof in its entirety.
(E) Section 7.01(c) of the Credit Agreement shall be amended
by adding the following new clause at the end thereof:
, and, if required to be restated, on or before January 31, 1998,
Borrower shall deliver to the Lenders and the Agent its restated annual
financial statements for its fiscal years ended December 31, 1995 and
December 31, 1996 audited in accordance with generally accepted auditing
standards together with the Borrower's independent public accountant's
reports on such financial statements;
(F) Section 7.09 of the Credit Agreement shall be deleted in
its entirety and the following new Section 7.09 substituted in lieu thereof:
SECTION 7.09. FINANCIAL COVENANTS. Borrower shall comply with the
following financial covenants:
(a) Minimum Consolidated EBITDA. Borrower's Consolidated
EBITDA for each period shown below shall not be less that the amount
shown below for such period.
Minimum
Period Consolidated EBITDA
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Fiscal year ending December 31,
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1997 $50,000,000
Fiscal quarter ending March 31, 1998 10,000,000;
(b) Maximum Funded Debt Ratio. Borrower's Funded Debt Ratio for its
fiscal quarter ending March 31, 1998 shall not exceed 3.5:1.0;
(c) Minimum Fixed Charge Coverage Ratio. Borrower's Fixed Charge
Coverage Ratio for its fiscal quarter ending March 31, 1998 shall not be
less than 1.0:1.0;
(d) Maximum Capital Expenditures. Borrower's Capital Expenditures
during each of its fiscal quarters ending March 31, 1998 and June 30, 1998
shall not exceed $7,500,000 for each such fiscal quarter; provided,
however, that if the full $7,500,000 of Capital Expenditure capacity for
the fiscal quarter ending March 31, 1998 is not utilized by such date, then
any unused amount may be utilized during the quarter ending June 30, 1998
so long as the aggregate of the Capital Expenditures made during those two
fiscal quarters does not exceed $15,000,000; and
(e) Positive Monthly Consolidated EBITDA. Borrower shall have a
Consolidated EBITDA of more than zero dollars for each monthly accounting
period in its fiscal year ending December 31, 1998.
Solely for the purposes of this Section 7.09, and notwithstanding
anything in this Agreement to the contrary, in no event shall any Default
or Event of Default in respect of any financial covenant for any particular
accounting period be deemed to exist at any time prior to the tenth (10th)
day after the end of such period. For example, if Borrower's Consolidated
EBITDA for its fiscal year ending December 31, 1997 is less than the
required minimum amount set forth in Section 7.09(a) above, no Default or
Event of Default arising from such violation shall be deemed to exist
earlier than January 10, 1998.
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 (the documents described in
items (i) and (ii) below being herein collectively called the "Supplemental
Credit Documents"):
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(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; and
(iii) A certificate of the Borrower in substantially the form
of Attachment 2 attached hereto, duly executed and appropriately
completed.
(B) Borrower shall have paid the Agent the modification and waiver fee
required under Section 4 below;
(C) 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
(D) 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 and the Waiver Letters.
SECTION 4. MODIFICATION AND WAIVER FEE. In consideration of the
modifications and waivers set forth herein, the Borrower shall pay to the Agent
(for ratable distribution by the Agent to the Lenders in accordance with their
respective Pro Rata Shares as in effect on this date) a modification and waiver
fee in the amount of $100,000, which fee shall be non-refundable and deemed
fully earned upon the effectiveness of this Modification.
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to the Lenders and the Agent that (a) each of Borrower
and the Guarantors has all requisite corporate power and authority to execute
and deliver each Supplemental Credit Document to which it is a party and to
perform its obligations under such Supplemental Credit Document, and the
Supplemental Credit Document 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
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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 and the Waiver Letters, (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 such date (except as to the extent that (x) any of such
representations or warranties relates to specific prior date or period or (y)
any breach of any of such representations or warranties has been waived in the
Waiver Letters or in this Modification).
SECTION 6. AGENT AND LENDER EXPENSES. Without limiting its
obligations under Section 11.03 of the Credit Agreement, the Borrower agrees to
pay on demand all of the Agent's and each Lender's reasonable attorneys' fees
and expenses (including the allocated cost of in-house counsel) and all other
reasonable out-of-pocket costs incurred by each of the Agent and the Lenders in
connection with its evaluation, negotiation, documentation or consummation of
this Modification and the transactions contemplated hereby.
SECTION 7. MISCELLANEOUS.
(A) Except as herein expressly provided, the Credit Agreement and
the Waiver Letters 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
amended by this Modification and the Waiver Letters 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).
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