<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 15, 1997
Medaphis Corporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-19480 58-1651222
(State or other jurisdiction of incorporation) Commission File Number (IRS Employer Identification Number)
</TABLE>
2700 CUMBERLAND PARKWAY
SUITE 300
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 444-5300
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index Located on Page: 4
Total Number of Pages: 20
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<PAGE> 2
Item 5. Other Events.
On December 15, 1997, the Registrant obtained a commitment from
Donaldson, Lufkin & Jenrette for a $210 million loan facility. The facility will
be used to refinance the Registrant's existing $168 million bank facility, to
provide liquidity for near term working capital needs and for general corporate
purposes. A copy of the commitment letter is filed as Exhibit 10.1 to this Form
8-K.
In addition, the Registrant issued a press release on December 16,
1997, a copy of which is filed as Exhibit 99.1 to this Form 8-K. The press
release relates to the commitment letter and to the preliminary approval by the
court on December 15, 1997 of a settlement of certain 1996 securities litigation
against the Registrant pursuant to the terms of a previously disclosed
memorandum of understanding.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Commitment Letter from DLJ Bridge Finance, Inc. to
Medaphis Corporation, dated December 15, 1997, with
respect to $210 million in aggregate principal amount
of senior secured increasing rate notes.
99.1 Press Release issued by the Registrant on December
16, 1997
2
<PAGE> 3
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 16, 1997
MEDAPHIS CORPORATION
By: /s/ Jerome H. Baglien
---------------------------------
Jerome H. Baglien
Senior Vice President,
Chief Financial Officer and
Assistant Secretary
3
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NO.
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<S> <C> <C>
EX-10.1 Commitment Letter from DLJ Bridge Finance, Inc. to Medaphis
Corporation, dated December 15, 1997, with respect to $210
million in aggregate principal amount of senior secured
increasing rate notes ..............................................5
EX-99.1 Press Release issued by the Registrant on December 16, 1997.........18
</TABLE>
4
<PAGE> 1
EXHIBIT 10.1
TO
FORM 8-K OF
MEDAPHIS CORPORATION
<PAGE> 2
December 15, 1997
Medaphis Corporation
2700 Cumberland Parkway
Suite 300
Atlanta, GA 30339
Attention: Mr. David McDowell
Chairman and Chief Executive Officer
Gentlemen:
I am pleased to advise you that DLJ Bridge Finance, Inc., a Delaware
corporation ("DLJ Bridge") hereby commits (the "Commitment") that it or one of
its affiliates will purchase up to $210.0 million in aggregate principal amount
of senior secured increasing rate notes (the "Bridge Notes") of Medaphis
Corporation, a Delaware corporation ("Medaphis" or the "Company"), the proceeds
of which will be used to: (i) refinance (the "Refinancing") an existing bank
facility (the "Existing Bank Facility") and, at the Company's option, under
certain synthetic and equipment leases with the lenders in the existing bank
group (the "Synthetic Leases"), and (ii) to provide liquidity for near term
working capital and other general corporate needs of the Company.
The Company agrees to pay DLJ Bridge a non-refundable commitment fee
(the "Commitment Fee") in an amount equal to two percent (2.00%) of the
principal amount of the Bridge Notes subject to this Commitment. The Company
also agrees to pay DLJ Bridge a takedown fee (the "Takedown Fee") with respect
to each takedown of the Bridge Notes, in an amount equal to two percent (2.00%)
of the principal amount of the Bridge Notes included in such takedown payable on
the date of each such takedown.
The Commitment Fee set forth above will be earned upon acceptance of
the Commitment and will be payable at the earlier of (i) the Issuance Date (as
defined below), or (ii) December 31, 1997; provided that such fee shall not be
payable if DLJ Bridge declines to make the initial funding of the Bridge Notes
by reason of a failure of a condition precedent to be satisfied notwithstanding
the Company having used its best efforts to cause such condition to be
satisfied. The Takedown Fee set forth above will be earned and payable with
respect to each takedown of Bridge Notes, without duplication, upon the issuance
of the Bridge Notes included in such takedown.
You understand that our obligation to make any monies available to the
Company is subject expressly to the execution and delivery of definitive
documentation, including without limitation a definitive securities purchase
agreement (the "Note Purchase Agreement"), reasonably satisfactory to us and
covering the matters expressly referred to herein and covering such other
matters as we may reasonably request (collectively, the "Definitive Documents")
and satisfaction of the other conditions precedent set out in the attached
Summary of Terms and Conditions (the "Summary of Terms and Conditions").
The Commitment is not assignable by you. Nothing in this letter (the
"Bridge Commitment Letter"), expressed or implied, shall give any person, other
than the parties hereto, any benefit or any legal or equitable right, remedy or
claim under this Bridge Commitment Letter.
The Company agrees to indemnify and hold the Indemnified Parties, as
defined in Exhibit A hereto, harmless to the extent set forth in Exhibit A to
this Bridge Commitment Letter and, upon demand from time to time, to reimburse
DLJ Bridge for all reasonable out-of-pocket costs, expenses and other payments,
including but not limited to reasonable
<PAGE> 3
Mr. David McDowell
Medaphis Corporation
Page 2 December 15, 1997
legal fees and disbursements incurred or made in connection with the Commitment,
and the preparation, execution and delivery of the Definitive Documents (not to
exceed in aggregate $350,000), regardless of whether or not the Definitive
Documents are executed.
The Company hereby represents that (a) all information, other than
Projections (as defined below), which has been made available to DLJ Bridge by
the Company or any of its representatives in connection with the transactions
contemplated hereby (together with information hereafter made available, the
"Information") has been reviewed and analyzed by the Company and, as
supplemented as contemplated by the next sentence, is (or will be, in the case
of Information made available after the date hereof) complete and correct in all
material respects when taken as a whole and does not (or will not, as the case
may be) contain when taken as a whole any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained therein
not materially misleading in light of the circumstances under which such
statements were or are made, and (b) all financial projections concerning the
Company and its subsidiaries that have been or are hereafter made available to
DLJ Bridge by the Company or any of its representatives in connection with the
transactions contemplated hereby (the "Projections") have been (or will be, in
the case of Projections made available after the date hereof) prepared in good
faith based upon reasonable assumptions. The Company agrees to supplement the
Information and Projections from time to time until the completion of the
Refinancing so that the representation and warranty in the preceding sentence is
correct on the Issuance Date.
This Bridge Commitment Letter and the attached Summary of Terms and
Conditions set forth the entire understanding of the parties as to the scope of
the Commitment and DLJ Bridge's obligations thereunder. The Commitment will
expire at 11:59 PM New York City time on December 15, 1997 unless accepted prior
to such time. The Commitment will also expire at the earlier of (i) the
Refinancing without the issuance of any Bridge Notes; (ii) the commencement by
the Company of the marketing of any securities for which Donaldson Lufkin &
Jenrette Securities Corporation ("DLJSC") is not exclusive agent, sole initial
purchaser or sole underwriter; (iii) 5:00 PM New York City time on December 31,
1997 if the Refinancing has not occurred by such time; or (iv) 5:00 PM New York
City time on March 31, 1998.
This Bridge Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York as applied to contracts made
and performed within such state, without giving effect to the principles of
conflicts of laws thereof. To the fullest extent permitted by applicable law,
each of the parties hereto hereby irrevocably submits to the jurisdiction of any
New York State court or Federal court sitting in the Borough of Manhattan in New
York City in respect of any suit, action or proceeding arising out of or
relating to the provisions of the Commitment and irrevocably agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in any such court. Each of the parties hereto waives to the fullest
extent permitted by applicable law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court, and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Except as required by law, this Bridge Commitment Letter, the Summary
of Terms and Conditions and all information given to DLJ by the Company, unless
publicly available or otherwise available to DLJ without restriction or breach
of any confidentiality agreement, will be held by DLJ in confidence and will not
be disclosed to anyone other than DLJ's agents and advisors without the
Company's prior approval or used for any purpose other than those referred to in
this Agreement.
<PAGE> 4
Mr. David McDowell
Medaphis Corporation
Page 3 December 15, 1997
Please indicate your acceptance of the Commitment and your agreement to
the matters contained in this Bridge Commitment Letter by executing this
document and returning it to us prior to the time of expiration set forth above.
Sincerely,
DLJ Bridge Finance, Inc.
/s/ Paul Thompson, III
------------------------------
By: Paul Thompson, III
Title: Chief Operating Officer
Accepted and Agreed to this
December 15, 1997
Medaphis Corporation
/s/ David E. McDowell
- ------------------------------------
By: David E. McDowell
Title: Chairman and Chief Executive
Officer
<PAGE> 5
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Set forth below is a summary of the terms of the Bridge Notes and the
conditions to the obligation of DLJ Bridge to purchase Bridge Notes. Capitalized
terms used herein and not otherwise defined have the meaning set forth in the
Bridge Commitment Letter to which this Summary of Terms and Conditions is
attached and of which it forms a part.
SENIOR SECURED INCREASING RATE NOTES
ISSUER: The Company.
ISSUE: Senior Secured Increasing Rate Notes (the "Bridge
Notes").
USE OF PROCEEDS: Proceeds will be used (i) to consummate the
Refinancing and (ii) to provide liquidity for near
term working capital and other general corporate
needs of the Company.
PRINCIPAL AMOUNT: Up to $210,000,000.
PRICE: 100% of principal amount.
DRAWDOWNS: The Bridge Notes may be issued, at the Company's
option, in up to four (4) tranches in minimum
denominations of $5,000,000 (or larger integral
multiples of $1,000,000) upon two (2) business days'
prior written notice to DLJ Bridge, provided however
that: (i) the funding of the first drawdown shall (a)
be of a sufficient amount to consummate the
Refinancing in full and (b) occur on December 23,
1997 or another mutually satisfactory date on or
prior to December 31, 1997, (ii) the total drawdowns
are not to exceed an aggregate of $210,000,000, and
(iii) no drawdowns shall take place after the
Expiration Date (as defined below). As used herein,
the term "Issuance Date" means the funding date of
the first drawdown.
INTEREST RATE: Interest shall be payable at the prime rate (as
defined below) plus a spread (the "Spread"). The
Spread will initially be 250 basis points. If the
Bridge Notes are not retired in whole by the end of
the first six month period following the Issuance
Date, the Spread will increase by 100 basis points
and shall continue to increase by an additional 50
basis points at the end of each subsequent three
month period for so long as any Bridge Notes are
outstanding. For purposes of this Summary of Terms
and Conditions, the "prime rate" means the prime or
reference rate as announced from time to time by The
Bank of New York.
Maturity: The Bridge Notes will mature on April 1, 1999.
Mandatory Redemption: The Company will redeem the Bridge Notes with,
subject to certain agreed exceptions, (i) the net
proceeds from the issuance of any debt or equity
securities or other indebtedness by the Company or
any of its subsidiaries (the "Permanent Financing")
or (ii) the net proceeds from asset sales by the
Company or any of its subsidiaries, in each case at
par plus accrued interest, provided, that the
redemption price shall be one hundred three percent
(103.0%) of par (with such premium being credited
against any fees under the Engagement Letter) plus
accrued interest if the Bridge Notes are redeemed
with or in anticipation of funds raised by any means
other than a transaction in which DLJSC has acted as
exclusive agent, sole initial purchaser or sole
underwriter to the Company and its subsidiaries
unless DLJSC has refused to do so.
<PAGE> 6
INTEREST PAYMENTS: Interest on the Bridge Notes will be payable in cash,
quarterly in arrears.
OPTIONAL REDEMPTION: The Bridge Notes will be callable, in whole or in
part, upon not less than 10 days' written notice, at
the option of the Issuer, at any time at par plus
accrued interest to the redemption date; provided,
that the redemption price shall be one
hundred three percent (103.0%) of par (with such
premium being credited against any fees under the
engagement letter) plus accrued interest if the
Bridge Notes are refunded (whether at the time of
redemption or maturity) with or in anticipation of
funds raised by any means other than operations or a
transaction in which DLJSC has acted as exclusive
agent, sole initial purchaser or sole underwriter to
the Company and its subsidiaries unless DLJSC has
refused to do so.
SECURITY: The Bridge Notes and guarantees described below will
be secured by a perfected first priority lien on all
existing tangible and intangible assets (other than
leasehold interests and other exceptions reasonably
satisfactory to DLJ Bridge) of the Company and its
domestic subsidiaries and a pledge of the stock of
all domestic subsidiaries of the Company subject to
permitted liens; provided that (i) no UCC financing
statement filings shall be required To be made prior
to the Issuance Date and (ii) on the Issuance Date
perfection will only be required to the extent
obtainable under the UCC. Mortgages on real estate
and security interests in fixtures will be granted
and perfected after closing upon request of DLJ
Bridge. Cash management service providers will be
entitled to share ratably in collateral (up to $3.0
million) subject to voting control by DLJ Bridge.
GUARANTEES: Each domestic subsidiary of the Company shall issue a
senior secured guarantee in favor of the holders of
the Bridge Notes.
RIGHT TO RESELL BRIDGE
NOTES: DLJ Bridge shall have the absolute and unconditional
right to resell Bridge Notes in compliance with
applicable law to any third party.
REPRESENTATIONS AND
WARRANTIES: The Note Purchase Agreement will contain
representations and warranties (subject to
appropriate materiality carve-outs) to DLJ Bridge and
holders of the Bridge Notes which are usual and
customary for transactions of this nature, including
but not limited to: (i) Existence and Power; (ii)
Authorization, Execution and Enforceability of
Material Agreements; (iii) Governmental
Authorization; (iv) Non-Contravention of Laws or
Material Agreements; (v) Financial Information; (vi)
Absence of Undisclosed Materially Adverse Litigation;
(vii) Taxes; (viii) Subsidiaries; (ix) Not an
Investment Company; (x) ERISA; (xi) Environmental;
(xii) Permits; (xiii) Leases; (xiv) Full Disclosure;
(xv) Capitalization; (xvi) Solicitation; Access to
Information; (xvii) Absence of Any Undisclosed
Liabilities; (xviii) Historical and Pro Forma
Financial Statements; (xix) No Material Adverse
Change; (xx) Lien Perfection and Priority; and (xxi)
Governmental Regulations.
COVENANTS: The Note Purchase Agreement will contain usual and
customary covenants for securities of this nature
including covenants with respect to (i) Furnishing of
Information; (ii) Use of Proceeds; (iii) Wholly Owned
Subsidiaries; (iv) Restrictions on Indebtedness; (v)
Restrictions on Dividends and Redemptions and
Repayment of Subordinated Debt or Pari Passu Debt;
(vi) Restrictions on the Sale of Assets (except for
sale/leaseback reasonably acceptable to DLJ Bridge
and sales for fair market value in cash); (vii)
Restrictions on Business
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<PAGE> 7
Activities; (viii) Restrictions on Transactions with
Affiliates (other than subsidiaries); (ix)
Restrictions on Merger or Consolidation (other than
inter-company transactions); (x) Restrictions on
Liens; (xi) Refinancing of Bridge Notes (including
providing such equity of the Company as is needed in
order to facilitate such refinancing); (xii)
Restrictions on Investments and Acquisitions; (xiii)
Restrictions on Settlement of Class Action Securities
Litigation with Cash (other than insurance proceeds
and previously disclosed settlements); and (xiv)
Additional Covenants which will include quarterly
interest coverage, debt/EBITDA and minimum net worth
maintenance covenants (but no other financial
covenants) based on at least a 10% variance from $75
million EBITDA case previously delivered to DLJ by
the Company. Compliance with the financial covenants
shall be determined from unaudited management
financial statements prepared in the ordinary course
of business following the conclusion of each fiscal
quarter.
EVENT OF DEFAULT: An Event of Default (as defined for the Bridge Notes)
will include but not be limited to: (i) the failure
of the Company to pay principal on the Bridge Notes
when due; (ii) the failure of the Company to pay
interest or fees on the Bridge Notes and the
continuance of such failure for 5 business days;
(iii) the failure of the Company or any of its
subsidiaries to comply with any other provision,
condition, covenant, promise, warranty or
representation in the Note Purchase Agreement or the
Bridge Notes, provided that in certain cases such
failure continues for 30 days after written notice;
(iv) a default under any instrument or instruments
governing indebtedness of the Company or any of its
subsidiaries when such default continues beyond any
applicable grace period and allows the holders of
such indebtedness to cause or causes such
indebtedness to become due prior to its stated
maturity or failure to pay any such indebtedness at
its stated maturity, in each case in respect of
indebtedness in an aggregate principal amount
exceeding a threshold amount to be agreed; (v) final
judgments aggregating (to the extent not covered by
insurance) in excess of a threshold amount to be
agreed rendered against the Company or any of its
subsidiaries and not discharged or stayed within 30
days (other than judgements implementing previously
disclosed or otherwise permitted settlements); (vi)
certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any of
its subsidiaries; (vii) material misrepresentations
in the Note Purchase Agreement; (viii)
unenforceability of any Guarantee; (ix) certain
defaults related to collateral; (x) certain ERISA
defaults; or (xi) Change of Control of the Company
(to be defined in a manner reasonably satisfactory to
the Issuer and DLJ Bridge).
In case an Event of Default shall occur and be
continuing, the holders of a majority in aggregate
principal amount of the Bridge Notes then
outstanding, by notice in writing to the Company may
declare the principal of and all accrued interest on
all Bridge Notes to be due and payable immediately.
If an Event of Default specified in clause (vi)
occurs, the principal of and accrued interest on the
Bridge Notes will be immediately due and payable
without any declaration or other act on the part of
the holders of the Bridge Notes. An acceleration
notice may be annulled and past defaults (except for
monetary defaults not yet cured) may be waived by the
holders of a majority in aggregate principal amount
of the Bridge Notes.
If an Event of Default shall occur and for as long as
such Event of Default shall be continuing, DLJ Bridge
shall have the right to appoint one (1)
representative to participate in all meetings of the
Company's Board of Directors provided, however, that
such right shall terminate if DLJ Bridge no longer
retains at least
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<PAGE> 8
50% of the outstanding Bridge Notes and provided
further such participation shall be limited to the
extent necessary to protect the Company's
attorney-client privilege unless the DLJ Bridge
representative is willing and able to become a member
of the Board of Directors of the Company.
DEFEASANCE PROVISION: None.
EXPIRATION DATE: The obligation of DLJ Bridge to purchase Bridge Notes
will expire upon the earliest of (i) the Refinancing
without the issuance of any Bridge Notes, (ii) the
commencement by the Company of the marketing of any
securities for which DLJSC is not exclusive agent,
sole initial purchaser or sole underwriter; (iii)
December 31, 1997 if the Refinancing has not occurred
by such time; or (iv) March 31, 1998.
GOVERNING LAW: New York.
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<PAGE> 9
NOTE PURCHASE AGREEMENT
The Commitment of DLJ Bridge to purchase the Bridge Notes will be
subject to the execution of definitive documentation including a definitive
securities purchase agreement (the "Note Purchase Agreement") which will contain
the terms and conditions set forth herein and such other conditions precedent,
covenants, representations, warranties, events of default and other provisions
as are customary for financings of this kind.
CONDITIONS TO FUNDING: The initial funding of the Bridge Notes (but not the
effectiveness of the Note Purchase Agreement) will be
subject to satisfaction of the following conditions
precedent:
(i) After giving effect to the initial funding,
the Company shall have no indebtedness for
borrowed money other than the Bridge Notes.
In addition, the Company will have capital
leases not in excess of $16.2 million and
other debt not in excess of $2.0 million;
(ii) DLJ Bridge has been provided with business
and financial information concerning the
Company and with certain limited information
regarding tax, legal and environmental
diligence. The results of the due diligence
investigations of DLJ Bridge to date (which
have been substantial) is satisfactory. DLJ
Bridge shall have completed its business,
financial, tax, legal and environmental due
diligence investigations of the Company
(including, without limitation, confirmation
of (i) forecast EBITDA for the quarter
ended, December 31, 1997, (ii) the status of
the pending settlement of class action
securities litigation and (iii) the
availability in a timely manner of 1993 and
1994 financial statements for use in
connection with refinancing of the Bridge
Notes) and the results of such
investigations shall be satisfactory to DLJ
Bridge. DLJ Bridge agrees to use its
reasonable best efforts to complete all such
business, financial, tax, legal and
environmental due diligence by December 17,
1997. This condition shall be deemed
satisfied or waived upon the completion of
such due diligence unless (i) any
information submitted to DLJ Bridge is
inaccurate, incomplete or misleading in any
respect reasonably determined by DLJ Bridge
to be materially adverse or (ii) any change
occurs, or any additional information is
disclosed to or discovered by DLJ Bridge
which DLJ Bridge reasonably deems materially
adverse in respect of the condition
(financial or otherwise), business, assets,
liabilities, properties, results of
operations, Projections or prospects of the
Company and its subsidiaries, taken as a
whole;
(iii) Receipt of consolidated financial statements
of the Company including balance sheets and
income and cash flow statements as of the
end of and for each of the fiscal years
ended December 31, 1995 and 1996 and the
nine months ended September 30, 1997 (which
shall not differ materially from the
information supplied to date to DLJ Bridge),
audited by independent public accountants of
recognized national standing and prepared in
conformity with GAAP, together with the
report thereon, all of which shall be
satisfactory to DLJ Bridge in all respects
in their sole discretion;
(iv) The corporate, tax, capital and ownership
structure (including articles of
incorporation and by-laws), shareholders
agreements and management of the Company
shall be consistent with that previously
described to DLJ Bridge or otherwise
reasonably satisfactory to DLJ Bridge in all
respects;
-5-
<PAGE> 10
(v) Satisfactory completion of all loan
documentation and other documentation
relating to the Bridge Notes in form and
substance satisfactory to DLJ Bridge and in
compliance with all applicable laws and
regulations;
(vi) Receipt of all governmental, shareholder and
third party consents, and approvals, if any,
necessary or desirable in connection with
the Bridge Notes and the related financings
and other transactions contemplated hereby
and expiration of all applicable waiting
periods without any action being taken by
any competent authority that could restrain,
prevent or impose any materially adverse
conditions on the Bridge Notes or such other
transactions or that could seek or threaten
to restrain, prevent or impose any
materially adverse conditions on any of the
foregoing, and no law or regulation shall be
applicable which in the judgment of DLJ
Bridge could reasonably be expected to have
any such effect;
(vii) DLJ Bridge shall have received reasonably
satisfactory opinions of counsel to the
Company as to the transactions contemplated
hereby (including compliance with all
applicable securities laws), and such
corporate resolutions, certificates and
other documents as DLJ Bridge shall
reasonably request;
(viii) A letter (the "Engagement Letter") shall
have been executed between the Company and
DLJSC engaging DLJSC as exclusive investment
banker to the Company for a period of three
years from the Issuance Date; and
(ix) Absence of any disruption or adverse change
in the financial or capital markets
generally which could reasonably be expected
to materially adversely affect the purchase
of the Bridge Notes or the refinancings
thereof.
The funding of each issuance of Bridge Notes will be
subject to the following conditions precedent:
(i) Except as disclosed in writing to DLJ Bridge
or in any 10-K or 10-Q of the Company prior
to December 15, 1997, absence of any
material adverse change in the business,
condition (financial or otherwise),
operations, performance, properties,
Projections or prospects of the Company and
its subsidiaries taken as a whole since
September 30, 1997;
(ii) Except as disclosed in writing to DLJ Bridge
or in any 10-K or 10-Q of the Company prior
to December 15, 1997, absence of any action,
suit, investigation, litigation or
proceeding pending or threatened in any
court or before any arbitrator or
governmental instrumentality that purports
to affect the Commitment or the Bridge Notes
or any of the other transactions
contemplated hereby, that could reasonably
be expected to have a material adverse
effect on the Commitment or the Bridge Notes
or any of the other transactions
contemplated hereby, or that could
reasonably be expected to have a material
adverse effect on the property, financial
condition, operations, Projections,
prospects or business of the Company and its
subsidiaries taken as a whole;
(iii) Absence of any Event of Default or event
that, with notice and/or the passage of
time, could become an Event of Default and
accuracy of all representations and
warranties in all material respects;
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<PAGE> 11
(iv) All fees and expenses due to DLJ Bridge in
connection with the purchase of the Bridge
Notes or to DLJSC as set forth in the
Engagement Letter or otherwise shall have
been paid in full;
(v) The Guarantees shall be in full force and
effect and DLJ Bridge shall have received
executed Bridge Notes and customary drawdown
certificates from the Company in connection
with each drawdown; and
(vi) Unless the Synthetic Leases shall have
theretofore been refinanced or are to be
refinanced with the proceeds of such
takedown, there shall remain the lesser of
$10.0 million and a sufficient unused amount
of the commitment to refinance the same.
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<PAGE> 12
EXHIBIT A
In consideration of the commitment given by DLJ Bridge Finance, Inc., a
Delaware corporation ("DLJ Bridge"), to the Company (the "Indemnifying Party")
pursuant to the Bridge Commitment Letter between the Company and DLJ Bridge of
which this Exhibit is a part (such Bridge Commitment Letter, together with all
Exhibits attached thereto, is referred to herein as the "Commitment"), the
Indemnifying Party agrees to indemnify and hold harmless DLJ Bridge, its
affiliates, and each person, if any, who controls DLJ Bridge, or any of its
affiliates, within the meaning of the Securities Act of 1933, as amended (the
"Act") or the Securities Exchange Act of 1934, as amended (a "Controlling
Person"), and the respective partners, agents, employees, officers and directors
of DLJ Bridge, its affiliates, and any such Controlling Person (each an
"Indemnified Party" and collectively, the "Indemnified Parties" or the "DLJ
Bridge Group"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim or
action, whether or not DLJ Bridge Group is a party thereto) arising out of, or
in connection with any activities contemplated by, the Commitment or any other
services rendered in connection therewith, including, but not limited to,
losses, claims, damages, liabilities or expenses arising out of or based upon
any untrue statement or any alleged untrue statement of a material fact or any
omission or any alleged omission to state a material fact in any of the
disclosure or offering or confidential information documents (the "Disclosure
Documents") pertaining to any of the transactions or proposed transactions
contemplated by the Commitment, including any eventual resale or refinancing of
any Bridge Notes (as defined in the Commitment), provided that the Indemnifying
Party will not be responsible for any claims, liabilities, losses, damages or
expenses to the extent they are determined by final judgment of a court of
competent jurisdiction to result from DLJ Bridge Group's gross negligence,
willful misconduct or bad faith. The Indemnifying Party also agrees that DLJ
Bridge Group shall have no liability (except for breach of provisions of the
Bridge Commitment Letter for which this Exhibit A is a part) for claims,
liabilities, damages, losses or expenses, including legal fees, incurred by the
Indemnifying Party except to the extent they are determined by final judgment of
a court of competent jurisdiction to result from DLJ Bridge Group's gross
negligence, willful misconduct or bad faith.
In case any action shall be brought against DLJ Bridge Group with
respect to which indemnity may be sought against the Indemnifying Party under
this agreement, DLJ Bridge Group shall promptly notify the Indemnifying Party in
writing and the Indemnifying Party shall, if requested by DLJ Bridge or if the
Indemnifying Party desires to do so, assume the defense thereof, including the
employment of counsel reasonably satisfactory to DLJ Bridge and payment of all
reasonable fees and expenses. The failure to so notify the Indemnifying Party
shall not affect any obligations the Indemnifying Party may have to DLJ Bridge
Group under the Commitment or otherwise unless the Indemnifying Party is
materially adversely affected by such failure. DLJ Bridge Group shall have the
right to employ separate counsel in such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
DLJ Bridge Group, unless: (i) the Indemnifying Party has failed to assume the
defense and employ counsel reasonably satisfactory to DLJ Bridge or (ii) the
named parties to any such action (including any impleaded parties) include DLJ
Bridge Group and the Indemnifying Party, and DLJ Bridge Group shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Indemnifying
Party, in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party,
provided, however, that the Indemnifying Party shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable fees
and expenses of more than one such firm of separate counsel, in addition to any
local counsel, which counsel shall be designated by DLJ Bridge. The Indemnifying
Party shall not be liable for any settlement of any such action effected without
the written consent of the Indemnifying Party (which shall not be unreasonably
withheld) and the Indemnifying Party agrees to indemnify and hold harmless DLJ
Bridge Group from and against any loss or liability by reasons of settlement of
any action effected with the consent of the Indemnifying Party. In addition, the
Indemnifying Party will not, without the prior written consent of DLJ Bridge,
settle or compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action, claim, suit or proceeding in
respect to which indemnification or contribution may be sought hereunder
(whether or not DLJ Bridge is a party thereto) unless such settlement,
compromise, consent or termination includes an express unconditional release of
DLJ Bridge and the other Indemnified Parties, satisfactory in form and substance
to DLJ Bridge, from all liability arising out of such action, claim, suit or
proceeding.
-8-
<PAGE> 13
If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then in
lieu of indemnifying such Indemnified Party, the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such claims, liabilities, losses, damages, or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and by DLJ Bridge on the other from the Transaction
contemplated by the Commitment or (ii) if the allocation provided by clause (i)
is not permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on the
one hand and DLJ Bridge on the other, but also the relative fault of the
Indemnifying Party and DLJ Bridge as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Exhibit A, the aggregate
contribution of all Indemnified Parties shall not exceed the amount of fees
actually received by DLJ Bridge pursuant to the Commitment. It is hereby further
agreed that the relative benefits to the Indemnifying Party on the one hand and
DLJ Bridge on the other with respect to any Transaction shall be deemed to be in
the same proportion as (i) the total amount of the Commitment bears to (ii) the
fees paid to DLJ Bridge with respect to the Commitment. The relative fault of
the Indemnifying Party on the one hand and DLJ Bridge on the other shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of material fact or the omission or alleged omission to state a
material fact related to information supplied by the Indemnifying Party or by
DLJ Bridge and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations set
forth herein (i) shall be in addition to any liability the Indemnifying Party
may have to any Indemnified Party at common law or otherwise, (ii) shall survive
the termination of the Commitment and (iii) shall remain operative and in full
force and effect regardless or any investigation made by or on behalf of the DLJ
Bridge or any other Indemnified Party.
-9-
<PAGE> 1
EXHIBIT 99.1
TO
FORM 8-K
OF
MEDAPHIS CORPORATION
<PAGE> 2
[MEDAPHIS LOGO]
INVESTOR CONTACT: CARYN DICKERSON
(770) 444-5348
MEDIA CONTACTS: MICHAEL SITRICK
(800) 288-8809
MEDAPHIS OBTAINS $210 MILLION LOAN COMMITMENT
FINANCING PROVIDES LIQUIDITY INTO 1999
JUDGE GRANTS PRELIMINARY APPROVAL OF SETTLEMENT OF CLASS ACTION LAWSUIT
ATLANTA, GEORGIA - (December 16, 1997) - Medaphis Corporation (NASDAQ: MEDA)
today said that it has obtained a commitment for a $210 million loan facility
from an affiliate of Donaldson, Lufkin & Jenrette to refinance its existing $168
million bank facility, provide liquidity for near term working capital needs and
for general corporate purposes. The Company said it expects the loan facility to
close by the end of the year. Medaphis believes the loan facility, when funded,
will be sufficient to fund its business plan into 1999.
Medaphis also announced that United States District Court for the Northern
District of Georgia signed an order on December 15, 1997 conditionally approving
as fair, reasonable and adequate, the settlement of the 1996 putative class
action litigation and conditionally certifying the classes for settlement
purposes. The settlement, as outlined in the memorandum of understanding
announced August 14, 1997, calls for the payment of $20 million in cash (to be
funded by the Company's insurance carriers), the issuance of 3,955,556 shares of
Medaphis common stock and warrants to purchase 5,309,523 shares of Medaphis
common stock at $12 per share for a five year period.
The lawsuit incorporates 19 putative class action lawsuits filed following the
Company's August 14, 1996 announcement regarding earnings expectations and
certain charges. As previously announced, the Company recorded a $52.5 million
charge in the quarter ended September 30, 1997 for this settlement. The
settlement is subject to certain conditions, including final approval of the
settlement by the District Court and approval and payment of the cash component
of the settlement by the Company's insurance carriers.
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<PAGE> 3
Borrowings under the loan facility will initially bear interest at Prime plus
250 basis points with increasing rates after six months through the loan's
maturity on April 1, 1999. The loan facility will contain the usual and
customary covenants for financing instruments of this nature, be secured by
substantially all of the assets of the Company and its subsidiaries, and be
guaranteed by substantially all of the Company's subsidiaries. The facility will
be callable, in whole or in part, at the option of the issuer, at any time. The
loan facility is subject to the completion of due diligence and other conditions
to closing, including, but not limited to, negotiation and execution of
definitive documentation, and includes a closing fee of 200 basis points and a
funding fee of 200 basis points. The notes evidencing the loan facility will be
placed privately and have no registration rights. The commitment letter, setting
forth the terms of the loan facility, is being filed with the Securities and
Exchange Commission.
David McDowell, Chairman and Chief Executive Officer, said that while there is
still a great deal of work to be done, he is pleased with the continued progress
the Company is making. "This increased loan facility should give us the
appropriate flexibility to execute the next phase of the Company's turnaround
plan," he said.
Medaphis is a leading provider of business management services and information
products to healthcare providers, corporations and other organizations. Based in
Atlanta, Georgia, Medaphis currently services approximately 20,700 physicians
and 2,700 hospitals across the nation and more than 100 systems integration
customers in industries including multi-unit retailing, energy,
telecommunications, financial services, manufacturing and transportation.
This Press Release contains statements which constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act
of 1995. "Forward-looking statements" in this Press Release include the intent,
belief or current expectations of the Company and members of its senior
management team with respect to the availability of, timing of and completion of
the loan facility, the public or private offering of debt securities, debt and
equity market conditions and the Company's future liquidity prospects, as well
as the assumptions upon which such statements are based. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance, and involve risks and uncertainties, and the actual results
may differ materially from those contemplated by such forward-looking
statements. Important factors currently known to management that could cause
actual results to differ materially from those contemplated by the
forward-looking statements in the Press Release include, but are not limited to,
adverse developments with respect to the Company's liquidity position or
operations of the Company's various business units, adverse developments in
public or private markets for debt or equity securities, or adverse developments
in the availability or timing of the loan facility. Additional information on
matters discussed in this press release, including factors that would cause
actual results to differ materially from those contemplated within this Press
Release can be found in the Company's Safe Harbor Compliance Statement included
as an exhibit to its Form 10-Q for the quarter ended September 30, 1997 which
was filed with the U.S. Securities and Exchange Commission on November 19, 1997.
###
