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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): October 24, 1997
Medaphis Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 000-19480 58-1651222
(State or other Commission File Number (IRS Employer
jurisdiction of incorporation) Identification Number)
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: 15
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Item 5. Other Events.
On October 24, 1997, the Registrant entered into a waiver and extension
agreement with respect to the Second Amended and Restated Credit Agreement,
dated as of February 4, 1997, among the Registrant, the Lenders signatory
thereto and SunTrust Bank, as agent for the Lenders, and a waiver and extension
agreement with respect to the Participation Agreement, dated as of April 21,
1995, as amended, among the Registrant, the Lenders signatory thereto and
SunTrust Bank, as agent for the Lenders. Copies of such waiver and extension
agreements are filed as Exhibit 10.1 and 10.2, respectively, to this Form 8-K.
In addition, the Registrant issued a press release on October 27, 1997,
a copy of which is filed as Exhibit 99.1 to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Waiver and Extension Letter Agreement, dated October
24, 1997, with respect to Second Amended and Restated
Credit Agreement, dated as of February 4, 1997, among
Medaphis Corporation, the lenders signatory thereto
(the "Lenders") and SunTrust Bank, Atlanta, as agent
for the Lenders
10.2 Waiver and Extension Letter Agreement, dated October
24, 1997, with respect to Participation Agreement,
dated as of April 21, 1995, as amended, among Medaphis
Corporation, SunTrust Bank, Atlanta, and Creditanstalt
Corporate Finance, Inc. (the "Lenders") and SunTrust
Bank, Atlanta, as agent for the Lenders
99.1 Press Release issued by the Registrant on October 27,
1997
2
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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: October 27, 1997
MEDAPHIS CORPORATION
By: /s/ Jerome H. Baglien
----------------------------------
Jerome H. Baglien
Senior Vice President,
Chief Financial Officer and
Assistant Secretary
3
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER PAGE NO.
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<S> <C> <C>
EX-10.1 Waiver and Extension Letter Agreement, dated October
24, 1997, with respect to Second Amended and Restated
Credit Agreement, dated as of February 4, 1997, among
Medaphis Corporation, the lenders signatory thereto
(the "Lenders") and SunTrust Bank, Atlanta, as agent
for the Lenders 5
EX-10.2 Waiver and Extension Letter Agreement, dated October
24, 1997, with respect to Participation Agreement,
dated as of April 21, 1995, as amended, among Medaphis
Corporation, SunTrust Bank, Atlanta, and Creditanstalt
Corporate Finance, Inc. (the "Lenders") and SunTrust
Bank, Atlanta, as agent for the Lenders 9
EX-99.1 Press Release issued by the Registrant on October 27,
1997 13
</TABLE>
4
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EXHIBIT 10.1
October 24, 1997
Medaphis Corporation
2840 Mt. Wilkinson Parkway
Suite 300
Atlanta, Georgia 30339
Attn: David McDowell
Chief Executive Officer
RE: Second Amended and Restated Credit Agreement, dated as
of February 4, 1997 (the "CREDIT AGREEMENT"), among
Medaphis Corporation (the "BORROWER"), the lenders
signatory thereto (collectively, the "LENDERS"), and
SunTrust Bank, Atlanta, as agent for the Lenders (the
"AGENT")
Gentlemen:
All capitalized terms used herein and not otherwise defined herein
shall have the meanings given such terms in the Credit Agreement.
We refer to the September 18, 1997 letter under which the Lenders,
among other things, waived Borrower's compliance with certain of the financial
covenants in the Credit Agreement (the "WAIVER LETTER"). The Borrower has
requested that the Required Lenders waive the deadline in paragraph (ii) of the
Waiver Letter for the termination of the Revolving Loan Commitments and the
payment of the Obligations (subject to certain exceptions as stated therein).
The Borrower also has requested that the Required Lenders waive any
breach of the Borrower's representations and warranties in Section 6.02 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) solely
to the extent any such representation, warranty and covenant breaches (and
resultant failure) result from any downward restatement by up to $40,000,000 in
total of Borrower's consolidated revenues for its fiscal years ended December
31, 1995 and December 31, 1996 and its two fiscal quarters ending June 30,
1997 (of which no more than $5,000,000 of any such restatement may relate to
downward adjustments of results for the two-quarter period ending June 30,
1997), which restatement, in turn, is the result of a change in the Borrower's
recognition of income on certain contracts of Health Data Sciences Corporation.
The Borrower also has requested that the Required Lenders confirm that any such
restatement and the commencement of any investigation, action or proceeding
before or by
<PAGE> 2
any court or governmental or regulatory authority as a result thereof will not
result in a Material Adverse Effect.
The Borrower also has requested that the Required Lenders extend the
deadline under Section 7.01(b) of the Credit Agreement for the delivery of
Borrower's financial statements for its fiscal quarter ending September 30,
1997 from November 15, 1997 to November 30, 1997 and waive solely to the extent
of such restatement the requirement that the monthly financial statements
required to be delivered by Borrower for the months of September, 1997 and
October, 1997 be prepared in accordance with GAAP.
Subject to the terms and conditions of this letter, the Required
Lenders hereby (i) extend the aforesaid Waiver Letter termination and payment
deadline from November 30, 1997 to January 31, 1998; (ii) waive any breaches
(and resultant failure) described in the first sentence of the third full
paragraph of this letter and any Defaults or Events of Default resulting from
such breaches; (iii) confirm that any such aforesaid restatement and the
commencement of any of the aforesaid investigation, actions or proceedings as a
result thereof will not result in a Material Adverse Effect; (iv) extend the
deadline for the delivery of the aforesaid quarterly financial statements from
November 15, 1997 to November 30, 1997; and (v) waive the aforesaid monthly
financial statement preparation requirement; provided, however, that (1) in
consideration of such extensions, waivers and confirmation, Borrower shall pay
to the Agent, on the effective date of this letter as provided below, a fee
(which fee shall be fully earned upon the effectiveness of this letter) in an
amount equal to one-quarter of one percent (0.25%) of the aggregate Revolving
Loan Commitments of all Lenders, and such fee shall be distributed by the Agent
to all Lenders in accordance with their respective Pro Rata Shares therof; (2)
the aforesaid extensions relate solely to the above-described deadlines and
nothing in this letter is intended, or shall be construed, to extend, waive or
otherwise modify any of the other terms and conditions of the Waiver Letter
(including without limitation the provisions therof regarding any extension of
such deadline beyond June 30, 1998, which provisions shall remain in full force
and effect); (3) the aforesaid waivers relate solely to the specific
provisions, restatement and time periods described above and nothing in this
letter 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
(4) the aforesaid confirmation relates solely to the specific restatement
described above and the commencement of the aforesaid investigations, actions
or procedings and nothing in this letter 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 direct or indirect result of such restatement or
that any subsequent development in any such investigation, action or proceeding
(including without limitation any adverse outcome therein) will not result in a
Material Adverse Effect.
<PAGE> 3
Please note that this letter (and the extensions, waivers and confirmation
provided herein) shall not become effective unless and until (a) the aforesaid
fee has been paid and (b) this letter has been signed by the Required Lenders
and this letter has been accepted and agreed to by the Borrower, in each case by
such person's signing a copy of this letter in the appropriate space indicated
below and returning the same to the Agent's counsel (which may be done by
telecopy and in counterparts).
SUNTRUST BANK, ATLANTA, as Agent
and as a Lender
By: /s/ David H. Eidson
-----------------------------
Name: David H. Eidson
--------------------------
Title: S.V.P.
------------------------
By: /s/ Robert E. Tincher
-----------------------------
Name: Robert E. Tincher
--------------------------
Title: S.V.P.
-------------------------
THE CHASE MANHATTAN BANK, as a
Lender
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
CREDITANSTALT-BANKVEREIN, as a
Lender
By: /s/ Robert M. Biringer
-----------------------------
Name: Robert M. Biringer
--------------------------
Title: EVP
-------------------------
By: /s/ John G. Taylor
-----------------------------
Name: John G. Taylor
--------------------------
Title: Senior Associate
-------------------------
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NATIONSBANK, N.A., as a Lender
By: /s/ DeWitt W. King, III
---------------------------------
Name: Dewitt W. King, III
------------------------------
Title: Senior Vice President
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PNC BANK, N.A., as a Lender
By:
---------------------------------
Name:
------------------------------
Title:
-----------------------------
WACHOVIA BANK, N.A., as a Lender
By: /s/ Ann B. Edwards
---------------------------------
Name: Ann B. Edwards
------------------------------
Title: Assistant Vice President
-----------------------------
ACCEPTED AND AGREED TO
this 24th day of October, 1997:
MEDAPHIS CORPORATION
By: /s/ Randolph L. M. Hutto
-------------------------------
Name: Randolph L. M. Hutto
-----------------------------
Title: Executive Vice President
----------------------------
cc: Each Guarantor
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EXHIBIT 10.2
October 24, 1997
Medaphis Corporation
2840 Mt. Wilkinson Parkway
Suite 300
Atlanta, Georgia 30339
Attn: David McDowell
Chief Executive Officer
RE: Participation Agreement, dated as of April 21, 1995, as amended
(the "Participation Agreement") among Medaphis Corporation (the
"Lessee"), SunTrust Bank, Atlanta, and Creditanstalt Corporate
Finance, Inc. (the "Lenders"), and SunTrust Bank, Atlanta, as
agent for the Lenders (the "Agent")
Gentlemen:
All capitalized terms used herein and not otherwise defined herein shall
have the meanings given such terms in the Participation Agreement.
We refer to the September 18, 1997 letter under which the Lenders, among
other things, waived Lessee's compliance with certain of the financial
covenants in the Credit Agreement as incorporated into the Participation
Agreement pursuant to Section 5.4 thereof (the "WAIVER LETTER"). The Lessee
has requested that the Lenders waive the deadline in paragraph (ii) of the
Waiver Letter for the payment of all Lender Balances.
The Lessee also has requested that the Lenders waive any Event of Default
or Potential Event of Default which may occur under clause (e) of Article XIII
of the Lease solely as a result of any breach of the Lessee's representations
and warranties in Section 6.02 of the Credit Agreement and any breaches of the
Borrower's covenants in Sections 7.01(a), 7.01(b), 7.01(c) and 7.03 of the
Credit Agreement which result from any downward restatement by up to
$40,000,000 in total of Lessee's consolidated revenues for its fiscal years
ended December 31, 1995 and December 31, 1996 and its two fiscal quarters
ending June 30, 1997 (of which no more than $5,000,000 of any such restatement
may relate to downward adjustments of results for the two-quarter period ending
June 30, 1997), which restatement, in turn, is the result of any change in the
Lessee's recognition of income on certain contracts of Health Data Sciences
Corporation. The Lessee also has requested that the Lenders confirm that any
such restatement and the commencement of any investigation, 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 as defined in the
Credit Agreement.
<PAGE> 2
The Lessee also has requested that the Lenders extend the deadline under
Section 5.3(b) of the Participation Agreement for the delivery of the
Borrower's financial statements for its fiscal quarter ending September 30,
1997 from November 15, 1997 to November 30, 1997 and waive solely to the extent
of the aforesaid restatement the requirement under Section 5.3(a) of the
Participation Agreement that the monthly financial statements for the months of
September, 1997 and October, 1997 required to be delivered by Borrower to each
Lender be prepared in accordance with GAAP.
Subject to the terms and conditions of this letter, the Lenders hereby (i)
extend the aforesaid Waiver Letter payment deadline from November 30, 1997 to
January 31, 1998; (ii) waive any such aforesaid Event of Default or Potential
Event of Default; (iii) confirm that any such aforesaid restatement and the
commencement of any such aforesaid investigation, action or proceeding will not
result in a Material Adverse Effect as defined in the Credit Agreement; (iv)
extend the aforesaid quarterly financial statement deadline; and (v) waive the
aforesaid monthly financial statement preparation requirement; provided,
however, that (1) in consideration of such extensions, waivers and confirmation,
Lessee shall pay to the Agent, on the effective date of this letter as provided
below, a fee (which fee shall be fully earned upon the effectiveness of this
letter) in an amount equal to one-quarter of one percent (0.25%) of the
aggregate outstanding principal balance of the Loans as of such date, and such
fee shall be distributed by the Agent to all Lenders in accordance with their
respective pro rata shares thereof; (2) the aforesaid extensions relates solely
to the above-described deadlines and nothing in this letter is intended, or
shall be construed, to extend, waive or otherwise modify any of the other terms
and conditions of the Waiver Letter; (3) the aforesaid waivers relate solely to
the specific provisions, restatement and time periods described above and
nothing in this letter is intended, or shall be construed, to constitute a
waiver of or a consent to a departure from any other provisions of the Lease;
and (4) the aforesaid confirmation relates solely to the specific restatement
described above and the commencement of the investigations, actions or
proceedings described above and nothing in this letter 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 the direct or indirect result of
such restatement or that any subsequent development in any such investigation,
action or proceeding (including without limitation any adverse outcome therein)
will not result in a Material Adverse Effect.
Please note that this letter (and the extensions, waivers and confirmation
provided herein) shall not become effective unless and until (a) the aforesaid
fee has been paid and (b) this letter has been signed by the Lenders and this
letter has been accepted and agreed to by the Lessee, in each case by such
person's signing a copy of this letter in the appropriate space indicated below
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and returning the same to the Agent's counsel (which may be done by telecopy
and in counterparts).
SUNTRUST BANK, ATLANTA, as Agent
and as a Lender
By: /s/ David H. Eidson
------------------------------
Name: David H. Eidson
---------------------------
Title: S.V.P.
--------------------------
By: /s/ Robert E. Tincher
------------------------------
Name: Robert E. Tincher
---------------------------
Title: S.V.P.
--------------------------
CREDITANSTALT CORPORATE
FINANCE, INC., as a Lender
By: /s/ Robert M. Biringer
------------------------------
Name: Robert M. Biringer
---------------------------
Title: EVP
--------------------------
By: /s/ John G. Taylor
------------------------------
Name: John G. Taylor
---------------------------
Title: Senior Associate
--------------------------
<PAGE> 4
ACCEPTED AND AGREED TO
this 24th day of October, 1997:
MEDAPHIS CORPORATION
By: /s/ Randolph L. M. Hutto
-----------------------------
Name: Randolph L. M. Hutto
---------------------------
Title: Executive Vice President
--------------------------
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[MEDAPHIS LOGO]
EXHIBIT 99.1
MEDAPHIS
Medaphis Corporation
2700 Cumberland Parkway
Suite 300 Investor Contact: Caryn Dickerson
Atlanta, Georgia 30339 (770) 444-5348
Media Contact: Michael Sitrick
(770) 444-4476
MEDAPHIS REVIEWING 1994-1996 SOFTWARE UNIT REVENUE
RECOGNITION PRACTICE AS PART OF REFINANCING DUE DILIGENCE
Earnings Announcement, Refinancing Package Delayed; Bank Waiver,
Loan Extension Obtained; Company Says It Should Have Sufficient
Liquidity Pending Renegotiation of Financing
ATLANTA, GEORGIA - (October 27, 1997) - Medaphis Corporation (NASDAQ: MEDA)
announced today that, in connection with its $250 million refinancing package,
the Company and its independent auditors are evaluating certain revenue
recognition matters in connection with the Company's Health Data Sciences
Corporation subsidiary relating principally to fiscal years 1994, 1995 and 1996.
The Company said the assessment is expected to be completed prior to the filing
of its Form 10-Q for the quarter ended September 30, 1997. The Company intends
to announce earnings for the third quarter concurrently with the filing of the
Form 10-Q.
As a result of this additional assessment, Medaphis said it does not expect to
complete the closing of the $250 million refinancing package on the previously
announced timetable. The senior bank financing commitment letter, which is
presently scheduled to expire on November 15, 1997, remains contingent upon
customary conditions and completion of an offering of at least $125 million in
senior subordinated notes. Medaphis said it has already obtained an extension
agreement from the requisite lenders under its existing bank and lease finance
facilities that extends its existing financing agreements through January 31,
1998. The Company has commenced discussions with its existing lending syndicate
and other financing sources towards a longer term committed facility and
increased liquidity.
Medaphis said it believes that with the current extension of and unused
availability under its existing credit agreement, and the continuation of
stringent cash management policies, Medaphis should have sufficient liquidity
pending the satisfactory renegotiation prior to January 31, 1998 of the
financing alternatives presently being pursued by the Company to resolve longer
term liquidity needs. The Company noted that while it was hopeful such
negotiations would be concluded on a satisfactory and timely basis, this could
not be assured. Medaphis' existing bank facility has approximately $168 million
in commitments, of which approximately $150 million is currently utilized, is
secured by substantially all of the Company's assets and requires mandatory
reduction of the commitments to $150 million on January 31, 1998 if the facility
is otherwise outstanding on that date.
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Medaphis said it has also obtained a waiver agreement from the requisite lenders
under its existing bank and lease finance facilities that provides for continued
borrowing under the facilities in the event that the Company determines that a
restatement of previously issued financial statements would be required,
provided that the downward restatement in both total consolidated revenues and
for financial periods subsequent to December 31, 1996 do not exceed specified
amounts.
David E. McDowell, who was named Chairman and Chief Executive Officer of
Medaphis in the fourth quarter of 1996, said that current assessment of revenue
recognition matter for the era pre-dating current management's arrival at the
Company is important to moving the Company's turnaround plan forward.
"We need to continue to understand the Company's recent history - its strengths
and weaknesses - if we are to maximize the potential of this Company," Mr.
McDowell said. "At the same time, we are concerned that these historical issues
do not overshadow the progress that we are making on our turnaround plan
including the good work being done by our employees and the support of our
vendors and customers.
Commenting on the business, Mr. McDowell continued, "We have made excellent
progress during 1997 in a number of areas, including our Physicians and Hospital
Services business units. Important work has already been completed on the
integration of the operations of HIT and BSG. However, Medaphis continues to be
affected by a large volume of non-recurring expenses associated with the
Company's recovery process."
Mr. McDowell said that he was grateful for the support of the Company's
employees, customers, vendors and other stakeholders over the past several
months and their continued support is essential to Medaphis achieving its goals.
"We would like to reach a stage in our turnaround efforts where the Company's
improvements in its operating business will be paramount and not diminished by
historical events and non-recurring expenditures," 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 timing of, completion of and scope of the
current reassessment of accounting matters, bank financing, and the public or
private offering of debt securities, debt and equity market conditions and the
Company's future liquidity as well as the assumptions upon which such statements
are based. Prospective investors are cautioned that any
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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 or difficulties in the integration of BSG and HIT, adverse
developments in the Company's efforts to renegotiate its funding and adverse
developments in the bank financing or public or private markets for debt or
equity securities, or adverse developments in the timing or results of the
Company's current reassessment of accounting matters. Additional factors that
would cause actual results to differ materially from those contemplated within
this Press Release can also be found in the Company's Safe Harbor Compliance
Statement filed as Exhibit 99.1 to the Company's Form 10-Q for the quarter ended
June 30, 1997.
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