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THIRD AMENDMENT
TO
REVOLVING CREDIT AGREEMENT (UNGUARANTEED)
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Third Amendment dated as of October 25, 1999 to Revolving Credit
Agreement (the "Second Amendment"), by and among APPNET SYSTEMS, INC., a
Delaware corporation (the "Borrower"), BANKBOSTON, N.A. and the other lending
institutions listed on Schedule 1 to the Credit Agreement (as hereinafter
defined) (the "Banks"), amending certain provisions of the Revolving Credit
Agreement dated as of January 8, 1999 (as amended and in effect from time to
time, the "Credit Agreement") by and among the Borrower, the Banks, BankBoston,
N.A. as agent for the Banks (the "Agent") and Antares Capital Corporation as
co-agent for the Banks. Terms not otherwise defined herein which are defined in
the Credit Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Borrower and the Banks have agreed to modify certain terms
and conditions of the Credit Agreement as specifically set forth in this Third
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of
the Credit Agreement is hereby amended as follows:
(a) The definition of "EBITDA" contained in ss.1.1 of the Credit
Agreement is hereby amended by deleting such definition in its entirety and
restating it as follows:
EBITDA. With respect to the Borrower and its Subsidiaries
for any fiscal period, an amount equal to Consolidated Net Income
for such period, plus, to the extent deducted in the calculation
of Consolidated Net Income and without duplication, (a) income tax
expense for such period; (b) Consolidated Total Interest Expense
paid or accrued (excluding accrued interest the payment of which
is deferred beyond one year from the date such amount is being
determined) during such period; (c) depreciation and amortization
for such period; (d) the one-time expense incurred in the fiscal
quarter ended September 30, 1999 pertaining to the severance
arrangements for certain employees; and (e) the amount of any
earn-out or noncompete for such period to the extent such amount
was capitalized and treated as debt (including without limitation
any earn-out such as that which was part of the consideration in
the acquisition of New Media Publishing, Inc., which earn-out was
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accounted for as compensation and noncompete and capitalized as an
intangible asset and amortized), and minus, to the extent added in
computing Consolidated Net Income and without duplication, all
noncash gains (including income tax benefits) for such period, all
as determined in accordance with generally accepted accounting
principles.
(b) Section 1.1 of the Credit Agreement is further amended by inserting
the following definition in the appropriate alphabetical order:
Earn-Out Payments. With respect to the Borrower and its
Subsidiaries for any fiscal period, that amount which would appear
on the Borrower's balance sheet as the line item for the accrued
cash amount of the present value of any acquisition related
earn-outs and/or contingent compensation liabilities owed or to be
owed by the Borrower or any Subsidiary, as determined for such
period calculated in accordance with generally accepted accounting
principles and in accordance with the Borrower's past accounting
practices, consistently applied.
Total Debt to EBITDA Ratio. As at any date of
determination, the ratio of (a) Total Indebtedness of the Borrower
and its Subsidiaries outstanding on such date to (b) EBITDA of the
Borrower and its Subsidiaries for the Reference Period ending as
of the most recent quarter ended, provided, however, when
calculating the Total Debt to EBITDA Ratio for any period in which
a Permitted Acquisition has occurred, the calculation of the Total
Debt to EBITDA Ratio shall be made on a Pro Forma Basis.
Total Indebtedness. All Indebtedness of the Borrower and
its Subsidiaries for borrowed money (including without limitation,
the Earn-Out Payments, the Seller Subordinated Debt and all
guarantees by such Person of Indebtedness of others for borrowed
money), purchase money Indebtedness and with respect to
Capitalized Leases and synthetic leases (as defined in clause (f)
of the definition of "Indebtedness"), determined on a consolidated
basis in accordance with generally accepted accounting principles.
ss.2. Amendment to Section 10 of the Credit Agreement. Section 10 of
the Credit Agreement is hereby amended by deleting ss.10 in its entirety and
restating ss.10 as follows:
10. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any
Revolving Credit Loan, Unpaid Reimbursement Obligation, Letter of
Credit or Revolving Credit Note is outstanding or any Bank has any
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obligation to make any Revolving Credit Loans or the Agent has any
obligation to issue, extend or renew any Letters of Credit:
10.1 Leverage Ratio. The Borrower will not permit the
Leverage Ratio at any time from (a) October 25, 1999 through June
30, 2000 to exceed 2.25:1.00; and (b) from July 1, 2000 and any
time thereafter to exceed 2:00:1.00.
10.2 Minimum EBITDA. The Borrower will not, as of the end
of any fiscal quarter ending during any period described in the
table set forth below, permit EBITDA of the Borrower and its
Subsidiaries for the fiscal quarter ending on such date, to be
less than the amount set forth opposite such period in such table:
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Fiscal Quarter
Ending Minimum EBITDA
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September 30, 1999 $2,000,000
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December 31, 1999 $1,500,000
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March 31, 2000 and $2,000,000
each fiscal quarter
ending thereafter
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10.3. Consolidated Operating Cash Flow to Total Debt
Service. The Borrower will not permit the ratio of Consolidated
Operating Cash Flow to Total Debt Service for any fiscal quarter
ending on or after June 30, 1999 other than the fiscal quarter
ending December 31, 1999 to be less than 1.50:1.00 for such fiscal
quarter, and will not permit the ratio of Consolidated Operating
Cash Flow to Total Debt Service for the fiscal quarter ending
December 31, 1999 to be less than 0.60:1.00 for such fiscal
quarter; provided, however, solely for the fiscal quarter ending
December 31, 1999, Total Debt Service shall not include any
mandatory payments of principal on the Seller Subordinated Debt
consisting of the convertible promissory note issued by Century
Computing, Incorporated in the original principal amount of
$2,000,000.
10.4. Consolidated Operating Cash Flow to Senior Debt
Service. The Borrower will not permit the ratio of Consolidated
Operating Cash Flow to Senior Debt Service for any fiscal quarter
ending on or after December 31, 1998 to be less than 2.00:1.00 for
such fiscal quarter.
10.5. Quick Ratio. The Borrower will not permit the ratio
of Consolidated Quick Assets to Consolidated Current Liabilities
to be less than (a) 1.25:1.00 at any time from August 16, 1999
through and including September 30, 1999 and (b) 0.90:1.00 at any
time thereafter.
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10.6. No Quarterly Net Loss. The Borrower will not permit
Consolidated Net Income for any fiscal quarter to be less than
$1.00.
10.7. Capital Expenditures. The Borrower will not make,
or permit any Subsidiary of the Borrower to make, Capital
Expenditures, other than Capital Expenditures which the Majority
Banks reasonably determine are made for nonrecurring one-time
infrastructure purchases or leases by the Borrower, in any fiscal
year that exceed, in the aggregate, (a) $3,000,000 for the fiscal
year ending December 31, 1999; and (b) $4,000,000 for the fiscal
year ending thereafter.
10.8. Total Debt/EBITDA. The Borrower will not permit the
Total Debt to EBITDA Ratio (a) from October 25, 1999 through June
29, 2000 to exceed 5.00:1.00 at any time; (b) from June 30, 2000
through December 30, 2000 to exceed 3.50:1.00 at any time; and (c)
from December 31, 2000 and any time thereafter to exceed 3.00:1.00
at any time.
ss.3. Conditions to Effectiveness. This Third Amendment shall not
become effective until the Agent receives a counterpart of this Third Amendment,
executed by the Borrower, each Subsidiary and the Banks
ss.4. Representations and Warranties. The Borrower hereby represents
that, on and as of the date hereof, each of the representations and warranties
made by it in ss.7 of the Credit Agreement remain true as of the date hereof
(except to the extent of changes resulting from transactions contemplated or
permitted by the Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date), provided, that all references
therein to the Credit Agreement shall refer to such Credit Agreement as amended
hereby. In addition, the Borrower hereby represents and warrants that the
execution and delivery by the Borrower and its Subsidiaries of this Third
Amendment and the performance by the Borrower and its Subsidiaries of all of its
agreements and obligations under the Credit Agreement and the other Loan
Documents as amended hereby are within the corporate authority of each of the
Borrower and its Subsidiaries and has been duly authorized by all necessary
corporate action on the part of the Borrower and its Subsidiaries.
ss.5. Ratification, Etc. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Third Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
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ss.6. No Waiver. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Agent or the Banks consequent thereon.
ss.7. Counterparts. This Third Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
ss.8. Governing Law. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
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IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as a document under seal as of the date first above written.
APPNET SYSTEMS, INC.
By: /s/
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Title:
BANKBOSTON, N.A.
By: /s/
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Xxx X. Massimo, Director
ANTARES CAPITAL CORPORATION
By: /s/
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Title:
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RATIFICATION OF GUARANTY
Each of the undersigned guarantors hereby acknowledges and consents to
the foregoing Third Amendment as of October 25, 1999 and agrees that each of the
Guaranty dated as of January 8, 1999, March 4, 1999 and March 10, 1999 from each
of the undersigned guarantors remains in full force and effect, and each of the
guarantors confirms and ratifies all of its obligations thereunder.
APPNET OF MICHIGAN, INC.
By: /s/
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Title:
APPNET OF MARYLAND, INC.
By: /s/
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Title:
SOFTWARE SERVICES CORPORATION
By: /s/
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Title:
NEW MEDIA PUBLISHING, INC.
By: /s/
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Title:
RESEARCH & PLANNING, INC.
By: /s/
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Title:
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CENTURY COMPUTING, INCORPORATED
By: /s/
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Title:
THE KODIAK GROUP, INC.
By: /s/
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Title:
I33 COMMUNICATION CORP.
By: /s/
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Title:
SIGMA6, INC.
By: /s/
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Title:
XXXXXXXXX ACQUISITION CORP.
By: /s/
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Title: