THIRD AMENDMENT TO
COMMERCIAL LOAN AGREEMENT
This Third Amendment to the Commercial Loan Agreement ("Amendment") is
entered into as of this 9th day of May, 1996 by and between SUMITOMO BANK OF
CALIFORNIA ("Bank") and THE TITAN CORPORATION, a Delaware Corporation
("Borrower"), with reference to the following:
RECITALS
A. Borrower and Bank entered into that certain Commercial Loan Agreement
("Agreement") dated August 8, 1994 and subsequently amended on May 25, 1995
and December 29, 1995.
B. Borrower anticipates acquiring the common stock of Eldyne, Inc.,
Unidyne, Inc., and Diversified Controls Systems, Inc. (collectively, the
"Eldyne Acquisition").
C. Borrower and Bank desire to amend the Agreement on the terms and
conditions set forth herein.
AMENDMENT
NOW THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Bank agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings given such terms in the
Agreement.
2. Amendments. This Agreement is hereby amended as follows:
A. 1.3 Interest Rate. Section 1.3 of the Agreement is hereby
eliminated and replaced with the following:
(a) Unless Borrower elects an Optional Interest Rate as
described below, the interest rate is Bank's Prime Rate in effect from time to
time plus one half of one percent (.50%).
(b) The "Prime Rate" equals the rate of interest set from time
to time by Bank at its head office in San Francisco, California as its Prime
Rate. The Prime Rate is determined by Bank as a meands of pricing credit
extensions to some customers and is neither tied to any external rate of
interest or index nor is it necessarily the lowest rate of interest charge by
Bank at any given time for any particular class of customers or credit
extensions. Any changes in the interest rate resulting from a change in the
Prime Rate shall take effect without notice on the date specified at the time
the Prime Rate is set.
THIRD AMENDMENT TO COMMERCIAL LOAN AGREEMENT
PAGE 2
(c) Optional Interest Rate. Instead of the interest rate based
on Bank's Prime Rate, Borrower may elect to have all or portions of the
Revolving Line of Credit (during the Availability Period) bear interest at the
Offshore Rate plus two and one half percent (2.50%), as more fully described
in paragraph 1.3 (d) below (the "Optional Interest Rate"), during an interest
period agreed to by Bank and Borrower. Each interest rate is a rate per
annum. Interest will be paid on the last day of each interest period and, if
the interest period is longer than 30 days, then on the first day of each
month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Prime Rate, unless Borrower
has designated another Optional Interest Rate for that Portion.
(d) Offshore Rate/Rate Plus Disclosed Spread. Borrower may
elect to have all or portions of the principal balance of the Revolving Line
of Credit bear interest at the Offshore Rate plus two and one half percent
(2.5%).
Designation of an Offshore Rate portion is subject to the
following requirements:
(i) The interest period during which the Offshore Rate will be
in effect will be no shorter than 30 days and no longer than 180
days as selected by Borrower (except that Borrower may select an
interest period of 14 days so long as the Offshore Rate portion is
at least $1,000,000). The last day of the interest period will be
determined by Bank using the practices of the offshore dollar
inter-bank market.
(ii) Each Offshore Rate portion will be for an amount not less
than two hundred fifty thousand dollars ($250,000) (other than for
an interest period of 14 days, in which event the amount may not
be less than $1,000,000) and increments of fifty thousand dollars
above the minimum.
(iii) The "Offshore Rate" means the interest rate determined by
the following formula, rounded upward to the nearest 1/100 of one
percent. (All amounts in the calculation will be determined by
Bank as of the first day of the interest period.)
Offshore Rate = Eurodollar Rate
(1.00 - Reserve Percentage)
Where,
(A) "Eurodollar Rate" means the interest rate quoted by the
Bank's International Department as the "LIBOR rate" applicable for
the interest period chosen by Borrower.
(B) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks for the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board Regulation D.
The percentage will be expressed as a decimal, and will include,
but not be limited to, marginal, emergency, supplemental, special,
and other reserve percentages.
(iv) Borrower may not elect not an Offshore Rate with respect to
any portion of the principal balance of the Revolving Line of
Credit which is scheduled to be repaid before the last day of the
applicable interest period.
(v) No portion of the principal balance of the line of credit
already bearing interest at the Offshore Rate may be converted to
a different rate during its interest period.
(vi) Each prepayment of an Offshore Rate option, whether
voluntary, by reason of acceleration or otherwise, will be
accompanied by the amount of accrued interest on the amount
prepaid, and a prepayment fee equal to the amount (if any) by
which:
(A) the additional interest which would have been payable
on the amount prepaid had it not been paid until the last
day of the interest period, exceeds
(B) the interest which would have been recoverable by Bank
by placing the amount prepaid on the deposit in the offshore
dollar market for a period starting on the date on which it
was prepaid and ending on the last day of the interest
period for such portion.
(C) Bank will have no obligation to accept an election of
an Offshore Rate portion if any of the following described
events has occurred and is continuing:
(x) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an Offshore
Rate portion are not available in the offshore Dollar
interbank market; or
(y) the Offshore Rate does not accurately reflect
the cost of an Offshore Rate portion.
(e) Interest Rate Reduction. At such time that the Borrower
experiences two consecutive quarters of positive net income, the
applicable Interest Rate will become the Offshore Rate plus two
percent (2.00%).
B. 6.2 Financial Information. Section 6.2 is hereby amended
witht he addition of the following:
(e) Borrower to submit a closing balance sheet reflecting the
Eldyne Acquisition by August 25, 1996.
(f) Within 55 days of each fiscal quarter end, consolidated
financial statements for the three entities constituting the
Eldyne Acquisition.
C. 6.5 Tangible Net Worth. Section 6.5 of the Agreement is
hereby eliminated and replaced with the following:
6.5 Minimum Tangible Net Worth. Borrower will maintain on a
consolidated basis as of of the last day of the quarter ending
June 30, 1996 a Minimum Tangible Net Worth of $28,000,000 plus 50%
of net income realized after December 31, 1995 shall apply.
"Minimum Stockholders Equity" to be defined as the difference
between Total Liabilities and Total Assets.
"Tangible Net Worth" to be defined as 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 intangibles, and monies due from
affiliates, officers, directors or shareholders of Borrower) plus
liabilities subordinated to Bank in a manner acceptable to Bank
(using Bank's standard form). Deferred income taxes shall not be
deemed intangible assets.
6.22 Additional Covenants. Section 6.22 sub section (e) is
eliminated and replaced with the following:
(e) acquire or purchase a business or its assets for a
consideration, including assumption of debt, in excess of One
Million and 00/100 dollars ($1,000,000.00).
The following sub-section is an addition to section 6.22:
(k) advance funds to Eldyne, Inc., Unidyne, Inc. or Diversified
Control Systems, Inc. as long as these subsidiaries have working
capital credit facilities committed to them by any financial
institution or commercial lender.
"BORROWER" "BANK"
THE TITAN CORPORATION SUMITOMO BANK OF CALIFORNIA
BY__/s/ Xxxxx Hay__________ BY__/s/ Xxxxx X. Xxxx, VP_________
Xxxxx Xxx, Xx. VP/CFO (Printed Name and Title)
(Printed Name and Title)
