Exhibit 10.32
FIRST AMENDMENT
TO
FOURTH AMENDED AND RESTATED LOAN AGREEMENT
 
This First Amendment to Fourth Amended and Restated Loan Agreement (this “First
Amendment”) is made as of the 31 day of December, 2008, by and among
 
Brown Brothers Harriman & Co., as Administrative Agent (hereinafter, the
“Administrative Agent”), a general partnership organized under the laws of the
State of New York with offices at 40 Water Street, Boston, Massachusetts 02109;
and
 
TD Bank, N.A., as Documentation Agent (hereinafter, the “Documentation Agent”) a
national banking association with offices at 7 New England Executive Park,
Burlington, Massachusetts 01803; and
 
Bank of America, N.A., as Syndication Agent (hereinafter, the “Syndication
Agent”), and, together with the Administrative Agent and the Documentation
Agent, the “Agents”), a national banking association with offices at 100 Federal
Street, Boston, Massachusetts 02110,
 
as Agents on behalf of Brown Brothers Harriman & Co., TD Bank, N.A., Bank of
America, N.A., and the other financial institutions which may hereafter become
lenders to the Loan Agreement (as defined below) (each such party a “Lender” and
collectively the “Lenders”),
 
and
 
Dynamics Research Corporation (hereinafter, the “Lead Borrower”), a
Massachusetts corporation, with its principal executive offices at 60 Frontage
Road, Andover, Massachusetts, as agent for itself and each of
 
DRC International Corporation (“International”), a Massachusetts corporation
with its principal executive offices at 60 Frontage Road, Andover,
Massachusetts;
 
H.J. Ford Associates, Inc. (“H.J. Ford”), a Delaware corporation with its
principal executive offices at 60 Frontage Road, Andover, Massachusetts; and
 
Kadix Systems, LLC (“Kadix”), a Virginia limited liability company with its
principal executive offices at 60 Frontage Road, Andover, Massachusetts.
 
(Each of the Lead Borrower, International, H.J. Ford, and Kadix being sometimes
hereinafter referred to individually as a “Borrower” and collectively as the
“Borrowers”).
 
Preliminary Statements
 
WHEREAS, the Borrowers, the Lenders and the Agents are parties to a certain
Fourth Amended and Restated Loan Agreement dated as of August 1, 2008 (as may be
amended and in effect from time to time, the “Loan Agreement”);
 
WHEREAS, the Borrowers have requested that the parties hereto amend the Loan
Agreement to modify certain provisions of the Loan Agreement; and
 
 
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WHEREAS, the Agents and the Lenders each agree to modify and amend certain
provisions of the Loan Agreement, subject to the terms and conditions set forth
herein;
 
NOW THEREFORE, as an additional inducement for the Lenders to maintain the
credit facilities on the terms and conditions set forth in the Loan Agreement as
amended hereby, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Borrowers herby
covenant and agree with the Agents and the Lenders as follows:
 
1.           Definitions.  Capitalized terms used herein and not other­wise
defined herein shall have the meanings assigned to such terms in the Loan
Agreement.
 
2.           Amendments to Loan Agreement.
 
 
(a)
Article 1 of the Loan Agreement is hereby amended by deleting the following
definitions of “2008 Reserve” and “EBITDA” contained therein:

 
““2008 Reserve”: is defined in Section 8-10.
 
“EBITDA”: for any period, the Consolidated Net Income of the Lead Borrower and
its Subsidiaries for such period adjusted by adding back thereto amounts
deducted in computing such Consolidated Net Income in respect of each of (a)
Consolidated Interest Expense, (b) provision for taxes in respect of income and
profits of the Lead Borrower and its Subsidiaries, (c) depreciation and
amortization of the Lead Borrower and its Subsidiaries, and (d) other non-cash
expenses incurred pursuant to employee equity compensation plans approved by
Borrower’s board of directors, each as determined in accordance with GAAP;
provided, however, the calculation of Consolidated Net Income for the periods
ending September 30, 2008 and December 31, 2008 shall not include the 2008
Reserve.”
 
and substituting the following text therefore:
 
““2008 Reserve”: is that certain pre-tax charge incurred in connection with the
resolution of certain litigation involving the Lead Borrower, as more
particularly described in EXHIBIT 6-17 hereof; provided, that solely for
purposes of calculating EBITDA when determining (i) the Fixed Charge Coverage
Ratio in Section 8-7 and (ii) the Leverage Ratio in Section 8-9, in each case
for the quarterly periods listed below, such 2008 Reserve shall not exceed the
following for the measurement periods indicated:
 
Trailing Four Quarter
 Period Ended
 
Maximum 2008 Reserve Amount
September 30, 2008
 
$14,819,000.00
December 31, 2008
 
$14,819,000.00
March 31, 2009
 
$6,000,000.00
June 30, 2009
 
$6,000,000.00

 
 
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“EBITDA”: for any period, the Consolidated Net Income of the Lead Borrower and
its Subsidiaries for such period adjusted by adding back thereto amounts
deducted in computing such Consolidated Net Income in respect of each of (a)
Consolidated Interest Expense, (b) provision for taxes in respect of income and
profits of the Lead Borrower and its Subsidiaries, (c) depreciation and
amortization of the Lead Borrower and its Subsidiaries, (d) other non-cash
expenses incurred pursuant to employee equity compensation plans approved by
Borrower’s board of directors, and (e) the applicable 2008 Reserve, if any,
actually incurred, each as determined in accordance with GAAP.”
 
 
(b)
Section 6.27(b) of the Loan Agreement is hereby amended by deleting the
following text appearing therein in its entirety:

 
“(b)           The Borrowers do not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrowers’
financial statements furnished to the Lenders or has been otherwise disclosed in
writing to the Lenders prior to the execution of this Agreement.”
 
and substituting the following text therefore:
 
“(b)           The Borrowers do not have any contingent obligations, other than
the 2008 Reserve, or obligation under any Lease or Capital Lease which is not
noted in the Borrowers’ financial statements furnished to the Lenders or has
been otherwise disclosed in writing to the Lenders prior to the execution of
this Agreement.”
 
 
(c)
Section 8.10 of the Loan Agreement is hereby amended by deleting the following
text appearing therein in its entirety:

 
“8-10 Net Profit.  The Borrowers shall earn a minimum Consolidated Net Income,
as determined in accordance with GAAP, of at least $1.00, measured quarterly as
of the end of each fiscal quarter of each fiscal year on a cumulative basis as
and for each such fiscal year, commencing with the fiscal year ending December
31, 2008; provided, however, the calculation of Consolidated Net Income for the
periods ending June 30, 2008, September 30, 2008 and December 31, 2008 shall not
include a reserve for a one-time pre-tax charge in an amount up to $8,900,000
(the “2008 Reserve”) in connection with the resolution of certain litigation
involving the Lead Borrower, as more particularly described in paragraph 2 of
EXHIBIT 6-17.”
 
and substituting the following text therefore:
 
“8-10 Net Profit.  The Borrowers shall earn a minimum Consolidated Net Income,
as determined in accordance with GAAP, of at least $1.00, measured quarterly, as
of the end of each fiscal quarter.”
 
 
(d)
Exhibit 6-17 to the Loan Agreement is hereby deleted and replaced with the text
attached hereto as Exhibit A.

 
3.           Amendment Fee.  In consideration of the Agents and the Lenders
entering into this First Amendment, the Borrowers shall pay to the
Administrative Agent, for the benefit of the Lenders, a fee (the “Amendment
Fee”) in the amount of Seventy Five Thousand Dollars ($75,000.00, to be shared
by the Lenders on a pro rata basis, as agreed among the Lenders) upon the
execution of this First

 
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Amendment, which Amendment Fee shall be deemed fully earned as of the date
hereof and shall be distributed by the Administrative Agent to the Lenders.
 
4.           Conditions to Effectiveness.  This First Amendment shall not be
effective until each of the following conditions precedent have been fulfilled
to the satisfaction of the Administrative Agent:
 
 
(a)
This First Amendment shall have been duly executed and delivered by the
Borrowers, the Administrative Agent and the Lenders and the Administrative Agent
shall have received a fully executed copy hereof.

 
 
(b)
The Administrative Agent shall have received such other documents, instruments,
and certificates relating to the transactions contemplated by this First
Amendment as may be reasonably requested by the Administrative Agent.

 
 
(c)
The Administrative Agent shall have received the Amendment Fee from the
Borrowers.

 
 
(d)
No default or Event of Default shall be continuing immediately after giving
effect to the execution of this First Amendment.

 
5.           Ratification of Loan Documents.  Except as specifically amended or
modified in this First Amendment, all of the terms and conditions of the Loan
Agreement and each of the other Loan Documents shall remain in full force and
effect.  Each of the Borrowers hereby ratifies, confirms, and reaffirms all
representations, warranties, and covenants contained therein.  Each of the
Borrowers hereby represents and warrants that, on the date hereof, no default or
Event of Default exists.  Each of the Borrowers further acknowledges, confirms
and agrees that the Borrowers do not have any offsets, defenses, or
counterclaims against the Agents or the Lenders arising out of the Loan
Agreement or the other Loan Documents, and to the extent that any such offsets,
defenses, or counterclaims may exist, each of the Borrowers hereby WAIVES and
RELEASES the Agents and the Lenders therefrom.
 
6.           Miscellaneous.
 
 
(a)
This First Amendment may be executed in several counterparts and by each party
on a separate counterpart, each of which when so executed and delivered shall be
an original, and all of which together shall constitute one instrument.

 
 
(b)
This First Amendment expresses the entire understanding of the parties with
respect to the transactions contemplated hereby.  No prior negotiations or
discussions shall limit, modify, or otherwise affect the provisions hereof.

 
 
(c)
Any determination that any provision of this First Amendment or any application
hereof is invalid, illegal or unenforceable in any respect and in any instance
shall not affect the validity, legality, or enforceability of such provision in
any other instance, or the validity, legality or enforceability of any other
provisions of this First Amendment.

 
 
(d)
The Borrowers each warrant and represent that each such Borrower has consulted
with independent legal counsel of such Borrower’s selection in connection with
this First Amendment and is not relying on any representations or warranties of
the Agents or the Lenders, or their respective counsels, in entering into this
First Amendment.

 
 
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(e)
Except as expressly provided herein, the amendments set forth herein shall be
effective as of the date of this First Amendment.

 
 
[Remainder of this page left intentionally blank.  Signature page follows.]
 
 
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IN WITNESS WHEREOF, the parties have duly executed this First Amendment as a
sealed instrument as of the date first set forth above.
 

 
DYNAMICS RESEARCH CORPORATON
 
(“Lead Borrower and Borrower”)
         
By:
/s/ David Keleher
   
Name:
David Keleher
   
Title:
Senior Vice President - Finance, 
   
CFO and Treasurer
           
DRC INTERNATIONAL CORPORATON
 
(“Borrower”)
         
By:
/s/ David Keleher
   
Name:
David Keleher
   
Title:
Vice President - Finance CFO 
         
H.J. FORD ASSOCIATES, INC.
 
(“Borrower”)
         
By:
/s/ David Keleher
   
Name:
David Keleher
   
Title:
Treasurer, CFO and Assistant 
   
Secretary
           
KADIX SYSTEMS, LLC
 
(“Borrower”)
         
By:
/s/ David Keleher
   
Name:
David Keleher
   
Title:
Manager
 

 
 
[Signature Page to First Amendment to
Fourth Amended and Restated Loan Agreement]
 
 
 
 

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BROWN BROTHERS HARRIMAN & CO.
 
(“Administrative Agent and Lender”)
         
By:
/s/ Daniel G. Head, Jr.
   
Name:
Daniel G. Head, Jr.
   
Title:
S.V.P.
                   
TD BANK, N.A.
 
(“Documentation Agent and Lender”)
         
By:
/s/ Jeffrey R. Westling
   
Name:
Jeffrey R. Westling
   
Title:
SVP
                   
BANK OF AMERICA, N.A.
 
(“Syndication Agent and Lender”)
         
By:
/s/ Thomas F. Brennan
   
Name:
Thomas F. Brennan
   
Title:
SVP
 

[Signature Page to First Amendment to
Fourth Amended and Restated Loan Agreement]

 
 

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EXHIBIT A

Exhibit 6-17

DYNAMICS RESEARCH CORPORATION

Litigation
 
 
1.  On October 26, 2000, two former Company employees were indicted and charged
with conspiracy to defraud the U.S. Air Force and wire fraud, among other
charges, arising out of a scheme to defraud the federal government out of
approximately $10 million. Both men subsequently pled guilty to the principal
charges against them. On October 9, 2003, the U.S. Attorney filed a civil
complaint in the U.S. District Court for the District of Massachusetts against
the Company based in substantial part upon the actions and omissions of the
former employees that gave rise to the criminal cases against them. In the civil
action, the U.S. Attorney has asserted three claims against the Company.  These
claims, which cannot lead to multiple awards, are based on the False Claims Act,
the Anti-Kickback Act, and breach of contract for which the government estimates
damages at approximately $24 million, $20 million and $10 million, respectively.
The U.S. Attorney is also seeking recovery on certain common law claims and
equitable claims as well as for recovery of costs, and interest on the breach of
contract damages.  The maximum possible awardable amount of damages, based on
the governments’ claims, is estimated to be $26 million.  On February 14, 2007,
the U.S. Attorney filed a motion for summary judgment as to liability and as to
damages in this matter. On March 31, 2008, the Court issued a Memorandum on
Summary Judgment Motion granting summary judgment in favor of the Government on
the breach of contract, False Claims Act and Anti-Kickback Act claims but, due
to substantial disputed facts, denied summary judgment on damages. Regarding the
alleged actual damages, the Company believes that it has substantive defenses
and intends to vigorously defend itself.  Upon completion of the proceedings in
District Court, the Company would consider appealing the District Court’s
decision granting summary judgment to the Government depending on the outcome of
the District Court proceedings, however, the Company has reached a tentative
agreement with the Government to settle the case solely for the Breach of
Contract claims for $15M, reduced by $5.8M for estimated tax benefits, for an
after-tax effect of $9.2M.
 
2.  On June 28, 2005, a suit, characterized as a class action employee suit, was
filed in the U.S. District Court for the District of Massachusetts alleging
violations of the Fair Labor Standards Act and certain provisions of
Massachusetts General Laws. The Company believes that its practices complied
with the Fair Labor Standards Act and Massachusetts General Laws. The Company
intends to vigorously defend itself and has sought to have the complaint
dismissed from District Court and addressed in accordance with the Company’s
mandatory dispute resolution program for the arbitration of workplace
complaints. On April 10, 2006, the U.S. District Court for the District of
Massachusetts entered an order granting in part the Company’s motion to dismiss
the civil action filed against the Company, and to compel compliance with its
mandatory dispute resolution program, directing that the parties arbitrate the
aforementioned claims, and striking the class action waiver which was part of
the dispute resolution program. Following the District Court’s decision, the
plaintiffs commenced arbitration before the American Arbitration Association,
asserting the same claims as they asserted in the District Court. On January 26,
2007 the Company filed an appeal with the United States Court of Appeals for the
Second Circuit appealing the portion of the District Court’s decision that the
class action waiver is not enforceable. The U.S. Court of Appeals on November
19, 2007 concurred with the District Court’s opinion that the matter should
proceed in arbitration and remanded the matter to the District Court.  The
parties have informed the District Court that they will proceed in arbitration
as a class action. In the arbitration, the Company has filed a Motion to Dismiss
and/or for Summary Disposition, asserting that

 
 

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the Company is entitled to use the “window of correction” provided by the Fair
Labor Standards Act’s regulations and that the arbitration should be dismissed
without further action in the arbitration.  The motion is was denied by the
arbitrator and the case will proceed to the discovery stage and assertions of
additional defense motions.