Exhibit 10.26

EX-10.26 37 dex1026.htm EXHIBIT 10.26 Exhibit 10.26

Exhibit 10.26

FIRST AMENDMENT TO

LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “Amendment”), dated as of October 3, 2007, is made by and among SFA, INC. a Maryland corporation (the “Company”), THE ANALYSIS CORP., a Delaware corporation (“TAC”, and together with the Company, collectively, the “Borrowers” and individually, a “Borrower”). SUNTRUST BANK (the “Lender”), and SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”).

RECITALS

The Lender, the Borrowers and the Administrative Agent are parties to a certain Loan and Security Agreement, dated as of February 9, 2007 (as amended, modified or supplemented from time to time, the “Loan Agreement”). Capitalized terms defined in the Loan Agreement and undefined herein shall have the same defined meanings when such terms are used in this Amendment.

The Borrowers have requested that the Lender and the Administrative Agent amend certain provisions of the Loan Agreement. The Lender has agreed to do so, subject to the other terms of this Amendment. Accordingly, for valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows:

AGREEMENT

1. Incorporation of Recitals. The Recitals hereto are incorporated herein by reference to the same extent and with the same force and effect as if fully set forth herein.

2. Amendments to Loan Agreement. Subject to the satisfaction of the conditions set forth in Section 3 below, the Loan Agreement is hereby amended as follows:

(a) the following definitions are added to Section 1.1 of the Loan Agreement:

“Special Dividend” means cash dividends or return of capital in an aggregate amount not to exceed $10,000,000 to be declared and paid by the Company during the fiscal quarter ending on December 31, 2007.

“Tangible Net Worth” means, at any time, Net Worth minus amounts carried on the books of the Company and its Subsidiaries for (1) any write-up in the book value of any assets resulting from a revaluation subsequent to the date of this Agreement, (2) investments in non-marketable debt or equity securities, (3) treasury stock, (4) unamortized debt discount expense, (5) any cost of investments in excess of net assets acquired at any time of acquisition, (6) loans, advances or other amounts owed to the Company or any of its Subsidiaries, by any of its officers, directors, shareholders, employees or Affiliates, (7) leasehold improvements, other than $1,477,122 of leasehold improvements carried on the books of the Company as of August 31, 2007, (9) patents, patent applications, copyrights, trademarks, trade names, goodwill, research and development costs, organizational expenses, capitalized software costs and other like intangibles, and (9) any accrued and unpaid dividends.

(b) The following definitions in Section 1.1 of the Loan Agreement are amended to read as follows:

“Administrative Fee” means a fee of $10,000 per year.

“Aggregate Revolving Commitment Amount” means the aggregate principal amount of the Aggregate Revolving Commitments from time to time. On the Closing Date, the Aggregate Revolving Commitment Amount equals $22,000,000.

“Borrowing Base means, at any time, (a) the sum of the following, without duplication, (1) 85% of amounts due with respect to Eligible Billed Receivables, plus (2) 55% of amounts to become due with respect to Eligible Unbilled Receivables. The Administrative Agent shall have, and reserves, the right at any time, in its reasonable discretion, to adjust the foregoing advance rate percentages and to establish reserves under the Borrowing Base.

“Minimum Compliance Level” means Tangible Net Worth (a) as of September 30, 2007 through December 30, 2007, negative $15,260,785, (b), as of December 31, 2007 through December 30, 2008, negative $12,334,285, (c) as of December 31, 2008, through December 30, 2009, negative $8,432,285, and (d) as of December 31, 2009, and all times thereafter, negative $4,530,285.

(c) Effective September 30, 2007, the table in the definition of Applicable Margin and Applicable Unused Fee Percentage is replaced with the table attached as Exhibit A hereto.

(d) In addition to the purposes set forth in Section 4.9 of the Loan Agreement, the Borrowers may use the proceeds of the Revolving Loans to pay the Special Dividend.

(e) Section 6.6 of the Loan Agreement is amended to read as follows:

“6.6 Restricted Payments. No Borrower make any Restricted Payment other than the Special Dividend, provided that, (i) a Borrower may make Restricted Payments to another Borrower, (ii) Restricted Payments may he made to consummate the transactions contemplated by the Stock Purchase Agreement, and (iii) Restricted Payments may he made to employees who terminate employment with the Company and are eligible to receive stock options, provided that no Default or Event of Default shall have occurred or will occur after giving effect thereto and the aggregate amount of such Restricted Payments shall not exceed $250,000 in any fiscal year of the Company.

(f) Sections 7.1 and 7.2 of the Loan Agreement is amended to read as follows:

“7.1 Minimum Tangible Net Worth. Tangible Net Worth shall not be less than the Minimum Compliance Level as of September 30, 2007 or at any time thereafter.

7.2 Maximum Funded Debt Ratio. The Funded Debt Ratio shall not exceed (a) 3.50 to 1 at any time prior to December 31, 2008, or (b) 3.25 to 1 as of December 31, 2008, and all times thereafter prior to December 31, 2009, and (c) 3.00 to 1 as of December 31, 2009, or at any time thereafter.”

(g) Except as specifically modified by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed by the parties hereto and remain in full force and effect.

(h) Each of the Borrowers, the Administrative Agent and the Lender agrees that each reference in the Loan Documents to the Loan Agreement shall be deemed to be a reference to the Loan Agreement as amended hereby.

3. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of the following conditions:

(a) Receipt by the Agent of an original counterpart of this Amendment duly executed by the Borrowers, together with a replacement Revolving Note evidencing the increased Revolving Commitment of the Lender, duly executed and delivered by the Borrowers (the “Amendment Documents”):

(b) Receipt by the Bank of such evidence of appropriate corporate, authorization, as applicable on the part of the Borrowers with respect to the increase in the Aggregate Revolving Credit Commitment Amount as the Administrative Agent may reasonably request:

(d) The Borrowers shall pay to the Lender an amendment fee of $25,000.

4. Amendment Only; No Novation; Modification of Loan Documents. Each of the Borrowers acknowledges and agrees that this Amendment only amends the terms of the Loan Agreement and the other Loan Documents and does not constitute a novation, and each of the Borrowers ratifies and confirms the terms and provisions of, and its obligations under, the Loan Agreement and the other Loan Documents in all respects. Each of the Borrowers acknowledges and agrees that each reference in the Loan Documents to any particular Loan Document shall be deemed to be a reference to such Loan Document as amended by this Amendment. To the extent of a conflict between the terms of any Loan Document and the terms of this Amendment, the terms of this Amendment shall control.

5. No Further Amendments. Nothing in this Amendment or any prior amendment to the Loan Documents shall require the Administrative Agent or the Lender to grant any further amendments to the terms of the Loan Documents. Each of the Borrowers acknowledges and agrees that there are no defenses, counterclaims or setoffs against any of their respective obligations under the Loan Documents.

6. Representations and Warranties. Each Borrower represents and warrants that this Amendment has been duly authorized, executed and delivered by it in accordance with resolutions adopted by its board of directors. All other representations and warranties made by the Borrowers in the Loan Documents are incorporated by reference in this Amendment and are deemed to have been repeated as of the date of this Amendment with the same force and effect as if set forth in this Amendment, except that any representation or warranty relating to any financial statements shall be deemed to be applicable to the financial statements most recently delivered to the Administrative Agent in accordance with the provisions of the Loan Documents.

7. Fees and Expenses. The Borrowers jointly and severally agree to pay all reasonable, out-of-pocket costs and expenses of the Administrative Agent, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the preparation and administration of this Amendment.

8. Severability. Any provision of this Amendment held to he illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9. Governing Law. This Amendment shall he construed in accordance with and be governed by the laws (without giving effect to the conflict of law principles thereof) of the State of New York.

10. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall he deemed to constitute one and the same instrument. It shall not be necessary that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on more than one counterpart.

[SIGNATURES ON FOLLOWING PAGES]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed by their respective duly authorized representatives all as of the day and year first above written.

BORROWERS:

SFA, INC., a Maryland corporation


By:		/s/ Jerry D. Robinson
Name:		Jerry D. Robinson
Title:		President & CEO

THE ANALYSIS CORP., a Delaware corporation


By:		/s/ John O. Brennan
Name:		John O. Brennan
Title:		President & CEO

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to he signet by their respective duly authorized representatives all as of the day and year first above written.

BORROWERS:

SFA, INC., a Maryland corporation


By:
Name:
Title:

THE ANALYSIS CORP., a Delaware corporation


By:
Name:
Title:

[SIGNATURES CONTINUE ON FOLLOWING PAGES]

ADMINISTRATIVE AGENT:

SUNTRUST BANK, a Georgia banking corporation,

as Administrative Agent

By:

/s/ Lindsey Rheaume

Lindsey Rheaume

Vice President

LENDER:

SUNTRUST BANK, a Georgia banking corporation

By:

/s/ Lindsey Rheaume

Lindsey Rheaume

Vice President

Exhibit A

Table for Applicable Margin and Applicable Unused Fee Percentage


Funded Debt Ratio	Applicable Margin for Revolving Loans		Applicable Margin for Term Loans		Applicable Unused Fee Percentage
Less than or equal to 1.25 to 1.	1.60	%	1.80	%	0.10	%
Greater than 1.25 to 1, and less than or equal to 1.75 to 1.	1.80	%	2.00	%	0.125	%
Greater than 1.75 to 1, and less than or equal to 2.25 to 1.	2.00	%	2.20	%	0.15	%
Greater than 2.25 to 1, and less than or equal to 2.75 to 1.	2.20	%	2.40	%	0.175	%
Greater than 2.75 to 1, and less than or equal to 3.25 to 1.	2.40	%	2.60	%	0.20	%
Greater than 3.25 to 1	2.60	%	2.80	%	0.25	%