EXHIBIT 10.1
THIRD AMENDMENT TO THE AMENDED AND RESTATED
COMMERCIAL LOAN AGREEMENT
This Third Amendment to the Amended and Restated Commercial Loan Agreement
("Third Amendment") is entered into by and between The Titan Corporation, a
Delaware corporation ("Borrower"), Sumitomo Bank of California, a California
banking corporation ("Sumitomo"), and Imperial Bank, a California banking
corporation ("Imperial") (Sumitomo and Imperial are collectively referred to
herein as the "Banks"), and Sumitomo in its capacity as agent for Sumitomo
and Imperial ("Agent"), and is dated as of March 27, 1998. Reference is
hereby made to (1) that certain Amendment to Agreement Re Release of Certain
Titan Information Systems Corporation Collateral dated as of February 25,
1998 ("Second Amendment"), (2) that certain Agreement Re Release of Certain
Titan Information Systems Corporation Collateral dated as of December 8, 1997
("First Amendment"), and (3) that certain Amended and Restated Commercial
Loan Agreement dated as of May 15, 1997 by and between Borrower, the Banks,
and Agent; collectively the "Loan Agreement". Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement and Amendment to Existing Security Documents dated May 15, 1997.
Any reference in the Amendment to Existing Security Documents to the Amended
and Restated Commercial Loan Agreement, shall hereby be deemed to refer to
the Loan Agreement.
I. RECITALS
A. It is contemplated that Titan, or wholly-owned subsidiaries of
Titan, will acquire one hundred percent (100%) of the common stock of
Validity Corporation ("Validity"), and Horizons Technology, Inc.
("Horizons"). Banks have approved these acquisitions per the consent
letter dated March 25, 1998.
B. In connection with these acquisitions, Borrower has requested
that the Banks increase the Revolving Line of Credit to Thirty Million
Dollars ($30,000,000).
C. The Banks are willing to grant this request on the terms and
subject to the conditions set forth below.
II. AMENDMENT
Now, therefore, it is hereby agreed by and between the parties hereto as
follows:
1. Paragraph 1.1(a) of the Loan Agreement is hereby restated in its
entirety as follows:
1.1(a) REVOLVING LINE OF CREDIT. During the Availability Period,
Banks will provide a line of credit (the "Revolving Line of Credit") to
Borrower. The maximum amount of the Revolving Line of Credit including the
subline facility for letters of credit (the "Total Commitment") is Thirty
Million Dollars ($30,000,000). Of the Total Commitment, Sumitomo's Commitment
is Fifteen Million Dollars ($15,000,000) and Imperial's Commitment is Fifteen
Million Dollars ($15,000,000). Upon execution of this Agreement, the respective
Commitments of the Banks shall be as set forth above. Under no circumstances
shall any Bank be obligated to advance more than its particular Commitment. The
respective Commitments of the Banks may be assigned pursuant to SECTION 9.1
hereof. As used in this Agreement,
"Pro Rata Share" means, as to any Bank at any time, the percentage equivalent
(expressed as a decimal, rounded to the fifth decimal place) at such time of
such Bank's Commitment DIVIDED BY the total Commitment of all Banks.
Sumitomo's initial Pro Rata Share is 0.50 and Imperial's initial Pro Rata
Share is 0.50. Borrower's obligation to repay the Revolving Line of Credit
is evidenced by two promissory notes (one in favor of Sumitomo and one in
favor of Imperial) substantially in the forms of EXHIBITS A-1 AND A-2
attached herewith (collectively, the "Revolving Line Notes").
2. Paragraph 1.2 is hereby restated in its entirety as follows:
1.2 AVAILABILITY PERIOD. The period under which Borrower may
draw on the Revolving line of Credit ("Availability Period") is between the date
of this Agreement and June 30, 1999 (the "Maturity Date"), unless Borrower is in
default, in which event Banks need not make any advances.
3. Paragraph 4.1(i) is hereby restated in its entirety as
follows:
4.1(i) RELEASE DOCUMENTS. Within 5 business days of closing the
acquisitions of Validity Corporation and Horizons Technology, Inc., Agent shall
have received UCC-2 termination statements executed by the acquired companies'
secured parties, allowing for permitted liens under Paragraph 6.10, and such
other release documents as the Banks may require to release all liens in favor
of such parties with respect to all property covered by the Security Documents.
4. Paragraph 5.6 is amended only to the extent of replacing the
date "December 31, 1996" with "December 31, 1997".
5. Paragraph 6.2(e) is amended only to the extent of replacing
the number "30" in line two of that paragraph with "60".
6. Paragraph 6.3 is hereby restated in its entirety as follows:
6.3 QUICK RATIO. To maintain on a consolidated basis of the
last day of each quarter, a ratio of Quick Assets to current
liabilities of at least 1.05:1.00. As used herein, "Quick
Assets" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as
long-term investments. For purposes of computing this
ratio, Current Liabilities shall include the outstanding
balance under the Revolving Line of Credit.
7. Paragraph 6.4 is hereby restated in its entirety as follows:
6.4 NET WORTH. To maintain on a consolidated basis as of the
last day of each calendar quarter, a Net Worth in an amount
at least equal to One Hundred and Three Million Dollars
($103,000,000), PLUS an amount equal to seventy-five percent
(75%) of the cumulative sum of net income less cash
dividends for each calendar quarter beginning with the
calendar quarter ending June 30, 1998 and continuing on each
calendar quarter thereafter (with the quarterly step-ups in
the minimum Net Worth to be effective as of the last day of
each calendar quarter); and no reduction or deduction in the
permitted minimum Net Worth shall be made by reason of any
losses during any quarter.
8. Paragraph 6.5 is hereby restated in its entirety as follows:
6.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain on a
consolidated basis of the last day of each quarter, a ratio
of Total Liabilities to Tangible Net Worth not exceeding
1.45:1.00 and, effective December 31, 1998 and thereafter, a
ratio not exceeding 1.25:1.00. As used herein, (i) "Total
Liabilities" means the sum of current liabilities plus long
term liabilities, excluding the Subordinated Debt, and (ii)
"Tangible Net Worth" means book net worth minus intangible
assets (such as goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt
discount and expense, deferred research and development
costs, capitalized software costs, license fees, deferred
marketing expenses, and other like intangible, and monies
due from affiliates, officers, directors or shareholders of
Borrower) plus the Subordinated Debt. Deferred income taxes
shall not be deemed intangible assets.
9. Paragraph 6.6 is hereby restated in its entirety as follows:
6.6 PROFITABILITY. To maintain on a consolidated basis a
positive net income before taxes and extraordinary items and
a positive net income after taxes and extraordinary items on
an annual basis and not to experience two consecutive
quarters of losses.
10. Paragraph 6.7 is hereby deleted in its entirety.
11. Paragraph 6.8 is hereby restated in its entirety as follows:
6.8 FIXED CHARGE COVERAGE RATIO. To maintain on a consolidated
basis a Fixed Charge Coverage Ratio of at least 1.15:1.00.
"Fixed Charge Coverage Ratio" means the sum of net income
(or net loss), plus gross interest expense, plus
depreciation, plus non-cash amortization, minus
extraordinary income/gains, plus extraordinary non-cash
expenses/losses, minus gains (or plus losses) on
sales/dispositions of fixed assets, less capital
expenditures (net purchase money financing), less any cash
payments made under the terms of any acquisition agreements
with regards to seller financing and covenants not to
compete, less cash dividends, less cash stock purchases
DIVIDED BY the sum of gross interest expense plus current
portion of all indebtedness including capital leases. This
covenant shall be measured beginning June 30, 1998.
Calculation of this ratio (a) through December 31, 1998
shall be on the basis of year-to-date income statement
results annualized, and (b) on a rolling four quarter basis
thereafter; in either case, the balance sheet items shall
not be annualized.
12. Paragraph 6.9(d) is hereby restated in its entirety as
follows:
6.9(d) Debt and lease obligations reflected in the December 31,
1997 fiscal year end financial statement of Borrower
submitted to Agent and Banks.
13. Paragraph 6.10(c) is hereby restated in its entirety as
follows:
6.10(c) Liens disclosed in the December 31, 1997 fiscal year end
financial statement of Borrower submitted to Agent and
Banks.
14. Paragraph 6.13 is hereby restated in its entirety as
follows:
6.13 LOANS TO OFFICERS. Not to make any loans, advances, stock
purchases, capital contributions or other extensions of
credit to any of Borrower's executives, officers, directors,
shareholders, employees (or any relative of any of the
foregoing) or affiliates (i.e. companies which are minority
owned or whose results are not consolidated in Borrower's
financial statements) in excess of $75,000 to one individual
or $400,000 in total in any fiscal year (other than those
reflected in Borrower's December 31, 1997 fiscal year end
financial statements).
15. Paragraph 6.14 is hereby restated in its entirety as
follows:
6.14 Not to, without the prior written consent of all Banks
(which consent will not be unreasonably withheld), acquire
or purchase a business or its assets for a consideration
(including assumption of debt, seller financing and net
present value of covenants not to compete) in excess of One
Million Dollars ($1,000,000).
16. Paragraph 6.26 is restated in its entirety as follows:
6.26 Borrower will not transfer any of Borrower's assets to
any subsidiary, affiliate or related entity without first
obtaining the written consent of Banks, which consent
shall not be unreasonably withheld in the case of a
transfer of assets to a wholly owned subsidiary. At any
time that Borrower forms a new subsidiary, affiliate, or
other related entity, it will immediately notify the
Banks of such formation and will, upon request of Agent
or either of the Banks, execute and deliver a continuing
guaranty, security agreement, and financing statement
(UCC-1), together with such other documents required by
Agent or either of the Banks, executed by such entity,
providing assurance to Banks that Banks' lien on all of
Borrower's assets and the assets of Borrower's
subsidiaries, affiliates and related entities is a first
lien on all such assets (and, without limiting the
foregoing, Agent and Banks may condition the transfer of
any such assets on the execution and delivery of such
guaranties, security agreements, financing statements and
other such documents). Borrower represents and agrees
that at all times the security interest and lien of the
Agent and the Banks in all assets of the Borrower and
each of Borrower's subsidiaries, affiliates or related
entities as to which security agreements, financing
statements or other security documents have been
provided, shall at all times remain a first position
security interest and lien against such assets, subject
to no other financing statements, liens or other prior
encumbrances of any nature whatsoever; and Borrower shall
at all times take all such actions as are
necessary to maintain the first position priority of the
security interests and liens of Agent and Banks with respect
to the assets of Borrower and all such subsidiaries,
affiliates and other related entities.
17. As additional consideration for entering into this
Agreement, Borrower shall pay to Agent (a) for the sole
benefit of Agent, a fee of Seven Thousand and Five Hundred
Dollars ($7,500.00) which shall be payable substantially
concurrently with the execution of this Agreement and on
each anniversary thereafter, and (b) for the ratable benefit
of Banks a commitment fee in the amount of Seventy Five
Thousand Dollars ($75,000.00), which shall be payable
substantially concurrently with the execution of this
Agreement.
18. The Loan Agreement and the existing security documents
remain unmodified and in full force and effect, except as
otherwise amended hereby and the occurrence of any default
under this Amendment or the failure by Borrower to observe
or perform any term, covenant or agreement contained in this
Amendment, shall be deemed to be a default under the Loan
Agreement and other Loan Documents.
19. The Revolving Line Note in favor of Sumitomo is hereby
amended and restated in its entirety as set forth on Exhibit
A-1 hereto, and the Revolving Line Note in favor of Imperial
is hereby amended and restated in its entirety as forth on
Exhibit A-2 hereto. In connection herewith, Borrower shall
execute each of the Amended Revolving Line Notes in favor of
Sumitomo and Imperial.
20. Agent may condition the effectiveness of this Third
Amendment on all of the following conditions being satisfied
(any of which Agent may, in its sole and absolute
discretion, waive):
a. Agent shall have received fully executed originals of
this Third Amendment;
b. The Consent of Guarantors, Grantors and Pledgors
attached hereto shall be fully executed by each of the parties
indicated therein;
c. Borrower shall have paid all of the fees required in
this Third Amendment, and any and all costs and expenses incurred
by Agent, including without limitation reasonable attorneys'
fees, in connection with this Third Amendment and the matters
described herein; and
d. Borrower shall deliver such additional documentation
and information to Agent as Agent reasonably requests.
This Amendment is executed as of the date first written above.
"Borrower"
THE TITAN CORPORATION, A Delaware
corporation
By:/S/ XXXX X. XXXXXXX
--------------------
Xxxx X. XxXxxxx
Senior Vice President
Chief Financial Officer
"Banks"
THE SUMITOMO BANK OF CALIFORNIA,
a California banking corporation,
in its individual capacity
By:/S/ XXXXXX XXXXXX
-----------------------------
Xxxxxx Xxxxxx, Vice President
IMPERIAL BANK, a California banking
corporation
By:/S/ XXXXXXX X. XXXXXXX
-----------------------
Xxxxxxx X. Xxxxxxx, Vice
President
"Agent"
THE SUMITOMO BANK OF CALIFRONIA, a
California banking corporation, as
Agent for itself and Imperial Bank
By:/S/ XXXXXX XXXXXX
-----------------------------
Xxxxxx Xxxxxx, Vice President
