EXHIBIT 10.27
FIRST AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and
entered into as of June 14, 2002 by and between Sparta, Inc., a Delaware
corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A. ("Bank"). This
Agreement amends and restates in its entirety that certain loan agreement dated
as of September 9, 1999 by and between Borrower and Bank, as amended.
SECTION 1. THE LOAN
1.1 THE REVOLVING LOAN. Bank will loan to Borrower an amount not
to exceed Six Million Dollars ($6,000,000) outstanding in the aggregate at any
one time (the "Revolving Loan"). Borrower may borrow, repay and reborrow all or
part of the Revolving Loan in accordance with the terms of the Revolving Note.
All borrowings of the Revolving Loan must be made before July 1, 2004 at which
time all unpaid principal and interest of the Revolving Loan shall be due and
payable. The Revolving Loan shall be evidenced by a promissory note (the
"Revolving Note") on the standard form used by Bank for commercial loans. Bank
shall enter each amount borrowed and repaid in Bank's records and such entries
shall be deemed to be the amount of the Revolving Loan outstanding. Omission of
Bank to make any such entries shall not discharge Borrower of its obligation to
repay in full with interest all amounts borrowed.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively,
all the credit facilities described above.
As used herein the word "Note" shall mean, collectively,
all the promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for working capital and general corporate purposes.
1.4 INTEREST. The unpaid principal balance of the Revolving Loan
shall bear interest at the rate or rates provided in the Revolving Note and
selected by Borrower. The Revolving Loan may be prepaid in full or in part only
in accordance with the terms of the Revolving Note and any such prepayment shall
be subject to the prepayment fee provided for therein.
1.5 UNUSED COMMITMENT FEE. Commencing on September 30, 2002 and
on the last calendar day of each three month period thereafter, or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of one eighth of one
percent (.125%) per year on the average unused portion of the Loan for the
preceding quarter computed on the basis of actual days elapsed of a year of 360
days.
1.6 BALANCES. Borrower shall maintain its major depository
accounts with Bank until the Note and all sums payable pursuant to this
Agreement have been paid in full.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.8 SECURITY. Prior to any disbursement of the Loan, Borrower
shall have executed a security agreement, on Bank's standard form, and a
financing statement, suitable for filing in the office of the Secretary of State
of the State of Delaware and any other state designated by Bank, granting to
Bank a first priority security interest in such of Borrower's property as is
described in said security agreement. Exceptions to Bank's first priority, if
any, are permitted only as otherwise provided in this Agreement. At Bank's
request, Borrower will also obtain executed landlord's and mortgagee's waivers
on Bank's form covering all of Borrower's property located on leased or
encumbered real property.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and any Note or any of the other Loan
Documents, the terms of such Note or other Loan Documents will prevail over the
terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Bank's
satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with
all terms and conditions required by this Agreement to be performed or complied
with by it prior to or at the date of the making of such disbursement and shall
have executed and delivered to Bank the Note and other documents deemed
necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
copies of resolutions duly adopted by the Board of Directors of Borrower,
authorizing this Agreement and the Loan Documents. Such resolutions shall also
designate the persons who are authorized to act on Borrower's behalf in
connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 SUBORDINATION AGREEMENTS. Bank shall have received such
subordination agreements, in form and substance satisfactory to Bank, as shall
be necessary for Borrower to achieve and maintain compliance with the provisions
of Section 5.7 hereof.
2.4 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
analysis and design of systems for national defense programs.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest) and their addresses, and the names of
Borrower's principal shareholders, are as provided on a schedule delivered to
Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance
of this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms of
any indenture, agreement or undertaking to which Borrower is a party or by which
it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of Borrower,
including both a balance sheet at December 31, 2001, together with supporting
schedules, and an income statement for the twelve (12) months ended December 31,
2001 have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby. Since December 31, 2001, there has been no material adverse change in
the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in
the ordinary course of business, Borrower has good and marketable title to all
of the property reflected in its financial statements delivered to Bank and to
all property acquired by Borrower since the date of said financial statements,
free and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any
of its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the state of its organization, and has the power and authority to
carry on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into
this Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by
this Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and
no Reportable Event or Prohibited Transaction as defined in ERISA has occurred
with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently
planned by Borrower, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan
only as provided in subsection 1.3 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims levied
or imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within sixty (60) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited balance
sheet as of the close of such fiscal quarter, its unaudited income and expense
statement with supportive schedules and statement of retained earnings for that
fiscal quarter, prepared in accordance with generally accepted accounting
principles;
(b) Within one hundred and twenty (120) days after the
close of each fiscal year, a copy of its statement of financial condition
including at least its balance sheet as of the close of such fiscal year, its
income and expense statement and retained earnings statement for such fiscal
year, examined and prepared on an audited basis by
independent certified public accountants selected by Borrower and reasonably
satisfactory to Bank, in accordance with generally accepted accounting
principles applied on a basis consistent with that of the previous year;
(c) As soon as available, copies of such financial
statements and reports as Borrower may file with any state or federal agency;
(d) Such other financial statements and information as
Bank may reasonably request from time to time;
(e) In connection with each fiscal year-end statement
required hereunder, any management letter of Borrower's certified public
accountants;
(f) Prompt written notice to Bank of all events of default
under any of the terms or provisions of this Agreement or of any other
agreement, contract, document or instrument entered, or to be entered into with
Bank; and of any litigation which, if decided adversely to Borrower, would have
a material adverse effect on Borrower's financial condition; and of any other
matter which has resulted in, or is likely to result in, a material adverse
change in its financial condition or operations; and
(g) Prior written notice to Bank of any changes in
Borrower's officers and other senior management; Borrower's name; and location
of Borrower's assets, principal place of business or chief executive office.
4.6 CURRENT RATIO. Borrower will at all times maintain a ratio of
current assets to current liabilities of at least 1.25:1.0, as such terms are
defined by generally accepted accounting principles except that, for the
purposes of this calculation, any amounts borrower under the Revolving Loan
shall be considered a current liability.
4.7 TANGIBLE NET WORTH. Borrower will at all times maintain
Tangible Net Worth of not less than Twenty Five Million Dollars ($25,000,000).
"Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to tangible net worth of not greater than
2.00:1.00. "Tangible Net Worth" shall mean net worth increased by indebtedness
of Borrower subordinated to Bank and decreased by patents, licenses, trademarks,
trade names, goodwill and other similar intangible assets, organizational
expenses, and monies due from affiliates (including officers, shareholders and
directors).
4.9 FIXED CHARGE COVERAGE RATIO. Borrower will maintain a ratio
of EBITDAR to Debt Service of not less than 1.50:1.0 as of the close of each
fiscal quarter. "EBITDAR" means earnings before interest, taxes, rent,
depreciation, amortization and other non-cash expense including stock based
compensation for the 12 months immediately preceding the date of calculation.
"Debt Service" means the sum of the principal portion of term obligations which
came due during the twelve (12) months preceding the date of calculation plus
interest expense plus rent expense made during the twelve (12) months preceding
the date of calculation.
4.10 INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties. Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand
by Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.
4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly
to Bank upon demand, reasonable attorneys' fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorneys' fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and legal staff.
4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank,
as soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except (a) pursuant to agreements made with Bank, and (b) indebtedness
incurred for the purpose of purchasing stock from current or former employees
provided, however, that payments arising from such obligations do not exceed
Borrower's quarterly stock repurchase limitation.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another in excess of $2,000,000 without Bank's written
consent.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in
the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner or extend credit, except as allowed by Borrower's Stock Option Plan or
loans extended to current employees not to exceed Ten Thousand Dollars ($10,000)
per employee.
5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of deposit
of Bank, direct U.S. Government obligations and commercial paper issued by
corporations with the top ratings of Xxxxx'x or Standard & Poor's, provided all
such permitted investments shall mature within one year of purchase.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any
dividends, other than a dividend payable in its own common stock, or authorize
or make any other distribution with respect to any of its stock now or hereafter
outstanding.
5.7 SUBORDINATION OF CERTAIN INDEBTEDNESS. Not at any time permit
the aggregate principal amount outstanding under all promissory notes issued by
Borrower to all former employees of Borrower and other persons in full or
partial consideration for Borrower's repurchase of shares of stock in Borrower
from such former employees and other persons to exceed Four Million Dollars
($4,000,000) unless all such amounts in excess of Four Million Dollars
($4,000,000) are subordinated to all obligations now or hereafter owed by
Borrower to Bank pursuant to subordination agreements in form and substance
satisfactory to Bank. Bank hereby acknowledges and agrees, however, that each of
such subordination agreements shall permit Borrower to make, and shall permit
the payee of the promissory note(s) subordinated thereby to receive, regularly
scheduled payments of principal and interest under such promissory note(s) so
long as Borrower has made each and every payment of principal and interest due
and owing to Bank and is not in default under any of its agreements with Bank.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue the Loan
and automatically, unless otherwise provided under the Note, shall make all sums
of interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or observance
of any covenant or condition of the Loan Documents; or
6.4 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or subordinating creditor dies, disavows or
attempts to revoke or terminate such guaranty or subordination agreement; or
6.5 There is a change in ownership or control of ten percent
(10%) or more of the issued and outstanding stock of Borrower.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing
signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may
be changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK OF CALIFORNIA, N.A. SPARTA, INC.
By: /s/ Xxx Xxxx By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------- --------------------------------
Name: Xxx Xxxx Name: Xxxxxx X. Xxxxxxx
Title: Vice President Title: President/CEO
Address: 18300 Xxx Xxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
Suite 310 --------------------------------
Xxxxxx, XX 00000 Name: Xxxxx X. Xxxxxxxxx
Title: Vice President and
Chief Financial Officer
Attention: Xxx Xxxx, VP
Telecopier: (000) 000-0000 Address: 00000 Xxx xx xx Xxxxxxx
Telephone: (000) 000-0000 Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, VP
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
